Environmental Law Prof Blog

What Does the Trump Administration Have Against Industries Negotiating Deals with Regulators?

Last Thursday morning, the Environmental Protection Agency and the National Highway Transportation Safety Administration revoked California’s authority to regulate mobile sources’ greenhouse gas emissions.  Todd's previous post here provides a concise summary of the legal issues, and other bloggers have already done a nice job explaining the revocation rule’s flaws and the reasons why many of the Administration’s public claims about the new rule are dishonest.  I won’t rehash those points here. 

My interest is in a particular motivation for the new rule.  The Trump Administration seems to have been outraged that California and major carmakers tried to negotiate an agreement resolving their modest differences.  And the outrage at that deal seems to go well beyond general frustration with California’s opposition to the Trump Administration climate policies.  The Administration appears to have accelerated the schedule of the revocation and made it a separate decision partly because of California’s negotiations; the preamble to the final rule goes on at length about those negotiations; Trump and his political appointees have unleashed an unusually high number of anti-California taunts and threats in recent days; and, perhaps most tellingly, the administration has launched an antitrust investigation into the automakers who tried to compromise with California. In short, the fact that California and automakers were negotiating a deal seems to have given the administration a fit.

This hostility to deals between regulators and the regulated isn’t a new thing.  A few weeks earlier EPA announced a policy against the use of “supplemental environmental projects” in environmental settlements.  A SEP is an environmentally beneficial project carried out by an entity that had violated some environmental law, and the money spent on the project partially reduces the financial penalty the violator otherwise would have paid.  Usually both sides see SEPs as good deals: rather than just pay a fine, the money improves the environment and the community where the violation occurred (and if either side doesn’t like the deal, it can reject it).  So SEPs ought to appeal to an administration ostensibly interested in dealmaking and regulatory flexibility.  But the Trump Administration has prohibited using SEPs to settle enforcement actions against government entities and has suggested it might try to eliminate them entirely.

This hostility to negotiated deals also shows up in the administration’s persistent attacks on compensatory mitigation, which I’ve written about here.  Compensatory mitigation allows people to damage the environment in ways that would be otherwise unallowable so long as they provide extra environmental restoration or protection someplace else.  In other words, it allows flexibility for negotiated deals. At its best (it is not always at its best), the deals can be beneficial for both regulated entities and the public: regulated activities can proceed in desirable locations while high-value environmental resources are protected or restored.  But the Trump Administration has been attacking compensatory mitigation for several years now, sometimes with enthusiastic support from congressional Republicans.

All of this might seem a little odd.  If you like regulatory flexibility, and you like deals, what’s not to like about a deal that provides regulatory flexibility?  Perhaps the answer is that you really dislike the regulations that made the deal necessary.  That partially explains why the Trump Administration is trying to revoke California’s authority over greenhouse gases, though it doesn’t explain why the act of negotiating seems to have drawn so much extra ire.  And it also doesn’t explain why the administration is going after SEPs or compensatory mitigation.  In either case, the assault on negotiation just reduces a regulated entity’s options.  Why do that?

One answer, explored in an interesting article by law professor Lee Anne Fennell, is that if you dislike government regulators, perhaps anything that takes flexibility away from those regulators is appealing, even if it undercuts flexibility for regulated entities.  The goal, in other words, might just be to hurt government however you can, regardless of the collateral consequences for regulated entities.  Fennell offers this theory as a partial explanation for conservative affection for cases like Nollan v. California Coastal Commission and Dolan v. City of Tigard.  I think she’s on to something, but conservative activists aren’t just creatures of emotion.  There are strategic calculations at work here as well.

A second possible reason, which I explored in the essay on compensatory mitigation, is a sense government regulators will be less inclined to implement laws at all if they don’t think they can implement them in a flexible way.  Regulators are generally well aware that enforcement is controversial, and they therefore may be somewhat reluctant to embark on a regulatory initiative if they know it will culminate in a financial penalty—particularly if that penalty will be imposed on a powerful or sympathetic actor like a prominent business or local government.  The possibility of a SEP or a compensatory mitigation deal therefore might make implementing the law more feasible.  And if you don’t want implementing the law to be feasible, taking that option away might make some strategic sense; it’s just a way to ensure that there’s less enforcement overall.

