Top environmental developments in 2017 for ADG companies

by Hogan Lovells
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The Trump administration has made it clear that it will seek to eliminate environmental regulations that it sees as imposing an unjustified economic burden.1 As is often the case when control of the federal government changes hands, the President and his allies in Congress will advance much of his environmental agenda indirectly, through personnel and the budget process. The full effects of new political appointments and appropriations might not be seen for some time, yet some more direct actions are already changing the regulatory landscape for the aerospace, defense, and government services (ADG) industry and other sectors.  

Several developments are likely to impact ADG companies in 2017. These include: (1) the recent Executive Order requiring two rules to be repealed for every new rule issued, (2) congressional disapproval of recent rules under the Congressional Review Act (CRA), 5 U.S.C. §§ 801, et seq., and (3) actions by the Environmental Protection Agency (EPA) to rescind some of its own rulemakings under the guidance of its new Administrator, Scott Pruitt. In addition, ADG companies should track one ongoing rulemaking that may yet survive the change in administrations: the listing of n-propyl bromide2 (nPB) as a hazardous air pollutant (HAP).

The Trump administration moves to put federal agencies on a regulatory budget

President Trump has tried to place federal agencies on a regulatory “budgeting process.”3 Executive Order 13,771, signed on 30 January 2017, declares that “for every one new regulation issued, at least two prior regulations [must] be identified for elimination[.]”4 Under the Executive Order, agencies cannot select just any two regulations to repeal. For fiscal year 2017, the remaining incremental costs of the repealed regulations must fully offset the incremental cost of the proposed regulation.5 For later fiscal years, the Office of Management and Budget (OMB) will grant each agency a regulatory allowance of incremental costs; after the agency expends its allowance, it must offset new incremental costs through repeal of existing regulations.6 Notably, Executive Order 13,771 applies to any agency that submits a significant regulatory action to OMB for review under Executive Order 12,866,7 including the EPA and others that directly regulate the ADG industry.  

Under a second directive, Executive Order 13,777, the Trump administration has instructed covered agencies to designate Regulatory Reform Officers and a Regulatory Reform Task Force.9 These task forces, chaired by the Regulatory Reform Officers, will take the lead in identifying which regulations to repeal, looking especially for regulations that impact jobs, “outdated, unnecessary, or ineffective” regulations, regulations that produce net costs, and those that interfere with other reform programs.10 Agencies must designate their Regulatory Reform Officers by 25 April 2017,11 and each Regulatory Reform Task Force must report to its agency head by 25 May 2017.

The public might see the Executive Orders’ impact on agency rulemaking dockets even before the task forces have made their first reports. OMB’s Office of Information and Regulatory Affairs (OIRA) has issued its biannual “data call” for submissions to the Unified Agenda of Federal Regulatory and Deregulatory Actions.12 The submissions should describe “all regulations under development or review during the 12 months following publication” of the Unified Agenda, including even Advance Notices of Proposed Rulemakings,13 and OIRA made a point to ask agencies to identify the incremental costs of any new regulations expected to be issued in the current fiscal year and the two rules that will be repealed to offset those costs.14 Submissions to OIRA were due at the end of March,15 and the Unified Agenda has historically been published online within roughly two months of the submissions.16 

Until publication of the Unified Agenda, the immediate effect of the Executive Orders is unclear, but there have been some indications that the regulatory budget has slowed or snuffed out some rules that could impact ADG companies. For instance, the Department of Transportation has suspended publication of its monthly Significant Rulemaking Reports as it re-assesses the schedules “for many ongoing rulemakings[.]”17 This might foretell the demise or delay of proceedings by the Federal Aviation Administration and the Pipeline and Hazardous Materials Safety Administration. Of particular relevance to the ADG industry, the regulatory budget could disrupt proceedings to amend the Hazardous Materials Regulations to impose vapor pressure limits on some or all flammable liquids transported in interstate commerce.18 

President Trump’s regulatory budget mechanism has not gone unchallenged. Within days of Executive Order 13,771’s publication, several non-profits sued to stop implementation of the order entirely.19   These groups allege that the Executive Order violates separations of powers principles, violates the President’s constitutional duty to faithfully executive laws passed by Congress, violates the Administrative Procedure Act, and violates numerous other statutes specific to particular agencies.20   The government has yet to respond with its own pleading.21   

Congress rolls back Recent environmental regulations through the CRA

Under the CRA, each agency promulgating a rule must submit a short report on the rule to both Houses of Congress and the Government Accountability Office.22 When the report arrives, Congress may pass a joint resolution disapproving the rule within 60 legislative days; if that happens, the rule will not take effect unless President Trump vetoes the resolution (an unlikely proposition given his party’s control of Congress).23 To date, Congress has passed CRA resolutions to cancel the Department of Interior’s Stream Protection Rule, which sought to increase restrictions on coal mining companies,24 and the Bureau of Land Management’s revisions to its land management planning process.25 Congress is currently entertaining resolutions to cancel EPA’s update to the Risk Management Program.26 

The CRA interacts with the Trump Administration’s Executive Orders in an important way. OMB has interpreted a CRA disapproval resolution as a form of repeal capable of offsetting incremental costs of a new regulation in compliance with Executive Order 13,771.27 And since any rule canceled under the CRA must have been promulgated recently (assuming a timely report), nearly all of the incremental costs from that rule should count toward the offset.  

