The Volokh Conspiracy - D.C. Circuit Upholds EPA's AFO Agreements:

Today a divided panel of the U.S. Court of Appeals for the D.C. Circuit dismissed challenges to a series of agreements between the U.S. Environmental Protection Agency and operators of animal feeding operations (AFOs) in Association of Irritated Residents v. EPA. Judge David Sentelle wrote the majority opinion, joined by Judge Brett Kavanaugh. Judge Judith Rogers dissented. Based upon my preliminary read, this looks like a significant decision for both environmental policy and administrative law. Pollution from AFOs, also known as "CAFOs" for "Concentrated Animal Feeding Operations," is a major environmental issue in much of the country, and the decision further addresses the distinction between agency rules and enforcement actions, the latter of which are not subject to judicial review.

The case grew out of federal efforts to begin regulating emissions from AFOs under the Clean Air Act and other environmental statutes. There is no question that AFOs can be a substantial source of environmental emissions, but there significant uncertainty about how to measure AFO emissions, and therefore it is not clear which AFOs are subject to what environmental requirements. This prompted the EPA to propose an innovative agreement with AFO operators. As the majority opinion explains:

Generally, an AFO emits these pollutants in proportion to its size: the more animals it houses, the more it pollutes. Precise measurements have eluded the government and the AFO industry, which are in agreement that there is no existing methodology to measure reliably an AFO's emissions. . . . The present uncertainty hampers EPA's ability to enforce the requirements of the Clean Air Act, EPCRA, and CERCLA against AFOs. EPA's solution to this problem was to invite AFOs to sign a consent agreement under which each AFO will assist in developing an emissions estimating methodology. . . . In exchange, EPA will not pursue administrative actions and lawsuits against the AFOs for a defined period of time. . . . In the agency's judgment, this is the "quickest and most effective way" to achieve compliance.

In sum, the EPA said to AFO operators: Pay a fine and help us figure out how much you pollute so we can enforce the law against you in the future, and we won't prosecute you for your current and past emissions, even if they are violating the law. Environmental groups argue that this lets polluters off easy. EPA argues that this is the quickest way for the EPA to obtain the information necessary to adopt regulatory controls on polluting AFOs. In a sense, the policy debate here is similar to that over environmental audit privilege.

Whether or not the EPA's idea makes good policy sense, AFO operators thought it was a good deal, and the vast majority of eligible industry participants signed up. Environmental groups that have long sought AFO regulation were not so thrilled and filed a petition for review of the EPA-AFO agreements alleging that the agreements were regulations dressed up as an enforcement actions, that the EPA failed to follow the proper rulemaking requirements, and that the EPA exceeded its statutory authority. The D.C. Circuit found these arguments unavailaling, however, and dismissed the petitions for review on the grounds that "the agreements do not constitute rules, but rather enforcement actions with the EPA's statutory authority" and "exercises of EPA's enforcement authority are not reviewable by this court."

Here are some excerpts from the majority opinion:

The Agreement is intended to save the time and cost of litigation while providing the agency with an opportunity to determine whether, and to what extent, AFOs are subject to the statutory requirements. . . . EPA could have pursued enforcement actions against each individual AFO, but determined that a broader strategy would lead to quicker industry-wide compliance. . . . These judgments -- arising from considerations of resource allocation, agency priorities, and costs of alternatives -- are well within the agency's expertise and discretion. . . . .

Petitioners argue that the Agreement is intended to "prescribe law" because it grants an exemption from the Acts for a specified period of time. We disagree. The Agreement merely defers enforcement of the statutory requirements, and makes that deferral subject to enforcement conditions that will ultimately result in compliance. An AFO that fails to fulfill specific obligations loses the protections of the Agreement, leaving EPA free to sue or take other enforcement actions against the AFO. A limited deferral subject to enforcement conditions works no change in the agency's substantive interpretation or implementation of the Acts. As a result, it is not consistent with the concept of a "rule" as that term has been defined. . . .

More generally, in the Agreement EPA issues no statement with regard to substantive statutory standards. EPA has not bound itself in a way that reflects "cabining" of its prosecutorial discretion because it imposed no limit on its general enforcement discretion if the substantive statutory standards are violated. . . .

We find no principled reason to treat EPA's decision to secure compliance by settlement in lieu of litigation differently than its decision to initiate and subsequently settle litigation. . . .

The covenant not to sue participating AFOs does not represent a policy that EPA will not enforce the Acts; to the contrary, it is part of the agency's attempt to ensure that AFOs comply with the Acts. . . .

The authority bestowed on the agency sufficiently covers EPA's actions in this case. EPA's power to make decisions about whether and how to enforce the Acts reasonably contemplates the agency developing a plan for achieving compliance that it deems best suited to the industrial landscape and technological obstacles presented. Its ability to choose among numerous enforcement options in a particular case encompasses its decision that the best way to proceed in this case is by the Agreement.

Judge Rogers wrote a lengthy dissent, concluding that the agreements were, in fact, a legislative rule and that the Agency exceeded its statutory authority.

