DC Circuit’s “Aneurysm of Activism”: EPA Temporary Stay of Air Rule Is Final Agency Action

Featured Expert Column – Environmental Law and Policy

sboxermanBy Samuel B. Boxerman, Sidley Austin LLP with Katharine Falahee Newman, Sidley Austin LLP

On July 3, 2017, in a 2-1 per curium decision, the US Court of Appeals for the DC Circuit vacated a three-month stay that the United States Environmental Protection Agency’s (“EPA”) had issued while the agency reconsiders its 2016 New Source Performance Standard (NSPS) for the oil and gas sector.  See Clean Air Council v. Pruitt, No. 17-1145, (D.C. Cir. July 3, 2017).  In a well-reasoned dissent, Judge Brown argued neither the agency’s decision to grant a temporary stay nor reconsider aspects of its own regulation were final agency action.  Relying on the dissent, intervening states and industry stakeholders have sought rehearing en banc and that request is pending.  However, regardless of the outcome of that request, the panel ruling indicates that EPA may face an activist DC Circuit that will scrutinize the agency’s process as it reconsiders regulations promulgated during the previous Administration.    

Background 

In 2016, EPA issued the “Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources; Final Rule.” 81 Fed. Reg. 35,824 (June 3, 2016) (“2016 Rule”).  The rule imposed additional federal regulation of the oil and gas production and midstream sectors, including leak detection and repair requirements that EPA claimed would capture and reduce methane emissions.

Industry groups had filed petitions for review challenging the 2016 Rule, while also asking EPA to reconsider certain portions of it.  Those actions were pending when the new Administration came in—and President Trump issued an Executive Order directing EPA to review and consider changing or repealing the 2016 Rule. See Presidential Executive Order on Promoting Energy Independence and Economic Growth (Mar. 28, 2016) (directing review of 2016 Rule and to promptly “publish for notice and comment proposed rules suspending, revising or rescinding” the rule).

Following that direction, EPA asked and the D.C. Circuit agreed to hold the pending challenges to the 2016 Rule in abeyance.  Then, relying on its authority under § 307(d) of the Clean Air Act, EPA granted industry petitions for reconsideration of select issues in the 2016 Rule.  Subsequently, on June 5, 2017, EPA issued a three-month stay during reconsideration.  See Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources; Grant of Reconsideration and Partial Stay,” 82 Fed. Reg. 25,730 (June 5, 2017) (“EPA’s stay”). EPA has likewise published a proposed rule to extend the compliance dates two additional years, in order to have sufficient time to look more broadly at the entire 2016 Rule.  82 Fed. Reg. 27,645 (June 16, 2017).  The comment period on the two-year extension is pending.  However, six environmental groups filed a petition for review of EPA’s decision to issue the initial three-month stay, along with a motion for either a judicial stay or summary vacatur of EPA’s stay.

Panel Decision

The panel began by reciting the settled proposition that “an agency’s decision to grant a petition to reconsider a regulation is not reviewable final agency action.”  Op. at 6.  However, the panel went on to do just the opposite.  The panel framed its analysis within the well-established principle that courts only review final agency action, and finality requires that the action (1) be at the end of the agency’s decision-making process and (2) determine a party’s rights or obligations.  Bennett v. Spear, 520 U.S. 154, 177-78 (1997).

The panel found that the stay met these requirements.  EPA’s stay, the panel reasoned, “is essentially an order delaying the rule’s effective date, and this court has held that such orders are tantamount to amending or revoking a rule” and thus the end of EPA’s decision-making on that issue.  Op. 6-7.  Further, the stay determines regulated parties’ rights or obligations, because regulated entities otherwise would have had to complete their initial monitoring surveys and repair any identified leaks had EPA not stayed the deadlines.  Op. 7.  “Forgiving” these requirements, according to the panel, has legal obligations, as much as imposing them.  Op. 8

Having determined the stay was final action, the panel then decided that to review the stay it had to first review EPA’s reconsideration decision as the panel concluded the issues were linked under the Act.  Op. at 10 (“CAA section 307(d)(7)(B) expressly links EPA’s power to stay a rule to the two requirements for mandatory reconsideration.”)  Ibid.  With the issues now linked, the panel then reviewed the merits of EPA’s decision and found the Act did not authorize EPA’s decision to grant reconsideration. According to the panel, petitioners could have raised their objections to the rule during the rulemaking, and thus an essential requirement for administrative reconsideration was not met. Op. at 23. And, if EPA had no authority to grant reconsideration, then the three-month stay was not authorized and had to be vacated.

Dissent

In her dissent, Judge Brown likewise started with Bennett v. Spear, but reached the opposite conclusion from the panel.  First, the dissent explained, the stay is not the end of EPA’s decision-making process.  As Judge Brown reasoned, a stay is like “hitting the pause button,” and as such, “is the antitheses of ending the matter.”  Op. at 25.  Rather, this “temporary stay facilitates” EPA’s evaluation of “discrete issues” on reconsideration; “it does not resolve them.”  Op. at 26.  As such, the stay is only an intermediate step in EPA’s process that allows the agency time to convene and conduct its reconsideration process.  It does not affect EPA’s ultimate, final decision on reconsideration.  Indeed, the dissent chided the panel for using a “peculiar backdoor” to find the unreviewable reconsideration decision reviewable in an “aneurysm of activism.” Op. 28-29.  “If an intermediate stay is the consummation of an agency’s decision-making, we have conflated the agency preserving the status quo, i.e., forestalling the rule’s requirements in order to reconsider them, with the agency completing a course of action, i.e., ordering compliance.”  Op. 29 (emphasis in original).

Second, the dissent also argued that the temporary stay does not determine any rights and obligations.  The dissent acknowledged the stay has consequences, but notes that “establishes nothing.”  Op. at 29.  Instead, as Judge Brown explained, “Agency actions of various kinds, ‘final’ or not, come with consequences.  The relevant question is whether the consequences have a ‘legal force or practical effect’ beyond ‘the disruptions that accompany’ the agency making a decision to ‘initiate proceedings.’”  Op. at 29 (emphasis in original).  In this circumstance, EPA is not compelling any regulated party to do anything.  As such, the stay has no real effect.  “The stay’s consequences therefore do not impose legal or practical requirements on anyone – separating them from the kind of consequences encompassed by ‘final agency action.’”  Op. 30   The mere fact that the Petitioners are “impatient with delay” while EPA conducts its reconsideration “does not make EPA’s action final.”  Op. 30-31.

Conclusion

Even if the court denies the en banc rehearing request, the panel decision still may have only a short-term potential impact on sources subject to the 2016 Rule.  The panel emphasized that EPA remains free to revise existing rules, including compliance deadlines requirements.  Op. 23 (“nothing in this opinion limits EPA’s authority to reconsider the [2016 Rule] and to proceed with its” rulemaking to extend the compliance deadline by two years).  That said, the court’s expansive reading of “final agency action” and scrutiny of EPA decision-making bears close watching.

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