These offsets might be considerable, at least taking the Stream Protection Rule as an example. Based on the Department of Interior’s cost estimates—which were far lower than that of the coal industry—the disapproval resolution freed up nearly US$100m per year of incremental costs that may be absorbed by other regulations.28 Though OMB suggests that the future cost-savings should be discounted to present value,29 the current guidance does not make clear whether agencies can collapse those future cost-savings into this year’s regulatory allowance. In other words, it is not clear if agencies must treat the cost-savings as an annuity providing offsets each year or as a lump-sum that can be applied to a single year.

Whether or not agencies will use the CRA-generated offsets to propose new regulations is another matter.

The new EPA Administrator is shifting the agency’s focus

As early as his nomination hearings, the new EPA Administrator has made clear that he seeks to rebalance the agency’s priorities.30 His testimony in those hearings strongly suggest that he is particularly seeking to reduce the federal role in environmental regulation and to allow states the freedom to pursue their own approaches to environmental protection.

Under Administrator Pruitt, the EPA has already withdrawn an earlier information collection request for methane emissions data from the oil and gas industry.31 The notice of withdrawal points out arguments against the information request raised by officials representing 11 states, and the EPA explained that it “takes these [states’] concerns seriously and is committed to strengthening its partnership with the states.” 32

Perhaps the Administrator’s most significant action to date concerns the Clean Water Act. The President has directed the EPA to repeal its Waters of the United States rule.33 That rule, jointly issued in 2015 by the EPA and the Army Corps of Engineers, attempted to clarify exactly which bodies of water fell under the protection—and discharge prohibitions, permitting schemes, and other legal mechanisms—of the Clean Water Act.34 Despite the EPA’s assertion that the rule would not fundamentally shift the allocation of federal and state responsibilities under that statute,35 the rule attracted substantial criticism from governors and state attorneys general for its perceived expansion of federal authority.36 The Administrator seems to have taken this criticism to heart, quickly giving notice of the EPA’s intent to withdraw the rule.37 The withdrawal notice made special reference to opposition to the rule from 31 states.38 The ADG industry should expect that Administrator Pruitt will seek further regulatory revisions to give the states more responsibility for environmental regulation.

Despite the efforts of the Trump administration and Congress, some rulemakings relevant to the ADG industry might continue 

Despite the actions of the Trump Administration, Congress, and Administrator Pruitt, some hold-over rulemakings of interest to the ADG industry may continue to progress. For example, the EPA has been considering two petitions to list nPB as an HAP under the Clean Air Act.39   This chemical is used in the vapor degreasing processes of suppliers to the ADG and other industries.40 Although the EPA had at times suggested that nPB might be a preferred alternative to other solvents,41 manufacturers of those competing solvents and the New York Attorney General both filed petitions to force an EPA finding that nPB is known to cause or may reasonably be anticipated to cause adverse effects to human health or the environment.42 If the EPA makes such a finding, it would add nPB to its HAP list. 

The petition process might provide a mechanism through which rulemakings like the nPB listing survive the new deregulatory directives. “[A]ny person” may file a petition to list a chemical as a HAP.44 The EPA is obligated under the Clean Air Act to either grant or deny such petitions within 18 months, and it cannot reject them solely out of a lack of resources or time to assess their merits.45 If the EPA refuses to list, petitioners can seek judicial relief against the agency to force it to address the issue.46 The petitioners might therefore use the courts to compel the HAP listing and its follow-on proceedings.

Those follow-on proceedings can have significant consequences, so ADG companies might wish to monitor this front. After the listing, for example, facilities would need to re-assess whether they have crossed the “major source” threshold as they add nPB to their yearly HAP emissions.47 Major source status most notably triggers an obligation to apply for a Title V operating permit,48 which imposes a number of important requirements, including a requirement to self-report “deviations” to the EPA.49 The EPA also must use its HAP list to design its sector-specific National Emissions Standards for Hazardous Air Pollutants (NESHAP), which specify rigorous technological controls.50 The petitions might thus force changes to the NESHAP for the aerospace or halogenated solvent cleaning industries.51   

Comments on the nPB HAP finding are currently due by 10 June 2017.52   

Conclusion

The Trump administration clearly hopes to do its utmost to reduce the cost to industry from environmental regulations. Its Executive Orders on regulatory reform have already begun to fulfill that goal and will likely chill future agency regulation. Congress and the EPA itself have already moved to undo recent rulemakings. Nonetheless, given the prospect of court challenges and the potential for rulemaking petitions, these actions do not guarantee an end to all current or future environmental rulemakings or regulatory expansions. Thus, ADG companies should continue to stay abreast of developments in this area.

