“Immediately Effective” Midnight Rules — Beyond The Hour For Change Or Vulnerable To Court Challenges?

Vinson & Elkins LLP

Ordinarily, the law governing how agencies create regulations — the Administrative Procedure Act — requires a thirty-day window between when a rule is published in the Federal Register and becomes “final” and when the rule is formally in effect. One exception to that requirement is the “good cause” exemption.1 This exemption was invoked frequently in a series of regulations issued late in the Trump administration. So, where does this leave the Biden administration in an effort to reverse any such regulations? And what are the ramifications for those who are regulated? Here, we discuss these questions and how at least one federal court has recently reacted to such an “immediately effective midnight rule.”

What are “Midnight Rules”?

“Midnight rulemaking” is a common name for a somewhat par for the course practice of every outgoing presidential administration as it wraps up its time in office. Often also referred to as the “Cinderella effect” or “Cinderella constraint,” federal agencies often issue a flurry of rules as the clock runs out on the outgoing administration’s term. This phenomenon tends to be especially pronounced when an outgoing administration will be replaced by an incoming administration of a different party. In this respect, the most recent transition appeared no different than many that came before it, where there was an effort to finalize various regulatory initiatives before turning into a pumpkin.

What are some of the key uses of making “immediately effective” “midnight rules”?

What appears somewhat different in the most recent round of “midnight rulemaking,” however, is the Trump administration’s multiple invocations of the “good cause” exemption under Section 553(d) of the Administrative Procedure Act to promulgate such rules with immediate effect.

For example, on December 23, 2020, EPA issued a rule overhauling cost-benefit procedures under the Clean Air Act (“CAA”). The EPA established “procedural requirements governing the preparation, development, presentation, and consideration of benefit-cost analyses (“BCA”), including risk assessments used in the BCA, for significant rulemaking conducted under the CAA.”2 Using section 301(a) of the CAA as the basis for authority to promulgate the rule — “to prescribe such regulations as are necessary to carry out [the EPA’s] functions” — the EPA also determined that “good cause” existed to make the final rule effective immediately; namely, that “the goals of the rule, ensuring transparency and consistency in BCAs for significant CAA rulemakings, are crucial for ensuring confidence in EPA decision-making.”3

A second example is even more recent. On January 11, 2021, the EPA promulgated a final rule adopting greenhouse gas (“GHG”) emission standards and test procedures applicable to certain classes of engines used in airplanes.4 This time, the EPA used section 307(d) of the CAA to determine that the 30-day waiting period did not apply to this action.5 The EPA also provided an alternative basis for the immediate effective date, again drawing on the “good cause” exemption provided by Section 553(d)(3). The EPA explained that good cause existed because it was providing “regulatory certainty as soon as possible and no party w[ould] be harmed by an immediate effective date [because] . . . parties [would not need] to adjust their behavior prior to the effective date.”6

In addition to the EPA’s “pivotal science” rule (discussed below as to recent litigation), two other EPA “midnight rules” followed a similar vein. On December 18, 2020, and December 31, 2020, the EPA retained, without revision, the current national ambient air quality standards (“NAAQS”) for both particulate matter7 and ozone,8 respectively, and made those determinations immediately effective.

The Biden Administration’s Response to Midnight Rulemaking

This approach may limit the Biden administration’s ability to “freeze” these rules and to reverse them before becoming effective. Just as “midnight rulemaking” is a staple of every outgoing administration, so too is unmaking such rules as much as possible at the dawn of the incoming one. Like his predecessors, President Biden issued a memorandum9 on Inauguration Day directing the withdrawal of rules that have been sent to the Office of the Federal Register but not yet published and the postponing of rules that have been published in the Federal Register but not yet taken effect.10 Principally, this provides the new administration time to reconsider the Trump administration’s actions taken in its final days.

But by making a number of midnight rules immediately effective, the Trump administration may have made it difficult or impossible for the new administration itself to suspend or reconsider those rules without first going through the lengthy notice and comment process that the APA typically requires for any new regulation.

How might the courts get involved?

