EPA in Need of Adult Supervision

After Carol Browner was confirmed as Environmental Protection Agency (EPA) Administrator, one of her first actions was to promulgate new rules governing reformulated gasoline. In particular, the EPA mandated that a minimum percentage of oxygenates–fuel additives that increase the oxygen content of fuels–come from renewable sources. The explicit purpose of the rule, in Browner’s own words, was to "create additional markets for ethanol," a corn-based alcohol fuel known for its ability to induce subsidy-promoting delirium in presidential candidates during the Iowa caucuses. Ethanol and ETBE, an ethanol derivative, are the only "renewable" oxygenates on the market. The rule operated so as to give ethanol an edge against rival oxygenate MTBE.

The EPA claimed authority for its rule under the Clean Air Act. By EPA’s reading, the Act allowed the EPA to mandate the use of ethanol even though independent analyses suggested that, if anything, the mandate would reduce air quality, not improve it. In addition, the rule would cost consumers an estimated $50 to $300 million per year. Before long, the EPA’s rule was challenged in federal court, where it was struck down. "The sole purpose of the RFG program is to reduce air pollution, which it does through specific performance standards for reducing VOCs and toxics emissions," the court noted, adding that "EPA admits that the [ethanol rule] will not give additional emission reductions for VOCs or toxics…and has even conceded that the use of ethanol might possibly make air quality worse." No matter how important the ethanol lobby, the court declared, the Clinton administration did not have the statutory authority to subsidize it through environmental regulations.

This case, American Petroleum Institute v. US EPA, was a sign of things to come in the Clinton administration. Over the past eight years, dozens of EPA rules have been challenged in federal court, and dozens of EPA rules have been struck down. Despite judicial doctrines that counsel extreme deference to regulatory agencies, the Clinton EPA has lost in federal court time and again. Since 1993, federal courts have struck down EPA rules covering everything from the imposition of California automobile emission standards in eastern states to scientific studies of secondhand smoke. The EPA has lost cases for regulating too much and (if you can believe it) for not regulating enough. The EPA has lost cases for setting new national ambient air quality standards too tightly, and the EPA has lost cases for not setting air quality standards at all.

As documented in a forthcoming study written for the Reason Public Policy Institute, the EPA under Browner has had a real hard time defending her policies in court. Whereas most federal agencies win most legal challenges most of the time, the EPA loses a majority of its cases in the federal court with primary jurisdiction over most challenges to EPA rules. In cases argued since Browner took over, this court, the US Court of Appeals for the DC Circuit, has struck down all or a substantial portion of the challenged rule in 53 percent of the cases. The EPA actually won outright only one-third of the time. The EPA’s record in the DC Circuit is particularly poor, but the EPA has lost significant cases in other courts as well. Taken as a whole, the EPA’s record in federal courts suggests a federal agency badly in need of adult supervision.

Several of the EPA’s losses in federal court are quite significant in the context of environmental policy, raising questions about the rigorousness of the agency’s policy evaluation and development, as well as the propriety of the current administration’s priorities and policies. A few examples:

· In 1999, the DC Circuit struck down EPA’s new National Ambient Air Quality Standards (NAAQS) for ozone and particulates. The court found that EPA failed to consider the potential negative public health impacts of its own standards and could not articulate the "intelligible principle" used to set the standards at one level of exposure as opposed to another. The NAAQS standards, had they been upheld, would have been the most expensive rules in EPA’s 30-year history.

· The EPA sought to list methylene diphenyl diisocynate (MDI) as a hazardous air pollutant. In its analysis, the EPA insisted upon treating MDI as a gas at ambient temperatures at which MDI is a solid, and therefore cannot be released as an air emission. The court noted that EPA’s approach "bespeaks a ‘let them eat cake’ attitude that ill-becomes an administrative agency whose obligation to the public it serves is discharged if only it avoids being arbitrary and capricious."

· The EPA characterized secondhand smoke as a "known cause of cancer" before it even began a formal evaluation of the scientific evidence. A court found this unacceptable because "EPA publicly committed to a conclusion before research had begun." Moreover, "EPA disregarded significant epidemiologic information, deviated from its Risk Assessment Guidelines, failed to disclose important findings and reasoning, and left significant questions without answers."

Regulatory analysts frequently single out the EPA for criticism, citing the high costs and minimal benefits of EPA’s rules. The EPA’s record in federal court suggests that many of these criticisms are justified. Whatever the nature and extent of its statutory mandate, it is important that the EPA administer its responsibility in a faithful and accountable manner. This means adhering to the priorities, and limits, established by the Congress, and making clear to the public the bases upon which it acts.

Other agencies, such as the Occupational Safety and Health Administration, have shown that federal courts are no barrier to the imposition of costly and irrational regulations. "Judicial deference to decisions of administrative agencies like EPA rests on the fundamental premise that agencies engage in reasoned decision-making," declared Clinton appointee Judge David Tatel in overruling one EPA decision. EPA’s failure in this regard, not the severity of its regulatory agenda or some anti-regulation bias in the federal courts, is the source of its legal difficulties. Ultimately, if the EPA is unhappy with the way in which its rules are handled by the courts, it has no one to blame but itself.

Jonathan H. Adler ([email protected]) is a Senior Fellow in Environmental Policy at CEI. This article is adapted from a longer study to be published by the Reason Public Policy Institute later this spring.