32 ELR 10721 | Environmental Law Reporter | copyright © 2002 | All rights reserved

Draft Guidance on the Appropriate Use of Rules Versus Guidance1

James W. Conrad Jr.

1. This Dialogue began as a paper presented by the author at the Fall Meeting of the American Bar Association's (ABA's) Section of Environment, Energy, and Resources held in St. Louis, Missouri (Oct. 5, 2001). The author thanks his co-presenters (Jeffrey Holmstead, Ronald Levin, and Kenneth Weinstein) as well as David Buente for helpful comments on the paper. I also received valuable comments from numerous lawyers among American Chemistry Council staff and member companies, to whom I apologize for losing track of their names.

The author is Counsel, American Chemistry Council. His academic background includes the George Washington University Law School, J.D., Haverford College, B.A.

[32 ELR 10721]

Trade associations and other representatives of regulated entities frequently decry federal agencies' use of guidance documents and the like in lieu of notice-and-comment rulemaking.2 The U.S. Congress has denounced such "back-door regulation,"3 and even public interest groups and individuals will sue over "de facto" or "spurious" rules when it suits their purposes.4

However—in my organization, at least—whenever we have collected examples of agency use of guidance documents, we have found as many cases where we supported the use of guidance as where we opposed it. Drawing from that experience, this Dialogue attempts to articulate a set of considerations that might help federal agencies decide whether to proceed by regulation or guidance.

While these considerations are generally consistent with the American Chemistry Council's past decisions to support or challenge agency use of guidance, this Dialogue should be considered my own views.5 On the other hand, these considerations are intended to be supportable by any organization, regardless of its place on the ideological spectrum.

The first part of this Dialogue lays out several distinctions that I have found to be helpful in promoting clear thinking on this admittedly very difficult topic.6 It defines the terms at issue in the debate and articulates the three primary, but different, concerns motivating participants in the debate. It also distinguishes between situations where agencies can issue rules and those where they cannot, which is central to understanding the metes and bounds of "regulation by guidance." The next part outlines the issues just mentioned that agencies should consider in choosing between rulemaking and guidance. To help round out the picture, the final two parts deal with the other two types of "non-rule rulemaking" that regulated entities and others often criticize, which for shorthand purposes I refer to as "regulation by information" and "regulation by enforcement."

Background

Definitions

Judicial decisions and the trade literature are replete with varying and thus confusing uses of terms like "substantive rules" and "guidance documents," a confusion that is not aided by the Administrative Procedure Act's (APA's) definition of the term "rule" to mean a much broader spectrum of agency actions than most people conventionally think of as "rules."7 Fortunately (and perhaps surprisingly), academic writers are fairly consistent in classifying all the possible sorts of "rules" under the APA into two categories, which I will call:

. Regulations, i.e., "legislative" or "substantive" rules that have the force of law because Congress has given the agency power to issue such rules; and

. Guidance, i.e., "nonlegislative rules" (everything else, basically: rules of agency practice and procedure, interpretive rules, policy statements, etc.).

This Dialogue adopts that typology.

[32 ELR 10722]

The Issues at Stake

In thinking about regulation versus guidance questions, I have found it helpful to remember that people who care about these issues are basically concerned about three things:

. The opportunity to have input before a document is issued—the essence of notice-and-comment rulemaking;

. The opportunity to seek judicial review of the document afterwards; and

. The opportunity to act at variance with the document without becoming the subject of an enforcement action based on it, i.e., whether it is legally binding.8

These are three different things, addressed by different parts of the APA,9 and they do not always go together. Regulations normally require notice and comment, are generally reviewable, and are clearly enforceable; interpretive rules do not require notice and comment, are often reviewable, and in theory are not themselves enforceable (though the laws they interpret are); policy statements and the like do not require notice and comment, are often held non-reviewable, and also are not themselves enforceable. In thinking through a "rulemaking by guidance" question, it is a good idea to start by considering which of these issues is the problem. Each of them is discussed at various junctures below.

The Threshold Question: Did Congress Empower the Agency to Issue a Regulation?

The notion that an agency should have proceeded by regulation in a given case, rather than issuing a guidance, assumes that the agency could have issued a regulation—that is, that Congress gave it that power.

Agencies issue or adopt a huge range of "guidance" documents that have a practical effect on members of the public by prescribing or suggesting behavior by those or other members of the public or the agencies. A somewhat cursory review of these documents reveals that many of them cover topics over which agencies do not have clear rulemaking authority; e.g.,

. U.S. Environmental Protection Agency's (EPA's) Waste Minimization Prioritization Tool. EPA has no authority under the Resource Conservation and Recovery Act (RCRA) to compel facilities to minimize their generation of hazardous waste. To promote that goal, however, in 1997, EPA released a software tool that ranked chemicals by persistence, bioaccumulation, and toxicity.10 This tool was widely criticized, both for substantive reasons and because interested parties were not invited to comment on it beforehand or to seek corrections afterward.

. The National Toxicology Program's (NTP's) Annual Reports on Carcinogens. The Public Health Service Act does not give the Department of Health and Human Services authority to write rules regarding carcinogens. But it does instruct it to over-see the NTP and its publication of an annual Report on Carcinogens.11 Substances identified as "known" or "reasonably anticipated" to be carcinogens fall under great regulatory and nonregulatory scrutiny. Private parties have limited ability, however, to participate in the development of these reports.12

. EPA Ambient Water Quality Criteria. The Clean Water Act requires states to set ambient water quality standards for their waters.13 While EPA cannot directly promulgate state standards except where states have failed to do so or done so incorrectly,14 EPA is empowered to issue water quality criteria,15 and state standards must, as a practical matter, hew closely to those federal criteria.