This case involves the intersection of two doctrines. The first involves an agency's unreviewable enforcement discretion, and the second relates to agency rulemaking power. The initial question for the court is whether the scope of enforcement discretion is expansive enough to cover the animal feeding operation ("AFO") protocol formally announced by the Environmental Protection Agency ("EPA") in the Federal Register . . . . The court concludes that the enforcement protocol is an exercise of enforcement discretion that falls within the scope of the exception to judicial review set forth in Heckler v. Chaney, and that EPA has not promulgated a legislative rule subject to the notice and comment requirements of the Administrative Procedure Act . . . . Undoubtedly there is some conceptual overlap between the doctrines to the extent that policies adopted by agencies often reflect discretionary determinations about how to enforce statutes that Congress has entrusted them to implement. However, by imposing a civil penalty on AFOs in the absence of individualized determinations of statutory violations, EPA has attempted to secure the benefits of legislative rulemaking without the burdens of its statutory duties. Our precedent does not permit the boundless stretching of Chaney to undercut the purposes of notice-and-comment rulemaking. . . .

By replacing the enforcement scheme in three congressional statutes with an unauthorized system of nominal taxation of regulated entities, EPA has promulgated a reviewable regulation. EPA cannot avoid the regulatory responsibilities imposed by Congress by trading nominal sanctions for amnesty to the regulated industry. However much enforcement discretion EPA may have in determining whether or not to file enforcement actions and whether to settle and on what terms, Congress has not authorized EPA to allow the regulated community to buy its way out of compliance with the statutes. For a minimum penalty plus $2,500, an AFO can, under the enforcement protocol, avoid liability for any potential and ongoing violations of three statutes for at least a two-year period while EPA gathers and studies emissions data and for an indeterminate period thereafter while EPA develops and publishes new estimation methodologies, . . . ; at no point are there repercussions beyond a possible future enforcement action if an AFO opts out of the agreement to be bound by the methodology regulations that EPA develops. Assuming no glitches, EPA's endeavor to develop reliable methodologies could, according to the recommendations it has followed, take five, twenty, or even thirty, years. This is not an enforcement scheme at all, and is not a decision that Congress committed to agency discretion.

Given the AdLaw-heavy nature of the decision, and the lack of a circuit split, I do not think this is a particularly good candidate for certiorari, nor do I expect en banc review. Nonetheless, I think this is an interesting and important case for administrative law and environmental policy types to chew over.

