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MANDATE MADNESS: WHEN SUE AND SETTLE 

JUST ISN’T ENOUGH 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION 

POLICY, INTERGOVERNMENTAL RELATIONS AND 

PROCUREMENT REFORM 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JUNE 28, 2012 

Serial No. 112–185 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

DAN BURTON, Indiana 

JOHN L. MICA, Florida 

TODD RUSSELL PLATTS, Pennsylvania 

MICHAEL R. TURNER, Ohio 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

CONNIE MACK, Florida 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

ANN MARIE BUERKLE, New York 

PAUL A. GOSAR, Arizona 

RAU ́ L R. LABRADOR, Idaho 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

JOE WALSH, Illinois 

TREY GOWDY, South Carolina 

DENNIS A. ROSS, Florida 

FRANK C. GUINTA, New Hampshire 

BLAKE FARENTHOLD, Texas 

MIKE KELLY, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

EDOLPHUS TOWNS, New York 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

DENNIS J. KUCINICH, Ohio 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MIKE QUIGLEY, Illinois 

DANNY K. DAVIS, Illinois 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

JOHN A. YARMUTH, Kentucky 

CHRISTOPHER S. MURPHY, Connecticut 

JACKIE SPEIER, California 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

ROBERT BORDEN, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION POLICY, INTERGOVERNMENTAL

RELATIONS AND PROCUREMENT REFORM

JAMES LANKFORD, Oklahoma, Chairman 

MIKE KELLY, Pennsylvania, Vice Chairman 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

RAU ́ L R. LABRADOR, Idaho 

PATRICK MEEHAN, Pennsylvania 

BLAKE FARENTHOLD, Texas 

GERALD E. CONNOLLY, Virginia, Ranking 

Minority Member 

CHRISTOPHER S. MURPHY, Connecticut 

STEPHEN F. LYNCH, Massachusetts 

JACKIE SPEIER, California 

(III) 

C O N T E N T S 

Page 

Hearing held on June 28, 2012 ............................................................................... 1 

WITNESSES 

Mr. E. Scott Pruitt, Attorney General, State of Oklahoma 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 8 

Mr. Roger R. Martella, Jr., Partner, Sidley Austin LLP, Former General 

Counsel, U.S. Environmental Protection Agency 

Oral Statement ................................................................................................. 32 

Written Statement ............................................................................................ 34 

Mr. William L. Kovacs, Senior Vice President, U.S. Chamber of Commerce 

Oral Statement ................................................................................................. 43 

Written Statement ............................................................................................ 45 

Mr. Robert Percival, Robert F. Stanton Professor of Law, Director, Environmental Law Program, University of Maryland Francis King Carey School 

of Law 

Oral Statement ................................................................................................. 65 

Written Statement ............................................................................................ 67 

Mr. William Yeatman, Assistant Director, Center for Energy and Environment, Competitive Enterprise Institute 

Oral Statement ................................................................................................. 75 

Written Statement ............................................................................................ 77 

APPENDIX 

The Honorable Jackie Speier, a Member of Congress from the State of California, Opening Statement .................................................................................. 99 

The Honorable James Lankford, a Member of Congress from the State of 

Oklahoma, Draft Remarks .................................................................................. 101 

United States Environmental Protection Agency, Letter to the Honorable 

James Lankford .................................................................................................... 103 

Office of the Attorney General, Department Policy Regarding Consent Decrees 

and Settlement Agreements ................................................................................ 105 

Associated Builders and Contractors, Inc., Letter to The Honorable James 

Lankford and The Honorable Gerald Connolly ................................................. 110 

Letter to The Honorable Lisa Jackson, Administrator, Environmental Protection Agency from The Honorable James Lankford ............................................ 111 

(1) 

MANDATE MADNESS: WHEN SUE AND SETTLE 

JUST ISN’T ENOUGH 

Thursday, June 28, 2012 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON TECHNOLOGY, INFORMATION POLICY, INTERGOVERNMENTAL RELATIONS AND PROCUREMENT

REFORM, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. 

The subcommittee met, pursuant to call, at 9:02 a.m., in Room 

2203, Rayburn House Office Building, Hon. James Lankford [chairman of the subcommittee] presiding. 

Present: Representatives Lankford, Kelly, Labrador, Connolly 

and Speier. 

Staff Present: Alexia Ardolina, Assistant Clerk; Joseph A. 

Brazauskas, Counsel; Brian Daner, Counsel; Linda Good, Chief 

Clerk; Kristina M. Moore, Senior Counsel; Noelle Turbitt, Assistant 

Clerk; Jeff Wease, Deputy CIO; Jaron Bourke, Minority Director of 

Administration; Adam Koshkin, Minority Staff Assistant; Suzanne 

Owen, Minority Health Policy advisor; and Cecelia Thomas, Minority Counsel. 

Mr. LANKFORD. The committee will come to order. 

This is a hearing from the Oversight and Government Reform, 

Technology and Procurement Reform and Intergovernmental Relations Subcommittee. We exist to secure two fundamental principles: 

First, that Americans have the right to know the money Washington takes from them is well spent; and, second, Americans deserve an efficient and effective government that works for them. 

Our duty on the Oversight and Government Reform Committee 

is to protect these rights. Our solemn responsibility is to hold government accountable to taxpayers because taxpayers do have a 

right to know what they get from their government. We will work 

tirelessly in partnership with citizen watchdogs to deliver the facts 

to the American people and bring genuine reform to the Federal 

bureaucracy. This is the mission of the Oversight and Government 

Reform Committee. 

We have a significant amount of attention that is going to happen today focused on the red tape, and that has happened across 

all of Congress recently from both parties actually trying to make 

us more efficient. This is an issue that does hold us back from our 

own growth in prosperity. 

Today’s hearing we are going to focus on examining the highly 

questionable practice that’s been perfected by the Environmental 

Protection Agency known as ‘‘sue and settle.’’ This has emboldened 

2 

the administration to pursue an aggressive green agenda while escaping political accountability for the costs and burdens of these 

regulations and what they impose on job creators. 

The process is rather simple. Environmental groups will sue the 

EPA, demanding the agency issue a regulation on an accelerated 

timeframe. Rather than fighting the lawsuit, EPA quickly agrees to 

the special interest demands. These settlement agreements are 

reached after closed-door negotiations between EPA and environmental groups, where other interested parties are excluded. Once 

the settlement agreement is approved by a Federal Court in a consent decree, the EPA is legally bound to engage in the rulemaking. 

It is important to note that when a court approves the consent 

decree, it does not consider the merits. The court is merely accepting and ratifying what the parties agreed to. 

In the past 3 years, the administration has conducted approximately 60 settlements with special interests. Twenty-nine of these 

agreements bound the EPA to make major policy changes. The 

plaintiffs in these cases are often the very same reoccurring players: The Sierra Club, NRDC, Defenders of Wildlife, Wild Earth 

Guardians, Center for Biological Diversity. These special-interest 

groups not only hold a special seat at the table with the EPA, EPA 

is effectively paying them to sue the agency. In 2011 alone, taxpayers reimbursed these groups millions of dollars to participate in 

these sue-and-settle agreements. 

In addition to examining this outrageous practice, we will hear 

today about two particular egregious cases where EPA defied all 

norms of transparency, sidelined interested parties, and is now in 

the process of imposing extraordinary burdensome regulations. 

These two cases are EPA’s regional haze regulations and its greenhouse gas standards for power plants. 

In the case of regional haze, Congress was crystal clear that this 

is purely an aesthetic visibility program and is to be administered 

by the States, not by the EPA. Through sue and settle, EPA is attempting to federalize the program in imposing costs well beyond 

what the State had determined was necessary or justified. Ultimately, EPA’s proposal will cost billions of dollars for visibility improvements that are undetectable to the human eye. 

In the second case study, New Source Performance Standards for 

electric utilities, EPA concluded settlement negotiations on December 23rd, 2010, and agreed to promulgate NSPS for greenhouse 

gases for both new and existing electric generating units under section 111(a) and 111(d) of the Clean Air Act. At the time this settlement was reached, EPA was not in violation of any mandatory 

duty, and as such the litigants didn’t have a legal leg to stand on. 

And yet the Agency settled, committing the Agency to make major 

policy changes without interested parties at the table, and they rewarded litigants with a cash prize they were never entitled to. 

These two case studies are but two examples of the dozens of policy changes EPA has committed to in sweetheart sue-and-settle arrangements with special interests. 

Time and again when the EPA is criticized for the excessive burden imposed by their Agency, whether it be Utility MACT, Boiler 

MACT, Florida water quality standards, regional haze, NSPS, 

EPA’s response is suspiciously similar: The Agency had no discreVerDate Aug 31 2005 10:53 Nov 02, 2012 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\DOCS\76368.TXT APRIL
3 

tion to extend the timeline to hear additional points of view. It is 

under a court order to finalize those regulations by date certain. Of 

course, that court order was agreed to by EPA in the first place. 

Let’s be clear: What EPA claims the law requires them to do is 

nothing more than what EPA agreed to do in a collusive agreement 

with special-interest allies. The lack of transparency is designed to 

circumvent other regulatory checks Congress has put in place. 

