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SUNSHINE FOR REGULATORY DECREES AND 

SETTLEMENTS ACT OF 2013 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

ON

H.R. 1493 

JUNE 5, 2013 

Serial No. 113–28 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 
(II) 

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

STEVE CHABOT, Ohio 

SPENCER BACHUS, Alabama 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

MARK AMODEI, Nevada 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

GEORGE HOLDING, North Carolina 

DOUG COLLINS, Georgia 

RON DeSANTIS, FLORIDA 

[Vacant] 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

JOE GARCIA, Florida 

HAKEEM JEFFRIES, New York 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW

SPENCER BACHUS, Alabama, Chairman 

BLAKE FARENTHOLD, Texas, Vice-Chairman 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

GEORGE HOLDING, North Carolina 

DOUG COLLINS, Georgia 

[Vacant] 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

SUZAN DelBENE, Washington 

JOE GARCIA, Florida 

HAKEEM JEFFRIES, New York 

DANIEL FLORES, Chief Counsel 

JAMES PARK, Minority Counsel 
(III) 

C O N T E N T S 

JUNE 5, 2013 

Page 

THE BILL 

H.R. 1493, the ‘‘Sunshine for Regulatory Decrees and Settlements Act of 

2013’’ ..................................................................................................................... 3 

OPENING STATEMENTS 

The Honorable Spencer Bachus, a Representative in Congress from the State 

of Alabama, and Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ........................................................................................ 1 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Ranking Member, Committee on the Judiciary, and 

Member, Subcommittee on Regulatory Reform, Commercial and Antitrust 

Law ........................................................................................................................ 18 

The Honorable Doug Collins, a Representative in Congress from the State 

of Georgia, and Member, Subcommittee on Regulatory Reform, Commercial 

and Antitrust Law ............................................................................................... 20 

The Honorable Steve Cohen, a Representative in Congress from the State 

of Tennessee, and Ranking Member, Subcommittee on Regulatory Reform, 

Commercial and Antitrust Law .......................................................................... 27 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Committee on the Judiciary ................................. 29 

WITNESSES 

William L. Kovacs, Senior Vice President, Environment, Technology & Regulatory Affairs, U.S. Chamber of Commerce 

Oral Testimony ..................................................................................................... 86 

Prepared Statement ............................................................................................. 88 

Allen Puckett, III, President, Columbus Brick Company 

Oral Testimony ..................................................................................................... 101 

Prepared Statement ............................................................................................. 104 

John D. Walke, Clean Air Director and Senior Attorney, Natural Resources 

Defense Council 

Oral Testimony ..................................................................................................... 110 

Prepared Statement ............................................................................................. 112 

Thomas Easterly, Commissioner, Indiana Department of Environmental Management 

Oral Testimony ..................................................................................................... 136 

Prepared Statement ............................................................................................. 138 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Committee 

on the Judiciary, and Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law .................................................................................. 19 

Material submitted by the Honorable Doug Collins, a Representative in Congress from the State of Georgia, and Member, Subcommittee on Regulatory 

Reform, Commercial and Antitrust Law ............................................................ 21 
Page

IV 

Material submitted by the Honorable Spencer Bachus, a Representative in 

Congress from the State of Alabama, and Chairman, Subcommittee on 

Regulatory Reform, Commercial and Antitrust Law ........................................ 31 

Material submitted by the Honorable Doug Collins, a Representative in Congress from the State of Georgia, and Member, Subcommittee on Regulatory 

Reform, Commercial and Antitrust Law ............................................................ 157 

Material submitted by the Honorable Spencer Bachus, a Representative in 

Congress from the State of Alabama, and Chairman, Subcommittee on 

Regulatory Reform, Commercial and Antitrust Law ........................................ 177 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Letter from Associated Builders and Contractors, Inc. (ABC) ............................. 218 

Letter from the Public Lands Council, the National Cattlemen’s Beef Association, American Sheep Industry Association, and the Association of National 

Grasslands ............................................................................................................ 219 

Resolution 13-2 from ECOS .................................................................................... 220 

Wall Street Journal Article ..................................................................................... 222 

Response to Questions for the Record from John D. Walke, Clean Air Director 

and Senior Attorney, Natural Resources Defense Council ............................... 224 
(1) 

SUNSHINE FOR REGULATORY DECREES AND 

SETTLEMENTS ACT OF 2013 

WEDNESDAY, JUNE 5, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:04 a.m., in room 

2141, Rayburn Office Building, the Honorable Spencer Bachus 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Bachus, Goodlatte, Holding, Collins, 

Cohen, Conyers, Johnson, DelBene, Garcia, and Jeffries. 

Staff present: (Majority) Daniel Flores, Chief Counsel; Ashley 

Lewis, Clerk; and James Park, Minority Counsel. 

Mr. BACHUS. Well, I am told by the minority staff to go ahead 

and proceed. So we will do that. 

The Subcommittee on Regulatory Reform, Commercial and Antitrust Law hearing will come to order. 

Without objection, the Chair is authorized to declare recesses of 

the Committee at any time. 

We welcome all our witnesses today. And after an opening statement, I will do a more thorough introduction of each of our witnesses. 

One of our witnesses is going to testify from a remote location, 

and we are having a little technical difficulty with that right now 

also. 

And now we will go to opening statements. 

Today the Subcommittee is holding a hearing on H.R. 1493, the 

‘‘Sunshine for Regulatory Decrees and Settlements Act of 2013,’’ 

which is designed to address a problem commonly known as ‘‘sue 

and settle.’’ Some folks refer to it as ‘‘settle and sue.’’ So I think 

either one would probably be descriptive. 

Let me thank Subcommittee Member, Representative Doug Collins of Georgia, for introducing this bill, and I am pleased to be an 

original cosponsor. 

We have been reminded recently it is essential that Government 

agencies perform their duties with full transparency and accountability. This includes allowing all members of the public a proper 

opportunity to provide comment and input during an open regulatory process. 
2 

In recent years particularly, we have seen an increase in the use 

of consent decrees and settlement agreements in Federal litigation. 

These settlements can circumvent the normal regulatory process 

and at times run contrary to legislative intent of the elected Representatives of Congress. They are often the product of litigation 

between a Federal or a State agency and a pro-regulatory outside 

group. The parties then come to an agreement or a consent decree 

that has binding effect and that, in essence, sets new policy without allowing outside parties any input on the final terms. 

As the Chairman of the Regulatory Reform Subcommittee, I am 

particularly concerned that the practice of sue and settle can allow 

agencies to do an end run around the public participation and thorough analysis required by the Administrative Practice Act, the Regulatory Reform Flexibility Act, and other statutory requirements 

for rulemaking. Consent decrees should not be entered into lightly. 

They have the force of law and are difficult to overturn, and they 

offer the public no opportunity for comment. They can have longlasting consequences and tie the hands of future Administrations, 

preventing them from establishing policies based on new facts or 

data. This is a problem that needs to be dealt with. 

According to the Chamber of Commerce study, the current Administration has entered into more than 70 sue-and-settle agreements which have led to the issuance of hundreds of new regulations. One entity alone was responsible for nearly half of these new 

agreements. 

The Sunshine for Regulatory Decrees and Settlements Act will 

provide much needed transparency and notice to allow input from 

all stakeholders and provide a better process for Federal decisionmaking. 

With that, let me say that I look forward to the testimony of our 

witnesses on this legislation. 

And I now recognize the Ranking Member of the full Committee, 

Mr. Conyers, for any opening statement that he might have. 

[The bill, H.R. 1493, follows:] 
3 

113TH CONGHESS 

1ST SESSION H. R. 1493 

To impose certain limitations on consent decrees and settlement agreements 

by agencies that require the agencies to take regulatory action in accordan('e with the terms thereof, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

ArRIL 11, 2013 

lVIr. COLLINS of Georgia (for himself, Mr. WESl'SlO~l£LAND, lVIr. FRAl\KS of 

Arizona, Mr. BISHOP of Utah, Mr. CRLnIER, Mr. HOLDING, lVIrs. 

