Trump Not Bound by Obama Volkswagen Settlement with EPA

In a post earlier this week, I discussed our coalition letter asking the Trump administration to investigate the extent to which President Obama used a judicial settlement to force Trump to implement his (Obama’s) failed legislative proposal to support electric vehicle infrastructure. In this post, I want to elaborate on how this judicial settlement, which was reached with Volkswagen last October, infringes on President Trump’s Article II authority.

Here’s the backstory. In 2011, President Obama announced his administration’s goal of putting 1 million electric vehicles on the road by 2015. To this end, he twice went to Congress seeking funds for electric vehicle infrastructure. Both times, Congress demurred. Having been rebuffed by Congress, the Obama administration turned to other means to achieve his preferred policy. Last October, the Justice Department and the Environmental Protection Agency reached a partial settlement with Volkswagen over Clean Air Act violations attendant to the company’s installation of “defeat devices” on almost 500,000 cars sold in the U.S., and the agreement includes a stipulation that VW work with EPA to invest $1.2 billion in electric vehicle infrastructure. According to the EPA, the basis for the $1.2 billion investment was to address VW’s “deceptive marketing of the subject vehicles as ‘green’”; however, the Clean Air Act doesn’t regulate false advertising. Notably, the $1.2 billion investment is four times what the Obama administration originally and unsuccessfully sought from Congress. In light of this context, the partial consent decree is an extra-statutory policy program that entails usurpation of Congress’s lawmaking and appropriations power.

Unfortunately, there’s a second constitutional concern raised by the settlement: it commits the Trump administration to implement what is effectively a failed legislative proposal by his predecessor. In three weeks, VW is required to submit a draft investment plan to the EPA. Then, VW and the EPA are supposed to engage in extensive discussions, after which the company would submit a final plan to the EPA for review. Subsequent to EPA review and approval of the investment plan, VW is required to submit annual investment proposals, which are subject to agency review and approval. Under the terms of the settlement, the agency is required to impose financial penalties if the company fails to comply with any EPA-approved measure.

Plainly, oversight of the VW plan would require significant EPA resources, and this commitment intrudes on President Trump’s Article II responsibility to execute the laws. The EPA’s duty to implement the electric vehicle investment is not set forth by statute; rather, it is animated by the Obama administration’s consent to a voluntary agreement pursuant to an enforcement action. The problem is that EPA is beholden to thousands of non-discretionary responsibilities across numerous enabling statutes, which the agency is failing to meet. For example, in a recent study, I reviewed the EPA’s performance achieving almost 1,100 Clean Air Act deadlines, and I found that the agency was late on 84% of these date-certain duties by an average of more than four years. Faced with these unmet statutory responsibilities, the allocation of EPA’s limited resources is a quintessentially executive act. In other words, the Obama administration was not constitutionally permitted to use judicial settlements to exercise the discretionary authority of future presidents by committing their resources to extra-statutory policy programs.

Assuming that President Trump does not welcome having his discretion cabined by his predecessor, the EPA’s extensive involvement in the electric vehicle infrastructure would operate in a strange constitutional limbo. Congress neither delegated authority nor appropriated funds to EPA to manage a massive investment in electric vehicles. At the same time, EPA’s involvement would defy the president’s management preferences. (Again, this assumes the Trump administration does not want to implement the investment). In this likely scenario, EPA’s role in the settlement’s industrial policy would be a strange constitutional creature—an administrative program that is unmoored from Articles I and II.  

There is an easy way out of this constitutional quagmire, should the present administration want one. The parties can modify the settlement with the court’s consent. If the Trump administration decides it doesn’t want to spend its limited resources implementing the failed legislative proposals of the prior president, then I strongly suspect that VW would go along. After all, the company’s impetus for agreeing to the $1.2 billion electric vehicle investment was to avoid civil penalties that would have been greater than $1.2 billion. The upshot is that the company is unlikely to care whether the money goes into the Treasury (as it should) or the electric vehicle investment; either way, the company is “saving” on civil penalties. Moreover, excising the electric vehicle industrial policy would not upset the rest of the complicated settlement. Whereas all the other components of the $14.7 billion settlement—including consumer relief—are linked, the electric vehicle plan is the only component of the partial consent decree that stands alone. So it can be cut out, without influencing the rest of the agreement.

For more reading:

  • The partial consent decree was entered on October 25th by the U.S. District Court, Northern District of California (In re: Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, 3:15-md-02672-CRB).
  • In comments to the Justice Department on the proposed partial consent decree, my colleagues Theodore Frank, Adam Schulman, and I argue that the National ZEV Investment Plan contravenes the Clean Air Act and common sense, in addition to raising serious constitutional concerns.
  • In written testimony before a House Judiciary Subcommittee, I elaborate on the constitutional questions raised by the settlement.
  • In a letter sent yesterday to President Trump, a coalition of free market groups ask for an investigation into how much of the EPA’s resources would be committed to managing the electric vehicle infrastructure plan.