In California Communities Against Toxics v. EPA, the U.S. Court of Appeals for the DC Circuit issued an opinion that may have a lasting impact on administrative agencies’ use of guidance memos and policy statements. For years, federal agencies like EPA have issued such documents as a means to give the general public, industry stakeholders and even their own employees some indication of how the agencies will interpret and apply their own rules and relevant federal statutes under particular circumstances. However, because these guidance publications have been historically treated by courts as merely advisory opinions, agencies do not need to go through any type of public participation process like with promulgated regulations, nor are they judicially reviewable under the Administrative Procedures Act (APA).

This may sound fine and well in theory, but as California Communities Against Toxics shows, agencies and those interacting with agencies often use and rely on guidance documents as much as an agency’s own promulgated rules. This creates a three-tiered system of administrative law (an already unwieldy beast): at the first level, federal regulations—sometimes referred to as “legislative rules”—have the force and effect of federal law but are tempered by strict public notice and comment requirements; second, agency “interpretive rules” state how an agency interprets its own regulations and are subject to judicial review as final agency actions under the APA, but do not require prior public interaction; and third, guidance documents reveal how agency officials and others should react when presented with certain situations, but are not subject to public input nor judicial review.

An issue in the DC Circuit’s case was a 2018 memorandum issued by William Wehrum, the Assistant Administrator for EPA’s Office of Air and Radiation. In it, Wehrum tells all regional air division directors that § 112 of the Clean Air Act “compels the conclusion” that a major source of toxic emissions can be downgraded to an area source (with a consequential lowering of regulatory burdens) at any time after it limits its emissions below the major source threshold. The memo went on to proclaim that it superseded a 1995 guidance memo in which EPA determined that the Clean Air Act compelled the opposite conclusion. Despite being a fairly clear mandate for how the Clean Air Act should be interpreted and applied, when the Wehrum memo was challenged, EPA took the position that the Wehrum memo is merely a guidance document, not a formal rule or a final agency action.

The DC Circuit agreed with EPA, holding that the court lacked subject matter jurisdiction since the Wehrum memo is not a final agency action. The court rationalized its decision in two ways. First, that courts should look at the “unique constellation of statutes and regulations that govern the action at issue.” And, “[s]econd, although all legislative rules are final, not all final rules are legislative, and the finality analysis is therefore distinct from the test for whether an agency action is a legislative rule.”

The DC Circuit’s ruling is important for several reasons. For one, the opinion urges other courts to refrain from using similar factual situations in case law to make a “one-size-fits-all” analysis; instead, courts should rigorously analyze the agency’s acts within the context of the agency’s statutory authority and applicable regulations. Applied here, the court’s analysis of the Clean Air Act showed that judicial review could only occur after specific agency events, like the approval or denial of a permit application, which were lacking in this case.

The other major point of the DC Circuit’s opinion is that the analysis for whether an agency action is final is not dependent on determining whether the action is a legislative rule. Instead, courts should apply a two-prong test to determine finality: (1) the action must be a “consummation” of an agency’s decision making process; and, (2) “the action must be one by which rights or obligations have been determined, or from which legal consequences will flow.” For California Communities Against Toxics, and likely for most other questionable agency guidance, the key inquiry is whether the action in question gives rise to “direct and appreciable legal consequences.”

For the Wehrum memo, the court had no qualms about finding it to be a “consummation” of EPA’s decision making process, since the memo flatly compelled agency officials to interpret the Clean Air Act in a particular way. Instead, the issue came with the second factor; namely that there were no legal consequences flowing directly from the memo. If a point source operator wants to downgrade its operation’s status in the manner the Wehrum memo contemplates, the operator must nevertheless follow the Clean Air Act permitting process. The agency’s response to the permit application, regardless of whether the agency follows the Wehrum memo or not, is the final agency action, not the guidance itself. In other words, although the Wehrum memo may announce the agency’s position on downgrading major sources under particular circumstances, there is no agency action without some other triggering event. As the DC Circuit put it: the Wehrum memo is “all bark and no bite.”

The dissenting opinion points out that the court’s holding is a discrepancy from its prior cases: “[the DC Circuit] has repeatedly held that judicial review is available… for guidance documents that bind EPA official on how long to make Title V permitting decisions.” In support, the dissent cites to Appalachian Power Co. v. EPA and National Environmental Development Association’s Clean Air Project v. EPA, both of which held that guidance documents issued by EPA and involving the Clean Air Act were judicially reviewable, final agency actions. The majority was unswayed, noting that, for Appalachian Power, the guidance at issue required state action in reviewing emission and monitoring standards. Similarly, in National Environmental, the guidance was used for an implemented Federal Implementation Plan.

The majority opinion concludes by noting that this case will not be the “Rosetta Stone” for determining whether agency guidance is reviewable by courts, and the opinion’s nuanced lines in the sand certainly back this pronouncement. With the DC Circuit finding that an agency’s policy positions, guidance memoranda, etc. are not judicially reviewable until agency action is taken consistent (or inconsistent) with those publications, the court has created a rule that is simple in theory, but complicated in practice. Industry stakeholders and the general public should be aware that, even though an agency has fully informed everyone how it will respond to a particular event, the agency’s stated position cannot be challenged until some other action occurs. In sum, California Communities Against Toxics is certain to further the continued use of guidance documents to inform how agencies will respond in given circumstances, without concern for immediate, legal repercussions.