ELLYIERS, Mr. YOHO, lVIr. 8TUTZJliL"-.l\[. Mr. SOL'THERLAND, Mr. PERRY, 

Mr. BACHUS, lVIr. COBLE. Mr. GAn.DNER, Mr. GRAv'ES of Georgia, }Ir. 

MEADOWS, lVIl'. (imVDY, Mr. GOHMERT, Mr. BENTIVOLIO, }Ir. 

WEN8TRUP, ~Vlr. PRrCE of Georgill, lVlr. Gr:--JGREY of Georgia, Mr. BROl~N 

of Georgia, Mr. DAlNES. and Mr. KINGSTON) introduced the following 

bilL which was referred to the Committee on the .Jucii('.iary 

A BILL 

To Impose certain limitations on consent decrees and settlement agreements by agencies that require the agencies 

to take regulatory aetion in aecordanee 'with the terms 

thereof, and for other purposes. 

1 Be it enacted by the Senate and House 

United States oJAfner'ica in ./J·Y,'.IIrv~'< assernbled. 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the "Sunshine for Regu5 latory Deerees and Settlements Ad of 2013". 
4 

2 

1 SEC. 2. DEFINITIONS. 

2 In this Act3 (1) the terms and "agency action" 

4 have the meaning:s given tho:se term:s under :section 

5 551 of title 5, United States Code; 

6 (2) the term "covered civil action" means a civil 

7 action8 (A) seeking to compel agency action; 

9 (B) alleging that the agency is unlmvfully 

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withholding or unreasonably dela,ving an agency 

action relating' to a regulatory action that would 

affect the rights of-

(i) private persons other than the person bringing the action; or 

(iil a State, locaL or tribal government; and 

brought under-

(i) chapter 7 of title 5, United States 

Code: or 

(ii) any other statute authorizing such 

an action; 

(3) the term "covered consent decree" meam:-

(A) a consent decree entered into in a covered civil actioll; and 

.HR 1493 IH 
5 

3 

1 (B) any other consent decree that requires 

2 agency action relating to a regulatory action 

3 that affects the rights of4 (i) private persons other than the per5 son bringing the action; or 

6 (ii) a State, local, or tribal govern7 mcnt; 

8 (4) the term "covered consent decree or settle9 ment agreement" means a covered consent decree 

10 and a covered settlement agreement; and 

11 (5) the term "covered settlement agreement" 

12 means13 (1\) a settlement agn;ement entered into in 

14 a covered civil action; and 

15 (B) any other settlement agTeement that 

16 reqUIres agency action relating to a regulatory 

17 action that affects the rights of18 (i) private persons other than the per19 son bringing the action; or 

20 (ii) a State, local, or tribal govern21 meci. 

22 SEC. 3. CONSENT DECREE AND SETTLEMENT REFORM. 

23 (a) PIJR~DIXGS ~'li"lD PRELIMIKARY J\L~TTERS.-

24 (1) IN OE::-.rERAL.-In any covered civil action, 

25 the ageney against whieh the eovered eivil action is 

.HR 1493 IH 
6 

4 

1 brought shall publish the notice of intent to sue and 

2 the complaint in a readily accessible manner, indud3 ing by making the notice of intent to sue and the 

4 complaint available online not later than 15 days 

5 after receiving service of the notice of intent to sue 

6 or complaint, respectively. 

7 (2) ENTRY OF A CnVERED CONSENT DECREE 

8 OR SETTLElVIENT AGREElVIEXT.-A party may not 

9 make a motion for entry of a covered COllsent decree 

10 or to dismiss a civ~l action pursuant to a covered sd11 tlement agreement until after the end of proceedings 

12 in accordance with paragraph (1) aud subpara13 gTaplls and (B) of paragraph (2) of subsection 

14 (el) or subsection (el)(g)(A), ,'\'hichever is later. 

15 (b) INTERv"ENTION.-

16 (1) REBUTTABLE PRESrlVIPTIOK.-In eonsid17 ering a motion to intervene in a covered ei,~l action 

18 or a civil action in which a covered consent decree 

19 or settlement agreement has been proposed that is 

20 filed by a person who alleges that the agency action 

21 in dispute would affect the person, the court shall 

22 presume, subject to rebuttal, that the illterests of 

23 the person would not be represented adequately by 

24 the existing parties to the action . 

• HR 1493 IH 
7 

5 

1 (2) STATE, LOCAL, AND TRIBAL GOVERN2 MENTS.-In con:sidering a motion to intervene in a 

3 covered civil action or a civil action in which a cov4 ered consent decree or settlement agreement has 

5 been propo:sed that is filed by a State, local, or tribal 

6 govermnent, the court shall take due account of 

7 \Yheth(~r the movant8 (A) administers jointly with an agency that 

9 is a defendant in the action the statutory provi10 sions that give rise to the reglJlatory action to 

11 which the action relates; or 

12 (B) administers an authority under State. 

13 local, or tribal law that would be preempted by 

14 the regulatory action to which the action re15 late:s. 

16 (c) SETTLE:\1ENT NEGOTL~TIONS.-Efforts to settle 

17 a covered ci\~l action or otllen,~se reacll an agreement 011 

18 a covered consent decree or settlement agreement shall19 (1) be conducted pursuant to the mediation or 

20 alternative dispute resolution program of the court 

21 or by a district judge other than the presiding judge, 

22 magistrate judge. or special master, as determined 

23 appropriate by the presiding judge; and 

24 (2) inrlude any party that intervenes in the ne25 tion . 

• HR 1493 IH 
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6 

1 (d) PUBLICATION OF AND COMMENT O~ COVER.ED 

2 COXSENT DECREES OR SETTLEME~T AGREEMENTS.-

3 (1) IN GBNEB.'.c~~h-Not later than GO days be4 fore the date on which a covered consent decree or 

5 ~ettlement agTeement i~ filed with a court, the agen6 cy seeking to enter the covered consent decree or 

7 Rettlement agTeement shall puhlish in the Federal 

8 Register and online9 (A) the proposed covered consent decree or 

10 settlement agreement; and 

11 (B) a statement providing12 (i) the statutory basis for the cover'eel 

13 consent decree or settlement agreement: 

14 and 

15 (ii) a de~eription of the term~ of the 

16 covered consent decree or settlement agree17 ment, including whetller it prov~des for the 

18 award of attorneys' fees or costs and, if so, 

19 the basis for ineluding the award. 

20 (2) PUBI,!C C01\L\11~N'I'.-

21 (A) IN OENERAL,-An agency seeking to 

22 enter a covered consent decree or' settlement 

23 agreement shall accept public comment during 

24 the period deRcrihed in paragraph (1) on any 

25 i~8ue relating to the rnatter~ alleged in the eurn-

.HR 1493 IH 
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plaint in the applicable civil action or addressed 

or affeded by the proposed eovered consent decree or settlement agreement. 

(B) RESPO~SE TO COlVIl\iENTS.-~\.n agency 

shall respond to any comment received under 

subparagraph (A). 

SUBlVIISSIONS TO C:m~F~T.-'''11en moving that the court enter a proposed covered consent decree or settlement agreement or for dismissal pursuant to a proposed covered consent 

decree or settlement agTeement, an agency 

sha11-

.HR 1493 IH 

(i) inform tlle court of the statutory 

hasis for the proposed covered consent decree or settlement agTeernent and its 

terms; 

(ii) submit to the court a summary of 

the comments received under subparagraph 

(A) and the response of the agency to the 

comments; 

(iii) submit to the court a certified 

index of the admiuistl'ative record of the 

notice and comment proceeding; and 
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(iv) make the administrative record 

de:scribed in dau:se (iii) fully acC',e:s:sible to 

the court. 

(D) INCLUSION IN RECORD.-The court 

:shall include in the C',ourt reC',ord for a civil aC',-

tion the certified index of the administrative 

record suhmitted hy an agency under subparagraph (C) (iii) and any documents listed in the 

index which allY party or amicus curiae appearing before the court in the actioll submits to the 

court. 