It is important to understand that, strictly speaking, "regulation by guidance"—the complaint that is frequently leveled at EPA and other federal agencies—only involves cases where an agency has legislative authority to issue a regulation on the subject. This situation is discussed in the next part of this Dialogue. The best comparable label for the three examples just listed—where an agency does not have rulemaking authority—is "regulation by information." This is discussed somewhat more briefly in the third part of this Dialogue.

Regulation or Guidance?

In cases where an agency has the power to issue a regulation, when is it appropriate to proceed by guidance? Put another way, how can you tell if a given guidance document is a "good" one, or a "bad" one that is likely to generate criticism and maybe lawsuits?

[32 ELR 10723]

Does the Guidance Bind the Public?

In General

All concerned, it seems, agree that regulations—which have the force of law—may bind the public, and that guidance cannot.16 Even EPA has stated unambiguously that it "does not intend its policy statements and guidance documents to be binding and they have no binding legal effect on the public."17 The same EPA document makes reference to "binding guidelines," but it seems to refer to documents that would have been regulations but for some exception from notice-and-comment requirements.18

Therefore, a guidance document should not read like a rule,19 and ought to make clear that it does not impose binding requirements on the public.

The Federally Permitted Release Saga

In the last several years, EPA has issued two guidance documents that provide an illuminating contrast on the issue of binding the public. Both documents address what constitutes a "federally permitted" air release for purposes of emergency reporting under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) § 10320 and the Emergency Planning and Community Right-To-Know Act (EPCRA) § 304.21 This question has bedeviled EPA and regulated parties for many years, and the last of three EPA proposed rules on the topic—issued in 1989—had left several options dangling without resolution.22 The first guidance document, EPA's 1999 Interim Guidance on the topic, declared that the guidance "is consistent with statements the Agency has previously made regarding the federally permitted release exemption," and "does not impose new legally-binding requirements."23 On the other hand, the guidance also stated that it "resolved" the issues left hanging a decade earlier,24 and EPA subsequently issued a memo providing temporary enforcement discretion for certain facilities who "may have mistakenly believed" their releases were exempt to conform their conduct to the guidance.25

In early 2000, a coalition of companies and organizations challenged the guidance as a de facto rule promulgated in violation of the APA (among other things).26 After a challenge to the guidance survived a motion to dismiss, EPA suspended the Interim Guidance in May 2000 and entered into settlement negotiations that finally resulted in a new document (which I'll call the Final Guidance) being issued on April 17, 2002.27 In summary, the Final Guidance provides that "whether a particular air release . . . is exempt . . . requires a case-by-case determination based on the specific permit language or applicable control requirement."28

The two guidances are excellent examples respectively of how not and how to write a guidance document. The Interim Guidance sounds a lot like a rule. It speaks of releases that "do not qualify for the . . . exemption," so that "the facility must immediately notify" relevant authorities.29 The Final Guidance, by contrast, uses words like "usually," "probably," "generally," and "may be," and states that it is "difficult to establish a 'bright line'" in the abstract.30 The Final Guidance also makes clear that it is the relevant laws and regulations that "contain legally binding requirements,"31 whereas the guidance document "does not impose new legally binding requirements. . . ."32

Since guidances should not impose requirements, it would be incongruous for one to announce an apparently binding new legal rule. As noted earlier, however, the Interim Guidance announced that it had "resolved" the interpretive issues raised in previous proposed rules.33 The Final Guidance makes no such claim, instead stating that it "explains," "discusses," or "reflects" the Agency's thinking.34

What exactly "binding" means in the context of guidances can be the subject of some disagreement. At a minimum, however, it means that the agency takes the guidance to be dispositive of an issue; that a private party is precluded from raising an objection to it before the agency.35 Again, the Final Guidance is commendable, since it assures regulated entities that they will have an opportunity to challenge it if applied to them. "Interested parties are free to challenge our position in particular situations before the administrative or judicial courts, which ultimately decide how the exemption applies based on the statutes and regulations themselves."36

[32 ELR 10724]

"Practically Binding" and the Occupational Safety and Health Administration's (OSHA's) Cooperative Compliance Program (CCP)

The more difficult sense of "binding" is the "practical effect" concept, which is well-illustrated by the following case study. In 1997, OSHA created a CCP directed at workplaces with high injury rates. Companies opting into the program would establish a health and safety program in cooperation with OSHA, and in exchange would be dropped from OSHA's regular inspection process. High-injury workplaces not opting in the program would become the subject of heightened inspections.

The U.S. Chamber of Commerce challenged the program as being a de facto rule.37 The U.S. Court of Appeals for the District of Columbia (D.C.) Circuit agreed and struck it down for lack of notice and comment.38 OSHA argued that the CCP was a procedural rule, because it did not require anyone to do anything, and thus was not "binding."39 The court disagreed, finding that the "practical" effect of the program was to "place the burden of inspection" on employers who didn't opt in.40 OSHA also argued that its rule was only a policy statement, but the court again disagreed, stating that the rule did not announce the agency's "tentative intentions for the future," but rather "informed employers of a decision already made."41

At some level, any document announcing an agency's intentions will have some practical effect of coercing regulated entities' behavior, even if those intentions are tentative or subject to challenge before the agency. Query what would have happened if OSHA had said employers who did not opt in would "likely" be inspected?

Does the Guidance Bind the Agency?

