We Shouldn’t Dismiss “Sue and Settle” – or Other Regulatory Problems

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Sue and settle tactics may influence agency behavior and rulemaking.

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Are “sue and settle” tactics used by regulatory agencies something we need to worry about? Not according to Daniel Walters, who argues in a recent The Regulatory Review essay that the practice of agencies collusively settling deadline lawsuits “almost never occurs” and that, to the extent it does, it contributes “to the democratic character of what is otherwise a very shadowy forum.” Such claims are only plausible under the sort of logical positivism on which so much academic writing about regulatory topics is premised, in which the only “facts” about which we can speak (or that we care about) are those that can be found in published literature.

People who have spent their careers as environmental practitioners know that deadline lawsuits and settlements have largely dominated the U.S. Environmental Protection Agency’s (EPA) regulatory agenda for the last several decades. Most of us have also experienced the “sue and settle” game first-hand, sometimes from both sides, and can explain what’s wrong with it. This issue should not distract us, however, from the much greater opportunities that currently exist to improve the regulatory system.

According to Walters, a U.S. Government Accountability Office (GAO) study shows that “between May 2008 and June 2013, the EPA only issued nine rules from seven settlements” made with environmental non-governmental organizations (ENGOs). To be more accurate, the GAO report says that the EPA issued nine major rules growing out of such settlements – or about one every seven months – each of which, by definition, had or will have at least a $100 million impact on the economy in one or more years. GAO (but not Walters) also explains that the EPA issued five other major rules in that same period pursuant to court orders where settlement talks failed. In short, ENGO deadline lawsuits drove 41% of the 32 major rules issued by the EPA over those five years.

Deadline lawsuits have policed essentially all of the EPA’s air program in recent decades, just as the Environmental Defense Fund “mega-deadline” lawsuit governed much of the Resource Conservation and Recovery Act (RCRA) program throughout the period before. Deadline suits have been filed under the Comprehensive Environmental Response, Compensation, and Liability Act (most recently, the “108(b)” financial responsibility rulemaking) and most other EPA programs. Obviously, these suits are enforcing congressional deadlines that the EPA has missed. But the EPA has missed a lot of deadlines, and so the EPA is negotiating much of its workload with ENGOs.

What’s wrong with that? Potentially two things, as I saw first-hand in the 1990s. At the outset of that decade, the U.S. Court of Appeals for the D.C. Circuit struck down the RCRA “mixture and derived-from” rules for procedural reasons. Congress in 1992 required the EPA to finalize a replacement rule by October 1994. The EPA attempted to develop an ambitious, risk-based replacement rule through a stakeholder dialogue, but it soon became obvious that the EPA would never meet Congress’s deadline.

I worked at a chemical industry trade association that was deeply involved in the rulemaking effort, and at one point I suggested to an EPA staffer that we might file an anticipatory deadline suit. He was intrigued by the idea, noting, “it does help you secure resources.” In the end, we and the waste treatment industry filed suits after the deadline passed. The U.S. Department of Justice, the EPA, and the waste treatment industry then conducted negotiations (from which my association was excluded, even though we had intervened in the waste treatment industry’s suit), resulting in a settlement by which the EPA agreed to propose, though not necessarily finalize, certain regulatory options eagerly sought by the treatment industry (because – surprise – the options would have required extensive waste treatment). In the end, the risk-based rulemaking collapsed under the weight of its complexity, and the EPA met its legal obligation by reinstating, this time without procedural error, the original rule.

There can be no realistic dispute that, when the EPA is required to issue a proposed or final rule by an agreement that is subject to judicial supervision, that rulemaking is going to have a stronger claim on agency resources than projects not so supervised. The EPA may not “make changes in existing budget allocations specifically to address settlements in deadline suits,” as it told GAO, but obviously those settlements will drive future budget allocations.

Congress intends the EPA to issue rules when it subjects the EPA to deadlines, but currently, those deadlines end up being recrafted by the EPA, ENGOs, and judges. Other stakeholders often have views on what the EPA is going to be doing less of, or later, as a result. The pending “sue and settle” legislation that seemed to animate Walters’ essay would just allow these stakeholders to intervene and express those views in the course of settlement discussions overseen by a judge or other third-party neutral, rather than (at best) being relegated to filing comments on the proposed agreement (a process that, in my experience, has never been effectual). This may actually have been Congress’s intent under Section 113(g) of the Clean Air Act, which established the public comment process to allow “persons who are not named as parties or intervenors…to comment” on certain proposed settlement agreements.

Most problematic is the EPA’s tendency, as I saw in the example I mentioned above, to agree in settlements to propose one or more very specific regulatory options in proposed rules. As Walters explains, “many of the most important substantive decisions are made by the time the agency publishes a notice of proposed rulemaking in the Federal Register.” While the agency remains free to finalize something else, the agency will have devoted a substantial amount of the limited resources for that rulemaking fleshing out and supporting an ENGO’s preferred option. The result is inevitably a thumb on the rulemaking scales. These settlement negotiations, not the normal pre-proposal process going on outside the courthouse, are the more influential and still more troubling “shadowy forum.” The pending legislation would just allow other interested intervenors to participate in the process.

In fairness, Walters’ post on “sue and settle” legislation is no more hyperbolic than the rhetorical justifications advanced by the biggest proponents of those bills. Political polarization has led the policy debate to fixate on comparatively minor issues like “sue and settle,” making it virtually impossible to have rational discussions about the merits of other, much more important opportunities to improve the regulatory process – as Rebecca Strauss helpfully explained in her recent The Regulatory Review essay. For example, lawmakers could benefit from truly substantive debate about whether and how to bring independent regulatory agency rulemaking under the Office of Information and Regulatory Affairs’ oversight, or about whether and how to require major rules to contain a plan for when and how their effectiveness could be assessed. Most apposite to Walters’ concerns, the Senate version of the Regulatory Accountability Act in the last Congress contained a “notice of initiation” mechanism that would have brought more transparency to the “shadowy” pre-proposal discussions that agencies have with the universe of interested stakeholders. But we can’t have productive conversations if these issues are reflexively cast as a morality play.

This essay is part two of a three-part series on The Debate Over “Sue-and-Settle” Legislation

Jamie Conrad

Jamie Conrad is the principal of Conrad Law & Policy Counsel, a law and lobbying practice based in Washington, D.C. Having practiced regulatory law for almost three decades and formerly served as Chair of the ABA Section of Administrative Law and Regulatory Practice, Conrad currently represents business interests on the issues discussed in this essay.