(3) PUBLIC HEARINGS PERMITTED.-

(A) 1"1 rm"lI.JHAI,.-After providing notice 

m the Federal Register and online, an agency 

may holll a publiC', hearing regarding ~whether to 

enter into a proposed covered consent decree or 

settlemellt agreement. 

(B) RECORD.-If an agency holds a public 

hearing under subparagTaph (A)-

.HR 1493 IH 

(i) tl1e agency sha11-

(I) submit to the court a summary of the proceedings; 

(II) submit to the court a certified index of the hearing record; and 
11 

9 

1 (III) provide access to the hear2 ing reconl to the court; and 

3 (ii) the full hearing record shall be in4 eluded in the court record. 

5 (4) ~VLlliDATORY DEADLINES.-U a propo:sed 

6 covered consent decree or settlement agreement re7 quires an agency action hy a date certain, the agen8 cy shall, when moving for entry of the covered con9 sent decree 0[' settlement agreement or dismissal 

10 based 011 the covered consellt decree or settlement 

11 agTeement, inform the court of12 (A) any ['equired regulatory action the 

13 agellCY has not taken t11at t11e covered consent 

14 decree or settlement agreement docs not ad15 dre:ss; 

16 (B) how the covered consent decree or set17 tlemellt agreC'ment, if approved, would affect 

18 the discharge of the duties described in sub19 paragraph (A); and 

20 (C) why the effects of the covered consellt 

21 decree or settlement agreement on the manner 

22 in which the agency discharges its duties is in 

23 the public interest. 

24 (e) SUBMISSION BY THE GOVERN:VIENT.-

.HR 1493 IH 
12 

10 

1 (1) IN GE~ERAL.-For any proposed covered 

2 consent decree or settlement agTeement that con3 tains a term described in paragraph (2), the Attor4 ney General or, if the matter is being litigated inde5 pendently by an al-reney, the head of the ag'ency shall 

6 submit to the court a certification that the Attorney 

7 General or head of the agency approves the proposed 

8 covered consent decree or settlement agreement. The 

9 Attorney General or head of the agency shaH pel'son10 ally sign any certification submitted under this para11 graph. 

12 (2) TERlVIS.-A term described 1Il this para13 gTapll is14 (A) in the case of a covered consent decree, 

15 a term that16 (i) converts into a nondiscretionary 

17 duty a discretionary authority of an agency 

18 to propose, promulgate, re,ise, or amend 

19 regulations; 

20 (ii) commits an agency to eXl)end 

21 funds that have not been appropriated and 

22 that have not been budgeted for the regu23 latory action in question; 

.HR 1493 IH 
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(iii) commits an agency to seek a particular appropriation or budget authorization; 

(iv) divests an agency of discretion 

committed to the agency by 8tatute or the 

Constitution of the United States, \vithout 

regard to whether the discretion was 

granted to respond to changing mrcumstances, to make poliey or maua/2'el'ial 

choices, or to protect the rights of tllird 

parties; or 

(v) otherwise affords relief that the 

court could not enter under its own authority upon a final judgment in the civil 

action; or 

(B) in the ease of a eovered settlement 

agreemell t, a term-

.HR 1493 IH 

(i) that provides a remedy for a failure by the agency to eomply with the 

terrns of the eoverecl settlernent agreement 

other than the revival of the civil action resolved by the eovered settlement agreement; and 

(iil that-
14 

12 

1 (1) interferes 'with the authority 

2 of an ag'eney to revise, amend, or 

3 Issue rules under the procedures set 

4 forth in chapter 5 of title 5, United 

5 States Code, or any other statute or 

6 Executive order prescribing 1'u1e7 making procedures for a rnlemaking 

8 that is the subject of the covered set9 tlement agreement; 

10 (II) commits the flgency to ex11 pend funds that have not been appro12 priated and that have not been budg13 eted for the regulatory actioll m ques14 tio~ or 

15 (Ill) for such a eovered settle16 ment agreement that commits the 

17 agency to exercise ill a pflrtieular way 

18 discretion which was committed to the 

19 agency by statute or the Constitution 

20 of the United States to respond to 

21 changing circumstances, to make pol22 icy 01' Inanagerial choices, or to p1'o23 tect the rights of third parties, 

24 (f) REv"LEW BY COrRT,-

.HR 1493 IH 
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18 

1 (1) AlVIICUS.-A court considering a proposed 

2 covered eonsent deeree or settlement agreement shall 

3 presume, subject to rebuttal, that it is proper to 

4 allow amicus participation relating to the covered 

5 consent deeree or settlement agreement by any per6 son who filed public comments or participated in a 

7 puhlic hearing on the covered consent clecree or set8 tlement agreement under paragraph (2) or (:3) of 

9 subsection (d). 

10 (2) HFJV1FJW OF r)FJADT,INFJS.-

11 (A) PROPOSED COV'ERED CONSENT DE12 CREES.-Fol' a proposed covered consent de13 cree, a court shall not approve the covered con14 sent decree unless the proposecl covered consent 

15 deeree allows suffieient time and incorporates 

l6 adequate procedures for the agency to comply 

17 'with chapter 5 of title 5, rnited States Code, 

18 and other applicable statutes that govern rule19 making and, unless contrary to the public inter20 est, t11e pro,~sions of any Executive order t11at 

21 governs rulemaking. 

22 

23 

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(B) PROPOSED COV~RED SETTLK\IENT 

AGREE}IENTS.-For a proposed covered settlement agTeement, a court shall ensure that the 

eovered settlement agTeement allows suffieient 

.HR 1493 IH 
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14 

1 time and incorporates adequate procedures for 

2 the agency to comply vvith chapter 5 of title 5, 

3 United States Code, and other applicable stat4 utes that govern rulemaking and, unless conS trary to the public intere8t, the provi8ion8 of 

6 any Executive order that governs rulemaking. 

7 (g) ~'L.NNTTAL REPOItT8.-Earh agency shall submit to 

8 Congress an annual report that, for the year covered by 

9 the report, ineludes10 (1 ) the number, identity, and content of covered 

11 civil actions brought against and covered consent de12 crees or settlement agreements entered against or 

13 into by the agency; and 

14 (2) a description of the statutory basis for15 (A) each covered eonsent deeree or settle16 ment agreement entered against or into by the 

17 agency; and 

18 (B) any award of attorneys fees or costs in 

19 a civil action resolved by a covered consent de20 cree or settlement agreement entered against or 

21 into by the agency. 

22 SEC. 4. MOTIONS TO MODIFY CONSENT DECREES. 

23 If an agency moves a court to modify a covered con24 sent decree or settlement agreement and the basis of the 

25 motion is that the terms of the covered consent deeree or 

.HR 1493 IH 
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15 

1 settlement agreement are no longer fully in the public il1-

2 terest due to the oblig'ations of the agency to fulfill other 

3 duties or due to changed facts and circumstances, the 

4 court shall review the motion and the covered consent deS cree or settlement agTeement de novo. 

6 SEC. 5. EFFECTIVE DATE. 

7 This Act shall apply to8 (1) any covered civil action filed on or after the 

9 date of enactment of this Act; and 

10 (2) al1Y covered C011sent decree or settlement 

11 agTeement proposed to a court on or after the date 

12 of enactment of this Act. 

() 

.HR 1493 IH 
18 

Mr. CONYERS. Thank you, Chairman Bachus. 

I too join in greeting our witnesses. 

But there are some problems here. Our research on this so-called 

sunshine in regulatory decrees and settlements has a simple goal, 

and that is to discourage the use of settlement agreements and consent decrees. I think that is very, very serious. 

And I am joined in this analysis, which is an attempt to delay 

regulatory protections, to slow it down. The result is, unfortunately, it jeopardizes not only public health, but safety, and it explains why the American Civil Liberties Union is opposed to this 

measure. The Natural Resources Defense Council is opposed to this 

measure. The National Association for the Advancement of Colored 

People is opposed to this measure. The Sierra Club is opposed to 

this measure. Earth Justice, all in strenuous opposition. 