Environmental regulations only work when they are made in an 

open process that involves all stakeholders. Sue-and-settle rulemaking is an affront to that process. 

Finally, I want to tell you that we very much wanted a representative from the EPA here today to respond to these concerns 

that our panelists will raise and that I am raising. However, despite adequate notice, EPA has refused to provide a witness for today’s proceedings. I am hopeful we can find a date in the near future when they can make an appropriate witness available to respond and add to detail to our questions today. 

With that, I would like to recognize the person filling in for our 

ranking member today Ms. Speier for an opening statement. 

Ms. SPEIER. Mr. Chairman, thank you. And let me say at the 

outset, first I would like to offer this into the record and ask unanimous consent that it be placed in the record. This is a letter from 

the United States Environmental Protection Agency dated June 22. 

The chair mentioned that there was ample time offered to those 

at EPA to have a participant here. Actually, the first request came 

in on June 14th. They checked their travel schedules and other 

hearing requirements and found that one of the—both of the people 

that would be appropriate to testify at this hearing could not make 

it. So rather than finding a date that could accommodate both our 

schedules, this hearing went forward without having EPA represented, which frankly does not meet my standards as a committee that is supposed to be about oversight and hearing from the 

parties. So I would like to submit this for the record. 

Mr. LANKFORD. Without objection. 

Mr. LANKFORD. And one additional side note. We responded back 

to them when they said these three individuals were not available, 

asked for other individuals, asked for people by name. They responded back they had no one available. We asked for basically 

what the reasons were there was no one available on any of the 

topics on it, and we just received back a correspondence on that. 

So we do look forward to having them to get a chance to discuss 

this at a further hearing. 

Ms. SPEIER. All right. Thank you, Mr. Chairman. 

I must say that I have been a member of this committee for 4 

years. I chaired a committee on oversight when I was in the State 

legislature in California for 6 years. And oversight hearings are 

supposed to be objective evaluations of an issue. It is in the interests of both the Democrats and the Republicans in Congress to find 

where there are problems and to fix them. But when hearings are 

entitled, as most hearings in this committee recently, with a point 

of view, we are not being objective, we are not looking at both 

sides, we are ramming down a particular principle, and I find that 

particularly disconcerting. 

4 

The focus of today’s subcommittee hearing is on consent decrees 

and settlement agreements to commonplace court procedures that 

give parties in lawsuits the opportunity to settle their differences, 

while avoiding prolonged trials and mounting legal expenses. These 

procedures help parties in court cases reach compromises that 

bring advantages to both sides. 

In lawsuits against the Environmental Protection Agency, whether brought by State or local governments, private companies, environmental groups or local citizens, a consent decree often leads to 

a timelier and less expensive resolution for all involved. Consent 

decrees and settlements provide resolution and certainty, while allowing EPA to do its job and protect the public interest. That is the 

commonsense, noncontroversial context for today’s hearing. Or at 

least it should be. 

Unfortunately, the majority has chosen to break with this historic support for these environmental protections, which are overwhelmingly popular with the public, and which they once helped 

create, in order to push a false narrative to fit a propollution agenda. Terms to describe consent decrees like ‘‘mandate madness’’ and 

‘‘sue and settle’’ are catchy political slogans, but they are based on 

a flawed understanding of how our environmental laws work. 

Accusations that environmental groups are somehow dictating 

government policy through court settlements rings just as hollow. 

In fact, an August 2011 GAO report covering the years 1995 to 

2010 found, and I repeat this, no discernible, no discernible trend 

in lawsuits against the EPA. Now, this is the GAO, which is a separate entity that is independent, making that statement. However, 

it did note that private companies and industry trade associations 

accounted for 48 percent of those lawsuits, while local and national 

environmental and citizen groups collectively accounted for 30 percent. 

So what are we saying here? Is black white and white black? The 

reality is that EPA gets sued a lot, not just by green groups, but 

more often than not by polluting industries, which are better funded and choose to fight their violations in court instead of cleaning 

up their acts. ‘‘Sue and settle’’ is a manufactured term and a distraction from the real sue-and-pollute strategy that these corporations prefer. 

Existing law already provides ample means for parties to comment on and seek changes to consent decrees that they don’t like. 

However, partisan attempts to rewrite those rules that have served 

the courts and the American people so well for decades is a solution 

in search of a problem. 

I would like to thank our witnesses here for appearing before the 

subcommittee, and I would like to say that I look forward to your 

testimony. We will see. 

Mr. LANKFORD. Thank you. 

Mr. LANKFORD. All the Members will have 7 days to submit 

opening statements and extraneous material for the record. 

I would like to recognize our panel. The Honorable Scott Pruitt 

is the attorney general of my State, of the State of Oklahoma. I 

know that he also has an appointment across the street at the Supreme Court. There is something happening today at 10 o’clock, I 

understand, over there, I have heard some sort of rumor on that. 

5 

And our State was also part of that, so he will be part of that as 

well. So we will excuse you around 9:30 today after we hear your 

testimony. 

Mr. Roger Martella is a partner at Sidley Austin LLP and a 

former general counsel of the U.S. Environmental Protection Agency. Thank you for being here as well. 

Mr. William Kovacs is senior vice president for environment and 

technology and regulatory affairs at the U.S. Chamber of Commerce. 

Mr. Robert Percival is the director of the environmental law program, professor of law at the University of Maryland Francis King 

Carey School of Law. Thank you for being here very much. 

And Mr. William Yeatman—is that correct, Yeatman—is the assistant director for the Center for Energy and Environment at the 

Competitive Enterprise Institute. Thank you for being here. 

Pursuant to committee rules, all witnesses are sworn in before 

they testify. If you would please rise and raise your right hands, 

please. 

Do you solemnly swear or affirm that the testimony you’re about 

to give to this committee will be the truth, the whole truth, and 

nothing but the truth so help you God? 

Thank you. 

Let the record reflect all witnesses answered in the affirmative. 

You may be seated. 

In order to allow time for discussion, I would like you to limit 

your oral testimony to 5 minutes. You will see there the time, but 

we will also be attentive to that as well. We are not going to try 

to cut people off in the middle of it, but we would like you to be 

attentive to that. Your written statement, of course, has already 

been submitted for the record itself. 

I would like to recognize Mr. Scott Pruitt to begin our testimony 

today. 

WITNESS STATEMENTS 

STATEMENT OF E. SCOTT PRUITT 

Mr. PRUITT. Chairman Lankford, Ranking Member Connolly and 

members of the subcommittee, good morning, and thank you for inviting me to appear before you today to present my concerns on the 

legal and policy implications of recent actions that the chairman 

identified taken by the U.S. Environmental Protection Agency. This 

is a critical issue for Oklahoma, and I appreciate the attention that 

the chairman and this subcommittee is devoting to this matter. 

First I would like to be clear about my intentions today regarding environmental policy. My comments will in no way disregard 

the law or the provisions we as a Nation or States have put into 

place to protect our natural resources. We take seriously our responsibility to preserve and protect these valuable natural assets 

so that they may be enjoyed by our children and grandchildren. 

This responsibility requires a delicate balance between environmental and economic interests, which is why Congress, when drafting the Clean Air Act and the Regional Haze Program, gave deference and authority to the States, not a Federal agency, to take 

economic factors into consideration when deciding what actions 

6 

needed to be taken and over how many years for implementation. 

With these considerations in mind, the State of Oklahoma submits 

that Oklahoma stakeholders, not the EPA, should make decisions 

on regional haze where outcomes directly affect Oklahomans. 

Congress was clear when they drafted the Clean Air Act and 

other environmental laws they intended for States and EPA to 

work together. They intended for cooperative federalism to take 

place to reach outcomes that protect our environment and at the 

same time take into consideration the economic costs. Unfortunately, this has not been the case over the past 3 years. 

In Oklahoma’s case, the regional haze matter, the EPA ignored 

its own provisions and denied our carefully crafted State plan in 

place of an unwarranted Federal plan. The State plan was not devised on a whim, but created after careful consideration and input 

from all the stakeholders in the State, including the Oklahoma Department of Environmental Quality. We followed the rules. The 

EPA did not. 

If the EPA’s unlawful Federal plan is allowed to move forward, 

utility rates in the State of Oklahoma will rise as much as 20 percent over a 3-year period, and the economic harm to the State will 

be irreparable. To stop the Federal plan, I, on behalf of the State, 

filed an appeal to the EPA’s final rule and asked the tenth circuit 

for a stay. In a rare decision, as this committee will recognize, the 

court granted a stay this month, which we believe recognizes the 

potential merits of our case. 

Once we became aware of actions by the EPA in Oklahoma, we 

began to dig deeper into the current EPA practices across the country. What we found was a complete abrogation of notice and public 

comment requirements when instituting Federal plans, as well as 

a setting of an environmental agenda through consent decrees. In 

several instances the EPA filed consent decrees on the same day 

that environmental groups filed lawsuits. This was in spite of the 

fact that these cases involved, as you know, Mr. Chairman, involved complex legal issues that typically would take weeks to review and respond. Such actions raised questions and concerns 

about the motives and transparency behind EPA’s activities. 