Even if a guidance purports to leave discretion for the agency, a court may hold it to be a de facto rule if, in practice, agency staff follow it rigidly.42 Moreover, courts and academics alike have assailed the standard EPA disclaimer, parodied above, as being "boilerplate" and "a charade."43

For example, in May 1993, EPA Administrator Carol Browner issued a memorandum announcing her draft "Combustion Strategy" for reducing hazardous waste incineration.44 Among other things, the memo declared that incinerators, boilers, and industrial furnaces burning hazardous waste, though already subject to RCRA regulation, would be required to meet tighter standards taken from the Clean Air Act (CAA) new source performance standards (NSPS) for new municipal solid waste incinerators.45 Several groups representing hazardous waste combustors sued, arguing that the memo was an illegal attempt to amend the existing RCRA rules.46 Shortly after the lawsuit was filed, EPA issued a memo "clarifying" that the NSPS numbers were "targets" to be considered in conducting site-specific risk assessments at individual facilities.47

There is significant disagreement about how good or bad it is for vast bureaucracies to be able to enforce consistency among their myriad offices.48 However, just as a guidance must leave regulated entities free to challenge it before the agency, a guidance must also leave agency staff at some level in the hierarchy free to depart from it, and the staff must do so where regulated entities present a prima facie case for doing so, in order to avoid a successful legal challenge.

Is There a History of Rulemaking on This Subject?

The essence of the "regulation by guidance" objection is that an agency is circumventing or evading both notice-and-comment and judicial review. Sometimes, the facts are pretty compelling.

. Appalachian Power Co. v. U.S. Environmental Protection Agency.49 The 1990 CAA Amendments required EPA to issue rules for operating permit programs, including monitoring requirements.50 EPA published proposed and final rules on the topic, which included reference to "periodic . . . monitoring."51 The preamble to the final rule stated that if any existing federal air standards lacked sufficient monitoring to satisfy these regulations, "EPA will issue a rulemaking to revise such requirement."52 Instead, six years later, EPA issued a "Periodic Monitoring Guidance" that implicitly found the monitoring of numerous federal standards to be inadequate.53 The D.C. Circuit struck down the guidance as being a de facto rule.54

. Federally Permitted Releases. As recounted earlier, EPA issued three proposed rules on this subject over a six-year period.55 EPA sought the dismissal of a lawsuit on related questions by representing to the D.C. Circuit that it would issue a final rule on the subject.56 Thereafter, the issue was listed on EPA's semiannual Regulatory Agenda as an ongoing, [32 ELR 10725] "substantive" rulemaking.57 And yet the Agency "resolved" the issues at stake through its Interim Guidance. After a challenge to the guidance survived a motion to dismiss, EPA suspended the guidance and ultimately replaced it with the more "guidance-like" Final Guidance.

In cases where an agency has already begun a rulemaking process, therefore, it would behoove the agency to finish that course, rather than opt for guidance.

Does the Issue Involve Controversial Legal Calls?

Faced with politically sensitive issues of law with vocal proponents on both sides, agencies are often tempted to craft compromise positions in guidances that are frequently "draft" or "interim." A prominent example is EPA's recent Title VI guidance.58 This guidance generated heated opposition from both sides of the issue and satisfied no one. The heightened sensitivity of the issue only fed suspicion, on both sides, that the Agency was attempting to circumvent its legal obligations through guidance. Moreover, questions that primarily involve legal issues—as opposed to factual ones—are the easiest for an agency to address. The comments they attract are more in the nature of legal briefs than the voluminous, fact-laden filings of typical rulemakings. Such an administrative record is thus easier to manage and review. And defending a decision in such a case is also more straightforward.59 Thus, agencies should proceed by rulemaking, rather than guidance, in matters that primarily involve contentious legal issues.

Is the Subject Matter Highly Technical and Case-Specific?

In General

EPA regulations already vie with those of the Internal Revenue Service and the U.S. Securities and Exchange Commission as being among the most complex and detailed in the Code of Federal Regulations. And yet, those regulations frequently do not contain sufficient detail to enable a determination of their applicability to a particular set of facts. Also, where a regulation addresses a very heterogeneous subject matter, it makes sense for the regulation to be expressed in simple, general terms, and for its applicability to be articulated, and developed case by case, through guidance. Examples where EPA has properly used guidance for highly technical or fact-specific subjects include:

. Guidances for Implementing the High Production Volume Chemical Challenge Program. Under this voluntary program, chemical companies are screening and testing hundreds of chemicals. These guidances describes how to categorize chemicals for these purposes, conduct structure/activity relationship analyses, and assess the adequacy of existing data.60

. Soil Screening Guidance. This Superfund document provides a flexible, tiered approach for developing risk-based soil screening levels (SSLs).61 It focuses on a simple methodology for developing site-specific screening levels, but also includes detailed models and generic SSLs to be used where site conditions warrant.

. The Integrated Risk Information System (IRIS) Database. This database of over 500 chemicals contains EPA's derivations of acceptable doses, based on detailed reviews of toxicological and epidemiological literature.62 EPA is continuously updating these, albeit too slowly to keep up with the growth in relevant data.

. The Audit Policy. This document describes how EPA will treat disclosures of noncompliance that are voluntarily identified.63 While the Agency follows it quite strictly, it has departed from it in a few compelling cases and for particular Agency initiatives.

