US Supreme Court Affirms Tweaked Auer Deference, But Is It Now a “Paper Tiger”?

In our prior coverage of Kisor v. Wilkie, we predicted that the Court would impose “greater scrutiny” on “administrative agencies’ . . . interpretation of their regulations.” And the Court did. The Court’s decision will affect every aspect of the federal government’s regulation of environmental, safety, and health.

At the end of its term, the US Supreme Court issued its opinion in Kisor v. Wilkie—upholding but limiting Auer deference. Auer instructs that courts must defer to an agency’s construction of its own regulation unless that interpretation is “plainly erroneous or inconsistent with the regulation.” (Indeed, under Auer (before Kisor), the US Supreme Court upheld regulations even when the interpretation was not “the best one.”) Auer deference, however, will work much differently going forward.

The Court narrows Auer’s application, recasting old precedent in a stricter light

Writing for a plurality, (with the Chief Justice concurring in the judgment and the “bounds of Auer deference”), Justice Kagan emphasized three existing limits on a reviewing court’s deference to an agency’s interpretation of its own regulations. The Court’s recasting of the following limits means less deference to agencies’ interpretation of their own regulations:

Genuine ambiguity. The Court emphasized, for instance, that a court should not defer to an agency’s interpretation unless a regulation is “genuinely ambiguous” after the court “has resorted to all the standard tools of interpretation.” This restatement of Auer deference means less deference to an agency’s interpretation of its regulation; the Court previously allowed an agency interpretation unless “plainly contrary” to the regulation’s text.
Appropriate source. The Court reiterated that Auer deference should not extend to the “speech of a mid-level official” because those sorts of officials are not tasked with making “authoritative policy in the relevant context.” This language may significantly curtail Auer deference—particularly for politically sensitive issues where a change in the President’s party means an about-face on mid-level guidance. (For instance, consider the political flip-flops defining “Waters of the United States.” Or, as another example, consider the recent back-and-forth over guidelines surrounding Title IX’s application based on gender identity.)
Litigation rationale. Repeating a principle that the Court has selectively enforced in the past, the Kisor Court held that courts should not defer to “agency interpretations advanced for the first time in legal briefs.” That practice, the Court explained, failed to defer to an “agency’s fair and considered judgment on the matter in question.” Going forward, agencies will need to develop their litigation rationale before they walk into court.

In practice, these limits mean that courts will defer less often to an agency’s interpretation of its own regulation. Lawyers challenging agency action should test these limits—applying each argument in the appropriate context. Kisor’s recasting of Auer deference provides a powerful backstop to an agency’s discretion interpreting its own regulations.

The Court adds a critical new limit—no deference for issues that fall in a “judge’s bailiwick”

In addition to restating the existing limits, the Kisor Court added a fourth limit: Auer deference applies only to “agency-type” decisions. “Some interpretive issues may fall more naturally into a judge’s bailiwick. . . . When the agency has no comparative expertise in resolving a regulatory ambiguity, Congress presumably would not grant it that authority.”

Applied liberally, this new limit may drastically narrow the scope of Auer deference. The Court provided little guidance about which decisions involve “agency-type” decisions and which do not. And, since Kisor reflects a significant paradigm shift for Auer deference, existing precedent also offers little guidance about which “expertise” deserves deference.

Justice Gorsuch, concurring in the judgment, claimed that Kisor’s new guideposts leave Auer deference “maimed and enfeebled—in truth, zombified.” He also warned that keeping Auer deference intact (however enfeebled) sits “uneasily with the Constitution.” Litigants should expect that lower court judges—particularly those who share Justice Gorsuch’s concerns about Auer’s constitutionality—may use Kisor’s guideposts to further restrict agency discretion in interpreting agency regulations.

What does this mean for Chevron deference?

With Auer deference zombified, the Court may soon address its intellectual cousin, Chevron deference. (That rule, as we’ve mentioned before, requires courts to accept an agency’s reasonable interpretation of the ambiguous terms of a statute that the agency administers.)