The bill’s provisions, in effect, are being used to prevent Federal 

regulatory actions from being implemented, and it does not take a 

legal scholar to figure out what the purpose of the legislation is. 

It is pretty patent. It gives opponents of regulation additional opportunities to stifle rulemaking by allowing essentially any third 

party who is affected by the regulatory action at issue to intervene, 

to participate in settlement negotiations, to submit public comments. And so this is all going in the wrong direction for all the 

wrong reasons. 

So H.R. 1493—this measure would needlessly slow down the 

process by imposing an extensive series of burdensome requirements on agencies that seek to enter into consent decrees or settlement agreements. It mandates that agencies provide for public 

comment on a proposed consent decree and requires agencies to respond to all such comments before a consent decree can be entered. 

It is a slow-down operation. 

And then there would be not one but two public comment periods, one for the consent decree and one for the rulemaking that results from the consent decree, doubling the agency’s effort. 

Moreover, the bill would allow an unlimited number of third parties to intervene in the consent decree, furthering the delay of an 

entry of such decree. 

Now, I mean, there are so many things wrong with this bill that 

I am going to submit the rest of my statement. But just let me conclude on this note. 

The bill addresses a nonexistent problem. There is no evidence 

of collusion between agencies and private entities with respect to 

consent decrees and settlements, and there has been no convincing 

explanation as to why the current law is insufficient. The bill codifies certain Justice Department guidelines issued 30 years ago by 

then Attorney General Ed Meese and have since been codified in 

the Code of Federal Regulations. These regulations set forth in detail the criteria that the Department of Justice attorneys must follow when determining whether or not to enter into consent decrees 

or settlement agreements. So why do we need to codify them? Is 

there any evidence that these guidelines are not already being followed? 

So I am disappointed at the subject matter of this hearing. I am 

saddened to think of all the things that we need to be doing in the 

Judiciary Committee that deal with far more pressing issues. 
19 

And so I will submit the rest of my statement and thank the 

Subcommittee Chair for permitting me to make these opening remarks. 

[The prepared staement of Mr. Conyers follows:] 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Committee on 

the Judiciary, and Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law 

H.R. 1493, the ‘‘Sunshine in Regulatory Decrees and Settlements Act of 2013,’’ has 

a simple goal: to discourage the use of settlement agreements and consent decrees. 

Why is this problematic? Here are just a few reasons. 

To begin with, this bill, by delaying regulatory protections, jeopardizes public 

health and safety, which explains why the National Resources Defense Council, the 

American Civil Liberties Union, the NAACP, the Sierra Club, and EarthJustice 

among other groups, strenuously opposed a very similar version of this bill in the 

last Congress. 

This bill’s provisions, in effect, could be used to prevent federal regulatory actions 

from being implemented. 

For example, the bill gives opponents of regulation multiple opportunities to stifle 

rulemaking by allowing essentially any third party who is affected by the regulatory 

action at issue in a covered civil action to: 

• intervene in that civil action, subject to rebuttal; 

• participate in settlement negotiations; and 

• submit public comments about a proposed consent decree or settlement agreement that agencies would be required to respond to. 

Often a federal agency defendant is sued because of its failure to take regulatory 

action or because it has missed statutory deadlines for taking such action, often by 

years. 

Consent decrees and settlement agreements can help assure that the agency takes 

such action by a date certain. 

H.R. 1493, however, would needlessly slow down this process by imposing an extensive series of burdensome requirements on agencies that seek to enter into consent decrees or settlement agreements. 

For instance, it mandates that agencies provide for public comment on a proposed 

consent decree and requires agencies to respond to all such comments before the 

consent decree can be entered in court. 

In the case of consent decrees concerning a rulemaking, an agency would be forced 

to go through two public comment periods: one for the consent decree and one for 

the rulemaking that results from the consent decree, doubling the agency’s effort. 

Moreover, the bill would allow an unlimited number of third parties to intervene 

in the consent decree process, further delaying the entry of a consent decree. 

Like nearly all of the anti-regulatory bills we have considered to date since the 

last Congress, H.R. 1493 piles on procedural requirements for agencies and courts. 

Also, like these other bills, this measure encourages dilatory litigation by interests 

that are hostile towards regulatory protections. 

Another concern is that this bill threatens to undermine a critical tool that 

Americans use to guarantee their Congressionally-mandated protections, including 

civil rights laws and environmental protections. 

By reducing costly and time-consuming litigation, consent decrees and settlement 

agreements benefit both plaintiffs and defendants. 

They help to ensure that federal protections are enforced while leaving flexibility 

for state and local governments as to how they will carry out their federal obligations. 

Take, for example, a consent decree resolving a dispute under the Clean Air Act. 
20 

In light of the fact that the bill would allow any private party whose rights are 

affected by such decree a right to intervene, that could potentially include anyone 

who breathes air as well as any industry or special interest group. 

So H.R. 1493 could have a chilling effect on the use of consent decrees and settlement agreements, and the inevitable result will be more litigation that will result 

in millions of dollars of additional transaction costs. 

And, guess who is going to bear the expense of these litigation costs? Of course 

it will be the American taxpayer. 

It is not surprising that the Congressional Budget Office in its analysis of a similar bill considered in the last Congress stated that the measure would impose millions of dollars in costs ‘‘primarily because litigation involving consent decrees and 

settlement agreements would probably take longer under the bill as agencies would 

face new requirements to report more information to the public and other additional 

administrative costs.’’ 

Finally, this bill addresses a non-existent problem. There simply is no evidence 

of collusion between agencies and private entities with respect to consent decrees 

and settlements. 

Other than unsupported allegations, H.R. 1493’s proponents have failed to offer 

a convincing explanation as to why current law is insufficient. 

For instance, the bill codifies certain Justice Department guidelines, first issued 

by Attorney General Edwin Meese nearly 30 years ago, that have since been codified 

in the Code of Federal Regulations. 

These regulations set forth detailed criteria that Justice Department attorneys 

must follow when determining whether or not to enter into consent decrees and settlement agreements. 

So I must ask: why do we need to codify them? Is there any evidence that these 

guidelines are not already being followed? 

There simply is no need for this legislation. 

I thank the witnesses for joining us today and I look forward to your testimony. 

Mr. BACHUS. I thank the full Committee Ranking Member, Mr. 

John Conyers, Jr. of Michigan, for that opening statement. 

And I would also like to say that I enjoyed my time as a Member 

under your chairmanship and have the deepest respect for you as 

an individual and also as a legislator. 

Mr. CONYERS. Thank you. 

Mr. BACHUS. At this time, I would like to recognize the sponsor 

of this legislation, the gentleman from Georgia, Mr. Doug Collins, 

for an opening statement. 

Mr. COLLINS. Thank you, Mr. Chairman. 

I appreciate you holding this hearing today and I look forward 

to hearing from our witnesses. And as much respect as I have for 

our distinguished Ranking Member, I believe this is exactly why 

we need to be here. I believe in talking about jobs and the economy. I would disagree with the wrong direction. I believe this is the 

right direction and moving in the right way in what we are dealing 

with here today as we look forward to hearing from witnesses who 

I believe will outline the problem and will outline the issues that 

we are talking about. 

Mr. Chairman, I ask unanimous consent to enter in the record 

a written statement from the Attorney General of the State of 

Georgia, Sam Olens. Mr. Olens was unable to be here today, but 

he is a tireless leader on this issue and I appreciate his—— 

Mr. BACHUS. Without objection. 

[The information referred to follows:] 
21 

SLaLement of 

Samuel S. Olens 

Georgia Attorney General 

House Committee on the Judiciary 

Subcommittee on Regulatory Reform, Commercial and Antitrust Law 

House Resolution 1493 

Sunshine for Regulatory Decrees and Settlements Act 

The views expressed in this testimony are those of the author alone and do not necessarily 

represent those oj the State of Georgia. 
22 

Chairman Bachus, Vice-Chairman Farcnthold, Ranldng Member Cohen, and Members of 

the Subcommittee, thank you for allowing me to submit written testimony today. 

