Regulating Behind Closed Doors

May 20, 2013

Over the past several years, the business community has come under increasing attack from interest groups using lawsuits against federal agencies and subsequent settlements as a technique to shape agencies’ regulatory agendas.

From a new wave of endangered species listings to the EPA’s federalization of the Chesapeake Bay cleanup program, to the federal takeover of regional haze programs, these “sue and settle” arrangements have fueled fears that the rulemaking process itself is being subverted to serve the ends of a few favored interest groups.

“Through the process of sue and settle rulemaking, agencies and organizations do an end-run around good government principles to achieve the policy objectives of special interests,” says Bill Kovacs, U.S. Chamber senior vice president for Environment, Technology & Regulatory Affairs.

Sue and settle works like this: Environmental and consumer advocacy groups file a lawsuit claiming that the federal government has failed to meet a deadline or has not satisfied some regulatory requirement. The agency can then either choose to defend itself against the lawsuit or settle it. Often times, it settles by putting in place a “court-ordered” regulation desired by the advocacy group, thus circumventing the proper rulemaking channels and basic transparency and accountability standards.

This results in economically damaging rules. For example, through sue and settle, EPA’s regional haze program could cost one Arizona power plant $700 million, and the Utility MACT rule attacking coal-fired power plants has cost thousands of jobs and will add $10 billion in costs.

Beginning in 2011, the U.S. Chamber set out to identify major sue and settle cases, how often the practice occurs, and the types of agency actions involved.Using a combination of approaches, the Chamber compiled a database of sue and settle cases and their subsequent rulemaking outcomes in the current and previous administrations.

The Chamber investigation shows that from 2009 to 2012, the EPA chose at some point not to defend itself in lawsuits brought by special interest advocacy groups at least 60 times. These cases include EPA settlements under the Clean Air Act and the Clean Water Act, along with key Fish and Wildlife Service settlements under the Endangered Species Act. Significantly, settlement of these cases directly resulted in more than a hundred new federal rules, many of which cost more than $100 million annually,

The database shows that several environmental advocacy groups have made the sue and settle process a significant part of their legal strategy. The Sierra Club has filed and settled 34 cases. By filing, then quickly settling, lawsuits covering significant EPA rulemakings and regulatory initiatives, these groups have been able to circumvent the normal rulemaking process and effect immediate regulatory action with the consent of the agencies themselves.

In July 2012, the House passed a bill to curtail sue and settle abuse; however, the Senate never took action. With the Chamber’s full support, legislation was reintroduced in the Senate and the House in April 2013.

“The Sunshine for Regulatory Decrees and Settlements Act is a strong bill that would implement important common-sense changes to the current system,” says Kovacs. “Passage of this legislation will close the massive sue and settle loophole in our regulatory process.”

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