February 22, 2017
Scott Pruitt, the Environmental Protection Agency’s (EPA) new administrator, has wasted little time getting to work since his confirmation to head the agency. On Febraury 21, Pruitt gave his first speech to staff outlining his desire to bring regulatory certainty to the agency. One aspect of bringing certainty he noted in an interview is to end the practice known as “sue and settle.”
The sue and settle issue has been addressed by the U.S. Chamber since 2013, and most recently in Sue and Settle Updated: Damage Done 2013-2016, which brings to light how “sue-and-settle” litigation used by activist groups drives agency agendas by prioritizing the issuance of regulations sought by the activists. The Chamber applauds Pruitt’s statement that he intends to do away with EPA’s involvement in such settlements. While Pruitt’s new policy is a step in the right direction, sue and settlement agreements have already imposed great damage on the regulatory process and our economy.
The practice of sue and settle involves activist groups who sue an agency, primarily EPA, and the agency enters into legally-binding settlement agreement, negotiated behind closed doors with little to no public input, the results of which allow activist groups to control agency priorities. Since 2009, the tactic has led to 137 new Clean Air Act regulations alone, many of which are sweeping, economy-transforming rules that have a profound impact on states which are left to bear the brunt of EPA’s environmental mandates.
An example of a sue and settle agreement leading to sloppy rulemaking and overly-burdensome regulations is EPA’s MATS rule (Utility Mercury and Toxic substances rule) which was estimated to annually cost $9.6 billion to the economy. The Supreme Court sent the rule back to EPA in 2015 for failure to adequately consider costs in Michigan v. EPA. But by the time the court sent the rule back, the damage had already been done because many facilities had already been shut down.
More importantly, in a NERA Economic Consulting study prepared for the Chamber, it was found that “the MATS rule would have a negative impact on worker incomes equivalent to 180,000 to 215,000 lost jobs in 2015, and the negative worker income impacts would persist at the level of 50,000 to 85,000 such ‘job – equivalents’ annually thereafter.”
Federal Implementation Plans
Unfortunately, sue and settle tactics have not only impacted agency rulemakings but have eroded state sovereignty. By way of illustration, the Clean Air Act (“CAA”) authorizes states to craft implementation plans to comply with the statute; e.g. Regional Haze implementation plans. If EPA finds the state plan insufficient, it can issue a Federal Implementation Plans (“FIP”), however, such actions are rare. But activist groups have used sue and settle agreements to sue EPA for approving state air implementation plans such as regional haze. When EPA settled these cases it agreed to impose impose FIPs on the states. These FIPs are in essence, a federal takeover of state responsibility.
As seen below, the number of FIPs imposed on states by the Obama administration over the last eight years was many times more than all the FIPs ever issued by all administrations.
Going even further, activist groups entered into settlement agreements with the EPA challenging the individual operating permits granted to facilities. This type of settlement agreement enables the EPA and special interest groups to rewrite facility permits, taking states out of the permitting process and removing much-needed certainty for the regulated community and businesses.
While the change of policy on sue and settle agreements at EPA is welcomed news, much damage to the businesses of the nation has already been done.
Time for Action
We’ve asked Congress to pass the Sunshine for Regulatory decrees and Settlements Act sponsored by Sen. Grassley and Rep. Collins of Georgia. If the Sunshine Act cannot be passed by Congress, Administrator Pruitt should issue a regulation prohibiting EPA from entering into sue and settle arrangements. Policymakers should go further, however and limit the use of citizen suits to parties who can prove actual injury, as is the case with all other citizens who sue the federal government.
Administrator Pruitt has a great challenge before him as he works to refocus EPA’s mission from one of a political activist organization to one that strives to achieve its congressionally-directed mission of protecting us and our air, water, and land. His speech to the EPA staff and his first interviews chart the right course; now he needs to implement it.
This post was updated on May 23, 2017, and reflects the following changes: "Febraury 21" replaced "Yesterday" and "Sue and Settle Updated: Damage Done 2013-2016" replaced "Sue and Settle: Regulating Behind Closed Doors".