States to take lead in regulatory environment post-Chevron

Two recent legal actions related to the U.S. Environmental Protection Agency’s (EPA) Phase 3 greenhouse gas (GHG) emissions rule for heavy-duty vehicles coupled with the U.S. Supreme Court overturning the Chevron doctrine are coming together to change the way manufacturers will have to address the regulatory environment.

In May, Republican attorneys general (AG) from 24 states sued EPA in the U.S. Court of Appeals for the District of Columbia Circuit opposing the rule. The lawsuit, which is being led by Nebraska AG Mike Hilgers, said it would “show that the final rule exceeds the agency’s statutory authority and otherwise is arbitrary, capricious, an abuse of discretion and not in accordance with law.”

A coalition of Democratic AGs from 22 states and the District of Columbia filed a motion to intervene in defense of the EPA rule, according to a recent blog post by law firm Troutman Pepper. The coalition is led by California AG Rob Bonta, who said in a press release regarding the motion, “Not only does EPA’s rule provide robust economic benefits, it also protects communities from harmful air pollution.”

According to Ashley Taylor, co-leader of Troutman Pepper’s state attorneys general practice and vice chair of the firm, every state department comes under the authority of the state attorney general. “Nothing happens in the state without the involvement of the state attorney general. The state attorney general is the hub and everything else is a spoke.” He added, “They have the ability, from a policy perspective, to influence every substantive aspect of state government.”

Additionally, although both the lawsuit and the motion were filed before the U.S. Supreme Court’s June ruling on the Loper Bright Enterprises v. Raimondo case that overturned the Chevron doctrine, that ruling will have implications for the outcome of the lawsuit as well as the way in which manufacturers will have to comply with the EPA’s rule and others like it.

“There was an amicus brief filed by the Georgia governor in that case (Loper Bright),” Taylor said. “It was the only one filed by a governor, and his point was simple. His point was we should be encouraging every state to develop different standards.”

Taylor explained that despite the partisanship often seen in such cases, the Chevron ruling was about a difference in philosophy about where expertise in policymaking should reside.

“One side says the expert should be in the bureaucracy with deference,” he said. “Another approach says no, the experts may exist, but those experts should probably be part of a congressional staff, and the bill should probably lay out in excruciating detail what the experts believe.”

With Chevron stripped away, many states are having to start over with their respective regulatory structures.

“When you challenge a state reg now, you’ll be able to argue that the deference previously provided under the Chevron doctrine should be changed because you’re pointing to the Supreme Court’s ruling in Loper,” he said. “And all the states are going to be grappling with this across every state agency.”

Taylor added that while federal cases against regulatory agencies such as EPA will be the ones garnering much of the press, “you’re going to have a thousand battles that are going to be state administrative battles.” These regulatory structures will be created “through enforcement actions and settlements,” he said.

One implication for manufacturers and other companies is that their approach to regulatory compliance will have to shift from a federal to state focus.

“For a company — their compliance program — if it’s a risk-based compliance program, where is our greatest risk? It’s being reoriented to the states,” he said. “You used to have the federal, and then oh, yeah, we’ll figure out what the states are doing. Now, they’re being reversed.”

For business-to-business companies, Taylor said that complying with the regulations of the state that is most stringent will likely keep you in good stead with the remaining states.

Taylor said it’s important to see how all the rulings related to the regulatory environment play out.

“Not only at the federal level, but across the states and across each regulatory agency and across each discipline,” he said. “There are going to be multiple ripple effects that we’re going to watch. I think five or 10 years from now, people are going to look back and in a state, you’re going to have an entirely different body of regulatory law.”

Street Smarts: Trucking’s Emissions Pushback Begins Major industry players voice concerns over EPA’s aggressive emissions regulations.

FTC noncompete ban: Unlike Texas, Pa. denies motion to stay effective date The differing decisions, a third lawsuit and the overturning of the Chevron deference cast uncertainty on the FTC’s ban.