The opinion in Kisor suggests, however, that the Court lacks five votes to overturn Chevron deference. First, Chief Justice Roberts joined the majority in preserving Auer deference. Second, in his concurrence, Chief Justice Roberts explained that he did not understand Kisor to “touch upon” Chevron deference. Finally, in prior writings, (for instance, his dissent in the 2013 City of Arlington v. FCC decision), the Chief Justice described Chevron as an important “guard[] against the Judiciary arrogating to itself policymaking properly left, under the separation of powers, to the Executive.” So Kisor does not necessarily portend Chevron’s demise, but it hardly suggests a full-throated endorsement either.

Squire Patton Boggs will continue to monitor developments in this area and provide updates.

Ohio Appeals Dismissal of the State’s Complaint Against Rover Pipeline LLC Due to Ohio EPA’s Failure to Timely Respond to Request for CWA Section 401 Certification

By Nicki Hewell on July 16, 2019 Posted in Clean Water Act, Energy & Utilities, Environmental Litigation

Pipe Laying On March 12, 2019, Judge Kristin G. Farmer for the Stark County Court of Common Pleas dismissed the State of Ohio’s Third Amended Complaint against Rover Pipeline. The State alleged that Rover had committed widespread environmental violations during the construction of its 713-mile interstate natural gas pipeline. The court dismissed the complaint on the grounds that it lacked jurisdiction to hear the case because the State had waited over a year to “act” on Rover’s Clean Water Act §401 Certification request. On April 10, 2019, the State appealed that decision to the Court of Appeals for the Fifth District of Ohio. Continue Reading

US EPA Formally Proposes Repeal of “Once In, Always In” Policy

By Nicole Bothwell on July 16, 2019 Posted in Air Quality, Rulemaking & Policy Development

On June 25, 2019, US EPA issued a proposed rule that would reverse the “once in, always in” policy for sources of hazardous air pollutants (HAP) that has been in place for more than 20 years. The rulemaking formalizes a January 2018 US EPA memorandum repealing the policy, an action that was challenged by environmental groups and is currently before the D.C. Circuit Court of Appeals. The petitioners claim that the memorandum conflicts with the structure and purpose of Section 112 of the Clean Air Act (CAA). The court heard oral arguments on April 1, 2019, but has not yet ruled. To the extent that petitioners claim the memorandum should have been subject to notice and comment, US EPA’s proposed rule may answer that challenge. However, the petition raises substantive issues related to whether the policy repeal is consistent with the CAA and the court’s ruling on these issues will likely affect the outcome of this rulemaking.

In the “once in, always in” policy, originally published in a 1995 memorandum, US EPA took the position that facilities that are major sources of HAP on the first compliance date of an applicable MACT standard must comply permanently with that standard, even if the source were to subsequently become an area source by limiting its potential to emit. In that memorandum, US EPA stated that the policy was the most natural reading of the language and structure of the Clean Air Act and a contrary reading would allow a source installing MACT to “backslide” from MACT control levels by operating only enough to reduce emissions below the major source threshold, thereby transitioning to area-source status and eliminating the MACT obligation.

The 2018 memorandum and the new proposed rule read the CAA to allow a source that does not meet the major source threshold to be treated as a minor source regardless of whether it had previously been classified as “major.” This means that a major source that takes an enforceable limit on its potential to emit or otherwise takes measures to bring its HAP emissions below the applicable threshold can be reclassified as an area source no matter when the source may choose to limit its potential to emit. US EPA justifies this reading as consistent with the plain language of the Clean Air Act by relying on the statutory definitions of “major source” and “area source,” which do not contain any language that “fixes” a source’s status at any particular point in time, nor do they preclude a source from changing its status.