Attorneys general are in the process of evaluating the EPA’s 

alarming practice of relying on consent decrees to deny States their 

important role as a partner under cooperative federalism. We are 

also concerned with the use of these consent decrees to implement 

Federal law. These decisions have put States in the position of 

dealing with burdensome regulations and harmful outcomes 

through processes in which they have no say. 

In conclusion, the EPA’s refusal to follow its own rules and create its agenda through consent decrees has denied States due process and ignored the foundation of cooperative Federalism set forth 

by Congress under the Clean Air Act. With the backing of the administration, the EPA is conducting, we believe, superlegislative 

activity that Congress has not authorized. 

Members must take seriously their role in passing legislation 

and not delegate their authority to agencies through unchecked 

rulemaking and questionable settlements. These issues are of great 

importance to the State of Oklahoma because Oklahomans value 

7 

our State’s natural resources which provide sustenance to Oklahoma’s citizens and fuel our economic development. 

I look forward to answering any questions the chairman and the 

committee may have. Thank you. 

Mr. LANKFORD. Thank you. 

[Prepared statement of Mr. Pruitt follows:] 

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Mr. LANKFORD. Mr. Martella. 

STATEMENT OF ROGER R. MARTELLA, JR. 

Mr. MARTELLA. Thank you. 

Chairman Lankford, Ranking Member Connolly and members of 

the committee, thank you for providing me the opportunity and the 

honor to appear before you today. 

I would like to start with the uncontroversial proposition that 

rulemaking activities should be built upon three bedrock principles 

of transparency, public participation and judicial review. The Administrative Procedure Act guarantees these principles and protections for all citizens when the government engages in rulemaking, 

and these procedural protections that are inherent to our democratic system are just as critical to protecting the environment as 

the substantive laws and rules themselves. 

However, the APA and our process for enacting effective Federal 

regulations is confronting new challenges that in some cases are 

bypassing these protections. Today I want to share with you my 

concern about recent efforts to circumvent the protections of transparency, public participation and judicial review in an emerging 

phenomenon that provides an off ramp to these principles. 

The concern arises out of a growing trend where certain groups 

increasingly are employing a so-called sue-and-settle approach to 

the government on regulatory issues. Such an approach effectively 

provides an off ramp that ignores these bedrock protections, such 

as, first, a lack of transparency. In such settlements, discussions 

and agreements typically are reached with a subset of interested 

parties without full stakeholder input, and frequently take place 

outside the boundaries of the public process. 

Second, a lack of public participation. In such settlements public 

participation is foreclosed three times. First, the agreement on how 

to regulate is reached without full input of stakeholders; second, 

the negotiated deadlines for final rules are frequently so quick that 

the public’s comments might receive little weight in the actual subsequent rulemaking; third, because the final rule must be the logical outgrowth of the proposal, settlement agreements that influence even the proposed rule effectively preordain the final outcome 

without full public participation. 

Third, a lack of judicial review. In such settlements parties frequently reach an agreement before a lawsuit is even filed or defended, thus depriving interested parties from intervening in the 

litigation to defend their interests where intervention has been 

granted. 

Fourth, a conflation of government and nongovernmental roles. 

In such settlements the NGO plaintiffs effectively set the priorities 

and timelines for how the government enacts certain rulemakings 

over other competing concerns and resources, in turn influencing 

policies and priority settings far beyond the reach of a particular 

settlement. These concerns are not theoretical or abstract, but have 

been rising with increasing frequency in the last several years. 

One recent example alluded to by the chairman includes the 

greenhouse gas New Source Performance Standards for utilities. In 

December of 2008, an NGO group predicted publicly it would be 

successful in convincing the EPA to phase out new coal-fired power 

33 

plants by setting a New Source Performance Standard at a level 

that no coal-fired power plant could meet. Exactly 2 years later, on 

December 23, 2010, EPA announced a consent decree with the very 

same NGO committing the Agency to propose and finalize this very 

rule even though it was not required to do so. 

Importantly, EPA agreed to promulgate such standards without 

any prior input from a single stakeholder in those affected impacted industries. When the ultimate proposal came out on March 

27th of this year, it was virtually identical to what the NGO had 

predicted in 2008 and barred the construction of new coal-fired facilities in the United States. Because of the unique nature of NSPS 

proposals, the rule is already in effect, even though EPA has yet 

to respond to a single stakeholder comment from industry on the 

issue. Thus, as a result of this settlement, we now have an effective 

rule that is barring new facilities without first offering transparency to the industry impacted, allowing for public participation 

before the rule took effect, and providing no real means of judicial 

review at this time. 

Finally, Mr. Chairman, just to emphasize a point, I do strongly 

support and encourage efforts to pursue settlement agreements and 

consent decrees whenever feasible. I don’t intend my comments to 

suggest it’s always inappropriate for a settlement agreement to 

provide some definition of scope to a proposed rule. However, my 

overarching recommendation to this subcommittee is to address 

and improve the process by which these agreements are reached in 

the first instance. 

By promoting fairness, transparency and public participation of 

interested stakeholders in the first instance, settlement agreements 

will better reflect a wide range of interests that must be balanced, 

result in stronger and more defensible outcomes, and improve the 

success of the subsequent rulemaking process. 

Thank you very much for this opportunity today to share my 

views. 

Mr. LANKFORD. Thank you. 

[Prepared statement of Mr. Martella follows:] 

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Mr. LANKFORD. Mr. Kovacs. 

STATEMENT OF WILLIAM L. KOVACS 

Mr. KOVACS. Thank you, Mr. Chairman and members of the committee. I am not going to try to go over old ground that others have 

discussed, so I am going to briefly hit sue and settle, but I also 

would like to talk about how it impacts jobs, and I think that’s 

where the business committee really comes in. 

But in essence, sue and settle is really a good-government concern. It’s transparency, public participation and the impact on jobs. 

And really what we are talking about is when you look at sue and 

settle, this is a subset of the interested community that is actually 

entering into contract negotiations. They are contracts. 

When the contract is decided, it is decided without the rest of the 

public involved. And I think from the business community point of 

view, being involved in those contract negotiations should be a fundamental right that we have under the Administrative Procedure 

Act, which the Congress passed decades ago to literally open up the 

process to the citizens and for participation between the citizens. 

So when this contract is executed and is filed with the court, the 

court doesn’t review the substance. What the court does is the 

court reviews the representations of the parties. And when it enters a judgment, that judgment cannot be disturbed unless it’s 

shown that there is an abuse of discretion by the court, which is 

an almost impossible standard. And then when the final rule comes 

out, even if it’s identical to what the agency and the environmental 

groups sought, our chances of overturning that based on an arbitrary and capricious standard are very, very low. So once the contract is made, the decision is made as to how to go forward. 

But let me talk about the more practical aspects of it. Environmental litigation is costing this country tens of thousands and hundreds of thousands and millions of jobs. In 2010, the U.S. Chamber 

did a study called Project No Project and we looked at environmental litigation across the country from the point of view of what 

was the private sector trying to finance in 2010. And we looked at 

just electric generation. We could have looked at cell towers, big 

box stores, cement companies. We could have looked at anything. 

We looked simply at electric generation. 

There were 351 projects where developers were trying to get permits. They could not get the permits. And the impact of not getting 

the permits meant that they could not invest $576 billion, which 

would have created 1.9 million jobs a year during the 7 years of 

construction. 

That is the impact of environmental litigation. There are ways to 

address it, and the Judiciary Committee is doing some of that. 

That is not my point here. 

The second point in sue and settle—and this is very, very specific 

because there is great data from the Department of Labor—when 

sue and settle occurs, it is a specific regulation on a specific industry. Take Utility MACT, take NSPS, take whatever you want, but 

that regulation is targeted at an industry. Jobs will be lost in that 

industry. 

And let’s assume that everything that the other side says is true, 

that jobs are created somewhere, and there is full employment evVerDate Aug 31 2005 10:53 Nov 02, 2012 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 C:\DOCS\76368.TXT APRIL
44 

erywhere, and, in fact, more jobs are created. But what your own 

statistics from your Department of Labor show is that the jobs that 

are created aren’t created in the same communities, they are created in different communities. So what happens is you have a real 

person with a real job that is lost in a real community that is impacted; and then on the other side of the equation, you have jobs 

created somewhere that they can’t get. 

Let me give you the statistics, because this is really what the key 

is. The Bureau of Labor Statistics every 3 years does a study of displaced workers, and the sampling is of about, just so we’ve got the 

numbers, 15 million workers. And of the 7 million workers that 

were what we would call long-term displaced, they didn’t have a job 

for 3 years—or they had worked for 17 years, but were out of a job 

during the survey—out of that, out of those 7 million workers, a 

majority of those workers were not able to get a job during the entire survey period, meaning that if the survey was 2007 to 2009, 

in 2010 51 percent of those workers did not have jobs. Now, that 

is displaced from all, and we’ve got to keep that in mind. But once 

you lose a job in an impacted area, you’re not going to get another 

one. And of the 49 percent who actually ended up getting jobs, we 

have 55 percent getting lower wages. 