Detroit Edison

A more controversial instance of this category of guidance is EPA's issuance of "applicability determinations" under the CAA, of which the most prominent is the 2000 Detroit Edison determination.64

That determination involved a power plant that was replacing the turbine blades in the high pressure sections of two steam turbines. The determination explained EPA's application, to those facts, of its regulatory exception from new source review (NSR) for projects involving "routine maintenance, repair, and replacement." A group of electric utilities sued, arguing that the determination was really an illegal amendment to that exception. The D.C. Circuit dismissed the case, accepting EPA's contention that the determination was not a rule at all, but rather an adjudication that applied the exception to a single facility.65

As a matter of administrative law, the Detroit Edison determination is probably best viewed as an adjudication, rather than a legislative or interpretive rule, as it applies very general statutory and regulatory language to a precise set of facts and disclaims any broader significance. On the other hand, an agency certainly could use a specific case like this one to announce a nationally applicable interpretation of a statute or its own regulations.66 In such a case, the interpretation should be reviewable as an interpretive rule.67

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More recently, EPA included the Detroit Edison determination in a Federal Register notice listing determinations that the Agency was publishing "in accordance with the [APA] and [CAA] provisions for judicial review," an ambiguous statement that raised questions about whether EPA was backtracking on its representations before the D.C. Circuit.68 When regulated entities requested EPA to clarify whether it intended the Detroit Edison determination to be an adjudication applicable only to one project or an interpretive rule applicable nationally, EPA issued an even more ambiguous Federal Register notice stating that "some" of the applicability determinations listed in the first notice were intended to be nationally applicable and "others" were not—without explaining which one of these categories included the Detroit Edison determination.69 As a result, a number of trade associations, including the American Chemistry Council, have sued EPA in the D.C. Circuit.70

Is the Subject, or the Agency's Understanding of the Subject, Evolving Rapidly or Likely to Do So?

A familiar criticism of the regulatory process is that it has "ossified," slowed to a snail's pace by the continual accretion of procedural requirements imposed by Congress, courts, and administrations. In theory, anyway, guidance documents can be issued more quickly than rules since guidances are not subject to these impediments. Particularly in areas where the subject, or the agency's understanding of it, is changing rapidly, it makes sense for the agency to proceed by guidance. Thus, as events and agency knowledge progress, the agency can more easily and quickly update the material. (Imagine if software had to be promulgated by regulation—it would be outdated before it was ever finalized.) Examples of situations where EPA has properly used guidance for rapidly evolving areas include:

. EPA's Views on Science Policy Issues Implicated by the Food Quality Protection Act (FQPA). The FQPA is pushing EPA and other interested parties to define the cutting edge of science policy on issues such as the percentile of exposure to be used as a regulatory threshold, how to assess aggregate and cumulative risks, and the use of probabilistic risk assessment. To implement the statute, EPA is issuing "policy papers" announcing its current views on these issues.71 The regulated community is divided on whether these policy papers should properly be considered regulations; the American Chemistry Council prefers EPA's use of guidance in this case to proceeding by regulation (provided that EPA does not implement these guidances as rigidly as rules).72

. The IRIS Database. These assessments involve similar sorts of science policy issues, such as when uncertainty or modifying factors should be used, their magnitude, and what sorts of data allow such factors to be reduced or dispensed with. Advances in toxicology and risk assessment lead to continual reassessment of these issues that militate against EPA administering the IRIS database by regulation.

. EPA's Cancer Risk Assessment Guidelines. Cancer assessments in IRIS and elsewhere within EPA are guided by these. EPA was sued for implementing draft revised guidelines instead of the most recently finalized, 1986 guidelines.73 The American Chemistry Council did not participate in this litigation.

Give Notice, Collect Comments Either Way

While an agency is not required to give the public an opportunity to comment on a guidance, nothing prohibits it from doing so. Allowing public comment on a draft guidance serves all the same salutary purposes served by seeking comment on a proposed rule, most notably ensuring that the agency gets the benefit of focused thinking by everyone sufficiently interested in the issue to comment. Where the issues are sufficiently weighty or of broad impact, and where time and resources permit, an agency only gains by soliciting comment before finalizing a guidance.74

Stop Evading Review

Above, I noted that people interested in agency rules are principally concerned about three things: (i) the opportunity for notice and comment; (ii) the availability of judicial review; and (iii) the prospect of enforcement. While notice and comment are important, I hazard to opine that, as between the first two of these topics, the second is the more fundamental. Deference considerations aside, it is still the province of the courts to say what the law is. People who challenge guidance as being promulgated in violation of the APA do want to comment, but equally or more importantly, they want a sure shot at judicial review (and under a less deferential standard). Earlier, I complimented the Final Guidance on federally permitted releases for clarifying that affected parties could challenge it if it was applied to them.75 It would be even better if agencies would be willing to allow their guidances to be challenged facially, without continually resorting to justiciability defenses like ripeness and finality. If they don't, they run the risk, as in Appalachian Power, that courts will increasingly require them to do everything by notice and comment.76

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Regulation by Information

The first part of the Dialogue observed that many of the "guidances" that irk regulated entities are published by agencies on subjects where it is questionable, at best, whether the agency actually possesses the power to issue a regulation. Instead, the agency is simply relying on its statutory authorities to collect and disseminate information.77 These agencies have realized, in the words of former EPA General Counsel Jonathan Cannon, that "information . . . can be a supplement, sometimes even an alternative, to regulation. When broadly available, information can change behavior."78

Moreover, the advent of the Internet and the ubiquity of computers have qualitatively changed the nature and extent of governmental information dissemination. Virtually all new documents released publicly by federal agencies, and many historic documents, are now available on their websites. Agencies are also actively developing information "products," projects that combine databases and/or models to produce multidimensional characterizations of particular companies, facilities, or regions. For example, EPA's Risk Screening Environmental Indicators model ranks sources of toxic chemical releases by a methodology that combines hazard and exposure data.79 In creating such products, agencies make the same sorts of policy and scientific choices that they make in issuing regulations.

This use of information has many actual and potential benefits, including speed, flexibility, efficiency, and public right-to-know. On the other hand, if the government's disclosures are inaccurate or misleading, they can inflict unwarranted harm on private parties and disserve the public and the government. Interests in business confidentiality and security may also be jeopardized.

