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Return to Due Process at EPA

October 22, 2017

Environmental Protection Agency Administrator Scott Pruitt has made major inroads toward improving the Agency’s rule-making processes by abandoning the “sue and settle” practices that had gained heightened prominence under the Obama administration.

“Sue and settle” occurs when activist groups circumvent the usual regulatory processes outlined by Congress by filing suit against government agencies to compel determinations. Private resolution of these legal actions by the EPA with the litigant in a settlement agreement then forms the basis of the Agency’s regulatory enforcement program.

These court-approved settlements have also included provisions for the Agency to cover the legal expenses of the environmental groups in bringing the claims, providing a taxpayer-funded mechanism to fuel the practice by defraying attorney fees. Corrosively, these settlement agreements give the impression of collusion between the regulator’s senior staff and green lobbyists.

A fundamental objection to the practice is that “sue and settle” allows the Agency and activist groups to privately determine the substance of environmental regulations. This circumvents the Administrative Procedure Act’s regulatory process and does not take into account the interests of other stakeholders, notably state governments and regulated entities.

Amongst the interests side-lined by these practices are those of the broader public who bear the cost of regulation that is inevitably passed on in higher prices and reduced consumer choice.

In effect, “sue and settle” represents an inverted form of regulatory capture in which environmental groups hijack the EPA and its regulatory agenda to the exclusion of the wider community of stakeholders. The practice is also used to funnel tax dollars from the Agency to special interests, making it reinforcing and the regulator a patron of the environmental groups.

That such an approach to regulation would be adopted during the Obama years is not surprising. Any loss of transparency, legitimacy and the cynicism engendered by a deliberately non-inclusive process were apparently assessed as being worth sacrificing.

Implicit in such an approach is an assumption that only the rights of green groups are worthy of consideration and that regulated entities have nothing to contribute in terms of improving regulatory outcomes. Needless to say, both contentions are without merit.

More insidiously, “sue and settle” invites cynicism with respect to the role and motivation of the EPA and its senior staff. In a fractious political environment, where trust is already greatly diminished, anyone with a serious interest in restoring faith in public institutions has a stake in restoring proper process to government. This is particularly the case for those who favour regulatory intervention in the economy in order to achieve social and environmental objectives.

“Sue and settle” practices were no less dubious when carried out by the EPA during the George W. Bush Administration. Although the practice was less prevalent, during this period it was the case of regulated entities privately negotiating settlements with the regulator instead of environmental groups.

Skewing the EPA’s regulatory processes in favour of any group will adversely affect regulatory outcomes. Inherent in regulatory interventions is a trade-off between the interests of affected parties to achieve overarching policy objectives. Failure to consider the legitimate interests of any stakeholder in the process compromises that assessment and unbalances the regulatory regime.

In short, “sue and settle” practices involve agencies cutting deals with environmental groups while sidelining other stakeholders. Regulation through litigation by-passes the normal rule-making process set in place by Congress that allows the interests of all parties to be properly balanced in accordance with the law. On those terms, “sue and settle” is correctly conceived of as an abuse of process. The practice offends transparency and inclusiveness.

Administrator Pruitt’s new directive ends “sue and settle” by transforming the way in which the Agency will approach consent decree and settlement agreement processes. Henceforth, the EPA will inform the public when the Agency is being sued, notify affected parties and seek their participation in the process, and will no longer pay litigants’ attorney fees. Proposed consent decrees and draft settlements will be posted online for review and comment by the public.

Proper process is fundamental to effective regulation. The reform of the EPA’s settlement procedures should be welcomed as a positive development. No longer will business or the general public be subjected to one-sided regulatory interventions brokered behind closed doors by environmental groups.

Burchell Wilson is a contributor to E21.

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