As Attorney General for the Stale of Georgia, a particular focus of mine has been fighting 

federal administrative and regulatory overreach. With increasing and dismaying frequency, 

constitutionaJ. principles offederalism and separation of powers have been set aside in favor of 

administrative cnd"routes to a preferred policy ontcome. One of the most troubling 

manifestations of this phenomenon is the practice known as "Sue and Settle." 

Sue and Settle occurs when an agency, intentionally or othenvise, abdicates its statutory 

discretion .- and eliminates the participation rights of States and other affected parties - by 

engaging in rulcmaldng via settlement. In these cases, the agency agrees to settlement talks with 

outside groups dIat nltimately cOlmnandeer the rulemaking process, creating legally binding, 

court-approved senlernents through closed-door negotiations that dictate the agency's policy 

priorities and funding choices. Indeed, EPA has shared publicly that complying with consent 

decree deadlines is the top agency priority, a position shared only with meeting statutory 

deadlines. These setrielllents or consent decrees have real-world effects on numerous parties 

who had no role in, and often no kno'.vledge of, the negotiations that led to the agreements' 

consummation. Congressional directives on transparency and administrative process play no 

role in Sue and Settle. That is plainly outside the bounds of the law set out in the Administrative 

Procedure Act, 5 U.S.C. § 500 et seq., and the Clean Air Act, 42 U.S.c. § 7401 et seq., and 

interrupts important federal principles of separation of powers, federalism, and the rule of law. 

As .lames Madison explained in Federalist No. 47, 

No political truth is certainly of greater intrinsic value, or is stamped with the 

authority of mOTe enlightened patrons ofliberty, than that on which the objection 

is founded. The accumulation of all powers, legislative, executive, and judiciary, 

in the same hands, whether of one, a few or many, and whether hereditary, sclfappointed, or elective, may justly be prononnced the very definition of tyranny. 
23 

Sue and Settle accretes the legislative, executive, and judicial powers in a single rcgulatory 

agency, and - perhaps even more troublingly - can in many instances cede that eonglomemtion 

of authority to an outside interest group. Outlined below are a few of the chief concerns from a 

legal and constitutional perspective. 

Separation of Powers. Congress has set out in the Administrative Procedure Act, the 

Clean Air Act, and elsewhere clear steps that federal agcncies must follow during the rulemaking 

process. Sue and Settle violates the terms of these procedures even as descrihed in the most 

general tenus. In the Clean Air Act, for example, Congress directs the EPA to begin by 

publishing a notice of the proposed rulemaking in the Federal Register. 42 V.S.c. § 307(d). 

That notice must contain a statement of thc rule's "basis and purpose," including a summary of 

the factual data on which the proposed rule is based, the methodology used in obtaining and 

analyzing the data, and any significant legal interpretations or policy issues behind the proposed 

rule. Congress also requires in that statute the opportunity for public comment and hearing. 

None of these congressional directives is obeyed in the context of Sue and Settle. Instead, 

outside advocacy groups notify agencies of their intent to sue and then conduct montllS of 

dosed-door negotiations. Tn certain cases, the resultant consent decree is filed the same day as 

the complaint. See, e.g., Defenders of Wildlife v. Jackson, No. 10-01915 (DD.C.) (complaint 

and consent decree filed Nov. 8, 2010); Environmental Geo"Techn%gies, LLCv. EPA, No. 10-

12641 (B.D. Mich.) (complaint and settlement agreement fiJedJuly 2, 2010). Such processes 

perform an end-run around the ru1emaking processes directed by Congress, and in doing so may 

also use a back door to achieve policy outcomes that have failed legislatively. 

Moreover, although Sue and Settle agreements are rendered legally binding when courts 

enter them, they have not been subjected to the same advcrsarial testing as normally occurs in an 

agency challenge; the court is largely stripped of its decisional role because the parties to the 

case agree, while other affected parties are ahsent and impotent. One federal appeals court 

recently agreed, holding that it was an abuse of discretion for a federal court to enter "a consent 

decree that permanently and substantially amends an agency rule that wonld have otherwise been 

subject to statutory rulemaking procedures." Conservation NOl1hwest v. Sherman, No. 11-

35729,2013 U.S. App. LEXIS 8396 at *14-*15 (9th Cir. Apr. 25, 2013). In many instances those 

parties do not even know of the negotiatious that lead to a settlement. In others, they arc actually 
24 

denied the opportunity to intervene. See Defenders of Wildlife v. Jackson, No. 10-1915,2012 

U.S. Dist. LEXIS 35750 (D.D.C. March 18, 2012). The D.C. Circuit upheld that decision, 

finding that the petitioners could not demonstrate injury and therefore did not have standing to 

intervcnc. Defenders of Wildlife v. Perciasepe, No. 12-5122,2013 U.S. App.lEXIS 8J23 (D.C. 

CiL April 23, 2013). 

In short, Sue and Settle permils an agency - along with an interested advocacy group - to 

develop its own rulemaking processes, often in contravention of those set out by Congress, and 

can bar other affected parties from any role in either the negotiation or the ultimate court 

approval of the settlement. Such unification of authority is contrary to the separation of powers 

principles so fundamental to our constitntional structure. 

Federalism. Sue and Settle also intruduces significant federalism cuncerns. States are 

often heavily affected by, yet almost never privy to, Sue and Settle negotiations. Yet the 

structure of our government and laws provides for shared responsibility in a range of regulatory 

areas. Sue and Settle practices permit the federal government and interested advocacy groups to 

withdraw constitutional and legal authority fmm States in order to achieve a desired pulicy 

outcome. Regardless of my State's or my personal agreement or disagreement with a particular 

policy judgment, I havc great concerns about expunging States from federal regulatory processes 

in which we have historically and statutorily played an important and authoritative role. 

The Clean Air Act, for example, is predicated on a model of "cooperative federalism," in 

which States and the federal government divide regulatory responsibilit.ies. The federal 

government develops standards within the law for emissions limits and other regulatory goals, 

while States are responsible for implementing those standards through State Implementation 

Plans, or SIPs. Sue and Sellie presents extraordinary complicatiuns for this outline of 

cooperative federalism, including but not limited to the factlhat States are forced to develop SIPs 

based on settlement timelines rather than at a pace that allows them to review and analyze the 

appropriate information to make the light decision for how to meet environmental goals within 

their horders. 

Not surprisingly, States have heen subjected to the same limitatious on intervenlion as 

private parties. In Wi/dEarth Guardians v. Jackson, for example, EPA opposed intervention by 
25 

)Jorth Dakota even though the case involved how and when EPA should act on N0I1h Dakota's 

proposed Regional Haze SIP. See Wi/dEarth Guardians v. Jacks()n, No. 4:09-cv-02453 (:.J.D. 

Cal.) (filed June 2, 2009; consent decree entered Feb. 23, 2010). North Dakota charged that EPA 

had ex.ceeded its authority in promUlgating a regional haze FIP under the auspices of an interstate 

transport consent decree. The district court did not permit North Dakota to intervene, deeming 

North Dakota's allegations that EPA relied on the consent decree in promulgating its regulation 

were a "sham" or "frivolity" - despite the fact that the EPA itself said that it was simultaneously 

excrcising its authority on regional haze and interstate transport requirements. WildEarth 

Guardians v. Jackson, No. 4:09-cv-02453 (N.D. Cal. Dec. 27, 2011). 

The Regional Haze issue is thus another arena in which States are losing their traditional 

role in the cooperati ve federalism structure of the Clean Air Act due to Sue and Settle consent 

decrees. EPA's regional haze program seeks to address impairments to visibility at national 

parks and othcr fcdcrallands, but is an aesthetic requirement rather than a health-related 

mandate. The statute, 42 U.S.C. § 7491(b)(2), requires affected States to put forth SIPs that will 

"make reasonable progress toward meeting the national goal" on regional haze. But for the first 

time, and as a result of Sue and Settle consent decrees, the EPA is allowed to propose combined 

Regional Haze SIPs and FIPs (pcderal Implementation Plans) - something EPA has not 

previously done in administering the Clean Air Act. These new PIPs have proved costly and 

improper. In five separate consent decrees negotiated without State participation, EPA agreed to 

commit itself to deadlines for evaluating the States' plans, and subsequently determined that each 

of those plans was procedurally dcfieient in some respect. Nat 'I Parks Cons. Ass'n v. Jackson, 

No. 1:1l-cv-01548 (D.D.C. Aug 18,2011); Sierra Club v. Jacksun, No. 1-10-cv-021l2 (D.D.C. 