To varying degrees, governmental agencies have acknowledged the legitimacy of these concerns. Fundamentally, however, the federal government has steadfastly resisted any notion that its information activities should be subject to the APA or similar laws that would impose procedural requirements like notice-and-comment procedures or judicial review.80 The federal government is also immune from libel or slander claims under the Federal Tort Claims Act.81 In theory, then, the federal government could publish information that it knew was false and defamatory, and yet an injured person would have no legal basis to challenge that action.

In response to steady criticism, EPA has begun to institute an Information Products Bulletin,82 somewhat analogous to a Regulatory Agenda, and an Integrated Error Correction Mechanism.83 It is still too early to gauge how effective these mechanisms are, though, and no other agency has done anything comparable. Concerned about this situation, last summer the American Bar Association adopted the following resolution, introduced by the Section of Administrative Law and Regulatory Practice and cosponsored by the Section of Environment, Energy, and Resources:

RESOLVED, the American Bar Association [(ABA)] recommends, concerning significant agency information dissemination activities intended to promote policy goals, that

(1) the President seek public participation by requiring agencies to list at an appropriate time such proposed activities in a widely available medium, such as the agency's website or the semiannual regulatory agenda.

(2) agencies take into consideration public input by

(a) identifying proposed activities, including the sources from which the information is drawn, and by inviting the public to comment on such activities and to attend public meetings as appropriate.

(b) establishing and publicizing a process for the correction of factual errors.84

The last aspect of the ABA's recommendation has been superseded by a small piece of appropriations legislation enacted in late 2000. As a result of § 515 of the Treasury and General Government Appropriations Act for Fiscal Year 2001, each federal agency is required to "issue guidelines ensuring and maximizing the quality, objectivity, utility, and integrity of information . . . disseminated by the agency," and to "establish administrative mechanisms allowing affected persons to seek and obtain correction of information disseminated by the agency that does not comply with the guidelines . . . ."85 Agencies must begin applying these guidelines to the development of information they disseminate on or after October 1, 2002.86 The administrative correction mechanisms must become effective that same day, and will apply retroactively to any information then disseminated by an agency, regardless of when it first disseminated the information.87

The statute required the Office of Management and Budget (OMB) to promulgate generic implementing guidelines, which it did in 2001,88 and agencies are now busy adapting the OMB guidelines to their individual circumstances. While administrative law scholars differ regarding the ultimate impact of this new legislation, may (as well as the author) believe that it will fundamentally change the legal landscape surrounding the "regulation by information" phenomenon, and could well be the most significant development in administrative law since enactment of the APA.

Regulation by Enforcement

Perhaps the major enforcement challenge left by the Clinton Administration for its successor was what to do with EPA's [32 ELR 10728] and the U.S. Department of Justice's aggressive NSR enforcement initiative against electric utilities and oil refineries. The primary defense in these cases is that the government is implementing new interpretations of the relevant statutory and regulatory provisions, for the first time, in the context of enforcement actions. A similar enforcement initiative in EPA Region 7—which was called off—was the antecedent of the two guidances on federally permitted releases discussed above. These cases are not unique.

Two legal concepts or questions are tied up in this issue.

The APA

When an agency enforces a new interpretation of an existing rule, the first question arises under the APA: is this new position a reasonable interpretation of the existing rules? If the answer is yes, the case can proceed to the question of fair notice, discussed below. If the answer is no, then the case is dismissed and no one has to comply with the new interpretation.89 If the government wants to enforce the interpretation in the future, it will first have to amend the existing rules through notice-and-comment rulemaking. The people will then have the chance to challenge the new rule. The government typically wins at this stage, however, since courts are extraordinarily deferential to agencies' interpretations of their own rules.90 (Academics generally think this deference is wrong,91 and many believe the U.S. Supreme Court may be willing to reconsider the issue in view of last term's decision in United States v. Mead Corp.)92

Sometimes the new interpretation is of a statute, rather than a rule. In this setting, a prior legal question comes up: is the new rule a legislative rule (in which case the agency loses because it should have complied with the APA), or an interpretive rule (in which case one asks whether the rule was a reasonable interpretation of the statute, and the possible answers, as just discussed, are yes (go to Fair Notice below) or no (case dismissed). Note, however, that if an interpretive rule really announces a change of a prior interpretation, then—in the D.C. Circuit, at least—the agency has to go through notice-and-comment rulemaking before it can enforce the new interpretation—even though the initial interpretive rule did not.93 Law professors seem universally to think this doctrine is also wrong.94

Fair Notice

Even if a new position is a reasonable interpretation of existing rules or statutes, general principles of fairness mandate that a defendant in an enforcement case must be given "fair notice" of the interpretation before penalties can be assessed. If the defendant did not, the case must be dismissed (or at least no penalties can be imposed for the time fair notice was not provided).95 As Judge Patricia Wald has written:

I believe legislators and rulemakers would do well to proceed in the immediate future with even greater caution than in the past in insuring that their rules give fair notice about what is expected of the regulated and fair procedures for disputing alleged violations. I predict courts will be increasingly sensitive to problems of regulatory fairness for some time to come.96

Regardless of whether a defendant had fair notice in the past, once a person is given fair notice, he or she is expected to comply with the new interpretation in the future (and could be fined for future violations). Some wrinkles under this point involve:

. How much time should people have to come in to compliance—are they entitled to as much time as people who got fair notice originally were given, or is something less okay?

. The D.C. Circuit has held that lack of fair notice not only bars penalty actions, but also injunctions that require the expenditure of money (because that is the equivalent of receiving a penalty).97 The decision barred the National Highway Traffic Safety Administration from issuing a recall of cars with a particular seat belt anchor (although cars made in the future had to employ an improved seat belt anchor). This case has interesting implications for environmental cases. Possibly the government cannot require cleanups or other corrective action to mitigate the past consequences of compliance with an old interpretation. A more aggressive interpretation would be that the government could not require installation of control equipment as a remedy for a past (but ongoing) violation of NSR requirements.