So when you look at the impact of regulations, you look at—and 

litigation, you look at it twofold. One is you don’t create the jobs, 

and that, I think, the Project No Project study clearly determines. 

And the second part of it is when you lose a job due to a regulation, 

even if jobs are created in other industries, that community is really impacted and that worker is impacted, and that’s something we 

have to keep in mind. 

And the most frustrating part is that since 1977, this Congress 

mandated that EPA do a continuing analysis of job loss and shifts 

in employment due to regulations, and in 35 years the Agency has 

never conducted that study. And this is what is so frustrating 

about it. On one hand, we want to turn everything into a mandate 

and let the Agency do what it wants, but Congress can give the 

Agency a mandate to worry about jobs, and the Agency won’t do 

it. 

Thank you very much. 

Mr. LANKFORD. Thank you, Mr. Kovacs. 

[Prepared statement of Mr. Kovacs follows:] 

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Mr. LANKFORD. Mr. Pruitt, I know you have got to be able to 

scoot out of here as well. You are excused from the panel. Thank 

you for being here. 

Mr. PRUITT. Thank you, Mr. Chairman. 

Mr. LANKFORD. Mr. Percival. 

STATEMENT OF ROBERT PERCIVAL 

Mr. PERCIVAL. Thank you, Mr. Chairman. Thank you for inviting 

me. I am Robert Percival, the director of the environmental law 

program at the University of Maryland Law School. 

I’m afraid I’m going to be a bit of a skunk at the party. I’ve been 

practicing environmental law for 31 years. When I first started 

practicing environmental law, it was during the early days of the 

Reagan administration. And what I’ve heard here today is complaints about how environmental regulation, which had long been 

a bipartisan issue, is killing jobs and killing the economy. 

Every time a new major program was being implemented, the 

feature of environmental law in the United States that has so distinguished us is the fact that we have citizen participation. We 

allow for citizen suits, and virtually every major program had to be 

implemented only because the agencies were forced by citizen suits 

to implement it. 

As Congresswoman Speier indicated, most lawsuits brought 

against the EPA are actually brought by industry groups. That’s 

part of the system. We allow ordinary citizens to go into court to 

make sure that EPA abides by the law. 

When the Reagan administration proposed to phase lead out of 

gasoline, there were cries of doom, we were going to have gasoline 

shortages. It has been one of the most successful environmental 

regulations in the world, adopted by virtually every country in the 

world. 

We had a very healthy economy until the global economic problems in 2008. At the same time we had environmental law that 

made us the envy of the world. All you have to do is go to China, 

as I do fairly regularly, and you see these young public-interest 

lawyers in China who would love to have a system like we have 

where they can hold their government accountable. 

And what I have heard today is that illegal regulations are being 

adopted, that the public is being cut out of the process because of 

these settlements. Similar charges were investigated way back in 

the Reagan administration in 1986, when Attorney General Edwin 

Meese came up with the Meese Memorandum to provide guidelines 

for what agencies could agree to when they reached settlements. 

And as I indicated in my testimony, settlements are a prominent 

feature of the U.S. legal system, and they’re expressly favored by 

public policy because they have so many benefits. 

The characterization of collusive litigation and sue and settle, I 

believe, is simply a fantasy. To be sure, agency policies are going 

to change when there is a change in Presidential administration. 

Administrations have the ability to change course, and if we have 

a new Republican administration coming into office in January, you 

may see a situation where EPA is more frequently reaching settlements with industry groups. 

66 

But there has not been any change in EPA that has in any way 

cut out the public from the process. There are already very important safeguards that prevent that; standing requirements that require concrete adverseness among litigants, the need to obtain judicial approval of settlements, and, most importantly, the requirements of the Administrative Procedure Act that preclude agencies 

from making commitments concerning the substance of rules. 

The D.C. circuit and other U.S. courts of appeal have not been 

shy about striking down EPA regulations, as Mr. Martella well 

knows, if they are, in fact, illegal, or if the Administrative Procedure Act has been violated. But the charge that EPA is out of control and as a result acting illegally I think was quite well refuted 

on Tuesday when the D.C. circuit came down with its Coalition for 

Responsible Regulation v. EPA decision upholding EPA’s greenhouse gas regulations, saying that everything EPA did essentially 

was correct. 

So I simply am not on board with the notion that we need to do 

more to discourage settlements. I think that will only make it more 

difficult for agencies to benefit the public, whether it’s in a Democrat administration or a future Republican administration. 

Thank you. 

Mr. LANKFORD. Thank you, Mr. Percival. 

[Prepared statement of Mr. Percival follows:] 

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Mr. LANKFORD. Mr. Yeatman. 

STATEMENT OF WILLIAM YEATMAN 

Mr. YEATMAN. Chairman Lankford, distinguished members of the 

subcommittee, thank you very much for inviting me to testify this 

morning. My name is William Yeatman. I work at the Competitive 

Enterprise Institute. We are a free-market think tank here in 

Washington, D.C. 

Wonderful. I am getting a visual aid. 

I am here this morning to speak to you about how EPA is using 

the sue-and-settle—so-called sue-and-settle consent decrees to 

usurp the States’ rightful authority on regional haze. 

First a short primer on the regional haze regulation. It’s a Clean 

Air Act regulation, and its purpose is to improve the view at national parks and wilderness areas. This point bears repeating. It’s 

an aesthetic regulation, not a public health regulation. Due to this 

fact, the Congress intended for the States to be the lead decisionmakers on regional haze policy, on visibility improvement policy. 

Despite State primacy, the Environmental Protection Agency has 

already imposed three Federal implementation plans for regional 

haze on Oklahoma, New Mexico and North Dakota over the 

staunch objection of State officials. EPA’s plans would cost almost 

$400 million per year more than the States’ plans, which were 

crafted with all due process over the course of years. Sue and settle 

featured prominently in EPA’s actions in these Federal implementation plans, and I’ll briefly sketch out how it worked for each of 

these States. 

In a northern California court, EPA agreed to deadlines on regional haze as part of a settlement agreement with Wild Earth 

Guardians. The States were not notified and were not part of this 

agreement. They were notified after the fact, but were not part of 

the agreement. 

On the eve of the consent decree deadline, EPA objected to the 

process used by States for their regional haze determinations. They 

didn’t take on the determinations directly due to State primacy accorded by the Clean Air Act on regional haze policy. Instead, they 

objected to the process. Usually it was the State’s cost-effectiveness 

analysis. That’s what they went after. This didn’t reject the State’s 

plan outright; rather, it held it in abeyance, sort of holding pattern. 

Then EPA claimed that, pursuant to the consent decree, it had no 

choice but to run roughshod over the State and impose its own preferred plan, Federal implementation plan. 

So that is how it has worked in each of these three States, this 

three-part strategy, already, and as I mentioned, Oklahoma, New 

Mexico and North Dakota, $400 million per year of cost over what 

the States had determined was necessary to comply with the regional haze rule. EPA’s proposed fix for Wyoming and Nebraska, 

these would cost $120 million per year more than the States’ plans. 

Utah and Arkansas are likely next. 

And for what? What is the ultimate benefit of these Federal implementation plans? Thanks to Colorado State University professors, they have actually created software that allows us to visualize 

visibility impairment. It is known as WinHaze. It is available on 

the Internet for free. I downloaded that software. I input the EPA’s 

76 

own data, its own baseline data, and its own visibility improvement 

data. What I found was rather striking. I have two images to convey what I did find. 

On the left here, this is Oklahoma, Wichita Mountains National 

Park. This is the most affected Class 1 area of the EPA’s Federal 

implementation plan for Oklahoma. This is the result. This is the 

putative benefits of the regulation right here. 

On the left we’ve got the State’s controls. On the right we’ve got 

EPA’s controls. Notably, this is the largest disparity between State 

and EPA controls. This is the biggest improvement engendered by 

any of EPA’s actions on regional haze today. This improvement, 

quote/unquote, was worth $282 million per year in control costs, in 

compliance costs. So this is a side-by-side photo. 

Up on the monitor—aww jeepers, we had it there right before, 

but perhaps it’s the not there anymore. We’ll get it back. 

Up on the monitor, in addition to side-by-side images, WinHaze, 

the aforementioned software, allows us to do split images, so it’s, 

in essence, a melding of two. On the left half, those are the State 

controls. On the right half, right 50 percent, those are EPA’s controls. The split image is meant to accentuate any difference between the two visibility results. 

As you can tell, or at least certainly to my eyes, there is no difference. Even the split image, which is supposed to accentuate the 

difference, is invisible. I cannot tell the difference. Last night at the 

Competitive Enterprise Institute, I lined up my colleagues and had 

them each look at this placard. None of them could distinguish a 

difference. So in essence, it appears to be all pain and no gain with 

respect to this regional haze regulation. 

That concludes my testimony. I look forward to taking your questions. Thank you very much. 

Mr. LANKFORD. Thank you. 

