Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

Although not breaking any new ground, a decision from the Massachusetts Appeals Court last week provides a helpful summary of the discretion typically given to MassDEP in making permitting decisions. In Healer v. Department of Environmental Protection, abutters to a proposed wastewater treatment facility in Falmouth sued MassDEP, claiming that the groundwater discharge from the leach field associated with the facility would damage drinking water supplies and nearby wetlands. The Court affirmed the MassDEP Commissioner’s rejection of the abutters’ challenge.

As the Court noted

the “applicable standard of review is “highly deferential to the agency” and requires the reviewing court to accord “due weight to the experience, technical competence, and specialized knowledge of the agency, as well as to the discretionary authority conferred upon it…. We give deference to the decision of an agency interpreting its own regulations … [and] do not intrude lightly within the agency’s area of expertise, as long as the regulations are interpreted with reference to their purpose and to the purpose and design of the controlling statute.”

As if that were not enough of a nod towards agency deference, the Court also noted, in the context of the plaintiffs’’ challenge to the monitoring requirements imposed in the permit, that

The Legislature “has chosen to put into the hands of an expert administrative agency the decision making regarding complex issues of environmental … science…, and has allowed the agency considerable discretion in determining monitoring of applicable parameters in order to carry out its duty….

Finally, the Court made at least one statement about the plaintiffs’ affirmative case that is sure to be cited by MassDEP and permittees in future citizen suits. In rejecting the plaintiffs’ argument that toxic household chemicals might cause environmental damage, the Court stated that the “regulations do not require the department to establish permit conditions based on the plaintiffs’ speculative concerns.”

So, what’s the upshot of Healer? It certainly confirms that, as a general matter, courts are not going to reverse agency decisions unless they seem really off-the-wall.  On the other hand, it remains true that MassDEP does not always win and my own jaded view is that courts remain willing to reverse MassDEP, even when deference would require that the court affirm the agency, if the agency decision somehow rubs the court the wrong way.

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Congress moved one step closer to adopting a federal renewable electricity standard ("RES") with the narrow passage of the American Clean Energy and Security Act by the House.  Twenty-nine states already have adopted some form of renewable energy portfolio standard, but a federal RES is widely thought to be important for creating a national renewable energy and energy efficiency market.  The House RES establishes a national compliance obligation overseen by the Federal Energy Regulatory Commission (“FERC”) under which large retail electricity suppliers (“Suppliers”) are required to invest in renewable energy and energy efficiency. For each compliance year, a Supplier must calculate its total volume of electricity sales during that year and then submit to FERC a sufficient number of federal renewable electricity credits (“Federal RECs”) and demonstrated annual electricity savings to meet the RES goal for that compliance year. Up to 25 percent (or 40 percent, upon a state’s request) of a Supplier’s RES obligation may be met through electricity savings rather than Federal RECs. The trade-off, however, is that the incentive to develop and deploy new renewable energy capacity may be diluted by allowing efficiency measures to count toward the RES goal.

The RES passed by the House would not preempt state programs with stricter compliance targets, meaning that the federal program would preserve to some extent the patchwork of state standards. If Congress does pass a federal RES, leveraging the resulting business opportunities will thus require an intimate understanding of how both federal and state programs work and, perhaps more importantly, how they interact.

For more details on the RES, please take a look at our recent client alert.

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Laura Rome of Epsilon has helpfully reminded me that the maturity of a regulatory program is also relevant to whether an agency should proceed by guidance or regulation.  With newer programs that remain in flux, the flexibility inherent in guidance – and the easier amendment process for guidance – counsels in favor of guidance rather than regulation.

Laura’s comment also reminded me that, a few years ago, NAIOP was sufficiently concerned about MassDEP’s use of guidance as an end-run around the formality of the regulatory process that it submitted to MassDEP suggested “Guidance on Guidance.”  The overarching principles contained in the NAIOP proposal are helpful reminders regarding the uses and limitations of guidance documents.