Conclusion

The familiar complaint about agencies engaging in non-rule rulemaking really breaks down into three different phenomena, which I have pejoratively labeled "regulation by guidance," "regulation by information," and "regulation by enforcement." [32 ELR 10729] The first of these can only happen where an agency actually has the power to issue legislative rules on a topic. In such cases, an agency's use of guidance may actually be preferable to its use of rulemaking in a variety of circumstances, provided the agency acts appropriately. This Dialogue has proposed a number of factors to help identify when those circumstances obtain. Thoughtful consideration of these factors by agencies might reduce the number of times that they and private parties find themselves in litigation over these issues.

2. See, e.g., Richard G. Stoll, Court Strikes Heavy Blow to "Rulemaking" Through Informal Guidance Documents, 31 Env't Rep. (BNA) 1284 (June 9, 2000).

3. See Non-Binding Legal Effect of Agency Guidance Documents, H.R. REP. NO. 106-1009 (Oct. 26, 2000).

4. See, e.g., Warder v. Shalala, 149 F.3d 73 (1st Cir. 1998) (Medicare beneficiaries challenge Health Care Financing Administration ruling regarding classification of orthotic management devices); Animal Legal Defense Fund v. Quigg, 932 F.2d 920 (Fed. Cir. 1991) (animal group challenges U.S. Patent and Trademark Office notice announcing patentability of living nonhuman organisms); Community Nutrition Inst. v. Young, 818 F.2d 943 (D.C. Cir. 1987) (nongovernmental organization challenges Food and Drug Administration guideline limiting enforcement to cases where aflatoxin levels in corn exceed "action level" of 20 parts per billion).

5. To paraphrase the U.S. Environmental Protection Agency's (EPA's) familiar disclaimer:

NOTICE: The policies set out in this outline are not final association action, but are intended solely as guidance. They are not intended, nor can they be relied upon, to create any rights enforceable by any party in litigation with the American Chemistry Council (ACC). ACC staff and members may decide to follow the guidance provided in this outline or to act at variance with the guidance, based on an analysis of case-specific circumstances. The author also reserves the right to change this guidance at any time without public notice.

6. See Peter Strauss, Publication Rules in the Rulemaking Spectrum: Assuring Proper Respect for an Essential Element, 53 ADMIN. L. REV. 803, 809 (2001) ("This topic is hard to write about.").

7. The APA says

"rule" means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs or accounting, or practices bearing on any of the foregoing.

5 U.S.C. § 551(4), available in ELR STAT. ADMIN. PROC.

8. How an agency action is classified can also trigger other consequences for agencies, such as the requirement to engage in cost/benefit analysis under Executive Order No. 12866 or to evaluate impacts to small entities under the Regulatory Flexibility Act, 5 U.S.C. §§ 601-612. However, these other sorts of consequences typically are less central to disputes over agency action.

9. Notice and comment is covered by 5 U.S.C. § 553(b)-(c), available in ELR STAT. ADMIN. PROC.; judicial review is covered by id. §§ 701-706, available in ELR STAT. ADMIN. PROC. Enforceability is not generally addressed by the APA except in two circumstances: § 552(a)(1) ("Except to the extent that a person has actual and timely notice of the terms thereof, a person may not in any mannerbe required to resort to, or be adversely affected by, a matter required to be published in the Federal Register and not so published."), and § 552(a)(2):

A final order, opinion, statement of policy, interpretation, or staff manual or instruction that affects a member of the public may be relied on, used, or cited as precedent by an agency against a party other than an agency only if—(i) it has been indexed and either made available or published as provided by this paragraph; or (ii) the party has actual and timely notice of the terms thereof.

10. See www.epa.gov/epaoswer/hazwaste/minimize/docs.htm (last visited Apr. 29, 2002).

11. See 42 U.S.C. § 241(b)(4)(A).

12. The U.S. Court of Appeals for the District of Columbia (D.C.) Circuit recently addressed this issue in Tozzi v. Department of Health & Human Servs., 271 F.3d 30, 31, 32 ELR 20335, 20337-38 (D.C. Cir. 2001). It held that the NTP's reports on carcinogens are reviewable final agency action because, inter alia, the Occupational Safety and HealthAdministration (OSHA) and several states impose regulatory requirements on substances that the reports list as "known" human carcinogens.

13. See 33 U.S.C. § 1313(a), ELR STAT. FWPCA § 303(a) (Clean Water Act).

14. See id. § 1313(b), ELR STAT. FWPCA § 303(b).

15. See id. § 1314, ELR STAT. FWPCA § 304.

16. See, e.g., Robert A. Anthony, Interpretive Rules, Policy Statements, Guidances, Manuals, and the Like—Should Federal Agencies Use Them to Bind the Public?, 41 DUKE L.J. 1311, 1315 (1992) ("Nonle gislative rules like policy statements, guidances, manuals and memoranda should not be used to bind the public.") (emphasis in the original). See also Peter Strauss, The Rulemaking Continuum, 41 DUKE L.J. 1465 (1992) (Where "the citizen is bound but the government is not . . . seems the very antithesis of the 'rule of law.'"); Ronald M. Levin, Nonlegislative Rules and the Administrative Open Mind, 41 DUKE L.J. 1498 (1992). Actually, there is some dispute about whether interpretive rules can bind the public, but we need not get into that dispute here.

17. Letter from Lisa K. Friedman, to Rep. David McIntosh (Mar. 2, 1999), reprinted in H.R. REP. NO. 106-1009, supra note 3, at 14.