Aug. 18, 20J 1); WildHarth Guardians v. Jackson, No. I : ll-cv-00743 (D. Col. June 16,2011); 

WildEarth Guardians v. Jackson, No. 4:09"cv-02453 (N.D. Cal. Feb. 23, 2010); WildEarth 

Guardians v. Jackson, No. 1:1O-ev-01218 (D. Col. Oet. 28,2010). Because the consent decree 

deadlines did not allow time for states to resubmit plans, the EPA imposed its own FIP controls. 

This type of action is in derogation of congressional intent, and depri yes States of the appropriate 

level of control as stewards of their resources and environments. 

The Regional Haze issue is only one example of EPA's decision to let outside interest 

groups control its regulatory agenda to the exclusion of its previous federalist paJ.1ners. States 
26 

Mr. COLLINS. In 2004, Frew v. Hawkins, a decision in the U.S. 

Supreme Court, expressed its concern that consent decrees may improperly deprive future officials of their designated legislative and 

executive powers. This potential for abuse and the lack of transparency in the status quo is why I believe so strongly in the need 

for this legislation. H.R. 1493 addresses weaknesses in the current 

system while preserving consent decrees as an important mecha-
27 

nism for settling legal disputes. Any argument as to the benefits 

of a statutory deadline enforcement has no place in this policy discussion. As a sponsor of this legislation, I believe that the ability 

of citizens to hold Government accountable is an important part of 

administrative law, but it must be appropriately carried out with 

transparency and full public participation. This legislation restores 

the balance and the intent of the APA and ensures that those who 

wish to subvert the rulemaking requirements in current law are 

unable to do so. 

I am proud to represent the thriving agricultural community in 

northeast Georgia and across the State. Farmers and ranchers 

back home are concerned by a recent settlement that has the potential to severely impact their livelihood. In 2011, WildEarth 

Guardians and the Center for Biological Diversity entered into an 

agreement binding Fish and Wildlife Services to deadlines for decisions on over 1,000 species under the Endangered Species Act. 

Even though the agriculture community will be significantly impacted by this agreement, they were not allowed to participate in 

its development. 

In addition, due to the fee-shifting statutes that provide attorney’s fees to special interest groups, WildEarth Guardians and the 

Center for Biological Diversity together received almost $300,000 in 

taxpayer dollars. American families across the Nation are tightening their belt. It is absolutely unacceptable that their hardearned taxpayer dollars go to fund back room deals that subvert 

the rulemaking process. 

I want to thank the witnesses for being here and especially Mr. 

Puckett for being here today, and I look forward to hearing from 

them and from all our witnesses on what I believe is an important 

subject and I believe a right direction for this Committee to be 

heading. And I thank you, Mr. Chairman, for your leadership in 

bringing this today. 

Mr. BACHUS. Thank you. Thank you. 

And I now recognize our Ranking Member, Steve Cohen of Tennessee, for his opening statement. 

Mr. COHEN. Thank you, Mr. Bachus. I appreciate the opportunity 

to speak, and it is particularly relevant here today in the Antitrust 

Committee where Delta Airlines struck again in my community. 

Even though they made testimony here that the merger would not 

affect hubs, they have taken the hub status away from Memphis 

and took our flights down to 60 from what were 243. I wish that 

we were concentrating on antitrust and airlines and what they are 

doing to the American consumer and employee in this country. 

But we are here today with another Groundhog Day. H.R. 1493, 

the ‘‘Sunshine for Regulatory Decrees and Settlements Act of 

2013,’’ is clearly designed to impede Federal rulemaking and other 

regulatory action, is like legislation we have considered in the past. 

It does this by imposing numerous constraints and disincentives to 

the entry of consent decrees and settlement agreements in civil actions that seek to compel agencies to comply with their statutory 

rulemaking requirements. H.R. 1493 threatens to undermine rulemaking by tilting this playing field in favor of anti-regulatory 

forces at taxpayers’ expense. It does so by taking several broad approaches. 
28 

First, it provides numerous opportunities for dilatory tactics by 

industry and other anti-regulatory interests. The bill makes it easier for any affected third party—any affected third party—to intervene in the underlying litigation and the settlement negotiations 

by requiring a court to presume—subject to rebuttal, yes—but presume that any third party affected by the agency action or dispute 

will not be adequately represented by the parties to the litigation. 

This intervention right is drafted so broadly that if the regulatory 

action at issue involved the Clean Water Act, theoretically any person who uses water would have a right to intervene in the negotiations on a potential consent decree or settlement agreement. Any 

industry interests out there would certainly not hesitate to intervene. 

Second, many of the terms of 1493, its key terms, are ambiguous, 

opening the door to confusion, litigation, and delay in resolving disputes. For example, the threshold question of what is a covered 

civil action under the bill, such civil action includes, one, alleging 

that an agency is ‘‘unlawfully withholding or unreasonably delaying action.’’ As a lawyer, I know that the interpretations of words 

like ‘‘unreasonably’’ simply open the door to litigation that may go 

on ad infinitum, ad nauseam, particularly when, as here, they appear in the threshold question of when the bill is supposed to 

apply. 

Third, the bill imposes numerous procedural requirements on 

agencies and courts that threaten to take away their already limited resources from issuing rules to protect public health and safety. For instance, the bill requires agencies to accept public comments on a proposed consent decree or settlement agreement and 

to respond to such comments. This provision alone would add considerable delay in resolving litigation meant to force an agency to 

meet its rulemaking and other statutory obligations. 

Finally, the effect of the bill’s various provisions would be to dissuade agencies from ever agreeing to enter into consent decrees or 

settlement agreements, making it more likely they would simply 

proceed with potentially expensive and time consuming litigation. 

That is why the Congressional Budget Office found that last year’s 

drafting of a bill, similar to H.R. 1493, which was last year’s bill, 

would cost taxpayers millions of dollars. 

In addition to being harmful, H.R. 1493 is simply unnecessary as 

its proponents offer no evidence of the problem that it purports to 

address. H.R. 1493’s proponents argue this bill is needed because 

Federal agencies collude with pro-regulatory plaintiffs to advance 

a mutually agreed upon regulatory agenda through the use of consent decrees and settlement agreements. Yet, when this Subcommittee considered a substantially similar bill in the last Congress, we were given no data or study indicating that such collusive 

consent decrees or settlement agreements were in fact a real problem. All we heard were the repeated assertions of the witnesses of 

the majority that such collusion was taking place. 

More credible was the testimony of John C. Cruden, a senior 

nonpartisan career official at the Justice Department’s Environment and Natural Resources Division for over 2 decades, who testified he was, ‘‘not aware of any instance of a settlement and cer-
29 

tainly none he personally approved that would remotely be described as collusive.’’ 

In the absence of actual evidence of rampant collusion between 

Federal agencies and plaintiffs, H.R. 1493 simply addresses a nonexistent problem. 

H.R. 1493 would needlessly slow down an agency action and open 

the door widely to almost anyone who wants to impede agency action, including the promulgation of important public health and 

safety rules. 

The bill is unnecessary. The bill is harmful. The bill is not going 

to go anywhere in the Senate. I urge my colleagues to oppose it. 

Mr. CONYERS. Would the gentleman from Tennessee yield? 

Mr. COHEN. I will yield. 

Mr. CONYERS. Thank you. 

I just had research on—this is the third hearing on regulatory 

activity in this Congress, but there were 16 other hearings during 

the 112th. I am writing an article on this because this is unbelievable. 

