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Bar News - September 16, 2011

Environmental & Natural Resources : Subject to Interpretation: The Limitations of Environmental Agency Guidance Documents


Mark C. Rouvalis
In the publicized case of American Electric Power Co. v. Connecticut, the Supreme Court recently held that Congress had authorized the Environmental Protection Agency (EPA) to regulate greenhouse gas emissions under the Clean Air Act. 131 S. Ct. 2527, 2537 (2011). This authorization displaced any federal common law of nuisance concerning the release of carbon dioxide gas, effectively precluding the plaintiffs’ federal common law claims to force a limitation upon companies that produce these emissions. More importantly, however, this marked the second time in a few years the Court affirmatively stated that Congress had granted the EPA the power to regulate the emission of greenhouse gases, widely considered to be at the root of global warming. See also Massachusetts v. EPA, 549 U.S. 497, 560 (2007). With the EPA promising a final determination by next May as to whether it will set controls on emissions from power plants, new rules regarding greenhouse gases may be forthcoming. American Electric, 131 S. Ct. at 2538.

These two Supreme Court cases confront the scope of the EPA’s regulatory rulemaking, coming down squarely in favor of the agency. They implicitly raise the question whether any challenges to environmental agencies’ broad authority of this type is viable. Yet, valid bases for challenging agency enforcement acts do exist. One such area is the misuse by federal (or state) environmental authorities of so-called guidance documents as establishing enforceable regulatory standards.

A rule or standard put forth by an agency is rarely the final act when it comes to establishing policy. Appalachian Power Co. v. EPA, 208 F.3d 1015, 1019 (D.C. Cir. 2000). More often, it is the first of many steps that will define the scope and scale of a regulation. Id. Agencies often issue statements of policy, known as "guidance documents," to explain, interpret, define, or detail what the regulations demand of a regulated entity. Exec. Order No. 13,422, 3 C.F.R. 191, 192 (2007). The EPA, in particular, issues these notices on almost all legislation related to the environment, maintaining an online database that hosts hundreds of guidance documents and compliance bulletins. EPA Policy & Guidance; Sam Kalen, The Transformation of Modern Administrative Law, 35 Ecology L. Q. 657, 672-73 (2008). The challenge facing regulated entities (and their representatives) is determining the effective authority and limitations of these agency-promulgated statements.

Though it addresses policy, a guidance document differs significantly from both legislative rules and statutes because, unlike the former, it is not legally binding. See, e.g., Appalachian Power, 208 F.3d at 1020. Rather, the purpose of a guidance document is to provide either an interpretation or clarification of statutory, regulatory, or technical issues, a need that is acutely important to environmental agencies (consider the ever-changing landscape and scientific knowledge with regard to natural resources, gas emissions, water quality, pollutants, waste, etc.). See generally, EPA Policy & Guidance; See, e.g., Environmental Law Reporter, Clean Water Deskbook, 171- 445 (Environmental Law Institute 1991) (1988); Subsurface Vapor Intrusion Guidance, 76 Fed. Reg. 230, at 2 (Nov. 29, 2002). Before producing a rule, agencies can use a guidance document to inform the general public about how it plans to apply policy to certain situations. Richard J. Pierce, Jr., Admin. Law Treatise § 6.3 at 319 (2002). After a rule is published, it can serve to fill gaps and clarify details of any broad language or ambiguous standards. Id.

Agencies typically are given much greater flexibility in the issuance of a guidance document due to its nonbinding nature. They do not need to provide the opportunity for public participation (i.e. notice and comment), publish anything in the Federal Register, supply a statement of basis, or provide any analysis. Admin. Proc. Act, 5 U.S.C. § 533 (2006). Under the Administrative Procedure Act (APA), these requirements only apply to administrative rules and statutes. Id. However, because of this ease of issuance, agencies have sometimes taken this opportunity to promulgate statements of policy that have a subtle, coercive effect. See Appalachian Power, 208 F.3d at 1019; Pierce, Admin. Law Treatise §6.3 at 319-320. The regulated community frequently has justifiable apprehension that agencies use the procedurally-simpler guidance document to circumvent the more strenuous process of enacting regulations, thereby creating what is essentially de facto legislation. Id. at 320. When this situation arises, regulated entities have a valid cause of action to contest the agency’s use of guidance documents as enforcement tools.

The distinction between a properly promulgated rule and an agency issued guidance document is significant. The foundation for the distinction is borne from the basic governmental principle we learned in elementary civics: the legislature passes laws and the executive branch enforces them. Yet, it is more complicated than that axiom suggests. Absent constitutional or other authority to act, the executive branch must act within the authority delegated by the legislature, and cannot expand or alter that authority by the use of agency interpretation which has not been through the rigorous rulemaking process. To be valid and enforceable, a rule must pass through the important, and potentially error-correcting, steps of pre-issuance publication and comment. In the absence of this process, (and even with it, if the agency exceeds its legislatively authorized power), a rule or guidance cannot be used for compliance or enforcement purposes.