18. See id. at 13 n.1.

19. In striking down EPA's Periodic Monitoring Guidance, the D.C. Circuit noted that "the entire guidance, from beginning to end . . . reads like a ukase. It commands, it requires, it orders, it dictates." Appalachian Power Co. v. EPA, 208 F.3d 1015, 1023, 30 ELR 20560, 20562 (D.C. Cir. 2000).

20. 42 U.S.C. § 9603(a), ELR STAT. CERCLA § 103(a).

21. 42 U.S.C. § 11004(a), ELR STAT. EPCRA § 304(a).

22. The three notices were 48 Fed. Reg. 23552 (May 25, 1983), 53 Fed. Reg. 27268 (July 19, 1988), and 54 Fed. Reg. 29306 (July 12, 1989).

23. 64 Fed. Reg. 71615, 71620 (Dec. 21, 1999) (citing the three Federal Register notices listed supra note 22).

24. See id. at 71615.

25. Memorandum from Steve Herman entitled "Enforcement of EPCRA § 304/CERCLA § 103" (Feb. 15, 2000).

26. National Ass'n of Mfrs. v. EPA, No. 00-1111 (D.C. Cir. filed Mar. 17, 2000). The American Chemistry Council participated in this lawsuit.

27. See 67 Fed. Reg. 18899 (Apr. 17, 2002).

28. Id.

29. 64 Fed. Reg. at 71617.

30. 67 Fed. Reg. at 18902-04.

31. Id. at 18901.

32. Id.

33. See 64 Fed. Reg. at 71615.

34. See 67 Fed. Reg. at 18899-900.

35. See Anthony, supra note 16.

36. 67 Fed. Reg. at 18902.

37. The American Chemistry Council did not join this lawsuit.

38. See Chamber of Commerce v. Department of Labor, 174 F.3d 206 (D.C. Cir. 1999).

39. See id. at 211. See also 5 U.S.C. § 553(b)(3)(A), available in ELR STAT. ADMIN. PROC. (notice and comment are not required for rules of agency organization, procedure, or practice).

40. See 174 F.3d at 211-12.

41. Id. at 213.

42. See, e.g., McLouth Steel Prods. Corp. v. Thomas, 838 F.2d 1317, 1321, 18 ELR 20473, 20475-76 (D.C. Cir. 1988) (agency staff would not depart from model).

43. See Appalachian Power Co. v. EPA, 208 F.3d 1015, 1023, 30 ELR 20560, 20562 (D.C. Cir. 2000) (quoting Strauss, supra note 16, at 1485). See also supra note 5.

44. See Press Release, EPA, EPA Administrator Browner Announces New Hazardous Waste Reduction and Combustion Strategy (May 18, 1993).

45. See id.

46. See Cement Kiln Recycling Coalition v. Browner, No. 93-1413 (D.C. Cir. filed May 10, 1993).

47. See Memorandum from Richard J. Guimond, to Regional Administrators, EPA (Aug. 11, 1993).

48. The whole thrust of Strauss, supra note 16, is that on balance society is better off if bureaucracies can act consistently.

49. 208 F.3d 1015, 30 ELR 20560 (D.C. Cir. 2000).

50. See 42 U.S.C. § 7661a(b)(2), ELR STAT. CAA § 502(b)(2).

51. 40 C.F.R. § 70.6(a)(3)(B).

52. 57 Fed. Reg. 32278 (July 21, 1992).

53. See Appalachian Power, 208 F.3d at 1019, 30 ELR at 20561.

54. See id. at 1028, 30 ELR at 20564.

55. See the Federally Permitted Release Saga section above.

56. See Motion of Certain Petitioners to Return Case to Active Docket, Alabama Power Co. v. Browner, No. 89-1408 (D.C. Cir. filed Apr. 6, 2000).

57. See, e.g., 64 Fed. Reg. 65139 (Nov. 22, 1999).

58. U.S. EPA, DRAFT TITLE VI GUIDANCE FOR EPA ASSISTANCE RECIPIENTS ADMINISTERING ENVIRONMENTAL PERMITTING PROGRAMS (2000).

59. This point is made persuasively in Levin, supra note 16, at 1506-07.

60. See www.epa.gov/opptintr/chemrtk/guidocs.htm (last visited Apr. 29, 2002).

61. See www.epa.gov/superfund/resources/soil/index.htm (last visited Apr. 29, 2002).

62. See www.epa.gov/iris (last visited Apr. 29, 2002).

63. See http://es.epa.gov/oeca/finalpolstate.pdf (last visited Apr. 29, 2002).

64. See 65 Fed. Reg. 77623 (Dec. 12, 2000).

65. See Utility Air Regulatory Group v. EPA, No. 01-1064 (D.C. Cir. filed July 10, 2001). Under the CAA's judicial review provisions, nationally applicable EPA actions are reviewable only in the D.C. Circuit, while locally applicable actions are reviewable only in the circuit where the source in question is located. 42 U.S.C. § 7607(b), ELR STAT. CAA § 307(b).

66. It could not use that opportunity to amend the regulation, of course—that would require notice-and-comment rulemaking.

67. It is also true that, even if the Agency denied it was announcing a nationally applicable determination, if it began rigidly following the Detroit Edison determination in subsequent determinations, one might be able to successfully argue that the original determination was really a de facto rule. See McLouth Steel Prods. Corp. v. Thomas, 838 F.2d 1317, 18 ELR 20473 (D.C. Cir. 1988).

68. 66 Fed. Reg. 57453 (Nov. 15, 2001).

69. 67 Fed. Reg. 1295 (Jan. 10, 2002).