Parties opposed to US EPA’s approach have argued that reclassification will allow major sources that reclassify to area sources to increase their emissions above what they could emit if they continued to be major sources. In the proposed rule, US EPA acknowledges that there are possible scenarios in which emissions could increase upon reclassification but finds that, in analyzing the 34 sources that have reclassified or are in the process of reclassifying since the issuance of the 2018 memorandum none will increase their emissions as a result of reclassification. Further, if US EPA determines that emissions are inadequately controlled following reclassification, the Agency can impose emission limits on area sources.

In addition to codifying the reclassification policy, the proposed rule would amend the definition of “potential to emit” to recognize the availability of non-federally enforceable limits (e.g., state only enforceable limits) for purposes of Section 112 applicability. The rule also proposes adding provisions to address the situation in which a source reclassifies from major to area source status and then reverts back to major source status. In that case, a major source that reclassifies to an area source will become subject to applicable area source requirements immediately upon becoming an area source if the first compliance date of the area source requirements has passed. If the area source then reverts back to its previous major source status, the source must meet major source requirements immediately upon reclassifying back to major source status. In certain circumstances, such as where the major source requirements have changed in the interim such that the source must undergo a physical change to comply, the source would be allowed extra time to achieve compliance. The proposed rule also specifies that status reclassification would not affect a source’s liability or any enforcement actions for a source’s past violations of major source requirements that occurred prior to the source’s reclassification.

If finalized, the new policy could reduce testing, reporting, and recordkeeping requirements imposed on facilities, as well as provide the industry with increased regulatory certainty borne from subjecting the policy to formal rulemaking procedures. US EPA is soliciting comment on numerous aspects of the proposed rule, and there will be a public comment period of 60 days from the date the rule is officially published in the Federal Register.

Squire Patton Boggs will continue to monitor developments and provide updates on this issue.

How Thoroughly do UK Businesses Need to Investigate What Happens to Their Waste After They Have Transferred It?

By Robert Biddlecombe on July 15, 2019 Posted in Environmental Due Diligence, Environmental Litigation, Environmental Protection, Health & Safety, Solid & Hazardous Waste

A recent prosecution by the Environment Agency, where a company was ordered to pay £327,000, has highlighted potentially difficult issues for businesses in complying with the statutory waste duty of care.

What is the Statutory Waste Duty of Care?

All businesses generate waste of some description: from paper and kitchen waste in offices, to hazardous waste in manufacturing facilities. Section 34 of the Environmental Protection Act 1990 provides, amongst other things, that it is the duty of any business that produces, carries, or disposes of waste to take all steps that are reasonable in the circumstances:

to prevent any other person from unlawfully depositing waste or treating, keeping or disposing of waste in a manner likely to cause pollution of the environment or harm to human health;
to prevent any other person from operating a waste facility without, or in breach of, an environmental permit (or, where an exemption applies, otherwise than in accordance with that exemption);
to prevent the escape of the waste from its control or the control of any other person; and
on the transfer of waste, to ensure that the person who takes the waste has the proper authorisation to do so, and that the waste is accompanied by a written description to help properly identify it.

It is an offence not to comply with this duty of care for which the maximum penalty is an unlimited fine. Although prosecutions for breach of the duty of care have declined from around 90 per annum in 2000, to around 10 per annum now, average fines have substantially increased in the intervening period.

Facts of the Case

Biowood Recycling Limited of Derby sourced waste wood and delivered it to a site in Great Staughton, Cambridgeshire. The site was subject to a registered waste exemption which allowed for 500 tonnes of material to be stored there in any seven-day period. However, the Agency estimated that 1,000 tonnes of waste wood were taken to the site every week for five weeks. After operating for 6 weeks, wood was found stacked 4 metres high at the site, with some falling into a hedgerow and a ditch, and it was considered to pose significant fire risk.

