Regulations v. Guidance: Pick Your Poison

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 2000, 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?

5 thoughts on “Regulations v. Guidance: Pick Your Poison

  1. It’s not just a qeustion of agency access and trust. There’s an issue of whether you (the practitioner) want flexibility (policy) so that you and the agency can work out a reasonable outcome, or do you want the outcome locked into regulations. The latter often become so complex and rigid that they may command an unreasonable outcome, or alternatively lead to litigation – not in my view an optimal way to sort out environmental issues! (note that the beginning of Seth’s blog just cites cases – each of which cost several years, and millions of dollars to the parties). Interesting cases, but do they benefit either the regulated or the regulators?

  2. Sam:
    I was hoping I could get a comment out of you. Thanks.
    I’m not persuaded that, in the absence of the relationship and trust resulting from frequent interaction with a small bureaucracy, flexibility benefits the regulated community. I just don’t see, at least in the vast majority of cases, the larger agencies being interested in using regulatory flexibility to reach what you describe as a reasonable outcome.
    That there was litigation about agency use of guidance in lieu of regulations doesn’t support your point. It only demonstrates, to the contrary, regulated industries are so terrified of the “flexibility” provided by agency guidance, that they are willing to spend huge sums of money in court to force the agencies into notice-and-comment rulemaking. I don’t see how such litigation can therefore be used in support of greater use of guidance in lieu of regulations.

  3. I am in the enviable position of agreeing with both of you. Generally, I would prefer regulations to guidance for all of the reasons that Seth points to. However, regulations developed too early are rarely as good as regulations held back until issues are well understood. An example of appropriate regulation can be found in wastewater management, which has a long history; its regulations reflect considerable experience, and they need to be updated only infrequently. Something like greenhouse gas emissions analysis, on the other hand, is evolving rapidly as science and policy both emerge and various schemes are tested, so it seems premature to move from guidance to regulation.

  4. A real problem for the regulated community is where guidance has the effect of regulation. That is, when a regulator cites a failure to follow guidance as a justification for the denial of a permit, assessing penalties, or other sanctions. Further, guidance must, at least, be applied as uniformly as possible, avoiding arbitrary and selective applications by individual regulators or regional offices.

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