[Prepared statement of Mr. Yeatman follows:] 

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Mr. LANKFORD. Thanks to all of you. 

I now recognize myself for 5 minutes, and we will begin some 

rounds of questions here. 

Mr. Martella, you’ve dealt with this in the past. Tell me what is 

typical in the EPA for a consent decree and working through the 

process, because you had mentioned it’s not inappropriate, and I 

would agree with you that not all settlements are inappropriate. 

But you also outlined a couple key statements. You said that we 

have to deal with the actual public policy and make sure the public 

is engaged in that. 

What would you set as a policy for this? Mr. Percival mentioned 

the Meese memo on it in the past. Is there a certain process that 

you would look at for that? 

Mr. MARTELLA. Sure, and thank you for the question. I would 

like to clarify that. I fully support settlements and consent decrees 

in every opportunity. In an ideal world, all litigation would be settled. I was a Justice Department attorney before EPA, and my incentive was always to settle over going to trial, as it is today. 

I think, though, you have to look at a number of factors, the first 

being the merits of the case that’s coming in. It’s not in the government’s interests to be settling frivolous cases. And so for the group, 

whether it’s an industry group or an NGO group, I am not trying 

to, you know, preference one over another, any group that comes 

to the EPA and says, we are going to assert this frivolous claim to 

get you to do something, will you settle it with us, the agency 

should be comfortable standing up in court and telling the court, 

this is frivolous; we are not going to be giving up our discretionary 

obligations just because somebody wants us to. 

I think, unfortunately, that is my gripe is that I’m seeing a lack 

of willingness to defend cases I think are frivolous, or at least 

where legitimate arguments could be made to defend them, and the 

result is it’s shifting resources. All of a sudden EPA is now adopting the folks who are coming in, their policies and their priorities 

as opposed so what the Agency’s priorities are. 

Mr. LANKFORD. Let me ask you about that then. The citizen suits 

that are set up there are really designed to force EPA to do its 

mandatory responsibilities. Am I correct on that? 

Mr. MARTELLA. That’s exactly what the intent should be, yes. 

Mr. LANKFORD. Correct. So if a citizen suit pushes them to do a 

discretionary responsibility, has that extended their—the NGO’s 

ability to be able to then take something as uniquely EPA’s responsibility? 

Mr. MARTELLA. I think that’s, you know, fundamentally kind of 

transforming the purpose of the citizen suits. A citizen suit, as you 

point out, is the government was required to do something, it didn’t 

do it. When you now enter the realm of we’re going to make you 

do something you’re not required to do because we think it is important even if you don’t think it is important, the government has 

limited resources, and that becomes a fundamental reallocation of 

resources. 

Mr. LANKFORD. Can a citizen suit also create a new policy; 

change previous policy and create a new policy off a citizen suit? 

Mr. MARTELLA. Right, and we saw that in the New Source Performance—— 

86 

Mr. LANKFORD. Is that appropriate? Is that an appropriate use 

of a consent decree? 

Mr. MARTELLA. I don’t believe that’s what Congress intended. 

Mr. LANKFORD. So we’ve got some basics here. If it is a mandatory responsibility, and it doesn’t extend to new policy, then you 

would suggest that is a better policy; that if a consent decree creates new policy or expands an existing policy, or if it mandates 

something for future administrations of something that’s clearly 

discretionary, then it’s also expanded beyond its bounds. 

Mr. MARTELLA. I would agree with that. 

Mr. LANKFORD. Are you familiar with the Meese memorandum 

Mr. Percival mentioned before? 

Mr. MARTELLA. Yes, sir. 

Mr. LANKFORD. I would ask unanimous consent to submit the 

Meese memorandum for the record. Without objection. 

This highlights three areas. It says the department or agency 

should not enter into a consent decree that converts into a mandatory duty otherwise discretionary authority. 

The second aspect of this is departments or agencies should not 

enter into a consent decree that either commits the department or 

agency to expend funds that Congress has not appropriated and 

that have not been budgeted for the action in question. 

And the third thing, the department or agency should not enter 

into a consent decree that divests the Secretary or agency, Administrator or his successors of discretion committed to him by Congress or the Constitution where such discretionary power was 

granted with the changing circumstances. 

Any issues with those three? 

Mr. MARTELLA. I think those are principles that I would hope 

would be vigorously applied to today. They are sound principles 

both intended to preserve the government’s own ability to set its 

own policies, but also avoid an infinite loop where people are constantly forcing the government to new obligations that it can’t 

meet, and people go back to court, and it ends up being less efficient for the courts. 

Mr. LANKFORD. Right. This is currently not what we’re doing 

now, right? 

Mr. MARTELLA. I would argue we’ve given examples today of 

things that are inconsistent with those principles. 

Mr. LANKFORD. This is really about process. This is not about 

trying to throw out all citizen suit possibilities. This is about trying 

to see if process is being followed through correctly, and if we are 

achieving the end result or if we are creating new legislation in a 

way that is outside of this Congress. 

Mr. MARTELLA. It’s about public participation, it’s about transparency, it’s about affirming the principles of the Administrative 

Procedure Act that Professor Percival referred to. 

Mr. LANKFORD. I was very interested in the fact that when the 

consent decree was formed dealing with Oklahoma, when that decree was formed, there were some timelines that were set on those, 

and for those timelines to change or to get an extension of those 

timelines, the State of Oklahoma would have to return to the environmental groups to request permission for an extension of the 

timeline. 

87 

Do you see that being appropriate, that a State would go to an 

environmental group to request permission to have an extension 

with the EPA? Does that seem like an appropriate extension to 

you? 

Mr. MARTELLA. I don’t want to speak for the Attorney General, 

but I would imagine that States would be very concerned about 

their sovereignty being intruded upon. 

Mr. LANKFORD. That seems just a little odd to me that in a consent decree that’s been signed off on, that we don’t come back to 

the EPA for an extension permission, we go back to environmental 

groups to acquire permission for that. 

With that, I would like to recognize Ms. Speier for 5 minutes. 

Ms. SPEIER. Mr. Chairman, thank you. 

And let me say at the outset, I have a great deal of respect for 

the chairman. I think there are some issues here that could really 

be looked at, and I’m willing to do them. But I must say that doing 

it in this manner doesn’t get us to a constructive resolution. 

To Mr. Martella, you suggest that maybe sometimes we should 

be defending cases. I think one of the questions we need to ask is 

is there enough staff to defend these cases? If you don’t have 

enough staff to defend the cases, then sue and settle is exactly 

where we’re going to go. 

To Mr. Kovacs, your comments about regulation and how it’s a 

job killer is something that is articulated over and over again. But 

I look to the deregulation of the financial services industry with the 

Gramm-Leach-Bliley Act and with the number of laws that were 

passed by this Congress after that act, and we now have 50 million 

people out of work in this country because the financial service industry came to a shutdown, and this government had to bail out 

that industry to the tune of over $1 trillion. So in terms of jobs lost, 

I think you can make the case that when you deregulate, sometimes there is greater job loss. 

Now, to you, Dr. Percival, I’m going to turn over the rest of my 

time to you, because I believe this hearing is, frankly, not as constructive as it could be. I would like to do a whole hearing on the 

haze in Oklahoma, because if, in fact, that is what is presented by 

Mr. Yeatman, then we should look at it, and we shouldn’t have 

third parties dictating to States whether or not there’s an extension. Those are legitimate issues we should be talking about. But 

I’m not interested in kangaroo hearings, and that’s what I think 

this is. 

So, Professor, please make any comments you would like to make 

about what everyone else has said. 

Mr. PERCIVAL. Thank you. 

I still, you know, come back to the point that this is not a situation where third parties are dictating what regulations are adopted. That still has to be done through the Administrative Procedure 

Act. Now, it is true that EPA, when it fails to perform a mandatory 

duty, then can be hauled into court, and a schedule is negotiated 

for how you’re going to cure this violation of law. 

The Meese memorandum, which I wrote the Law Review article 

that I submitted with my testimony about, I thought was unwise 

policy because it was designed essentially to say that the only remedy for the government not carrying out the commitments we make 

88 

in a settlement should be reviving the litigation rather than having 

an enforceable consent decree that actually increased the value of 

the government’s work. 

Now, you say if it’s true that the haze rules are outrageous and 

illegal, the tenth circuit steps in, you get them overturned in court. 

We have that open process, and EPA will have wasted a whole lot 

of time doing something illegal. People said that’s what they were 

doing with respect to greenhouse gas emissions, but the D.C. circuit has confirmed that that certainly wasn’t the case. 

The argument that somehow this private group is going to be 

able to dictate whether or not there could be an extension of time, 

if EPA feels it needs an extension of time, it can ask the court for 

an extension of time, and its word is probably going to be given 

some deference. But what we have seen in case after case is a situation where rules that Congress mandated be adopted a decade ago 

still have not been promulgated, and deadline after deadline 

passes, and sometimes courts say, enough is enough, and the rule 

ends up getting promulgated, but, as I mentioned in my testimony, 

even then the agency is free to reconsider them if they think that 

the rules are not adequately supported. 

Ms. SPEIER. You have more time. 