Two individuals involved in the operation of the site were prosecuted and given custodial sentences. However, Biowood was also prosecuted for breaching its statutory duty of care. After pleading guilty, Biowood was fined £12,690 and ordered to pay £314,426 in compensation to the landowner who had to clear the waste from the site. In sentencing, the judge noted that Biowood had no previous convictions and had assisted the Agency with its investigation, but still said that it had been “at least reckless” in its dealings with the operators of the site.

Following sentencing, Biowood was reported to have released a statement advising that it had no grounds to suspect the site was going to be operated illegally, that it had paid the market rate gate fees at the site, and that there were no ‘red flags’ that gave rise for concern. It insisted that it had made numerous checks prior to supplying material to the site, including a site visit, and verified that the operator had a lease from the site owner allowing the storage and treatment of waste wood on his site and a registered waste exemption which allowed waste wood to be treated by shredding. However, Biowood accepted that a further check would have revealed that the site, through its waste exemption, did not have the capacity to store the amount of waste that was being supplied.

Implications

What does case this mean for businesses? The Waste Duty of Care Code of Practice published by DEFRA and the Welsh Government recommends that businesses should check whether a person or another business is authorised to take waste before transferring waste to them, by asking for a copy of their waste carrier, broker or dealer registration and/or their site permit or registered exemption, and check the Agency’s public register for any information they provide. However, from the Biowood prosecution, it seems that simply following this guidance (and even inspecting the site) would not necessarily be enough. Arguably, a higher standard may have been required of Biowood, compared to, for example, a professional services firm, because Biowood specifically operates in the waste sector. As with so much regulation, whilst requiring businesses to do what is “reasonable in the circumstances” allows the law to be flexible enough to adapt to a myriad of different scenarios, it does not offer businesses much by way of certainty. Furthermore, the duty of care continues down the supply chain until such time as the waste is finally disposed of or recovered, so a business may have to carry out checks, not just against the first party downstream, but against several other downstream parties. This could tie up an inordinate amount of management time without any definite guarantee that a business has done all that is required of it under the duty of care.

Practical steps

Businesses should adopt a risk-based approach to the issue. For example, apart from checking the relevant authorisation(s) as per the Code of Practice, businesses can check whether the carrier, broker and/or dealer or site operator has convictions for waste offences via the Agency’s public register for companies or via a request for confirmation from its National Customer Contact Centre for individuals (including company directors or managers). More caution should be applied when dealing with smaller sites which are covered by exemptions, as they are generally less strictly regulated than sites subject to permits. If these checks suggest an elevated risk, businesses (especially those already in the waste sector) should seek to inspect the waste sites and ask whether recent audits of the site carried out by third parties (consultants or regulators) are available for review. Records should be retained of what due diligence is carried out so that, if a business is required to demonstrate that it took all reasonable steps to comply with its duty of care, it has evidence to justify its position.

June 2019 Update: Key Developments in UK and EU Environment, Safety and Health Law, Procedure and Policy

By Squire Patton Boggs on July 8, 2019 Posted in Health & Safety

Online News We are pleased to share with you the latest edition of “frESH Law Horizons – Key Developments in UK & EU Environment, Safety and Health Law, Procedure and Policy”. In our June edition, we summarise 34 developments in the environmental, safety and health sector. Some of the top stories this month include:

A food grain storage company has received a fine of £180,000 following the death of a worker struck by a lorry onsite
The Construction industry announces plans for mandatory licensing scheme for UK construction companies
UK government confirms ban on plastic straws, stirrers and cotton buds
UK commits to net zero carbon target by 2050
EU publishes the Single-use Plastics Directive
Waste company Biffa convicted of breaching EU transfrontier shipment of waste regulation
Waste incineration “best available techniques” conclusions approved
ClientEarth appeals EU court ruling on DEHP
We recently hosted our annual ESH conference

For more detailed information on these developments, as well as access to the remaining summaries, make sure you download a copy from our website. You can also subscribe to ensure you receive our most recent edition every month.