 

 

 

1      See Remarks by President Trump at the Conservative Political Action Conference, WhiteHouse.gov (24 February 2017), https://www.whitehouse.gov/the-press-office/2017/02/24/remarks-president-trump-conservative-political-action-conference; see also Remarks by President Trump in Joint Address to Congress, WhiteHouse.gov (28 February, 2017) (“We’re going to stop the regulations that threaten the future and livelihood of our great coal miners.”), https://www.whitehouse.gov/the-press-office/2017/02/28/remarks-president-trump-joint-address-congress; see also Remarks by President Trump at Signing of Waters of the United States (WOTUS) Executive Order, WhiteHouse.gov (28 February 2017), https://www.whitehouse.gov/the-press-office/2017/02/28/remarks-president-trump-signing-waters-united-states-wotus-executive.
2      The chemical known as nPB or n-propyl bromide is also known as 1-Bromopropane.  See, e.g., Hazard Alert – 1-Bromopropane, OSHA.gov (2013), https://www.osha.gov/dts/hazardalerts/1bromopropane_hazard_alert.html
3      Exec. Order No. 13,771: Reducing Regulation & Controlling Regulatory Costs, 82 Fed. Reg. 9339, 9339 (Feb. 3, 2017).
4      Id.
5      Id.
6      See id. at 9339-40.
7      Dominic J. Mancini, Acting Administrator of OIRA, Memorandum: Interim Guidance Implementing Section 2 of the Executive Order of 30 January, 2017, Titled ‘Reducing Regulation and Controlling Regulatory Costs (2 February 2017) [hereinafter “OIRA Guidance Memorandum”], https://www.whitehouse.gov/the-press-office/2017/02/02/interim-guidance-implementing-section-2-executive-order-january-30-2017.
8      See, e.g., Agency Rule List – Fall 2016,: Environmental Protection Agency Reginfo.gov (2016), https://goo.gl/uM1N8s.
9      See Exec. Order No. 13,777: Enforcing the Regulatory Reform Agenda, 82 Fed. Reg. 12,285, 12,285 (Mar. 1, 2017).
10      See id. at 12,285-86. 
11      See id. at 12,285 (“Within 50 days of the date of this order, the head of each agency . . . shall designate an agency official as its Regulatory Reform Officer.”).
12      See Dominic J. Mancini, Acting Administrator of OIRA, Memorandum: Spring 2017 Data Call for the Unified Agenda of Federal Regulatory and Deregulatory Actions 1 (2 March 2017), https://www.whitehouse.gov/sites/whitehouse.gov/files/briefing-room/presidential-actions/related-omb-material/spring_2017_unified_agenda_data_call.pdf.  
13      Id. at 5. 
14      Id. at 2.
15      Id. at 1.
16      Compare Howard Shelanski, Administrator of OIRA, Memorandum: Spring 2016 Unified Agenda of Federal Regulatory and Deregulatory Actions 1 (19 February 2016) (setting a submission deadline of 18 March, 2016), https://goo.gl/EqYAXw with Introduction to the Unified Agenda of Federal Regulatory and Deregulatory Actions, reginfo.gov (18 May 2016), https://goo.gl/Kkzz43.
17      See Significant Rulemaking Report Archive, Transportation.gov (2017), https://cms.dot.gov/regulations/significant-rulemaking-report-archive
18      See Hazardous Materials: Volatility of Unrefined Petroleum Products and Class 3 Materials, 82 Fed. Reg. 5499, 5499 (18 January 2017) (“PHMSA is considering revising the Hazardous Materials
Regulations (HMR) to establish vapor pressure limits for unrefined petroleum-based products and potentially all Class 3 flammable liquid hazardous materials that would apply during the transportation of the products or materials by any mode.” (emphasis supplied)).
19      See generally Compl., Pub. Citizen v. Trump, No. 1:17-cv-00253 (D.D.C. Feb. 8, 2017).
20      See id. at 43-48.
21      See Docket, Pub. Citizen v. Trump, No. 1:17-cv-00253 (D.D.C. Feb. 24, 2017).
22      5 U.S.C. § 801(a)(1).
23      See id. §§ 801(b)(1), 802.
24      See generally Stream Protection Rule, 81, Fed. Reg. 93,066 (Dec. 20, 2016).
25      See S.J. Res. 15, 115th Cong. (2017); H.J. Res. 44, 115th Cong. (2017).
26      See S.J. Res. 28, 115th Cong. (2017); H.J. Res. 59, 115th Cong. (2017).
