Sue And Settle: The USEPA’S Questionable Approach TO CAA Rulemaking

In recent years, USEPA has been increasingly engaging in a tactic with environmental groups to implement more stringent requirements under the Clean Air Act (“CAA”) without the opportunity for public scrutiny or objection, known colloquially as “sue and settle” rulemaking . This process, in effect, allows USEPA to impose such requirements while skirting the notice and comment protections set forth in administrative laws, such as the Administrative Procedures Act. In some cases, sue and settle rulemakings lead straight to the passage of federal implementation plans (“FIPs”).

In a typical sue and settle situation, an environmental group files suit against USEPA, but rather than defend the suit, USEPA enters into settlement negotiations, and proposes to take action based upon the group’s demands. The deal reached by the USEPA and the environmentalists often includes arbitrary deadlines that offer no meaningful opportunity to present a competing viewpoint on substantive issues. The court may approve and enter the settlement with little discussion. When USEPA implements the new requirements and opposition is raised, it argues that it is compelled by court order to do so based upon the terms of the decree. If a citizen or company wishes to challenge USEPA’s plan, it must clear the high hurdle of arbitrary and capricious review, a legal standard that affords considerable deference to USEPA decision-making.

The sue and settle tactic has been notably used in the context of regional haze regulation.[1] Here, states were required to submit state implementation plans (“SIPs”) defining emissions limits and controls for the sources located within their borders. Separately, USEPA entered into consent decrees whereby it agreed to accept or reject these SIPs by certain deadlines. USEPA then delayed taking action to reject each state’s proposed plan until just before its court-imposed deadline (and in some cases, after the deadline). As insufficient time is left for addressing any stated deficiencies in the state plans, USEPA is then “forced” to impose a FIP to comply with the deadline agreed to in the consent decree. The federal plans tend to include far more stringent requirements than state proposals, vastly increasing compliance costs.

The U.S. Chamber of Commerce, which has vocally opposed sue and settle rulemaking, estimates that USEPA’s regional haze FIPs will cost coal power plants in New Mexico, Oklahoma, and North Dakota a combined $375 million annually. Some state officials estimate the cost of compliance even higher.

While the coal industry has felt the impact of sue and settle rulemaking, other industries are close behind. USEPA has issued a proposed rule to impose a FIP on Minnesota and Michigan taconite mines, as well as a final rule forcing a FIP on two New York power generators. USEPA has laid the groundwork for imposing FIPs in several Midwestern and Southeastern states by partially or fully disapproved of state implementation plans. Unless the state promptly corrects all deficiencies—a near impossible task under the accelerated timelines—USEPA has the authority to promulgate a FIP within two years.

The legality of sue and settle rulemaking remains largely undetermined by the courts. However, efforts are underway to eliminate USEPA’s ability to utilize this tactic. Currently, proposed legislation in the House of Representatives would require USEPA to collect comments on its consent decrees before submission of the consent decree to the court for approval. See Sunshine for Regulatory Decrees and Settlements Act, H.R. 3862, 112th Cong. (2012). The bill would also establish a right for affected parties to intervene in litigation prior to entry of a consent decree. Id. The bill is currently before the House Committee on the Judiciary, and has been placed on the House calendar. The Republican party platform statement likewise seeks “an end to the [US]EPA’s participation in ‘sue and settle’ lawsuits, sweetheart litigation brought by environmental groups to expand the Agency’s regulatory activities against the wishes of Congress and the public.”

However, unless a divided Congress is able to act on this legislation, industries covered by USEPA regulations may still find themselves subject to additional requirements stemming from consent decrees between the government and environmental groups. Indeed, according to the Congressional statement of support for H.R. 3862, sue and settle cases have already led to new or modified standards for cement manufacturers, coal miners, oil and gas companies, electric utilities, and solid waste facilities. In its current, uninhibited form, the sue and settle tactic puts the USEPA just one court-imposed deadline away from regulating any industry within its purview – all without the public ever knowing. With sue and settle rulemaking occurring with more frequency, companies must remain vigilant and work closely with counsel to identify litigation that may threaten to undo cooperative SIP planning that it has performed with state regulators, and to prepare legal challenges where appropriate.

[1]See, e.g., Nat’l Parks Conservation Ass’n v. Jackson, No. 1:11-CV-01548(ABJ) (D.D.C., 2011); Sierra Club v. Jackson, No. 1:10-CV-02112-JEB (D.D.C., 2010); Wildearth Guardians v. Jackson, No. 1-11-CV-0001-CJA-MEH (D. Colo., 2011); Wildearth Guardians v. Jackson, No. 10-CV-01218-REB-BNB (D. Colo, 2011); Wildearth Guardians v. Jackson, No. 4:09-CV-02453-CW (N.D. Cal., 2009).