Fossil fuel companies threaten to complete the regulatory capture of EPA.
The U.S. Supreme Court has agreed to decide whether federal law preempts Boulder County, Colorado, from suing oil and gas companies for contributing to global climate change. In its lawsuit, which is one of dozens of similar lawsuits filed by state, tribal and local governments, Boulder County contends that “It has incurred and will continue to incur millions of dollars in costs to protect its property and residents from the impacts of climate change,” because the defendants contributed to climate change while obscuring fossil fuels’ dangerous climate impacts. The fossil fuel companies, supported by the Trump Administration, counter that the lawsuit is preempted by the Clean Air Act. The Court’s decision will have a substantial impact on the potential for regulatory capture, but that issue has not received the attention it deserves.
Regulatory capture—the problem of private industry gaining effective control over the regulatory process—is attributed to the dominant political and legal influence of business interests opposed to strong regulation. Business interests are generally in a better position to influence agency outcomes than the mass of citizens because it is easier for those business interests to become politically organized. And because business interests dominate the submission of information to an agency during public-comment process thanks to their greater resources, an agency only gets a one-sided understanding of a problem. Reflecting this imbalance, business interests can consistently obtain favorable regulatory outcomes.
Regulatory capture, however, is notoriously difficult to define. A decision or even several agency decisions in favor of industry are not necessarily wrong just because they were supported by a powerful and organized group. For that reason, I have proposed that regulatory capture occurs when agencies consistently adopt industry-favored policies. Most regulatory statutes, however, are aspirational; the U.S. Congress seeks to provide the greatest degree of protection that is reasonable, taking into account regulatory costs and other considerations. Given that Congress intends to maximize protecting the public, it would not have wanted an agency to persistently choose regulatory policies in response to industry influence that minimize the degree of stringency of regulations, if not avoid regulation altogether.
Based on this definition, there is ample evidence of regulatory capture at the U.S. Environmental Protection Agency (EPA). In the first Trump Administration, EPA rolled back more than 100 environmental rules. The current EPA is headed in the same consistently deregulatory direction, including proposing to reverse the endangerment finding, an earlier EPA ruling that climate change is endangering the country, despite a scientific consensus that global climate change is leading to numerous changes in the weather that harm people living in Colorado and the rest of the United States. This means that the Administration is arguing that only the federal government can regulate the sources of climate change and then taking the position that it declines to do so.
The Boulder County lawsuit is an example of how states can help to fill the regulatory gap that exists when federal agencies such as EPA are captured. Boulder Country is suing oil companies for public and private nuisance. A public nuisance exists when a company unreasonably interferes with a right that the general public shares in common. A private nuisance exists when a person’s use and enjoyment of land that person owns is interfered with substantially and unreasonably through the actions of another. Boulder Country argues that both torts have occurred.
Lawsuits like the one filed by Boulder Country provide a useful antidote to regulatory capture for three reasons. First, because the state courts constitute a broad and diverse set of institutions, the risk of regulatory capture is reduced even considering that many state judges are elected and need campaign donations. It would be nearly impossible for even well-resourced industries to capture a substantial portion of the state courts because of their sheer number. This means that there will be state courts available to protect people when EPA consistently does not do so.
Moreover, the parties in a case are allowed to present their evidence according to rules designed to put both parties on equal footing, regardless of their available resources. Members of a jury then decide the case based on the evidence presented to them. This means that litigation Davids, like Boulder County, have a more equal chance to win on the merits of their case even though they are opposed by billion-dollar corporate Goliaths.
Second, the state civil justice system provides a way to compensate people for the harms they have suffered when regulation fails to do so. Although it is preferable to rely on the regulatory system to prevent such harms, the state courts provide a form of corrective justice when regulatory agencies are captured. In this way, corporations are held accountable for their unreasonable harmful actions.
Finally, the payment of damages creates an incentive for corporations to abandon or mitigate the harmful behavior in the future. When faced with a credible threat of liability and the payment of damages, most corporations will stop or mitigate the behavior that would lead to the corporation paying compensation. When, by comparison, regulatory agencies are captured and the civil justice system is preempted, there is little left to discourage companies from continuing to engage in unreasonable behavior that injures others. When no legal system is available to protect people, a “race to the bottom” of increased loss and inequality is more likely.
Congress stated in the Clean Air Act that it did not intend to preempt state civil justice claims, and such claims obviously do not interfere with the non-existent regulation preventing oil and natural gas companies from causing climate damage. If the Court nevertheless holds that Boulder Country’s lawsuit is preempted by the Clean Air Act, the regulatory capture of environmental policy will be complete. When EPA declines to fulfill its statutory obligations, the states will be unable to address that gap. This cannot be what Congress intended when it passed the Clean Air Act.