Mr. PERCIVAL. Oh, okay. 

So what I would like to emphasize is that this is well-trod territory. Since 1986, when there was the big kerfluffle over the Meese 

memorandum, this charge was made that somehow environmental 

groups were dictating the priorities of EPA. When everyone looked 

into it, it turned out it wasn’t true then. There is absolutely nothing that has fundamentally changed about EPA during the Obama 

administration. It’s not a situation where the Agency is being dictated to by a group of environmental groups. 

If, in fact, it’s true that the agency is being sued in a situation 

where it does not have a mandatory duty, then the plaintiffs don’t 

have a leg up in court. They don’t have any possibility of winning 

that lawsuit. And that can be challenged when the court is trying 

to approve a consent decree if, in fact, they’re trying to say this is 

a mandatory duty and it’s not. 

So I’m saying the system works pretty well for both industry and 

environmental groups. EPA unfortunately gets beat up on by all 

sides, has its budget cut and the like, and the result is that you 

see a situation where the Agency is always the bogeyman, and occasionally, because our judiciary functions so well, you see a decision like the decision on Tuesday upholding the greenhouse gas 

regulations that tells the Agency, you are doing something that, in 

fact, complies completely with the law. 

Ms. SPEIER. Thank you. 

Mr. LANKFORD. I would like to recognize Mr. Kelly for 5 minutes. 

Mr. KELLY. I thank the chairman. 

I do believe this is—I would not use the term ‘‘kangaroo court.’’ 

I really am interested, Mr. Martella, I’ve watched this. Coming 

from Pennsylvania, I am watching now what’s going on. If we could 

go to just a little bit of background. 

We’re having coal plants shut down, all right? I know that 

there’s 11 plants in Pennsylvania just shutting down. Slide number 

3, if you could just go to that, please, for a minute. This is the 

89 

President before he became President: ‘‘So if somebody wants to 

build a coal-powered plant, they can; it is just that it will bankrupt 

them because they’re going to be charged a huge sum for all that 

greenhouse gas that’s being emitted.’’ 

Now, I watched another clip this morning of the President explaining how cap and trade would work because some people just 

don’t get it, so you have to force feed them into this, which I think 

is kind of an unusual take on things. I think there’s a much better 

way to do it. 

With New Source Performance Standards, let me ask you, what 

was the Sierra Club—what was their involvement in the New 

Source Performance Standards? 

Mr. MARTELLA. Well, what we know is December of 2008, the Sierra Club wrote an article that was public saying that their goal 

for the administration was to set a New Source Performance Standard that would make sure that no new coal-powered power plant 

could be built. Two years after that, the administration entered 

into a settlement with them setting a deadline for proposing such 

a standard. That agreement was entered into. It affected both the 

utilities and refineries, but no one ever consulted with the utilities 

and refineries in setting the schedule. 

Just a couple months ago in March, the EPA enacted the very 

proposal that looked identical to what the Sierra Club had written 

in 2008, and, again, without any prior consultation with the industries actually impacted by the substance of the proposal. 

Mr. KELLY. Without objection, Mr. Chairman, I wanted to enter 

into the record the newsletter from the Sierra Club. 

Mr. LANKFORD. Without objection. 

Mr. KELLY. I am interested, because this process that takes 

place, you call it an off-ramp decision, and so for those of us that 

come from the normal world, the regular world, the commonsense—and I don’t mean to in any way diminish people that come 

from the legal world where they use—things don’t have to make 

sense to you, commonsense, you have to have a law decree to understand some of it. 

I believe that if you’re not at the table, you’re on the menu. So 

when we have these decisions being made by groups, and it comes 

forward like that, would you have—in your former position at EPA, 

would you have litigated the New Source Performance Standards? 

Mr. MARTELLA. I believe, you know, I would have liked to have 

seen the government stand up in court and explain why it should 

not be forced to do this. And, in fact, Congress has given EPA a 

process that would have solved this for everybody without having 

invoked this impact. EPA could have done an Advanced Notice of 

Proposed Rulemaking. That would have allowed it to study the 

issue. Everyone could have been at the table. I share your point, 

everyone should be at the table. But it wouldn’t have had the immediate impact of shutting down coal-fired power plants. 

So there was clearly was an option before EPA that I would have 

advocated for to go with an Advanced Notice of Proposed Rulemaking that would not have had the immediate impact while shutting folks out. 

Mr. KELLY. Okay. So was there a mandatory duty? 

90 

Mr. MARTELLA. I would have been—if I was back at the Justice 

Department, I would have been very happy to stand up in the court 

and argue to the court there was no mandatory duty here. I would 

have felt very comfortable with that argument. 

Mr. KELLY. And I think—listen, I don’t think there’s anybody in 

this country that doesn’t want clean air and clean water. I think 

we are all serious in that. But there is also a factor of our economic 

freedom. And as we continue to take a look at this—I’m just trying, 

coming out of the private sector, understanding as we continue to 

turn on our back on things that are very abundant, accessible and 

affordable, which I believe in the fossils, we are turning our back 

on those and going in another direction that really costs the American consumer, which is who we represent, the American people, 

not just Republicans or Democrats, but everybody. Their costs of 

living under some of these new regulations are going to skyrocket 

because energy costs are going off the board. 

As I said, in Pennsylvania we see power plants shutting down all 

the time. The trend is, okay, well, fine, we’re going to go to natural 

gas. And now we are finding out, you know what? Well, you know 

what, that’s a little bit better than coal, but we’re finding problems 

with that, too. So sometimes you can mandate yourself into a situation where it’s so untenable. 

Mr. Kovacs, because I do believe it’s about jobs, I really do, and 

if we’re going to turn this thing around that we’re in right now, 

this decline that we’re in, it’s going to be about getting people back 

to work and having more people being able to obtain the standard 

of living that makes sense and they can support a family on. 

There’s a slide. If we can go to slide number 4. I think this is 

really something that we need to take a look at. 

This is a statement that was made by Curtis Spalding. He says, 

‘‘Lisa Jackson has put forth a very powerful message to the country. Just 2 days ago, the decision on greenhouse gas performance 

standards and saying basically gas plants are the performance 

standard, which means if you want to build a coal plant, you got 

a big problem. This was a huge decision. You can’t imagine how 

tough that was, because you got to remember if you go to West Virginia, Pennsylvania, and all those places, you have coal communities who depend on coal. And to say that we just think those communities should just go away, we can’t do that. But she has to do 

what the law and the policy suggested, and it’s painful. It’s painful 

every step of the way.’’ 

Now, this is about jobs, and you mentioned some metrics about 

the numbers of jobs that were being walked away from. 

Mr. KOVACS. Sure. The Bureau of Labor Statistics does this displaced worker survey, and it’s 7 million. So this isn’t a random survey. It’s 7 million for long-term unemployed. If you take long-term/ 

short-term, it’s 15 million. So we’re talking about whoever is unemployed and displaced. And what it finds is that the workers who 

lose a job, the long-term workers, the coal miners, the person who 

works in the utility plants, does not get a job within the survey period, which is a 3-year period. And after the survey period, 51 percent of those long-term workers who were unemployed—and this is 

going to a regulation that takes an industry out—51 percent of 

91 

those still did not have jobs afterwards. And of the 49 percent who 

got jobs, 55 percent were below what they made before. 

So that’s the impact. And of the jobs that are created, if you take 

a job out of Pennsylvania or West Virginia, and you build a battery 

plant in Michigan or California, they’re different workers. So you 

have a real-life impact on the workers where the displacement occurs, and you have a theoretical or modeled worker somewhere 

else. 

But the second point, which is, I think, more important, is that 

since 1977, Congress imposed a very—mandated a duty on EPA— 

the language is ‘‘shall’’—mandated that when they do a major regulation, that they do a jobs analysis and a shift in employment analysis. And that was specifically to find out what is the impact of 

these major economic regulations. And EPA has never done that, 

and that is mandatory. 

And what I think, and this is my last point, as I listen to this, 

we’re talking about mandatory duties and discretionary duties and 

how you convert them, but here is a clear example of a mandatory 

duty that EPA has never attempted even to do, and that’s really 

where I think the disgrace is, because they had the opportunity to 

link up what they were doing, what the Bureau of Labor Statistics 

were doing, and to find out what the impact of the regulations are. 

And if there was true public participation, and they truly cared 

about jobs, then they would be doing that analysis. 

Mr. KELLY. Thank you. 

Mr. LANKFORD. I’d like to recognize the ranking member Mr. 

Connolly. 

Mr. CONNOLLY. Mr. Chairman, I know at the full committee we 

have descended into the bad habit of prejudging the outcome of a 

hearing in the selection of the title. I had hoped we would not do 

that in this subcommittee. To have a hearing entitled ‘‘Mandate 

Madness: When Sue and Settle Just Isn’t Enough’’ kind of gives 

away the game. I don’t think it’s an intellectually honest pursuit. 

I don’t think this hearing is an intellectually honest pursuit. 

