Court decision helps coal's fight against EPA rules

OREANDA-NEWS. July 06, 2016. A recent US Supreme Court ruling on whether an autodealer should be required to pay workers overtime could help coal companies waging legal challenges against the Environmental Protection Agency (EPA).

The Supreme Court on 20 June ruled that a lower court improperly used the so-called "Chevron doctrine" to defer to the US Labor Department's decision to change its position on a rule exempting some auto dealership employees from overtime. Writing for the majority in Encino Motorcars LLC vs Navarro, justice Anthony Kennedy said Labor did not properly explain why it changed course on a long-standing rule. The court found that when an agency "has failed to provide even that minimal level of analysis, its action is arbitrary and capricious and so cannot carry the force of law."

While unrelated to environmental issues, the court decision appears to open an avenue for challenging the EPA and to call for a broader discussion of the Chevron doctrine — a legal precedent under which judges defer to agencies' interpretations of the law when there are ambiguities in how a law was written.

Just two days after the court ruling, attorneys for Arch Coal subsidiary Mingo Logan Coal sent a letter to the US Court of Appeals for the DC Circuit saying the Encino Motorcars vs Navarro ruling provides support for one of the company's core arguments. Mingo argued EPA improperly vetoed the US Army Corps of Engineers' permit for the Spruce mine by failing to take into account the length of time the permit had been in place.

While coal companies and their allies in Congress view the Chevron doctrine as an impediment to their efforts to block EPA rules, environmental groups also saw an opportunity in the Supreme Court's Encino Motorcars ruling.

That same week, Earthjustice and the Sierra Club sent letters to the DC Circuit claiming the decision is relevant in three other cases on EPA decision-making.

For example, Earthjustice said in two cases — American Forest & Paper Association vs EPA and US Sugar Corp vs EPA — regulators used a different definition of emissions limitations than it had in previous permits, allowing the companies to emit more pollutants than they typically might have.

"The court's refusal to apply Chevron deference here is an important clarification that an agency regulation must be procedurally valid in order to receive Chevron deference," said Cynthia Taub, an attorney at Steptoe & Johnson who handles environmental permit compliance issues. "The case will certainly be relied on in other challenges to agency decisions in a broad range of contexts, especially where the decision is a departure from prior agency policy."

The Chevron doctrine has been a key tool for defending environmental regulators' actions and a target of Republican legislators. The US House of Representatives Judiciary Committee in June approved legislation that would do away with the regulatory deference granted in the doctrine. That bill is unlikely to become law. But it is an issue Republicans hope to use to attract voters in the upcoming presidential and congressional races.

Kennedy said the Chevron doctrine does not apply when a federal agency "errs by failing to follow the correct procedures in issuing the regulation." While an agency does not always have to give a detailed explanation it "must at least `display awareness that it is changing position' and `show that there are good reasons for new policy'," particularly if the industry has relied on the policy for an extended period of time.

The reference to the extent of time an existing policy has been in place is particularly pertinent to EPA's veto of the Spruce mine permit, Mingo Logan said.

The company's "core argument here is that EPA failed to engage in reasoned decision making because it gave no weight to the reliance interests engendered by," the permit having already been issued by the Corps of Engineers, Paul D. Clement, a partner at Bancroft PLLC and lead attorney on Mingo Logan's case, said.

The corps issued the Spruce mine permit in 2007, and EPA vetoed it four years later. During that time, Mingo Logan moved forward with its plans.

EPA said Mingo Logan is not entitled to use reliance interests as an argument because previously it only made passing reference to the years it worked on the project. In addition, the agency provided a more reasoned explanation when it provided "substantial new information — most of which Mingo Logan has not disputed — and the rationale for limiting disposal site withdrawal to undisturbed sites."

Previous attempts by Mingo Logan to overturn EPA's veto have been unsuccessful. In March 2014, the Supreme Court declined to take up the company's appeal.

"The court is already aware of Mingo's arguments and EPA's arguments and this is a very similar argument," said Jennifer Chavez, an attorney with Earthjustice. "Mingo is exaggerating the importance of the Encino Motorcars decision." There are provisions in the Chevron doctrine that relieve an agency of addressing reliance interests in certain circumstances, and, even if there were not, Mingo "made this argument quite late."

Chavez declined to discuss Earthjustice's use of the Encino Motorcars decision in their arguments in three separate cases outside of the coal industry regarding EPA's application of the Clean Air Act and Clean Water Act.

Regardless, the recent Supreme Court decision invites more questions on how federal regulators wield their power.