Legal experts had mixed views on whether courts would declare regulations invalid because of widespread failures by federal agencies to inform Congress about new rules, as required under the Congressional Review Act.

In recent interviews with BNA, lawyers specializing in administrative law expressed surprise about the agency lapses, but disagreed about the likelihood of a successful legal challenge in which a court would hold the regulations were not in effect because of the failure to notify Congress.

Meanwhile, the Center for Regulatory Effectiveness, a business-backed regulatory law think tank, Jan. 8 took the first step toward a possible effort to nullify the Environmental Protection Agency's Endocrine Disrupter Screening Program, citing the agency's failure to provide notice to Congress and the Government Accountability Office under the CRA.

In a letter to Vice President Joe Biden, as president of the Senate, and House Speaker Nancy Pelosi (D-Calif.), the Center asked Congress to advise EPA that the screening program “is not in effect” until the agency provides the required notice to Congress and the GAO.

The program, which is opposed by industry, was announced by EPA in April (74 Fed. Reg. 17,559, April 15, 2009). Mandated by Congress under the Food Quality Protection Act, the screening program is designed to identify pesticides that can cause adverse effects in wildlife and humans.

The letter to congressional leaders comes after a recent CRS report (No. R-40997, Dec. 29, 2009) that found federal agencies over a 10-year period failed to comply with a key provision of the Congressional Review Act (5 U.S.C. §§801-808) that requires agencies to submit final rules to both houses of Congress and GAO before the rules can take effect. The agency failures to notify Congress and GAO could mean the regulations have no legal effect, CRS concluded, citing the CRA and its legislative history.

The act generally sets out expedited legislative procedures for Congress to review and disapprove of final rules after they are issued by federal agencies and departments.

CRS found that despite repeated reminders by GAO since 1999, neither the Office of Management and Budget nor the agencies have taken steps to notify Congress or the GAO of 1,031 final rules, including 101 final rules issued in fiscal year 2008.

Along with EPA's endocrine disrupter screening program, the topics addressed by the so-called “missing rules” also include lists of chemicals covered under the Department of Homeland Security's Chemical Facility Anti-Terrorism Standards, designation of critical habitats for endangered species, oil and gas lease operations, and changes to workplace drug and alcohol programs.

Asked about the CRS findings, OMB spokesman Tom Gavin told BNA, “We take very seriously our statutory responsibilities and encourage agencies to follow the law, including the Congressional Review Act.” He added, however: “Agency compliance is not something we have direct control over. When we do hear of problems, we try to encourage agencies to follow the law.”

“It's a fascinating issue,” said Richard Faulk, a corporate defense counsel with Gardere Wynne Sewell in Houston, Texas. “I expect as this gets more publicity, we'll begin to see collateral challenges to agency regulations based on the CRA problems.”

Faulk, who specializes in environmental law, told BNA he would “never advise clients they did not need to comply” with regulations because of the possible CRA problems. On the other hand, he said in an enforcement action brought by an agency, he could advise his client “to consider a challenge” using the CRA.

One possible impediment to a legal challenge, Faulk pointed out, was language in Section 805 of the CRA stating that “No determination, finding, action, or omission under this chapter shall be subject to judicial review.”

However, other lawyers knowledgeable about the statute and its application noted that the plain language of Section 801(a)(1)(A) of the CRA requires agencies to submit final rules to Congress and the GAO “before a rule can take effect.”

“An aggressive lawyer could well argue with some merit that a rule is not effective until it has been sent to Congress—because that's what the statute says,” asserted Sally Katzen, an administrative law expert with the Podesta Group who served as administrator of OMB's Office of Information and Regulatory Affairs (OIRA) during the Clinton administration.

Proponents of a legal challenge could also rely on the legislative history of the CRA, the CRS noted in its report. In a joint statement issued when the CRA was enacted, the sponsors of the measure clarified that the bar on judicial review was intended to apply to determinations by OMB on whether a rule was “major” and to congressional actions taken under the act.

“The limitation on judicial review in no way prohibits a court from determining whether a rule is in effect,” the sponsors said in their joint statement.

In challenging the validity of EPA's endocrine disrupter screening program, the Center for Regulatory Effectiveness cited the language of the CRA as well as the statute's legislative history.

However, asked about EPA's failure to provide notification about the screening program, EPA spokeswoman Latisha Petteway told BNA, “Neither the Notice describing EPA's policies and procedures nor the Notice announcing the list of chemicals to receive testing orders was a regulation within the meaning of the CRA.”

Jim Tozzi, a board member of the Center who signed the Jan. 8 letter to Biden and Pelosi, disputed the EPA's contention. He noted that the CRA incorporates the broad definition of “rule” contained in the Administrative Procedure Act, 5 U.S.C. 551(4) and includes any “agency statement … designed to implement, interpret, or prescribe law or policy.”

Moreover, Tozzi emphasized, the EPA notices were cleared by OIRA, which must approve all major rules, on March 3, 2009, as a “final rule,” according to information on OMB's website.

Of all the rules not sent to Congress or the GAO, Tozzi told BNA he singled out EPA's endocrine disrupter screening program to bring to congressional attention because “it would have minimal impact on the agency.”

