EPA Must Consult With Other Agencies Before Issuing Water Quality Criteria: Is This an Example of Congressional Use of Behavioral Economics?

Last month, Judge John Hunderaker held that the Endangered Species Act requires EPA to consult with the Fish and Wildlife Service and the National Marine Fisheries Service before issuing recommended water quality criteria.  He also vacated EPA’s 2016 chronic freshwater criterion for cadmium.  The case is potentially important for a number of reasons. 

First, it’s a thorough analysis of standing in cases where the plaintiffs claim a procedural injury – here, EPA’s failure to consult with FWS and NMFS before issuing new recommended water quality criteria.

Second, there is an extensive discussion regarding what constitutes agency “action” subject to judicial review.  EPA argued that promulgation of recommended water quality criteria is not an action because it does not dictate what states must do; they are free to promulgate WQC that differ from EPA’s recommendation.

However, as the Court noted repeatedly its opinion, the statute requires states that wish to vary their WQC from EPA’s recommendations to explain the basis for their decision to reject EPA’s recommendation.  That matters, because it imposes costs on states and “nudges” their behavior in the direction of adopting EPA’s recommendations.

And so we come to my real reason for posting about this case.  Without using the words “behavioral economics” or talking about “nudges” or “choice architecture”, the Court made clear that Congress, in enacting what the Court referred to as the “adopt-or-explain requirement”, had established a specific choice architecture for states deciding whether to adopt EPA’s recommended WQC and had purposefully nudged states in the direction of adopting EPA’s recommended WQC.  Moreover, as the Court noted, the nudge works, because states overwhelming choose to adopt EPA’s criteria.

Stakeholders can argue that the statute incorporates much more of a shove than a nudge and can reasonably take the position that Congress shouldn’t be nudging – or shoving – states in that direction.  Regardless, it important to recognize that it is possible in a federal system for Congress to provide incentives to states to take particular actions, while still leaving the ultimate decision to state authorities.

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