To:
Members, Affiliates, & Legal Affairs Committee
From:
National Office
Date:
June 27, 2000
Subject:
Circuit Court Decision Questions Authority of EPA Guidance
Reference:
Legal Alert 00-6
On April 14, 2000, the U.S. Court of Appeals for the D.C. Circuit overturned a guidance document issued by the U.S. Environmental Protection Agency (EPA) for the air program, calling into question the Agency's authority to issue prescriptive guidance outside of the rulemaking process. In Appalachian Power Company v. EPA, No. 98-1512 (see attached copy of the case), the court concluded that in issuing this particular monitoring guidance, EPA had significantly broadened existing rule requirements without conducting formal rulemaking. Though the case was brought under a specific challenge to a Clean Air Act guidance document, its practical effect could have much broader implications for guidance documents in other EPA programs.
Background
In 1992, EPA issued regulations on the adequacy of Title V state permit programs for air pollution sources under the Clean Air Act. One of the regulatory provisions addressed the degree to which air pollution sources are to employ “periodic monitoring” of emissions to measure compliance with various federal or state emission standards. The regulations did not define the frequency of “Periodic Monitoring” but indicated that the permit must provide monitoring “sufficient to yield reliable data from the relevant time period that are representative of the source's compliance with the permit.” The regulations left open for interpretation several major issues pertaining to the practical interpretation of the “Periodic Monitoring” requirement, including whether the federal or state permitting agency can “trump” existing emission standards and require more frequent monitoring in compliance with the 1992 regulations.In September 1998, EPA issued a guidance document to clarify various questions about the periodic monitoring requirement. The guidance answered the “trump” question by indicating that states and EPA regional offices may exceed the monitoring specifications of any existing standards to require more frequent monitoring. The guidance also provided specific factors for states and EPA regional offices to evaluate whether existing periodic monitoring requirements need to be augmented. The guidance was accompanied by the Agency's standard disclaimer indicating that the “policies set forth in this paper are intended solely as guidance, do not represent final Agency action, and cannot be relied upon to create any rights enforceable by any party.”
A group of effected electric utility companies (Appalachian Power Company, et al.) filed a petition for review with the Court of Appeals for the D.C. Circuit, claiming that the guidance has the effect of an Agency rulemaking and that it should be vacated because EPA had issued the document without following proper administrative procedures. The court issued a unanimous opinion that agreed with the utility companies and vacated the guidance document.
Summary of the Opinion
The opinion begins with a general observation about EPA's growing use of guidance as a substitute for rulemaking:“The phenomenon we see in this case is familiar. Congress passes a broadly worded statute. The agency follows with regulations containing broad language, open-ended phrases, ambiguous standards and the like. Then as years pass, the agency issues circulars or guidance or memoranda, explaining, interpreting, defining and often expanding the commands in the regulations. One guidance document may yield another and then another and so on. Several words in a regulation may spawn hundreds of pages of text as the agency offers more and more detail regarding what its regulations demand of regulated entities. Law is made, without notice and comment, without public participation, and without publication in the Federal Register or the Code of Federal Regulations.” (See p. 5 of attached opinion).
In response to EPA's argument that the guidance was not “binding”, the court disagreed finding that the document was binding in a practical sense. The court listed several factors for determining whether a guidance document might have a “binding effect”, including whether the Agency (1) “acts” as if a Headquarters document is “controlling in the field”; (2) treats the document in the same manner as it treats a legislative rule; (3) bases enforcement actions on the policies or interpretation formulated in the document; or (4) leads others to believe that it will declare a permit invalid unless it complies with the terms of the document. (See p. 5 - 6 of attached opinion). EPA had also argued that the guidance document was not a final Agency action. In rejecting this argument, the court indicated that two conditions must be satisfied for an agency action to be final: (1) the action must “mark the consummation of the Agency's decisionmaking process” and (2) the action must be “one by which rights or obligations have been determined, or from which legal consequences will flow.” (See p. 8 of attached opinion).
The court also dismissed EPA's reliance on its standard disclaimer noting that the statement does not relieve states and permittees of the obligations dictated through guidance. The court then addressed the validity of the guidance, relying upon the principle that an agency may not evade formal rulemaking procedures “by labeling a major substantive legal addition to a rule a mere interpretation.” (See p. 11 of attached opinion). The court determined that the guidance must be set aside in its entirety because it mandated the imposition of additional requirements not contained in the regulation without having undergone formal rulemaking procedures.
Future Implications for Agency Action
The opinion appears to send a signal that the D.C. Circuit, which has exclusive jurisdiction over review of many EPA rules of national applicability, will closely limit the Agency's practice of rule by guidance document. While it is unclear how the Agency will respond to and interpret the ruling, the Appalachian Power decision will certainly encourage a greater level of scrutiny by the regulated community over EPA guidance. The ruling will also add increased importance to AMSA's timely review of new EPA guidance documents as they are issued.For more information, please contact Greg Schaner at 202/296-9836.
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