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There are not too many areas of environmental law where practice intersects frequently with academic theory. One such area is whether agencies should use notice and comment rule-making any time they want to set forth policy or whether they should instead be permitted to use flexible guidance documents. The real issue from the practitioner’s point of view is the extent to which use of guidance permits street level bureaucracy a degree of unfettered discretion that is truly scary. Like Judge Roy Bean, these bureaucrats are the law West of the Pecos – or at least outside agency headquarters. The flip side of the debate is the notion that modern environmental law is simply too complicated to specify all rules through notice and comment rule-making. Agencies need, as a practical matter, the flexibility to operate through informal guidance.

The debate is illustrated by two D.C. Circuit Court of Appeals decisions. First, in Appalachian Power v. EPA, issued in 2001, the Court struck down EPA use of a guidance document. The Court nicely summarized the issue:

The phenomenon we see in this case is familiar. Congress passes a broadly worded statute. The agency follows with regulations containing broad language, open-ended phrases, ambiguous standards and the like. Then as years pass, the agency issues circulars or guidance or memoranda, explaining, interpreting, defining and often expanding the commands in the regulations. One guidance document may yield another and then another and so on. Several words in a regulation may spawn hundreds of pages of text as the agency offers more and more detail regarding what its regulations demand of regulated entities. Law is made, without notice and comment, without public participation, and without publication in the Federal Register or the Code of Federal Regulations. … The agency may also think there is another advantage--immunizing its lawmaking from judicial review.

The Court dismissed EPA’s contention that the document was not binding, and said this in response to EPA’s reference to its boilerplate statement that the guidance created no rights: 

“[R]ights” may not be created but “obligations” certainly are…. The entire Guidance, from beginning to end – except the last paragraph – reads like a ukase.

Haven't all our clients felt what it is like to be under agency ukase?

Unfortunately for those who liked the outcome in Appalachian Power, it seems to have been the high-water mark for those wanting to circumscribe agency use of guidance. More recently, the D.C. Circuit refused to review EPA guidance as though it were a rule. In Cement Kiln Recycling Coalition v. EPA, responding to an Appalachian Power-type challenge, the Court concluded that EPA had not treated the guidance at issue as binding and noted that, in response to Appalachian Power, EPA had edited the guidance to make it look less binding. The Cement Kiln plaintiffs thought this was evidence of subterfuge; the Court did not buy it. The Court did acknowledge that an agency assertion that guidance is non-binding “will not make it so where there is evidence —or practice – to the contrary."

The immediate context for this post is efforts by the Massachusetts Environmental Policy Act, or MEPA, office to take a second look at its greenhouse gas (GHG) policy in light of the legislative passage of the Global Warming Solutions Act. The work group (of which I am a member) reviewing this issue has been considering whether it is better to leave aspects of the policy as guidance or whether to put them in regulation.

As you can probably tell from the start of this post, my gut reaction is always to make the agency put its rules into notice and comment regulation. I’ve had too many experiences of street level bureaucrats who take advantage of the “flexibility” of agency guidance documents to become their own version of Roy Bean.

However, my friend Sam Mygatt, whose judgment I trust, has strongly endorsed the approach of leaving many of these issues to guidance. After puzzling over this for some time – How could Sam be right and I be wrong? – I realized what the answer is:

The size of the bureaucracy matters. 

The rules -- or guidance -- at issue here are promulgated by the MEPA office.  This is also the agency Sam deals with most frequently (he did run it at one time, after all). The MEPA office has a handful of reviewers. The consultants, such as Sam, who have large MEPA practices deal with the MEPA reviewers repeatedly. They are able to build relationships of confidence and trust; it is very difficult for these reviewers to see Sam as the devil, merely looking to desecrate the environment to benefit his client. 

Larger bureaucracies are different. Street level bureaucrats have inherently more autonomy in larger bureaucracies. Moreover, while we may all get to know some staffers at DEP or EPA, it is impossible to build the same type of relationships as is possible with the MEPA office.

At a casual empirical level, this distinction seems to have substantial force. For smaller bureaucracies, stick with guidance; with larger bureaucracies, make them issues rules.

Your take?

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