And I thank the gentleman for yielding. 

Mr. COHEN. You are welcome. 

I yield back the balance of my time which does not exist. 

Mr. BACHUS. Thank you, Mr. Cohen. 

I would now like to recognize the full Committee Chairman, Mr. 

Bob Goodlatte of Virginia, for his opening statement. 

Mr. GOODLATTE. Thank you, Mr. Chairman. I appreciate your 

holding this hearing. And I want to thank Mr. Collins for his introduction of the bill and Chairman Bachus and the Subcommittee for 

their prompt and careful consideration of it. 

America’s small businesses and job creators need relief from the 

flood of new regulations and red tape made in Washington. Small 

business owners cite Government regulations as one of the most 

important problems they face today. And while the flow of new regulations from Washington grinds on, so does America’s dismal unemployment situation. Make no mistake. The untimely drag of new 

regulations, too often issued without sufficient consideration of 

their costs, benefits, and impacts on jobs, remains a significant part 

of our virtual jobs depression. 

The Judiciary Committee is considering a strong set of regulatory 

reform bills to solve this problem while preserving important regulatory protections for the American people. The Sunshine for Regulatory Decrees and Settlements Act of 2013 is an important part 

of this initiative. Far too often, costly new regulations are issued 

directly under the authority of consent decrees and settlement 

agreements to force Federal agencies to issue new rules. Regulators 

often cooperate with pro-regulatory organizations to advance their 

mutual agendas in this way. 

The technique used is simple: an organization that wants new 

regulations alleges that an agency has violated a duty to declare 

new rules. The agency and the plaintiff work out a deal under the 

cover of litigation. The deal puts the agency under judicially backed 

deadlines to issue the rules. These deadlines often give the public 

and even States that co-administer regulations little opportunity to 

comment on proposed rules. Deals can go so far as to require agencies to propose specific regulatory language negotiated by the agen-
30 

cy and the regulation-seeking plaintiff. Those to be regulated frequently do not know about these deals until the plaintiff’s complaints and the proposed decrees or settlements are filed in court. 

By then, it is too late. Regulated businesses, State regulators, and 

other interested entities are unlikely to be able to intervene in the 

litigation. The court can approve the deals before regulated parties 

have an opportunity to determine whether new regulatory costs 

will be imposed on them. 

The Obama administration has entered into a high number of 

consent decrees and settlement agreements just like I just described. Examples include a consent decree to require new performance standards for greenhouse gas emissions under the Clean Air 

Act. They also include settlement agreements to require EPA to 

issue Chesapeake Bay TMDL’s that trigger billions of dollars in 

costs and the Fish and Wildlife Service to take actions involving 

hundreds of species under the Endangered Species Act. Deadlines 

set in these and other decrees and settlements can even be used 

to bind the hands of future Administrations. 

The Sunshine for Regulatory Consent Decrees and Settlements 

Act of 2012 puts an end to the abuse of this practice. It assures 

that those to be regulated have a fair opportunity to participate in 

the resolution of litigation that affects them. It ensures that courts 

have all the information they need before they approve proposed 

decrees and settlements, and it provides needed transparency on 

the ways agencies conduct their business. 

The bill also respects the basic rights of plaintiffs and defendants 

to manage litigation between them. 

As a result, the bill offers an effective and balanced remedy and 

it is a timely solution to a real and important problem. And I commend the gentleman from Georgia, Mr. Collins, for his efforts on 

this bill, and I strongly support them and yield back the balance 

of my time. 

Mr. BACHUS. Thank you. 

Without objection, other Members’ opening statements will be 

made a part of the record. 

Since the full Committee Ranking Member introduced something, I would like unanimous consent to offer a response to his 

submittal, which is ‘‘Sue and Settle: Regulating Behind Closed 

Doors,’’ authored by the U.S. Chamber of Commerce, in rebuttal 

and ask that it be entered into the record. 

[The information referred to follows:] 
31 
32 
33 

A Report on 

SUE AND SETILE 

REGULATING BEHIND CLOSED DOORS 

u.s. Chamber of Commerce 

MaV 2013 
34 

Acknowledgments 

lead Aud,,,,, 

WIlliam l . Kov~cs. Sen;or Vic" p, ... ident 

keith W. H~m.n, u.gal Pcl iq Coun",1 

100a11>0" A. Jachon, S.mior Director 

Proie<:! Team 

Oa'e" 8'1.'051, Policy Cou"..,I, Government Opernlion., OVu'igll1.& [on,um .... Affa,,, 

Man Hi' ''. Polity Coun,el. Environment & AjricullU,e 

Mary Martin, PoIky CounSoeI, Enerav. Clean AI, & Natural Resources 

Ch~fity Edgar, Man3ger, Comminee. and Communication. 

Shea 8f:ottwy, ComrnJnec Coordinator 

Carin RI,in&, Admlni,lrative" .. ist."! to I n. !.enio. vOce Pre.id,,"1 

Richard An, Legallnlem 

Andrew ",.,,11, L"l!ailntern 

The lead authors and !h~ proJect !".", are from Ihe U.s. o.. m!>e< Environ"","!, Technology & 

Regul.lory Aflai" Oivi.ioo. 

1\I!C<>I! "',ion 

The U.S. Chimber 01 Commerce thank. William Veatman, .,,1>tanl director of Ihe Cenu~r lor 

elll"gy and Environmen! 31 the Competitive Enle'p,j." Irmitute, 10. llelpins ~, IOfmu late an 

:>dditlona l met~<>dologv and the dellelopme"' 01 iI da,ab~~e 01 sue iI "d "","Ie cases. T~e 

dOI&b."" Was u.ed o<h",~ the ~ot;dltvo , ond .upplemcnt, I) .... Chambef'. diltabas~ 01 COl ..... 

• www.s!leil ... bettie.com 
35 

Contents 

Introduction 3 

Executive Summ~ry 5 

Report: SUI' and Sertle: ~eguloting Behind Clo~~d 000r5 10 

Cltalog of Sue and Seule Ca51!S 30 

list of Rules and Agency Actions 43 

Appendi~ A: Methodology I for Identifying Sue and Settle Cases 46 

Appendix B: Methodology II for Identifying Sue and Settle Case~ 48 

US Ch.mhet DI Commerce 
36 

Introduction 

What Is Sue and Settle? 

sue and settle occuf!r\"hen an agency intentionally 

relinquishes its statutoNdlscretlOll by acc.epq la ~ts 

f'~Dutside groups Iha effectively dictale\he prIortuls.and 

du es of Iheilgency l'IrOU8h 1egaliV blndl .. coun-approwyt 

,..s ttlements negotiated behil1d dosed dcxxs-wlthllO' 

participation by other aJfected partie5 Of the pu~. 

As iI result of the sue and settle process, the agency 

intentionally !r"nsforms itself from an Independeol.actor 

Ihat has discretion to perform Its duties In a mal'lf'lerhest 

serving the public Interest into an actor whservientfo the 

bindins terms of .settlement agreements, which includes 

using congressiOl'lallv appropriated funds to achieVe the 

demands of specific-oulsldi! groups. This process also allows 

agencies to a~ojd the normal protections built into the 

rulemaklng process-review by the Office of Management 

and Budgetand the publit, and t(lmpliam:e with executive 

orders- at the critital mOtnenlIYhen the agencv's new 

obligation is created. 

I 

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37 

What Is the Sue and Settle Proc.ess? 

En\liro 

fede a~:enta l sp . gelley eClflc deadlJ ne. 

Draft consent decree or settlement 

agreement Is todced with tnecoutt. 

In\lfteS and recei'le5 • 

the decree or agreement. 

u.s. Chamber of Commerce 
38 

Executive Summary 

William l. Kovacs 

U,S, Chamb~ SenlerVlceP, ... ldent 10' Envlronmellt, T<!Chnol"IV & Regulalol"/ AHal .. 