While the new administration itself may be limited in what it can try to do directly to attack these “immediately effective” rules, the courts could prove a different matter. In one recent example, a federal district court rejected EPA’s argument that a late-breaking Trump administration rule was merely procedural and a companion argument that there was “good cause” to make the rule immediately effective. The rule at issue, published 14 days before Inauguration, was denominated Strengthening Transparency in Pivotal Science Underlying Significant Regulatory Actions and Influential Scientific Information (“Pivotal Science Rule”).11 The EPA declared the Final Rule effective on publication based on two justifications: first, that the Pivotal Science Rule was procedural and therefore exempt from the Administrative Procedure Act’s general 30-day notice requirement; and second, that there was “good cause” for the Pivotal Science Rule’s immediate effect because it was “crucial for ensuring confidence in EPA decision-making.” Multiple non-governmental organizations brought suit and, on January 27, 2021 (a mere three weeks after it was issued as immediately effective), the United States District Court for the District of Montana declared the Pivotal Science Rule ineffective until February 5, 2021, 30 days from its date of publication on January 6, 2021. The court held that the EPA had acted unlawfully in making the regulation immediately effective.12 Judge Morris held that the Pivotal Science Rule was not a procedural rule at all: in fact, it “easily” met “the core requirements for a substantive rule” as it limited the EPA’s discretion. Additionally, Judge Morris found the EPA’s “good cause” rationale unpersuasive, holding that the agency had “failed to describe the crisis of “confidence” it sought to address [and] [f]ailed to show a need for urgent implementation[.]”13

Five days later, on February 1, 2021, and in a brief two-page order,14 Judge Morris granted EPA’s own (and unopposed) motion for vacatur and remand, filed on January 31, 2021. EPA asserted that the Pivotal Science Rule was a substantive rule which it lacked authority to promulgate under its housekeeping regulations, the source of authority identified as the basis for the rule. EPA’s filing of the motion for vacatur and remand demonstrates not just the Biden administration’s commitment to reversing many of the Trump administration’s rules, but also the available avenue of choosing not to defend (or continue to defend) the rule itself, essentially conceding a win to the challengers.15 The Biden administration now controls both the EPA and Department of Justice decision-making and can use this as a “new lever” to pull — it can choose not to defend an “immediately effective” determination and/or it can choose, as here, not to defend the substantive rule itself, whether that be on the basis of the authority used to promulgate the rule or a different basis. Rather, it would be left to intervening parties, if any, to seek to defend an “immediately effective” determination and/or the rule. In light of Judge Morris’ rulings on the Pivotal Science Rule, it will not be surprising if several other “immediately effective” “midnight rules” are challenged in the hope of a similar result. And, even if not, a court determination that a rule is not “immediately effective” will still provide some space for the Biden administration to consider its next move.

What else can the Biden Administration do?

The Biden administration also has at least one other option. The Congressional Review Act of 1996 (“CRA”) provides a streamlined procedure for Congress to enact resolutions disapproving (i.e., vetoing) rules federal agencies issue. This procedure is available only for a limited time after a rule16 is published and formally notified to Congress. Specifically, Congress has 60 legislative days (a period which is often much longer than 60 calendar days) to vote to disapprove such regulations. A CRA resolution is not subject to Senate filibuster, meaning that only simple House and Senate majorities — and the President’s signature — are required to enact legislation to overturn a rule. In practice, the CRA is most relevant when a new presidential administration involves a political party change, and the same party also controls both houses of Congress. That is the situation today, placing the Biden administration in a position to push for Congress to invoke the CRA as to various Trump administration midnight rules, including those made “immediately effective.” There are, however, complications. Disapproval of a rule under the CRA may affect the Biden administration’s ability to issue replacement rules: an agency cannot issue a rule that is “substantially” the same as the disapproved rule.17

Take-Away

The “immediately effective” designation of some of the Trump administration’s “midnight rules” has made it harder for the Biden administration to invoke at least one tool in the standard “new administration playbook” — a directive to “freeze” all rules not in effect cannot delay such “immediately effective” rules. However, such regulations are still vulnerable to legal challenge or repeal, albeit through different and less immediate mechanisms. Industries and businesses affected by “midnight regulations” should keep a close eye on how the Biden administration deals with these rules, especially those which are “immediately effective,” and be prepared to respond where appropriate.

1 5 U.S.C § 553(d).

2 Increasing Consistency and Transparency in Considering Benefits and Costs in the Clean Air Act Rulemaking Process, 85 Fed. Reg. 84,130 (Dec. 23, 2020) (to be codified at 40 C.F.R. pt. 83).