A successful challenge to a guidance document first requires a party to establish that the document is judicially reviewable. Cement Kiln v. EPA, 493 F.3d 207, 215 (D.C. Cir. 2007). Courts can only review issued statements that satisfy the APA’s "finality" requirement. 5 U.S.C. § 704 (2006) (stating that only "final agency action[s]…are subject to judicial review). An action is considered final if the agency has consummated the decision making process. Chicago & Southern Airlines, Inc. v. Waterman S.S. Corp., 333 U.S. 102, 113 (1948); Bennett v. Spear, 520 U.S. 154, 178 (1997). Though courts have a wide discretion in this determination, if drafts of the document are circulating, the agency is seeking comments on the potential interpretation, or it was not approved by the head of the agency, the guidance document will generally not satisfy the finality requirement. Connor Raso, Strategic or Sincere? Analyzing Agency Use of Guidance Documents, 119 Yale L. J. 782, 794 (2010). Additionally, the policy provided in the document must hold legal consequences for the party in order to be challengeable. Ctr. for Auto Safety v. Nat’l Highway Traffic Safety Admin., 452 F.3d 798, 806 (D.C. Cir. 2006). Language that creates enforceable rights or obligations will give rise to these consequences, but mere discretion granted to an agency by a document is not sufficient to meet this requirement. Appalachian Power, 208 F.3d at 1022.

Once a court has concluded that judicial review is appropriate, the analysis turns to whether the agency’s statement is a de facto legislative rule. Gen. Motors Corp. v. EPA, 363 F.3d 442, 448 (D.C. Cir. 2004); Molycorp, Inc. v. EPA, 197 F.3d 543, 545 (D.C. Cir. 1999). The agency’s characterization of the document and any publication in the Federal Register will be considered, but the determination ultimately rests on whether the action partakes in the fundamental characteristics of a regulation. Id at 448. These characteristics are revealed by the effect of the document. Pacific Gas & Elec. Co. v. FPC, 506 F.2d 33, 38 (D.C. Cir. 1974). A guidance document that amends, alters, or modifies existing regulations or rules in a binding manner is, for all practical purposes, a rule itself. Id. Furthermore, any attempt to expand the reading of a rule or broaden the power given by a regulation will be deemed to have the impermissible characteristics of a regulation. Appalachian Power, 208 F.3d at 1028. If an agency offers a statement of policy where otherwise there would not be an adequate legislative basis for enforcement of the policy, the statement will be considered a rule. Am. Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1112 (D.C. Cir. 1993). In these instances where an agency has issued a legislative rule both through a guidance document and without participating in the APA rulemaking process, the court will invalidate the action. Id.

The EPA has, on a number of occasions, had its guidance documents set aside as de facto legislative rules. For instance, in Appalachian Power Co. v. EPA, the agency released a document to help inform in the administration of the Clean Air Act. 208 F.3d at 1017-18. Part of this policy purported to require states to conduct a wide-ranging review of emissions standards under their permit programs and to adjust these standards when necessary. Id. This requirement imposed much broader obligations on the states than the original rule. Id. The court found the guidance document to be invalid because it amended a rule but had not complied with formal rulemaking procedures. Id. at 1028.

More recently, Natural Resources Defense Council challenged the actions of the EPA. Natural Resources Defense Council v. EPA, ---F.3d --- (2011) (2011 WL 2601560 at *1). The agency had released a guidance document addressing the obligations of regions that did not attain the necessary ozone air quality standards under the Clean Air Act. Id. at *5. The document authorized the EPA’s regional directors to approve alternative implementation plans, conferring control to the directors in a manner that had not been envisioned under the original Act. Id. The court found this grant of authorization to be an unacceptable expansion of the regulation and invalidated the guidance document. Id. at *11.

At the state level, New Hampshire’s treatment of guidance documents is strikingly similar to the federal standards. Petition of Daly, 129 N.H. 40 (1986); Petition of Pelletier, 125 N.H. 565 (1984). While many states allow the production of binding rules through the adoption of agency-issued documents, New Hampshire has no such legislative exception. N.H. Rev. Stat. Ann. § 541-A (2010). Instead, RSA 541-A outlines a rulemaking process much like the APA’s, requiring a filing of notice and the acceptance of comments. RSA §541-A:3. Any policy or practice requirement issued by a state agency must follow the statute, with regulated parties free to challenge the validity of guidance or interpretive documents. Daly, 129 N.H. at 42. The NH Supreme Court has held that policy statements which constitute a substantial modification or change of previous regulations will be considered a "rule." Id. Furthermore, any rule adopted by an agency must adhere to the rulemaking procedures of RSA 541-A. Pelletier, 125 N.H. at 571. Promulgated documents that circumvent this procedure are invalidated by the court, with the policy stripped of any effect. Id.

Guidance documents and policy statements produced by agencies can often have a coercive effect. Pierce, Admin. Law Treatise §6.3 at 319. Many regulated entities will "voluntarily comply" with agencies like the EPA simply because of the significant discretionary power the agencies have over them. Id. at 319-20. All administrative agencies, however, are subject to APA rulemaking procedures, and any documents that seem to require new policy or mandate broader standards than legislatively authorized can be challenged in court. If done correctly, these challenges can be successful, and agency-issued guidance documents may be invalidated, or unenforceable in the context of regulatory action.

Mark C. Rouvalis is a trial lawyer and partner in the Environmental Law Practice Group of McLane, Graf, Raulerson & Middleton, P.A.

Kenton J. Vilano is a summer associate at the firm. Gregory H. Smith, a partner in the Environmental Law Practice Group, also contributed to this article.

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