27      See Mancini, OIRA Guidance Memorandum, supra note 7 (“We will consider Acts of Congress that overturn final regulatory actions, such as disapprovals of rules under the Congressional Review Act, to operate in a similar manner as agency deregulatory for the purposes of the requirements of” Executive Order 13,771).
28      See id. at 93,069.
29      See Mancini, OIRA Guidance Memorandum, supra note 7 (incorporating OMB Circular A-4).  
30      See, e.g., Nomination of Attorney General Scott Pruitt to Be Administrator of the U.S. Environmental Protection Agency: Hearing Before the S. Comm. on Env. & Pub. Works, 115th Cong. 186 (2017), https://www.epw.senate.gov/public/_cache/files/1291a5e0-b3aa-403d-8ce3-64cb2ef86851/spw-011817.pdf.
31      See Notice Regarding Withdrawal of Obligation to Submit Information, 82 Fed. Reg. 12,817, 12,817 (7 March 2017).
32      Id.
33      See Exec. Order No. 13,778: Restoring the Rule of Law, Federalism, and Economic Growth by Reviewing the ‘‘Waters of the United States’’ Rule, 82 Fed. Reg. 12,497, 12,497 (3 March 2017).  Note that Executive Order 13,778 is directed to both EPA and the Army Corps of Engineers.
34      See generally Clean Water Rule: Definition of “Waters of the United States,” 80 Fed. Reg. 37,054 (29 June 2015).
35      See id. at 37102-03.
36      See, e.g., Letter from Terry Brandstedt Governor of Iowa, to Gina McCarthy, EPA, at 1-2 (16 October 2014) (“As currently written, this rule is nothing more than Federal encroachment on the states.”); see also Letter from Butch Otter, Governor of Idaho, and Lawrence G. Wasden, Att’y Gen. of Idaho, to Gina McCarthy, EPA, 1-2 (24 October, 2014).
37      See Intention to Review or Rescind the Clean Water Rule, 82 Fed. Reg. 12,532, 12,532 (6 March, 2017).
38      See id. at 12,532.
39      Granting Petitions to Add n-Propyl Bromide to the List of Hazardous Air Pollutants, 82 Fed. Reg. 2354, 2354 (9 January 2017).
40      See, e.g., EPA, Final Report of the Small Business Advocacy Review Panel on EPA’s Planned Proposed Rule Under Section 6(a) of the Toxic Substances Control Act as amended by the Frank R. Lautenberg Chemical Safety for the 21st Century Act for Use of Trichloroethylene (TCE) in Vapor Degreasing app. B 5 (2016), https://www.epa.gov/sites/production/files/2017-01/documents/report-sbar-appendixb-tsca-tce.pdf; see also National Air Emissions Standards for Hazardous Air Pollutants: Halogenated Solvent Cleaning, 72 Fed. Reg. 25,138, 25,153-54 (discussing comments from aerospace industry on use of nPB as an alternative to chlorinated solvents). 
41      See, e.g., id. app. A 47 (listing nBP as a “drop-in” substitute to TCE), https://www.epa.gov/sites/production/files/2017-01/documents/report-sbar-apenndixa-tsca-tce.pdf.  
42      See Granting Petitions to Add n-Propyl Bromide to the List of Hazardous Air Pollutants, 82 Fed. Reg. at 2354, 2356. 
43      42 U.S.C. § 7412(b)(3)(B).
44      Id. § 7412(b)(3)(A). 
45      Id. 
46      See, e.g., Am. Forest & Paper Ass’n v. EPA, 294 F.3d 113, 116-17 (D.C. Cir. 2002) (reviewing a decision to deny a delisting petition).
47      See 42 U.S.C. § 7412(a)(1) (tying major source status to 10 tons per year of a single HAP or 25 tons per year to any combination of HAPs); see also id. § 7661(2).
48      See 42 U.S.C. § 7661(a).
49      See, e.g., 40 C.F.R. § 70.6(a)(3)(iii).
50      See id. § 7412(d)(1) (“The Administrator shall promulgate regulations establishing emission standards for each category or subcategory of major sources and area sources of hazardous air pollutants listed for regulation . . .”).
51      See generally 40 C.F.R. Part 63, Subparts T (NESHAP for Halogenated Solvent Cleaning) and GG (NESHAP for Aerospace Manufacturing and Rework).
52      See Granting Petitions to Add N-Propyl Bromide to the List of Hazardous Air Pollutants, 82 Fed. Reg. 12,589, 12,589 (6 March 2017).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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