I’m glad, I guess, you have provided a forum for folks who don’t 

like the Environmental Protection Agency or don’t like environmental regulation to have a forum. And I can’t express enough my 

disappointment in the structure of this hearing and in the title 

itself. 

I’m all for an honest intellectual pursuit of the issue of unfunded 

mandates or burdensome mandates that may, in fact, be unproductive. I come from local government, where we had a struggle with 

that ourselves. I’m not unsympathetic. But to basically simply provide a forum for ranting about the EPA and its mission with very 

little empirical evidence to back it up is very troubling to this 

Member of Congress. 

Mr. CONNOLLY. I had hoped we would continue, or try to continue, a tradition in this subcommittee where we actually pursue 

issues in as neutral and objective a way as possible. I don’t think 

that’s going to happen here, and I register my disappointment. 

I yield back. 

Mr. LANKFORD. I would—I would say that it might be good to go 

through some of the notes in the testimony and such that is here 

to be able to examine the process and how things have significantly 

92 

changed in the process of this, because there has been a significant 

change. This issue is a process issue, and that has shifted, and it 

needs to be an appropriate process so the citizens have the opportunity to hear and be heard. 

Mr. CONNOLLY. Mr. Chairman, may I ask, is it your contention 

that the title of a hearing called ‘‘Mandate Madness’’ is an objective 

title? That’s just an objective, honest pursuit of public policy? 

Mr. LANKFORD. You know, the hearing itself deals with the policy 

issues. This is not a hearing about a title. This is a hearing about 

the facts in the case. 

Mr. CONNOLLY. Titles—titles matter, Mr. Chairman. 

Mr. LANKFORD. Yes, they do, but the facts matter even more. 

Mr. CONNOLLY. Well, I think the facts get skewed when the title 

clearly channels those facts in a certain direction. 

Mr. LANKFORD. Well, fortunately, this is not a court. This is a 

case where we have to bring things to light, and it has been done 

by—— 

Mr. CONNOLLY. It most certainly is not a court; otherwise a fair 

hearing on both sides would, in fact, be provided. 

Mr. LANKFORD. We would be glad to have a fair hearing for all 

people involved since we have consent decrees that don’t give a fair 

hearing to all involved. That would be wonderful. 

Mr. CONNOLLY. That’s your opinion, sir. That’s not my opinion. 

Mr. LANKFORD. I recognize Mr. Labrador. 

Mr. LABRADOR. Mr. Chairman, that’s actually the purpose of a 

hearing is to share both opinions, but apparently one side only 

wants their opinion heard and not the other. And we’ve actually 

been holding a hearing so we can give the other side the opportunity for them to actually state their opinions, but instead they 

want to just make statements about the fairness or unfairness of 

this hearing, which is rather shameful. 

Mr. Kovacs, I just have two questions for you, and then take as 

much time as you want, and then I’ll yield the rest of my time to 

the chairman. But I just heard Professor Percival state that there 

has been no change between the Bush administration and the 

Obama administration with respect to the EPA. Can you recall who 

in the Bush administration said that there was a plan to crucify 

regulated industries? Do you know what I am referring to? 

Mr. KOVACS. Yes, sir. 

Mr. LABRADOR. Can you explain what the change has been between the Bush administration and the Obama administration? 

Mr. KOVACS. Well, certainly the—let’s take a step back as I answer this. And to make it very clear, we’re not here to argue that 

we want to eliminate citizen suits or what is mandatory and what 

is discretionary. We’re here to say that as the EPA begins to exercise its discretion as to whether to sue or not, that the impacted 

parties need a seat at the table. And by a seat, we don’t mean sitting there and negotiating, but when the environmental group and 

the EPA come to that understanding, before it is filed with the 

court and has a court order attached to it, did it go out for comment. And if there is an impact on the—on the regulated community, that they have a right to use intervention within that court. 

Right now the regulated community is locked out of that process. 

And so what happens, as I explained in my opening statement, is 

93 

once the decision is made, the chances—and there is a court order, 

the chances of reversing that are virtually nil through the process. 

That decision has been made. 

So when you get into asking the question, how have things been 

different, the issue of sue and settle has been around for decades, 

and that’s why you have the Meese memo. The Reagan administration looked at it and said, this is not a process that the government 

should be actively involved in because it’s—it’s ceding the discretion of the agency to private groups, who then, because of the consent decree, literally have an involvement in that issue forever. 

And just the comment was made before where you have to go back 

to the environmental group to change the deadlines. 

The private party actually by contract gets a right. Let me repeat 

this. The private party by contract gets a right to be part of the 

supervision, not the regulator community, and, frankly, EPA cedes 

its authority. 

So what has changed is although you had sue-and-settle agreements going on for decades, right now you have, as the chairman 

mentioned in his opening, somewhere around 60 of them. And 

they’re filed—like in regional haze that William Yeatman was talking about, the States of Oklahoma, North Dakota, and New Mexico 

were involved, but the lawsuit was brought in Oakland, California. 

And so the first notice that they—that the States and the attorney generals and the Governor had was when the settlement agreement was actually entered and approved by the courts, and then 

they got notice. So what’s changed is it’s gone from a few a year 

to being the policy of the administration. That’s the change. And 

that’s the 60 of them that you have. 

And in some of these instances, to give you an idea of how broad 

they are, there was one in Oakland, California—seems to be a popular court—where there are actually 28 rules that were subject to 

1 consent decree regulating two-thirds of the industries in the 

United States. 

Mr. LABRADOR. Excellent. And I liked some of your comments. 

You said that the decision has already been made, that there has 

been no opportunity to be heard, but yet this hearing has been 

called a kangaroo court. I find that really fascinating. 

As you know, the Endangered Species Act is often the premise 

to these sue-and-settle rulemakings. Last week I was in a different 

hearing, Natural Resources hearing, and we heard testimony that 

the EP—that the ESA actually creates jobs. And in your experience, how does the ESA actually create jobs? 

Mr. KOVACS. Well, I always go back to Milton Friedman’s comment when he was—he was in China one time, and he was asking 

why they were building a dam with shovels, and the Chinese replied, well, that’s what the regulations call for, because we are trying to create jobs through—in essence through regulation. And 

Friedman’s remark was, well, if that’s the case, why don’t you just 

use spoons? You’ll create more. 

So the purpose of a regulation should be to undertake and to 

achieve what Congress intends of the—the public interest. And in, 

for example, the Endangered Species, I think, you know, you do 

have a situation where you are going to have more boots on the 

ground, you’re going to have more inspectors, you’re going to have 

94 

more government paperwork, you’re going to have more petitions 

for protection. You’re going to create jobs there, but the key is you 

lose; you lose jobs because the land that’s impacted, and if you go 

into some of the energy issues, in many instances is so vast that 

you’ve taken large areas of the United States out of development. 

And that’s why I keep on going back to the Bureau of Labor Statistics displaced workers. When a regulation comes in, it impacts 

a specific industry. Whether it be coal, cement, logging, we’ve got 

a lot of instances of that. And maybe jobs are created in Washington, D.C., but the jobs that are lost in Pennsylvania or New 

Mexico are not the same, are not—are not—these people do not get 

the jobs in Washington, D.C. And it’s the community that’s displaced. And I keep on coming back. These are real workers who are 

really displaced, whose families are displaced, whose communities 

are harmed. And that doesn’t mean that jobs aren’t created somewhere else. They might be. But that community has been harmed 

by that regulation. 

Mr. LABRADOR. Thank you. 

Mr. Chairman, I—it has been my experience as a practicing attorney for 15 years, and just watching and observing, you know, 

debates, that when you can’t debate the facts, you resort to ad 

hominem attacks. 

You’re one of the people I respect the most here in Congress. 

You’ve been one of the most fair individuals. And to come here this 

morning and listen to two different members of the minority attack 

you personally has been pretty distasteful. I thought I was just 

coming to a regular hearing, actually a pretty boring hearing, I 

thought that it was going to be. But maybe what we should do is 

see if the opinions of the chairman or the opinions of the ranking 

member prevail after having a full and fair hearing this morning. 

I yield back. 

Mr. CONNOLLY. Mr. Chairman. 

Mr. LANKFORD. This is—just a moment. I will definitely yield to 

you. 

This is what makes America a great country is that we do have 

divergent opinions, and all opinions are open here. Of all places, in 

the House of Representatives, every opinion should be heard on 

that one. And with that, I’d be honored to yield to the ranking 

member. 

Mr. CONNOLLY. Mr. Chairman, I want to directly respond to my 

colleague. 

No ad hominem attack was made against Mr. Lankford. My remarks were strictly limited to the nature of this hearing. 

Mr. LABRADOR. He is the chairman. 

Mr. CONNOLLY. He may be. I am the ranking member of the committee. I still don’t like the hearing, and I am entitled to not like 

the hearing. 

I have never cast a negative word about Mr. Lankford. In fact, 

we have worked well together. I consider him a friend. And I would 

ask you to withdraw those words, because no ad hominem attack 

was ever made against Mr. Lankford in this hearing. 

