Courts less deferential to regulatory agencies, GMU forum told

US Supreme Court decisions in the recently completed term suggest that judicial deference to federal regulatory agencies is starting to recede, speakers said at a July 8 forum sponsored by George Mason University’s School of Law. The trend potentially could affect how the oil and gas and other industries legally challenge regulations they consider burdensome and unreasonable, they suggested.

“It’s the duty of the courts to say what the law is,” said Richard O. Faulk, senior director of the Energy and Environment Initiative at the school’s Law and Economics Center. “The Supreme Court all too often has deferred to interpretations that were coined by the administration. Now, there’s a majority for contextual interpretation.”

The high court’s June 29 decision remanding the US Environmental Protection Agency’s mercury and air toxics emissions requirements to DC District Court was the 2014-15 term’s biggest environmental ruling. It basically said EPA erred in refusing to consider potential costs during the regulations’ earliest proposal phase.

In a 5-4 vote, the justices said EPA’s estimated $9.6 billion/year of costs and $4-6 million/year of benefits from the regulation was a gap that was too big to ignore, observed Kirsten L. Nathanson, a partner at Crowell & Moring LLP. “This was the first time the court required consideration of costs when Congress was silent,” she said.

But Faulk said the court’s ruling 4 days earlier in King vs. Burwell, where it found individuals living in states that did not establish their own exchanges remain eligible to buy health insurance under the Affordable Care Act through federally operated exchanges, also resisted regulatory deference (OGJ Online, July 2, 2015). The agency involved in this case was the US Internal Revenue Service.

“It was a choice of context versus test,” Faulk said. “The court looked not at the responsible, but the ACA as a whole and what it believed Congress intended. Maybe we’re finally going to see it and other federal courts look at what statutes really mean instead of deferring to an agency’s fictional expertise.”

Trio of initiatives

Robert R. Martella Jr., a partner at Sidley Austin LLC, noted that the trend is emerging relatively late in the Obama administration as it tries to move forward on three of its most ambitious environmental initiatives: the Clean Power Plan, which aims to limit emissions from existing coal-fired power plants; a proposed National Ambient Air Quality Standard reduction to 65-70 ppb; and EPA’s Waters of the US rule.

“These cases aren’t good news for EPA,” Martella said. “All these decisions will be cited in petitions for years to come.” An earlier decision said costs can’t be considered in regulating ground-level ozone under NAAQS, but the Supreme Court has shown it may be willing to take a closer look for other reasons, he said. “It will be important to see how the DC Circuit and other lower courts respond,” he added.

Nathanson said the Supreme Court did not describe a path forward in its latest ruling against EPA, but simply set up a fresh fight when it remanded the regulation to DC District Court. She said EPA also can be expected to argue that the decision was narrow and should not apply if groups seek a stay of CPP requirements. “Even so, EPA should be troubled by what the court has decided,” she said.

Speakers also agreed that courts are beginning to raise questions about regulatory science. “It’s been getting a free pass as a rule,” said Faulk. “When it came to the forefront in the court’s review of EPA’s greenhouse gas emissions requirements, it got no significant judicial review. Inevitably, that sort of super-deference needs to be viewed judiciously. Surely the courts can’t be expected to remain silent.”

Martella said he believes the Supreme Court sees climate change as a major issue. “We advise clients that courts still tend to be deferential,” he told the forum’s attendees. “That does not give EPA a blank check to impose regulations, because the courts also are looking more closely at the process and its impacts.”

Contact Nick Snow at nicks@pennwell.com.

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