Mobile Sources Face an Increased Risk of Agency Enforcement and Citizen Suits

By Jennifer Tharp on June 24, 2019 Posted in Air Quality, Environmental Litigation

On June 12, 2019, the US Environmental Protection Agency (US EPA) announced its seven enforcement and compliance assurance priority areas for fiscal years 2020-2023. One of the National Compliance Initiatives includes “Stopping Aftermarket Defeat Devices for Vehicles and Engines.” Specifically, the Agency expressed that it will have a focus on reducing aftermarket defeat device manufacture, sale, and installation across vehicle types.

Additionally, a recent case in the U.S. District Court for the District of Utah has the potential to broaden the reach of citizen suits under the Clean Air Act (CAA). The court permitted a group, the Utah Physicians for a Healthy Environment (UPHE), to bring a citizen suit against businesses and individuals engaged in the sale and repair of trucks for violations under 42 USC § 7522, including provisions regarding defeat devices. Section 7522 of the CAA, in part, prohibits any person manufacturing, selling, or offering to sell or install “any part or component intended for use with, or as part of, any motor vehicle or motor vehicle engine, where a principal effect of the part or component is to bypass, defeat, or render inoperative” emission-related devices or elements of design. Prior to this case, courts have restricted enforcement of violations under § 7522 to the federal government. By providing an avenue for enforcement through citizen suits, the district court’s approach expands the exposure manufacturers could face and may justify an additional layer of risk assessment for the industry.

The CAA’s citizen suit provision provides that citizens may commence a civil action for a “violation of (A) an emission standard or limitation under this chapter or (B) an order issued by the Administrator or a State with respect to such a standard or limitation.” Such an action may not proceed, however, “if the Administrator or State has already commenced and is diligently prosecuting a civil action in a court of the United States or a State to require compliance with the standard, limitation, or order. . . .” Historically, courts have interpreted the phrase “standard or limitation” to permit citizen suits only for air violations of stationary source emissions standards and certain other clear-cut violations. Violations under 42 USC § 7522 relating to the installation, sale, etc. of defeat devices, on the other hand, have traditionally been enforced only by government agencies because courts have interpreted the prohibitions in 42 USC § 7522 as not falling within “emission standards or limitations.”

Recently, however, in Utah Physicians for a Healthy Environment (UPHE) v. Diesel Power Gear LLC, et al., 2019 U.S. Dist. LEXIS 40545, the court considered a case where defendants allegedly violated 42 USC § 7522 of the CAA by tampering with emission control devices on diesel vehicles. Specifically, the petitioners claimed that the defendants “modified diesel trucks in violation of emissions limitations standards, sold parts designed to evade emissions standards, and sold illegally-modified trucks.” As a result, petitioners claimed these actions contributed to air pollution in the Wasatch Front and harm to members of UPHE. Chief Judge Shelby ultimately issued partial summary judgment to UPHE regarding its claims that the defendants violated the CAA and the Utah State Implementation Plan (SIP) regulations “relating to the installation, removal, operation, and sale of emission control devices on diesel vehicles.” In doing so, Judge Shelby potentially brought Section 7522 violations under the umbrella of CAA citizen suits.

A threshold question the court had to consider was whether or not UPHE had standing to bring such a suit. In context, even if other district courts permit such citizen suits in the future, plaintiffs will still have to establish standing. Judge Shelby analogized to Clean Water Act (CWA) cases in determining the standard to be used, and he stated that UPHE would have to show that “[d]efendants discharged a pollutant that causes or contributes to the kinds of injuries suffered by UPHE’s members in the Wasatch Front.” The petitioners met that burden, according to the court, by showing that defendants contributed NOx and particulate matter (PM) to air in the Wasatch Front. Judge Shelby noted that petitioners have standing to seek redress in the form of civil penalties, mitigation projects, and declaratory and injunctive relief, but not mandatory injunctive relief.