Unlike a major rule which under the CRA cannot take effect until 60-days after it is sent to Congress, the screening program was not categorized by OIRA as a major rule, noted Tozzi, adding, “I didn't want to put EPA through that hassle—all they have to do is send a letter.”

Other administrative law experts predicted affected companies would be unlikely to mount legal challenges to rules under the CRA in order to avoid significant regulatory upheaval.

“While the agency failures are shocking, the implications of upending all these rules is mammoth,” said Rena Steinzor, president of the Center for Progressive Reform, a group of progressive legal scholars. “The agencies will find a way to make the rules OK,” said Steinzor, an environmental law professor at the University of Maryland School of Law. “Companies have spent billions of dollars complying with these regulations over the years.”

In addition, Steinzor said few companies would see an advantage in pushing a challenge, “mainly because it would upset the predictability industry always says it wants.”

Added Jeffrey Lubbers, a fellow in law and government at American University's Washington College of Law, “I can't imagine though that a court would strike down a rule that has been in effect and enforced or relied upon for years because of a failure to send it to Congress X years earlier.”

Katzen, who headed OIRA during the Clinton administration, said, “The failure to raise this issue during the Bush administration is not surprising.”

She noted what she called a “lack of incentive” on the part of industry to mount a CRA-based challenge. “Consider a not so hypothetical case in which a rule establishes a relatively weak standard,” she said. “Industry suspects that this is the best it can expect so does not want to take steps to set is aside.”

Currently pending in Congress is a bill that could fix the problem going forward, CRS pointed out. H.R. 2247, which passed in the House in June and is now pending in the Senate Committee on Homeland Security, would amend the CRA to eliminate the requirement that federal agencies submit rules to Congress before they can take effect. The rules would still have to be submitted to the GAO, which would have responsibility for sending Congress a weekly report listing the rules it received. The bill does not address the past problems outlined in the CRS report.

The CRS noted in its December 2009 report that since 1999, the GAO has sent at least five letters to OIRA alerting OMB's regulatory policy office about the agency lapses, with the most recent letter sent in May 2009 documenting a total of 101 missing rule notifications in FY 2008. OIRA did not respond to any of the GAO letters sent prior to May 2009.

Asked about the GAO contacts, Katzen said, “I recall that OIRA took the CRA's requirements very seriously and worked with agencies to make sure they complied.” She added, that OIRA issued at least one guidance document to agencies during her tenure setting out the CRA compliance procedures.

Susan Dudley, who served as OIRA administrator during the latter part of the Bush administration, said she did not recall receiving letters from the GAO and “was not aware” agencies were not complying with the CRA.

“OIRA's only responsibility under the CRA is to determine which rules are ‘major’ and we took that responsibility very seriously,” Dudley told BNA in an e-mail message. “There was certainly no policy of neglecting the CRA or Congress's rightful role in the regulations that implement their statutes.”

Only a handful of cases exists that raise issues related to agency failures to comply with CRA notice requirements, according to the CRS which summarized several cases in a May 2008 report (RL 30116, 5/8/2008).

Three of the cases involved EPA enforcement actions brought by the Department of Justice under the Clean Air Act's new source review (NSR) standards. EPA argued that major modifications to power plants were not “routine maintenance” exempted under the Act and subjected the facilities to tightened NSR standards. The companies contended that EPA's revised interpretation, coming after several years of non-enforcement, constituted a new “rule” under the CRA, requiring notice to Congress and GAO.

In both United States v. American Electric Power Service Corp., 218 F.Supp. 2d 931 (2002) and United States v. American Electric Power Service Corp., 2006 WL 1331543, Nos. 2:04 CV 1098; 2:05 DV 360 (S.D. Ohio, 2006), the district court held that Section 805 of CRA barred judicial review.

Another district court reached a similar result in Texas Savings and Community Bankers Association v. Federal Housing Finance Board, 1998 WL 842 (W. Texas), aff'd 201 F.3d 551 (5^th Cir. 2000), in which three thrift associations sued the Federal Housing Finance Board challenging one of its policies regarding the home mortgage lending industry.

The plaintiffs alleged the new policy was a rule required to be reported to Congress and GAO under the CRA. The court upheld the statutory bar to judicial review, discounting the CRA's legislative history which was cited by the plaintiffs.

The most recent case in which a CRA challenge was raised, Montanans for Multiple Use v. Barbouletos, 568 F. 3d 225, 228 (D.C. Cir. 2009), also concluded that Section 805 of the CRA prohibited judicial review. In that case, the U.S. Court of Appeals for the D.C. Circuit upheld a lower court's rejection of a CRA-based challenge to a forest management plan promulgated by the U.S. Forest Service.

However, in United States v. Southern Indiana Gas and Electric Co., 55 ERC (BNA) 1597 (S.D. Ind. 2002), which also involved an EPA enforcement action under the NSR standards, a district court ruled that the judicial bar was “ambiguous” and declined to prohibit a challenge.

The court noted that the CRA “has no enforcement mechanism, and to read it to preclude a court from reviewing whether an agency rule is in effect … would render the statute ineffectual.” Accordingly, the court concluded it had jurisdiction to review whether an agency rule is in effect that should have been reported to Congress under the CRA. The court ruled that EPA's interpretation of the NSR did not constitute a new rule that was subject to the CRA.