Then there’s a third possibility, which I suspect explains some of the vehemence the administration has displayed against the California-automaker deal: the outrage is largely about maintaining a united industry front against regulators.  Consider, for a moment, the incentives of antiregulatory activists and politicians, a category that clearly includes the Trump Administration.  In many circumstances, they have made alliances with and get their money from businesses that are desperately opposed to regulation.  The coal industry is the most obvious example (for-profit colleges might be another); its viability depends on society’s willingness to tolerate massive externalization of costs, and government regulation is the means through which such tolerance usually comes to an end.  That means these industries badly need alliances with politicians and are willing to spend serious money to maintain those alliances, and the Republican Party has happily soaked up that money and political support. 

But there just aren’t enough desperately anti-regulatory businesses to dominate politics on their own.  Instead, those businesses and their political clients need alliances with a more mainstream business establishment, and also with public-sector entities that have mixed feelings about oversight from other parts of government.  Those alliances exist and have been powerful for years, but they also are fragile; many businesses, like the automakers, have realized that a world with stronger environmental regulations is world in which they can thrive (and some realize it might be the only world in which they can thrive).  Consequently, every settlement with regulators, and every negotiated deal that accommodates both environmental and business goals, is a threat to a fragile alliances upon which hyper-antiregulatory businesses and the Trump Administration both depend.  Without a more generalized business-environment conflict, and without a widespread perception that business and regulation are implacably at odds, their tenuous coalition falls apart.

Of course, that’s not the only dynamic in play.  Clearly Trump is lashing out at California partly because of his perpetually wounded pride.  But this administration has long pursued a strategy of ruthless disciplining allies that seem to waver in their support, and it also clearly perceives value in conflict.  As political strategy, that might all be quite smart.  But for people who want a well-governed society in which regulated entities thrive, it should be deeply concerning.

- Dave Owen

Some Observations on EPA and NHTSA’s Rule Revoking California’s Authority to Regulate Greenhouse Gas Emissions from Vehicles

As the media has widely reported, yesterday EPA and the National Highway Traffic Safety Administration (NHTSA) revoked California’s authority to regulate greenhouse gas emissions from vehicles.  California, other states, and environmental groups will file suit to challenge the new rules.  The agencies’ action raises lots of issues that will be litigated in the court challenges.  Here a few of my observations after reading the new rules.

The NHTSA rule relates to the agency’s authority under the Energy Policy and Conservation Act of 1975 (EPCA) to set fuel economy standards for vehicles.  EPCA gives NHTSA authority to regulate fuel economy in motor vehicles.  Section 509 of EPCA also preempts some state regulation; it provides that states “may not adopt or enforce a law or regulation related to fuel economy standards.”  49 U.S.C. § 32919(a).  The question NHTSA addressed in yesterday’s rule is whether a state emission standard that does not directly regulate fuel economy standards, but that nevertheless affects fuel economy standards, is “related to fuel economy standards” and thus preempted.  Everyone agrees that California’s greenhouse gas emission standards affect fuel economy.  NHTSA’s rule announced yesterday clarifies the agency’s position that EPCA preempts state vehicle emission standards that “directly or substantially affect” fuel economy.  If NHTSA’s interpretation broad interpretation is correct, then it would seem that the agency is correct that EPCA preempts California’s greenhouse gas emission standards.  But it looks to me that the agency’s interpretation goes farther than even it would like and therefore must be wrong.  Here’s why.

California has long regulated pollutant emissions from vehicles under special authority granted to it under the Clean Air Act.  More on that below.  It would thus be very difficult for NHTSA to argue that California lacks authority to regulate vehicle emissions of traditional pollutants, known under the Clean Air Act as criteria air pollutants.  Rather, the agency wants to limit the reach of its new rule to preempt only standards that regulate greenhouse gas emissions, which California has only started doing in the 2000s.  But vehicle emission standards for traditional pollutants substantially affect fuel economy.  So, NHTSA’s theory that EPCA preempts any state emission standard that substantially affects fuel economy would seem to wipe out all of California’s emission standards, not just its greenhouse gas emission standards.  Even if this Administration might like that, it is an untenable legal position, because the Clean Air Act explicitly gives California authority to adopt vehicle emission standards.  In other words, NHTSA’s rule seems incompatible with the Clean Air Act, which is a pretty good indication that it goes too far. 