Other noteworthy aspects of the case include Judge Shelby’s analysis of corporate responsibility and passthrough sales. Judge Shelby distinguished the responsible corporate officer doctrine from the corporate veil and held that the “responsible corporate officer doctrine applies in CAA citizen enforcement suits.” In doing so, he referenced decisions in the Second and Eleventh Circuits that had applied the doctrine and held defendants personally liable under the CAA and the CWA. Regarding passthrough sales, the court declined defendants’ argument that selling vehicles already equipped with defeat devices did not rise to the level of selling such parts under Section 7522(a)(3)(B). Instead, Judge Shelby wrote that the “language plainly encompasses B&W Auto’s ‘as is’ sale of modified vehicles it knew or should have known to contain defeat emission parts.”

Although this case is not binding on other federal courts, the success of UPHE may encourage other citizen suits in the future for CAA violations under Section 7522. It also occurs at a time when agency enforcement in the context of aftermarket parts is on the rise. For example, in April 2019, US EPA settled with an automotive parts manufacturer and distributor for manufacturing and selling defeat devices on vehicles. Aftermarket parts companies, manufacturers, and other entities in the industry should assess their risk profile based on these recent developments.

Asbestos Receiving Renewed Attention in Light of Additional US EPA Assessments under TSCA and Potential Ban by Congress

By Gary Pasheilich on June 10, 2019 Posted in Chemicals & Products, Rulemaking & Policy Development, Solid & Hazardous Waste

Asbestos is in the hot seat these days and is receiving significant attention from both US EPA and Congress. In particular, US EPA continues to evaluate asbestos risks under the Toxic Substances Control Act (TSCA) and has imposed additional regulations, while Congress is currently considering an outright ban on the substance.

On April 25, 2019, US EPA issued a final Significant New Use Rule (SNUR) under Section 5 of TSCA to prevent certain discontinued uses of asbestos from re-entering the marketplace without a review by EPA. The rule essentially restricts manufacturing, importing or processing of asbestos for certain target uses that are neither ongoing, nor already prohibited under TSCA. Continue Reading

May 2019 Update: Key Developments in UK and EU Environment, Safety and Health Law, Procedure and Policy

By Squire Patton Boggs on June 7, 2019 Posted in Health & Safety

Electronic News We are pleased to share with you the latest edition of “frESH Law Horizons – Key Developments in UK & EU Environment, Safety and Health Law, Procedure and Policy”. In our May edition, we summarise 26 developments in the environmental, safety and health sector. Some of the top stories this month include:

A fine for a NHS Trust for exposing contractors to asbestos during refurbishment work
The Food Standards Agency (FSA) fining a meat-cutting plant that prevented inspectors from entering the site
A US manufacturing company avoiding corporate manslaughter charges by pleading guilty to health and safety failings
The National Crime Agency publishing its strategic assessment and seeking investment to assist with serious and organised crime
The FSA and Food Standards Scotland announcing support for full-ingredient food labelling

US EPA Extends Date For Designation of Inactive Substances on the TSCA Inventory to August 5, 2019

By Steve Owens on May 28, 2019 Posted in Chemicals & Products, Rulemaking & Policy Development

US EPA has announced that the formal designation of substances as inactive on US EPA’s Toxic Substances Control Act (TSCA) Inventory will become effective on August 5, 2019. (84 Fed. Reg. 21773 (May 15, 2019)). US EPA’s action gives companies an additional three months to continue to manufacture, import and process substances, even though the substances are “identified” as “inactive” on the TSCA Inventory. Continue Reading

Springtime Showers Brings State Legislation in the US Friendly to Solar and Wind Energy

By Danelle Gagliardi on May 14, 2019 Posted in Climate Change & Sustainability, Energy & Utilities

During the spring’s customarily dreary weather, many states have been seeking out sunshine and wind. In the months of March and April alone, eight states in the US passed legislation in an attempt to either make the permitting process easier for solar and wind power or to commit to the use of renewable power by a certain date.

The significant renewable energy legislation passed this spring are highlighted below: Continue Reading