70. Utility Air Regulatory Group v. EPA, No. 02-1023 (D.C. Cir. filed Jan. 14, 2002).

71. See www.epa.gov/pesticides/trac/science/ (last visited Apr. 29, 2002).

72. By contrast, CropLife America has argued in court that EPA should proceed by rulemaking. See American Farm Bureau v. EPA, 121 F. Supp. 2d 84, 104-06 (D.D.C. 2000).

73. See Tozzi v. EPA, No. 00-CV02604 (D.D.C. filed Oct. 27, 2000; voluntarily dismissed Mar. 15, 2002).

74. See Administrative Conference of the United States, Recommendation No. 76-5, 1 C.F.R. § 305.76-5 (recommending notice and comment for interpretive rules of general applicability and policy statements that are likely to have a substantial impact on the public).

75. See 67 Fed. Reg. at 18902.

76. Professor Strauss is worth quoting on this point:

The inhibition attributable to the possibility of judicial review, while real, will be considerably less than that attributable to a requirement of rulemaking . . . . Review of a [guidance] threatens possible delay and the costs of going to court only if it occurs—an event necessarily less frequent than publication rulemaking itself would be, and one that will produce reversal only if the advice appealed from was wrong on the merits.

Strauss, supra note 16, at 1487.

77. For example, the CAA authorizes EPA to "collect and disseminate . . . basic data on chemical, physical, and biological effects of varying air quality and other information pertaining to air pollution and the prevention and control thereof." 42 U.S.C. § 7403(b)(6), ELR STAT. CAA § 103(b)(6).

78. Profile: Jonathan Z. Cannon, ENVTL. F., July/Aug. 1998, at 34, 36.

79. See www.epa.gov/opptintr/env_ind/index.html (last visited Apr. 29, 2002).

80. Several courts have concluded that governmental information products can be "final agency action" reviewable under the APA. See Tozzi v. Department of Health & Human Servs., 271 F.3d 30, 32 ELR 20335 (D.C. Cir. 2001) (NTP's reports on carcinogens); see also Flue-Cured Tobacco Coop. Stabilization Corp. v. EPA, 857 F. Supp. 1137, 25 ELR 20089 (M.D.N.C. 1994) (EPA report on environmentalor "secondhand" tobacco smoke), appeal docketed, No. 98-2407 (4th Cir. Sept. 15, 1998).

81. 28 U.S.C. § 2680(h).

82. See www.epa.gov/ipbpages/ (last visited Apr. 29, 2002).

83. See www.epa.gov/oei/quality.htm (last visited Apr. 29, 2002).

84. See www.abanet.org/ftp/pub/leadership/2001journal.doc, at 20 (last visited Apr. 29, 2002).

85. Pub. L. No. 106-554, 114 Stat. 2763A-153 to 2763A-154.

86. 67 Fed. Reg. 8459 (Feb. 22, 2002).

87. Id.

88. 66 Fed. Reg. 49718 (Sept. 28, 2001), revised and republished at 67 Fed. Reg. 8452 (Feb. 22, 2002).

89. See, e.g., General Elec. Co. v. EPA, 53 F.3d 1324, 1327-28, 25 ELR 20982, 20985-86 (D.C. Cir. 1995).

90. See, e.g., United States v. Hoechst-Celanese Corp., 128 F.3d 216, 221, 28 ELR 20236, 20237 (4th Cir. 1997) (EPA's interpretation of its Benzene national emission standards for hazardous air pollutants (NESHAPs) upheld because not "nonsensical"), cert. denied, 118 S. Ct. 2367 (1998).

91. See, e.g., John F. Manning, Constitutional Structure and Judicial Deference to Agency Interpretations of Agency Rules, 96 COLUM L. REV. 612 (1996).

92. 121 S. Ct. 2164 (2001) (interpretive rules, policy statements, and other guidances are not subject to the standard of deference established by Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 14 ELR 20507 (1984), but to the lower standard established under Skidmore v. Swift & Co., 323 U.S. 134 (1944)).

93. See, e.g., Syncor Int'l Corp. v. Shalala, 127 F.3d 90 (D.C. Cir. 1997); Paralyzed Veterans of Am. v. D.C. Arena, 117 F.3d 579 (D.C. Cir. 1997); American Mining Congress v. Mine Safety & Health Admin., 995 F.2d 1106 (D.C. Cir. 1992).

94. See, e.g., Michael Asimow & Robert A. Anthony, A Second Opinion? Inconsistent Interpretive Rules, ADMIN. & REG. L. NEWS, Winter 2000, at 16.

95. See, e.g., Hoechst-Celanese Corp., 128 F.3d at 224-27, 28 ELR 20236, 20238-41 (from 1984 to 1989, defendant did not have fair notice of EPA's interpretation of "use" in the Benzene NESHAPS); General Elec. Co. v. EPA, 53 F.3d 1324, 1328, 25 ELR 20982, 20985 ("[EPA's] interpretation is so far from a reasonable person's understanding of the regulations that they could not have fairly informed GE of the Agency's perspective."); Chemical Waste Management Chem. Servs., Inc., TSCA Appeal No. 93-1, 6 E.A.D. 1 (Envtl. Appeals Bd. (EAB) May 15, 1995) ("[One] cannot have 'notice' of a non-existent rule."); In re Phibro Energy USA, Inc., EPA Docket No. CAA-R6-P-9-LA-92002 (EAB Oct. 5, 1994).

96. See Hon. Patricia M. Wald, Environmental Postcards From the Edge: The Year That Was and the Year That Might Be, 26 ELR 10182, 10187 (Apr. 1996).

97. See United States v. Chrysler Corp., 158 F.3d 1350 (D.C. Cir. 1998).

32 ELR 10721 | Environmental Law Reporter | copyright © 2002 | All rights reserved