The following is a viewpoint from J. Michael Showalter and Ryan Granholm, environmental attorneys at Schiff Hardin.
Continuing reductions in environmental regulations across the power industry may seem like a good time for the C-suite to direct energy and attention towards other key priorities, but there is another force steadily working to tug reform back over the line — highly organized and increasingly strategic NGOs. Because deregulation is antithetical to their policy preferences, environmental groups routinely argue that federal agencies violate federal statutory laws, and power plant operations and infrastructure get caught in the crossfire.
The early days of the Trump Administration were marked by expansive promises of deregulation accompanied by efforts to stay or press pause on various rules and regulations issued in the waning days of the Obama Administration. Since then, NGOs have sought to challenge these stays and related delays using "citizen suit" provisions in many of the statutes themselves as well as statutes like the Administrative Procedure Act.
Citizen suits allow private parties to challenge an agency's failure to adopt regulations that a statute requires or to allege that an agency has been "too slow" in adopting regulations. The uptick in citizen suit cases filed by NGOs is their attempt to compel action and force the Trump Administration to act in response to a regulatory process they see as "too slow."
Several recent cases chart out the regulatory limits of executive power and outline a clear lesson — while it's not easy to reverse the course of the regulatory state, NGOs and other parties challenging agency action through citizen suits are seeking to demonstrate that regulators are allegedly overlooking obligations Congress imposed on them.
The first example is the Second Circuit's recent decision in Natural Resources Defense Council (NRDC) v. NHTSA involving a rule the Obama Administration enacted related to penalties for violations of fuel economy standards. After the Trump Administration took over, the penalty rule was quickly stayed in an attempt to halt enforcement of fuel emissions. An environmental NGO sued, saying that the rule conflicted both with the Federal Civil Penalties Inflation Adjustment Act Improvement Act of 2015 — which the Obama Administration said was what compelled the rule — as well as the Administrative Procedure Act.
The Second Circuit sided with the NGO and reversed the stay, in essence relying on three key principles:
Even the president must follow statutes. The court agreed with the previous administration that it needed to put the rule in place by looking at the history of the involved statutes.
Regulatory reform must be orderly. The court accepted the NGO's arguments that pressing pause on an existing rule didn't comply with the Administrative Procedure Act, which is basically a rulebook for federal agencies.
"Look Mom, but all the other kids do it" is not a valid legal argument. The court paid no attention to the fact that lots of agencies sought to use similar stays.
But NGOs are not always as successful in persuading a court to see it their way. A second case — the Fourth Circuit's decision in Ohio Valley Environmental Coalition v. Pruitt — provides both a more local example as well as illustration of a case where an agency got the benefit of the doubt.
Under the Clean Water Act (CWA), states are required to develop Total Maximum Daily Loads (TMDLs) for waters that are considered "impaired" — meaning not suitable for their designated uses. In 2012, the West Virginia Legislature enacted a bill requiring state regulators to create a new methodology for developing certain TMDLs. However, by the time the plaintiffs filed suit in 2015, West Virginia had not yet adopted a new methodology. Further, the state projected that it would not complete the process of developing new TMDLs until 2025.
The environmental groups sued in federal district court, claiming that because West Virginia has failed to develop the TMDLs, the EPA was required to issue its own water quality standards to fill the gap. While the district court agreed with the NGO, the Fourth Circuit sided with the agencies, because the EPA and the state agreed that West Virginia has a "credible plan" to complete TMDLs — even if the plan required several more years.
The two decisions discussed here differ because in one, the regulatory agency appeared to have overlooked the explicit wording of relevant statutes. In the other, even though the challenger identified an action that regulators were obligated to (eventually) conduct, the court was persuaded that the regulators had a credible plan in place to meet their statutory obligations. In close cases, agencies frequently get deference to create policy.
In other words, NGOs don't always win their cases, but they do regularly draw attention to agencies, companies, and states they allege are not in line with the decades-old federal environmental rules. With that in mind, utilities should consider two immediate and long-term action items to defend against ongoing citizen suits that can affect their bottom line:
Fully engage in the regulatory process
- Invest in good technical and legal advice, and pay attention to issues and continuing trends through trade associations and trade press. There's a lot of available information out there.
- Make sure all relevant parties — from the plant level to the C-suite — stay abreast of key environmental issues that can affect your business. Both bring important perspectives — plant employees often see things that will significantly affect the nuts and bolts of day-to-day operations more than the C-suite may realize.
- Where changes are coming, active involvement is key — from preparing and submitting comment letters to agencies by filing rule challenges to submitting "friend of the court" briefs — evaluate appropriate action and be proactive.
Pay attention and get involved
- Statutes create the guardrails for executive policy. Some policy changes require moving these guardrails, and only Congress can do that by revising major environmental statutes like the Clean Air Act (CAA) or Clean Water Act.
- While the Trump Administration has promised a regulatory rollback, regulatory changes take time because they need to comply with both statutes like CAA or CWA as well as procedural statutes like the Administrative Procedure Act.
Until Congress makes substantive changes to revise the existing rules governing these major statutes — a phenomenon not expected to happen anytime soon — this trend is likely to continue.