As to the EPA side of yesterday’s rule, I think the issues are murkier.  Clean Air Act Section 209 preempts state vehicle emission standards but also directs EPA to waive preemption for California for any state emission standards that are at least as stringent as federal standards, as long as the state standards are needed “to meet compelling and extraordinary conditions” and are consistent with federal emission standards.  42 U.S.C. § 7543.  As EPA readily admits, it has traditionally granted California’s requests for waivers under Section 209 after only cursory review.  In yesterday’s rule, EPA decided that California’s greenhouse gas emission standards for vehicles are not needed “to meet compelling and extraordinary conditions” in California because climate change is a global problem, and emissions from California vehicles do not affect California particularly.  EPA argues that greenhouse gas emission standards are in this respect fundamentally different than emission standards for criteria air pollutants.  This seems like a key underlying issue in this dispute:  Should greenhouse gases be treated like other air pollutants under the Act (in which case California probably should authority to regulate them through emission standards), or are they different in ways that matter to the application of the statute?  The Supreme Court’s decision in Massachusetts v. EPA, which essentially concluded that greenhouse gases are air pollutants under the Clean Air Act, supports the former position, while its later decision in UARG v. EPA, which held that not all Clean Air Act regulatory programs should apply to greenhouse gases, provides some support for the latter. 

A court also will have to decide whether the dire effects of climate change in California make the need for state emission standards “compelling and extraordinary,” or whether the effects must be California-specific and different from other states to be “compelling and extraordinary.”  One weakness in EPA’s position is its repeated insistence in yesterday’s rule that Congress’s sole motivation for giving California authority to set emission standards under Clean Air Act Section 209 was California’s special air pollution problems.  This supports EPA’s current position, because climate change is not a California-specific air pollution problem.  But the text of Section 209 makes clear, and the legislative history supports, that Congress also was motivated to give California special authority to regulate because the state already had shown leadership and initiative in tackling air pollution issues, before Congress enacted the Clean Air Act.  This seems to support allowing California to play a similar role with respect to climate change, and it’s a factor that EPA does not acknowledge in its rule.

Both agencies, but especially EPA, also will have to grapple with the fact that they are attempting to revoke regulatory authority that EPA previously granted to California, as opposed to denying that authority when California first requested it.  Some have argued that EPA lacks authority under the Clean Air Act to revoke a Section 209 waiver it has granted.  I am skeptical of that argument, because agencies generally have authority to reconsider past decisions and to correct past mistakes.  If EPA were to make a blatant error in granting a Section 209 waiver, I would think it would—and should—have authority to reconsider and revoke the waiver.  But I do think it should matter that EPA greenlighted the California standards.  Exactly how this should play into the court’s analysis is unclear.  Arguably it should increase the burden of the agencies to justify their position.  It also may affect the way that the court treats statutory ambiguity.  Under the Chevron doctrine, Courts often give deference to an agency’s interpretation of an ambiguous statutory provision.  Application of the Chevron doctrine here will already be in dispute, because of the agencies’ shifting position.  But, if one accepts that Clean Air Act Section 209 is ambiguous as to the scope of California’s authority to adopt emission standards, there seems to be a decent argument that EPA acted arbitrarily and capriciously simply by changing its interpretation after already approving California’s waiver under a different interpretation.  In other words, the agency may have acted arbitrarily and capriciously by revoking a prior decision based on a change from one otherwise reasonable statutory interpretation to another.  

--Todd Aagaard

New Study Shows Effects of Enforcement Actions on Emissions from Power Plants

One of the joys of working as an academic is that part of our job is just to read and learn from the works of others, even if it is not directly relevant to our own research.  Having recently shed significant administrative responsibilities, I have had more time to read some of the interesting scholarship that is being released.  One study that caught my eye over the summer was a working paper by Sam Krumholz, a PhD student at UC San Diego, entitled The Effectiveness and Incidence of Litigation as a Policy Instrument: The Case of the New Source Review Settlements.  The study immediately interested me for a couple of reasons.  First, I enjoy reading research about the law by non-legal academics, who tend to bring a different perspective to their analysis of legal topics.  Second, Krumholz’s study investigates the effects of enforcement actions that were underway during the time I was working as an environmental lawyer at the Justice Department, although I did not work on the cases Krumholz analyzes.  One of the debates at the Department was whether the enforcement cases being brought against coal-fired power plants for alleged violations of the New Source Review requirements under the Clean Air Act were accomplishing results that justified the considerable investment of resources by EPA and DOJ to litigate the cases.  Krumholz’s study offers important evidence about the positive impacts of the litigation.

Krumholz’s study evaluates the impacts of EPA’s New Source Review (NSR) Initiative, a series of enforcement actions taken in the early 2000s against certain coal-fired power plants, alleging that the plants had violated the Clean Air Act by undertaking major modifications without going through the New Source Review permitting process that would have led to more stringent emissions limitations.  As Krumholz notes, the NSR Initiative ultimately encompassed more than one-third of coal-fired power plants in the United States and required compliance measures estimated to cost more than $25 billion. 

