Sue and Settle – The Growing Problem of Closed-Door Rulemaking

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So-called “sue and settle” tactics are becoming an increasingly popular, problematic, and oftentimes successful litigation strategy used by pro-regulatory environmental groups. Because these groups, as well as regulators, are paying ever-increasing attention to the oil and gas industry, the industry must be on the lookout for potential sue and settle tactics that threaten not only the industry’s legitimate business interests, but also proper rulemaking procedures and the due process protections those procedures afford.

In sue and settle cases, pro-regulatory environmental groups sue, or threaten to sue, an agency, such as the U.S. Environmental Protection Agency (EPA), for alleged failure to meet mandatory statutory deadlines for new regulations or for unreasonably delayed discretionary action. In many cases, the agency action (or inaction) at issue is controversial, such as a major new regulatory program that imposes high costs on the regulated community. That controversy, when coupled with litigation leverage over the agency, can provide incentives to the agency to cooperate with the environmental plaintiffs. This is especially so when the agency is already predisposed to regulate but has delayed in doing so for political or other reasons. The end result of the litigation is, in many cases, a consent decree or settlement agreement between the agency and environmental plaintiffs that is negotiated behind closed doors without the regulated community’s knowledge or input and that sets accelerated deadlines for proposal and final issuance of new regulatory actions.

The accelerated timelines often embodied in the settlements can reorder agency regulatory agendas and undercut the public participation and analytical requirements of regulatory process statutes, such as the Administrative Procedure Act, the Regulatory Flexibility Act, and the Unfunded Mandates Reform Act. Additionally, the accelerated timelines can afford little or no opportunity for review of new regulations by the White House’s Office of Information and Regulatory Affairs (OIRA) under executive orders applicable to the rulemaking process. The sue and settle process can, as the foregoing indicates, result in rulemaking that elevates special-interest, pro-regulatory priorities over the broader public interest and deprive the public, regulated entities and OIRA of opportunities to participate in the regulatory process. The settlements, moreover, can bind or severely limit the regulatory discretion of subsequent administrations.

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