Mr. LABRADOR. Before you got here, Mr. Connolly, this was called 

a kangaroo court by a member of your party. You came in, and you 

95 

had some pretty distasteful statements about this. So I—I came 

this morning to hear both sides and—— 

Mr. CONNOLLY. Mr. Labrador, I can’t, any more than you can— 

you can’t take responsibility for other members of your party. I can 

take responsibility for my remarks. I think you would agree, since 

you pointed out you practiced law for 15 years, so pretend you’re 

in a courtroom. 

What you heard from the ranking member of this subcommittee 

was a critique of the intellectual foundation of this hearing and a 

critique of the nature of the title of this hearing that I consider to 

be intellectually dishonest. None of that had anything to do with 

Mr. Lankford as a person or as the chairman of the committee 

other than I don’t—I don’t like the judgment exercised. But it’s not 

about him personally. Would you not agree? 

Mr. LABRADOR. We can agree to disagree. Thank you. 

Mr. CONNOLLY. Mr. Chairman, I would have hoped my colleague 

would have given me the courtesy of acknowledging no ad 

hominem attack was made against you by this Member. 

Mr. LABRADOR. I have no further comments. I just made my comments because I—I was surprised by the nature of the attacks from 

your side. But we don’t need to debate this. 

Mr. CONNOLLY. Well, Mr. Chairman, a charge was made that an 

ad hominem attack was made. I would point out to Mr. Labrador 

there are actually rules in the House of Representatives about ad 

hominem attacks. 

Mr. KELLY. Mr. Chairman, could I ask for regular order, please? 

Mr. LANKFORD. We do need to move on, Mr. Connolly. I am going 

to do a quick round here and would be honored to be able to yield 

you time in that time just to be able to allow all voices to be heard, 

all opinions to be heard. 

Mr. CONNOLLY. I would have thought a point of personal privilege would have been respected, Mr. Chairman. 

Mr. LANKFORD. Well, it has been. 

I would like just to do a 3-minute round here of questions so we 

can do some follow-up on it and get a chance to pull some things 

together. 

I would also like to submit for the record, ask unanimous consent, a letter from the Association of Builders and Contractors. 

They make a statement in this letter. With that, so ordered. 

It says, when settlements are agreed to, they’re often—they often 

mandate that rulemakings go forward and frequently establish arbitrary timeframes for completion without stakeholder review or 

public comment. And they continue on from there. 

Where this originated from was over the past year and a half, 

and multiple hearings and multiple settings that I have been in, 

I have heard members in leadership and individuals who work 

with the EPA say to me, we have to do that because the court ordered us to do that. They couldn’t point to a specific piece. It was 

a court order that mandated us to do that. 

So it started me on a journey to go back and start to pull some 

of these court orders and to say, where did that court order come 

from, and exactly what did they order? What I found is many of 

these consent decrees did not order them directly to take a specific 

action; it ordered them to review policy, as is appropriate, if it had 

96 

not been reviewed, and it was a mandatory responsibility. But then 

they took that statement of it has to be reviewed and greatly expanded where it would go and then hid behind the statement, ‘‘We 

were ordered by a court to do that.’’ 

We were also—new policies were created. The NSPS, as Mr. 

Kelly mentioned before, where it went from new construction to 

now existing construction, that’s entirely new policy that’s been 

created by—without public comment, without input in the stakeholders. That’s something uniquely different than we’re just creating some sort of regulation, running it through the Administrative Procedures Act; now we’re creating new policy based on the 

consent decree. That’s a giant shift in what has occurred. 

There are also moments where outside litigants are placed in authority over States, or States are not given primacy to make a decision. Now they have to request permission of a litigant, and the 

States were not given the opportunity to be at the table. What we 

have is a situation where the people that are affected by it do not 

have the opportunity to actually address their grievance. They 

don’t have an opportunity to be able to express that unless they 

have a court case, unless they go through a process and try to reverse something, which is difficult to do. As Attorney General Pruitt mentioned before we are currently in the tenth circuit in Oklahoma and just had a stay because it was extended too far. It was 

a case gone too far. 

Now, that is very difficult when you’re planning for a power 

plant construction that is incredibly expensive and very capital intensive, now you don’t know what the rules are. And at any moment they could shift, and you have to sue and countersue and try 

to work through the process, all the time planning on a billion-dollar construction project. This creates instability. 

We have a stable process for this, and the concern is that we’re 

shifting away from that stable process, and we’re now creating regulations based on preferences and based on a consent decree without the appropriate people at the table. And I’m simply asking the 

question, who sets the timelines, who comes up with this, who has 

the opportunity to actually speak and comment into these issues, 

and shouldn’t it be the people that are affected. 

With that, I would like to recognize Mr. Connolly for 3 minutes. 

Mr. CONNOLLY. Mr. Chairman, I have no questions for this 

panel. 

Mr. LANKFORD. Mr. Kelly. 

Mr. KELLY. I thank the chairman. 

And, Mr. Martella, I want to go back to this, because I think 

what the chairman is hitting on is something that’s very critical 

here. Of course, it looks—the court’s only accepting the parties’ 

agreement to settle and not adjudicating whether the EPA’s legal 

position is correct, and I think that goes to the crux of the problem. 

Now, we can tap dance around all of the other issues, but the 

truth of the matter is when we change, and there’s a new administration that comes in, they also have the ability to appoint to these 

different agencies the structure of it and how it’s going to go forward. So if I have an agenda in place, what I do is I place into effect people who are going to go along with my agenda, and then 

I tell them, you know what, we got a problem, we can’t legislate 

97 

it, could you possibly take us to court, sue us, and then we’ll settle 

out of court, and then it will become law without the judiciary system? So please explain that to people, because I think that’s where 

we’re missing the point today. 

Mr. MARTELLA. And I think, you know, that’ the contrast between what our democratic system, you know, wants and then 

what is happening in some cases. Our system is all about transparency, that—the notion that government leaders are not going 

into back rooms with a subset of folks who are interested by things. 

It’s all about public participation, that everyone has an equal role 

to play in a process, and it’s about having an opportunity to challenge things in court. 

I think some of the examples you’ve heard today, again, we’re not 

here to say settlements are bad things. What we’re worried about 

is when we don’t have that level playing field of transparency and 

public participation. 

And just to give you one more example, back to NSPS, when 

EPA entered the consent decree with NGOs, there were other parties in the litigation. Trade associations had intervened, and in 

order to intervene in a case, it’s not automatic. You have to prove 

to a court that you’re adversely impacted, you could be adversely 

impacted by this case. And then the court says, okay, you could be 

harmed here, so I’m going to give you a right to participate. 

The concern with the NSPS is despite the fact the court had already found those parties could be adversely impacted, they were 

at no point part of the settlement discussions. They were never 

brought into the room. And that’s what, to me, I think, is kind of 

the fundamental flaw I have with our notion of transparency and 

public participation. 

Mr. KELLY. And I’ve got to tell you, when I’m back home in western Pennsylvania—the thing about the American people, they trust 

us so much with the process, and they have great faith in the process until they find out they’ve been gamed. 

Mr. MARTELLA. Right. 

Mr. KELLY. And so if I can effectively structure a situation to 

come out with the answer that I need or that I want and somehow 

do an end run, it’s not what made America great. And I think 

that’s the thing that frustrates us all. And when we look at why 

people are losing faith in the way the Federal Government works, 

it is because we have been able to take what was there and available to us, and tools that were supposed to be there for all people, 

and we have gamed them by people who know how to maneuver. 

And I got to tell you, it is deeply disappointing to me to sit and 

watch this and have it come down to something that it was never 

supposed to. It has morphed into something entirely different than 

what the American people believe, what they have faith in, and 

what the Founders started off with to begin. And that’s where it 

comes to—the wheels come off of it. 

And I appreciate what you have done. And I know that this 

agreement came about because it was legislation that was defeated. 

So when the legislation went down, we found a way to game it and 

do a settlement that becomes law without everybody being at the 

table. As I said earlier, if you’re not at the table, you’re on the 

menu. And I’m telling you right now that we are being gamed to 

98 

a point where no wonder the American people are losing faith in 

the people they have sent to represent them. So I thank you. 

I yield back, Mr. Chairman, and I thank you for your patience. 

And thank you for calling this hearing. It is essential that the people of the United States—not the people who are in the Beltway 

understand how to game it, but the people of the United States understand that they do have their day in court, and they should 

have been heard. And when they find out there was an out-of-court 

settlement made, that just rubs them the wrong way. And you 

know what? It doesn’t pass the smell test. 

Mr. LANKFORD. I would like to thank the witnesses for being 

here today. This is a very important issue, and this is something 

that has to be resolved. 

One of the things this committee has responsibility for is process, 

make sure process is followed. We also have a responsibility of 

dealing with the relationship between the States and cities, counties and the Federal Government. And it is essential that the 

States, cities, counties do their responsibility and the Federal Government does theirs. And you do bring things to light, and I appreciate all opinions coming out and being able to be shared today. 

And we will continue on a process of this Congress checking into 

these issues to make sure that we continue to follow through. So, 

thank you. 

With that, the committee stands adjourned. 

[Whereupon, at 10:20 a.m., the subcommittee was adjourned.] 

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