Krumholz’s objective was to use empirical analysis to determine the effects of the consent decrees that settled enforcement actions brought under the Initiative.  Krumholz found the following:

• Consent decrees were associated with significant emissions reductions (-20%) of nitrogen oxides and sulfur dioxide from the power plants.
• Ambient pollution levels near the power plants fell significantly for sulfur dioxide (-33%) and ozone (-4%). The smaller decrease for ozone probably reflects the fact that power plants are just some of the many contributors to ozone pollution.
• Cardiovascular mortality in counties near the power plants fell significantly (-1.5%).
• For power plants owned by investor-owned utilities, almost all of the cost of the settlements was passed on to ratepayers in the form of higher rates. Investor-owned utilities are subject to cost-of-service regulation, which allows them to recoup their costs in the rates they charge for their power. Due to data limitations, Krumholz was unable to analyze the impact on rates from consent decrees involving power plants in areas with competitive wholesale electricity markets.  Standard economic theory, however, would reason that power plants in competitive markets would not be able to pass on as much of their compliance costs in the form of higher rates.

Most legal scholars are familiar with regulatory impact analyses that prospectively project the costs and benefits of new regulatory proposals and regulations.  Less common are economic studies that retrospectively analyze the costs and benefits of regulations.  Krumholz’s study is an example of a third category, of which I have not seen many in environmental law:  empirical studies of the impacts of strategies to enforce environmental standards. 

One of my favorite pieces of environmental law scholarship has long been Dan Farber’s 1999 Taking Slippage Seriously article in the Harvard Environmental Law Review, which argues that environmental law should pay more attention to slippage—the gap between regulatory standards and the actual conduct of regulated parties.  Krumholz’s study provides an empirical basis for understanding the impacts of enforcement actions that reduce slippage, and therefore helps us understand both the impacts of slippage and the material benefits of enforcement actions.  It would be great to see more empirical studies of the effects of environmental enforcement and litigation.

--Todd Aagaard

Environmental Law Writing Competitions for Students - A (Hopefully) Comprehensive List

If you’re a second- or third-year law student with an interest in environmental law, chances are pretty good that you’ll soon be writing an environmental law paper.  You might write a few.  And you might be pleased to know that once your paper is complete, there are many different writing competitions to which you might submit it (or a shortened version of it).  Information about those contests is spread around the web (many schools have pages listing contests, but they’re generally incomplete and often have broken links), so I thought a consolidated list might be helpful.

A few things are worth noting about the table below:

-   While this list is more comprehensive than any other that I’ve seen, I’m not sure I’ve captured everything.  If readers know of missing competitions, please let me know and I’ll add them. 

- The reason I don’t have exact deadlines is that many competitions haven’t yet announced their 2020 deadlines.   

- The length limits for the ABA competitions are based on last year’s requirements.  This year’s requirements haven’t been posted yet.

- I haven’t included columns that list prize money or publication opportunities and obligations.  But many of these competitions do have money associated with them.  For those details, as well as additional details about length, formatting, and submission procedures, you should follow the links to the web pages for each contest (and keep in mind that some contests will update this information later this year).

Contest	Subject Matter	Deadline	Length
ABA Endangered Species Writing Competition	endangered species	May	< 10 double-spaced pages (footnotes can be single-spaced)
ABA Energy Law Writing Competition	energy	May	< 10 double-spaced pages (footnotes can be single-spaced)
ABA Public Land Law and Policy Writing Competition	public lands	May	< 10 double-spaced pages (footnotes can be single-spaced)
ABA Water Resources Law Writing Competition	water resources	May	< 10 double-spaced pages (footnotes can be single-spaced)
American College of Environmental Lawyers Stephen E. Herrmann Environmental Writing Award	environmental law	June	Published student notes and comments are eligible.  Nominations made by journals, not authors.
California Water Law Writing Prize	water resources (California focus preferred but not mandatory)	December 6, 2019	under 5,000 words
ELI Constitutional Environmental Law Writing Competition	constitutional and environmental law	April	50 double-spaced pages or less
IEL Hartrick Scholar Writing Competition	energy law	December	8,000 words or less
New York State Bar Association Animal Law Writing Competition	animal law	July	25 double-spaced pages or less
Smith-Babcock-Williams Student Writing Competition	law and land use planning	June	45 double-spaced pages or less
White River Environmental Law Writing Competition	environmental law and related fields	March	15-30 double-spaced pages

- Dave Owen