	[Jonathan Adler, July 17, 2007 at 2:36pm] Trackbacks D.C. Circuit Upholds EPA's AFO Agreements: Today a divided panel of the U.S. Court of Appeals for the D.C. Circuit dismissed challenges to a series of agreements between the U.S. Environmental Protection Agency and operators of animal feeding operations (AFOs) in Association of Irritated Residents v. EPA. Judge David Sentelle wrote the majority opinion, joined by Judge Brett Kavanaugh. Judge Judith Rogers dissented. Based upon my preliminary read, this looks like a significant decision for both environmental policy and administrative law. Pollution from AFOs, also known as "CAFOs" for "Concentrated Animal Feeding Operations," is a major environmental issue in much of the country, and the decision further addresses the distinction between agency rules and enforcement actions, the latter of which are not subject to judicial review. The case grew out of federal efforts to begin regulating emissions from AFOs under the Clean Air Act and other environmental statutes. There is no question that AFOs can be a substantial source of environmental emissions, but there significant uncertainty about how to measure AFO emissions, and therefore it is not clear which AFOs are subject to what environmental requirements. This prompted the EPA to propose an innovative agreement with AFO operators. As the majority opinion explains: Generally, an AFO emits these pollutants in proportion to its size: the more animals it houses, the more it pollutes. Precise measurements have eluded the government and the AFO industry, which are in agreement that there is no existing methodology to measure reliably an AFO's emissions. . . . The present uncertainty hampers EPA's ability to enforce the requirements of the Clean Air Act, EPCRA, and CERCLA against AFOs. EPA's solution to this problem was to invite AFOs to sign a consent agreement under which each AFO will assist in developing an emissions estimating methodology. . . . In exchange, EPA will not pursue administrative actions and lawsuits against the AFOs for a defined period of time. . . . In the agency's judgment, this is the "quickest and most effective way" to achieve compliance. In sum, the EPA said to AFO operators: Pay a fine and help us figure out how much you pollute so we can enforce the law against you in the future, and we won't prosecute you for your current and past emissions, even if they are violating the law. Environmental groups argue that this lets polluters off easy. EPA argues that this is the quickest way for the EPA to obtain the information necessary to adopt regulatory controls on polluting AFOs. In a sense, the policy debate here is similar to that over environmental audit privilege. Whether or not the EPA's idea makes good policy sense, AFO operators thought it was a good deal, and the vast majority of eligible industry participants signed up. Environmental groups that have long sought AFO regulation were not so thrilled and filed a petition for review of the EPA-AFO agreements alleging that the agreements were regulations dressed up as an enforcement actions, that the EPA failed to follow the proper rulemaking requirements, and that the EPA exceeded its statutory authority. The D.C. Circuit found these arguments unavailaling, however, and dismissed the petitions for review on the grounds that "the agreements do not constitute rules, but rather enforcement actions with the EPA's statutory authority" and "exercises of EPA's enforcement authority are not reviewable by this court." Here are some excerpts from the majority opinion: The Agreement is intended to save the time and cost of litigation while providing the agency with an opportunity to determine whether, and to what extent, AFOs are subject to the statutory requirements. . . . EPA could have pursued enforcement actions against each individual AFO, but determined that a broader strategy would lead to quicker industry-wide compliance. . . . These judgments -- arising from considerations of resource allocation, agency priorities, and costs of alternatives -- are well within the agency's expertise and discretion. . . . . Petitioners argue that the Agreement is intended to "prescribe law" because it grants an exemption from the Acts for a specified period of time. We disagree. The Agreement merely defers enforcement of the statutory requirements, and makes that deferral subject to enforcement conditions that will ultimately result in compliance. An AFO that fails to fulfill specific obligations loses the protections of the Agreement, leaving EPA free to sue or take other enforcement actions against the AFO. A limited deferral subject to enforcement conditions works no change in the agency's substantive interpretation or implementation of the Acts. As a result, it is not consistent with the concept of a "rule" as that term has been defined. . . . More generally, in the Agreement EPA issues no statement with regard to substantive statutory standards. EPA has not bound itself in a way that reflects "cabining" of its prosecutorial discretion because it imposed no limit on its general enforcement discretion if the substantive statutory standards are violated. . . . We find no principled reason to treat EPA's decision to secure compliance by settlement in lieu of litigation differently than its decision to initiate and subsequently settle litigation. . . . The covenant not to sue participating AFOs does not represent a policy that EPA will not enforce the Acts; to the contrary, it is part of the agency's attempt to ensure that AFOs comply with the Acts. . . . The authority bestowed on the agency sufficiently covers EPA's actions in this case. EPA's power to make decisions about whether and how to enforce the Acts reasonably contemplates the agency developing a plan for achieving compliance that it deems best suited to the industrial landscape and technological obstacles presented. Its ability to choose among numerous enforcement options in a particular case encompasses its decision that the best way to proceed in this case is by the Agreement. Judge Rogers wrote a lengthy dissent, concluding that the agreements were, in fact, a legislative rule and that the Agency exceeded its statutory authority. This case involves the intersection of two doctrines. The first involves an agency's unreviewable enforcement discretion, and the second relates to agency rulemaking power. The initial question for the court is whether the scope of enforcement discretion is expansive enough to cover the animal feeding operation ("AFO") protocol formally announced by the Environmental Protection Agency ("EPA") in the Federal Register . . . . The court concludes that the enforcement protocol is an exercise of enforcement discretion that falls within the scope of the exception to judicial review set forth in Heckler v. Chaney, and that EPA has not promulgated a legislative rule subject to the notice and comment requirements of the Administrative Procedure Act . . . . Undoubtedly there is some conceptual overlap between the doctrines to the extent that policies adopted by agencies often reflect discretionary determinations about how to enforce statutes that Congress has entrusted them to implement. However, by imposing a civil penalty on AFOs in the absence of individualized determinations of statutory violations, EPA has attempted to secure the benefits of legislative rulemaking without the burdens of its statutory duties. Our precedent does not permit the boundless stretching of Chaney to undercut the purposes of notice-and-comment rulemaking. . . . By replacing the enforcement scheme in three congressional statutes with an unauthorized system of nominal taxation of regulated entities, EPA has promulgated a reviewable regulation. EPA cannot avoid the regulatory responsibilities imposed by Congress by trading nominal sanctions for amnesty to the regulated industry. However much enforcement discretion EPA may have in determining whether or not to file enforcement actions and whether to settle and on what terms, Congress has not authorized EPA to allow the regulated community to buy its way out of compliance with the statutes. For a minimum penalty plus $2,500, an AFO can, under the enforcement protocol, avoid liability for any potential and ongoing violations of three statutes for at least a two-year period while EPA gathers and studies emissions data and for an indeterminate period thereafter while EPA develops and publishes new estimation methodologies, . . . ; at no point are there repercussions beyond a possible future enforcement action if an AFO opts out of the agreement to be bound by the methodology regulations that EPA develops. Assuming no glitches, EPA's endeavor to develop reliable methodologies could, according to the recommendations it has followed, take five, twenty, or even thirty, years. This is not an enforcement scheme at all, and is not a decision that Congress committed to agency discretion. Given the AdLaw-heavy nature of the decision, and the lack of a circuit split, I do not think this is a particularly good candidate for certiorari, nor do I expect en banc review. Nonetheless, I think this is an interesting and important case for administrative law and environmental policy types to chew over.