3 Id.

4 Control of Air Pollution from Airplanes and Airplane Engines: GHG Emission Standards and Test Procedures, 86 Fed. Reg. 2136 (Jan. 11, 2021) (to be codified at 40 C.F.R. pts. 87, 1030).

5 Section 307(d)(1)(v) provides that § 553 of the Administrative Procedure Act “shall not, except as expressly provided in this subsection, apply to actions to which this subsection applies.”

6 86 Fed. Reg. 2137.

7 Review of the National Ambient Air Quality Standards for Particulate Matter, 85 Fed. Reg. 82,684 (Dec. 18, 2020) (to be codified at 40 C.F.R. pt. 50). On January 13, 2021, a suit challenging this rule was filed in the U.S. Court of Appeals for the District of Columbia Circuit by several plaintiff states to include Oregon, Rhode Island, Virginia, and others. See California, et al. v. EPA, et al., 21-___ (D.C. Cir. 2021).

8 Review of the Ozone National Ambient Air Quality Standards, 85 Fed. Reg. 87, 256 (Dec. 31, 2020) (to be codified at 40 C.F.R. pt. 50).

9 Memorandum from Ronald A. Klain, Assistant to the President and Chief of Staff on Regulatory Freeze Pending Review (Jan. 20, 2021), available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/regulatory-freeze-pending-review/.

10 Id.

11 86 Fed. Reg. 469 (Jan. 6, 2021) (to be codified at 40 C.F.R. pt. 30).

12 Order, Environmental Defense Fund, et al., v. EPA, No. 4:21-cv-03 (D. Mont. Jan. 27, 2021).

13 Case law specifically challenging “immediately effective” midnight rules is scant at best. However, the use of the “good cause” exemption to bypass notice-and-comment requirements — related, but albeit not identical to the immediate effectiveness context — has been considered, although infrequently, and with varying outcomes. For example, in Natural Resources Defense Council, Inc. v. EPA, the Third Circuit noted that the exemption was to be “narrowly construed” and the circumstances surrounding the elimination of public procedures need to be “examined closely.” 683 F.2d 752, 764 (1982) (citing Sharon Steel Corp. v. EPA, 597 F.2d 377, 379 (3d Cir. 1979) and Council of the Southern Mountains, Inc. v. Donovan, 653 F.2d 573, 580 (D.C. Cir. 1981)). In that case, the court rejected the EPA’s argument that “good cause” excused its failure to employ notice and comment procedures, concluding that nothing prevented the EPA from complying with the Administrative Procedure Act or the Regulatory Impact Analysis requirement of Executive Order No. 12,291. Id. at 765.

14 Order, Environmental Defense Fund, et al., v. EPA, No. 4:21-cv-03 (D. Mont. Feb. 1, 2021).

15 Case law is mixed on whether a court can vacate a rule simply on the basis of the agency’s failure to defend without making an independent determination of the merits of the rule. The concern is that such a vacatur allows the agency to bypass the normal process for rescinding or modifying a rule under the Administrative Procedure Act. See Carpenters Indus. Council v. Salazar, 734 F. Supp. 2d 126, 125 (D.D.C. 2010) (“To summarily grant the federal defendants’ request for vacatur ‘would allow the [f]ederal defendants to do what they cannot do under the APA, repeal a rule without public notice and comment, without judicial consideration of the merits.’” (quoting Nat’l Parks Conservation Ass’n v. Salazar, 660 F. Supp. 2d 3, 5 (D.D.C. 2009))); see also Am. Waterways Operators v. Wheeler, 427 F. Supp. 3d 95, 100 (D.D.C. 2019) (declining to grant agency’s request for a remand to reconsider an issue where granting the request “would effectively allow [the agency] to circumvent the statutory requirement to . . . issue a determination within 90 days of receiving an application” (citation omitted)).

16 The CRA adopts the definition of “rule” in the Administrative Procedure Act — “the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency.” 5 U.S.C. § 551(4). See also Maeve P. Carey and Christopher M. Davis, Cong. Research Serv., R43992, The Congressional Review Act (CRA): Frequently Asked Questions 6 (Jan. 14, 2020).

17 This prohibition does not apply if a new rule is specifically authorized by law that is enacted after the date of the Congressional resolution which disapproved the first rule.

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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