BAQ(GROUt<lD 

The u.s, Chamber 01 Commerce undertook an inve<lieatlon of Ihe .ue 

and .el~e p<oc ... ~ l>e<:ause .. f Ihe growing number al tomploln!. Do{ 

tne bu,;nc .. rommunity IhHl It was being entirely ,hul oul of 

'''lIul.lo r~ deci,;on' by ~ey led .. ",1 .,e!\Ci .. " While the U.S. 

Environmental Prot""i"n A,gency (EPA) and the fish afld W,ldllfe 

s..Nice have tleen tude" in • .,lIlIng- ",nll." than dclendlnl-ca",. 

brought by adl'OCiOCY group •• other ilj!er><:ies, Il"I<:ludl08 the U.S. fore.t 

ScrAc ... the Bureau of l..1nd Management, the National P.rk SeMce. 

In., Army Corp" of Enginee,5. the U.S. Depanmen! 01 Agriculture, and 

Ihe US. Oellilrtmenl of Commerce. ha .... _Iso "E,eed to this I.ctk-. 

Iu di:r.cusscd in OUr r~rt SUf'(md k nit: lIegulotinQ Ikhlnd CIoSN Doors. we found that uncil!r 

Ihl, sue and .en '" p,oce ... EPA ch"",.t .ome point nm to de!erld Jr.el! in I.w.uir. brought bV 

,p~da[ IntetC'1 advocacy graup. ill lea.1 60 times belween 2009 and 2012.' In each case, it 

agrl.'<!d to settlemenl. on I"'m' favorab le to Ihose irou",. The.e ettlem~nl. directly ",.ulll'd 

In EPA ",reeing to publish more than 100 new ,egulatlons,' many of wh irh imp"'" compliance 

costs in Ihe !eM 01 million. and even bi llions of dollilrs.' 

LACk Of AGENCY TRAN5PAHNCV ON SUE AND SETTLE CASES 

We .Iso found that wh"n EPA was a.ked by Congre .. to provide Information .bOOI the notices 

01 lnlenllo.u" ,ecelved by III<! agency Of Ihe petllions for rulemaking served on EPA by p'ivale 

p.rtie •• the ~gency could nl>l-<>< wouk! not- provide the inl<><malion. When .uclt ~w,"Ir. 

we,e InITiated. EPA doe, nol dl",lo,e the nOlke of the laWSUit or lIS fi li.,. until ... sell\ement 

agreement had been worlced out wnh Ihe private partie, arid filed with the COU'I. As i 'esult. 

court orOer> we,e entered. binding lhe "iency 10 undertake a ,peci!ic rul"making within a 

specill, a nd usually v~ry shari lime od. notwithstanding whelher Ihe agenQ' actually had 

sullielent time to pt'rIorm the obligalions Imposed by Ihe «lull o,der. ln re.ponse to Congr"". 

EPA made It cle.r that Il l, ·unable to ..,commodate tlil, [co.,g,,,,,lonalj request to make all 

petition., noticl!>, and reque,t. 1<>< agency actioo publicly ;occc"ibic in one locat"," on the 

' .... """ion '" , ... "'t<IIoOolon' ,,,"'!101M .. "OIl '" """'.,.. .... MOI .. " .. <Hf<>1.o<IaI>"O IoA_k .. A ""'. '" UIb 

-'So< _.3-<1 "" ''''' .. ,"' •• ,.. ......... ,"" ..... ' ........ ,' ___ ... " ......... • foo. _,"" ..... ot ,..., ,oot>" _,"'-' ,.. ........... -' "'"'''' _ ,.-)2. 

•• www.s .".and~e tll1 com 
39 

Internet.·' SpecilicaHy, "the EPA d~ nol ha.e. centrali,1!d proce .. 10 Ind1'<1duallo; cha'iKleri,e 

"nd sort all Ihe dltle'enllypes of notices of intent Ihe aBe~cy receive.:' Imagine whill would 

hapPl!n 11 a , tate Of locallovernmenl, a ..:hool dlmlct, or a pubHdy traded company dalmed!O 

h,ve no knowledge ~boYl laws uit.\ brought .g.;n~1 it, Ihe number of ColSes IoC ttled by it! 

lawycrs, 0' Ihe numbe, olagr""m~ms that obfig"'ed it 10 undertake ><!efl!1ve nl!W KI)on11t i5 

un"Nginable Inal .uch an entlly wouk! be able 10 claIm ignorance oIlaMulu; thai '''nlfk"nlly 

Impact II '" 10 be unable to p'DVidc its cili,ens, custOffii!'rS, and 'egulatory ag""cic> wllh 

.equlr~d Inlorm.llon. And Vl'I, Ih"1I011ion of EPA has bt-en Ihal II ""'!lId not be bothert>d 10 

track settiements Ihat impose s1inlfianl new .u~ and 'eQul.emenl. on Ihe country <>t !O 

nolify Ihe publo.: .boullhem In 8n~ sv"lematl~ fa,hion.' 

SUE AND S(T'He SKIRTS PROCEOURAt SAFEGUARDS ON THE RUlEMAlC'lNG PROCESS 

The ""A <Ike '" agende. enle,ln, Into voIunlary ",.eemelll. wilh prl.ate parties 10 issue 

. p"dllc ru~makini requi'''lfI<!nts al.o SC\ICr~y u~d"rcul> agcncy wmpllar>(:e with tM 

Administralive Procedu.e ACI. The Admin,matrve Proce<lu.e Aot ;.; delijjned 10 p.omole 

tra",pare"CV and publ~ p~nklpalion In the rul~ma~lnl proce5S. Becaule Il>e subsunee of iI 

.u~ and ...ttl~ alr""m~nl has b .... n ful ly negotial~d berween the "8"n<,/ and the itdvoc:acy 

gfOUp befo.e Ihe public has ar",. oppMunil'/ 10 lee iI- even In lilose oJIua!ion' where the 

ag~ncy allow. public comment on Ih~ ft agrwmenl- Ihc outcome 01 the rulen'lakln, i, 

eMemlally ,et. Sue and settle alloW' EPA 10 avoid Ihe normal protection. built Imo thc 

ruk!ma~r"1I process. such is review by OMB, reviews under several el<l!Cutivc <>tders, and 

review. bV Ihe public and lhe regulat<!d community. fun ...... , the principles of federali,m a re 

also flillr .. ntl~ Ig nored when EPA u.cs Ihe conditions in lue and etll .. igreements 10 loCI alide 

"ale·admlnistered p'Oj]ram., .ueh ii' Ihe Rellonal Haze program. With no publk inpul, EPA 

bind. itself 10 Ihe demand, of. privale enlit'! wilh spe<ialinlerests Ihal ma~ be adver", '" the 

public inlc,cst especially In Ihe .reas of project dcveiOjlme"1 and job erea.lon, SlJe and scllie 

actfVitle, deny til<' public it! rn<><1 ba.k of all rllhu; In th" regulalory ""oce .. : lhe right 10 weigh 

In on a propor.M relulatory decision before asency Kllon occur<. 

SUE ANO SmLE CFlEATtS TENSION 80WHN TME BRANCHES OFGOVEFlNMfNT 

Al It. h"art, Ih" '<Ie and ... ttle luue Is a 'i"'illkln In which 1M e"":uliy,, branch e>]ldnd, the 

aUlhoritY of agenc le. at lhe .. ,pen", of cong.enklnal O ..... "lghl. Thl. oceu" with 31 lu" Ihe 

impllcil coopc.aliOtl ot the ccurts, which IYplcalJot rubber "amp proposed IoCtliemcnl 

a,reements """n thoogh Ihey ~n.ble priYate panle5 10 dictate ",ency pollc~ . Cong.ess I.s 

harmed beaou-e lIS control DYer appropriations diminiSh ... , ...... e and set ll~ !leab (and not 

COnllr .... ) IfKfea.inlll~ .re what drive an agencY5 budgel concern •. Additiona lly, the 

·«,IM!,o ....... "' G ........ E .... '-"''' .. _''' .. r .. '''''''''''''ot<'''''''._,.,.'''''''' .. ......-.." ..... .. _ h«l u ...... ChaIm>o"-....,,. tom ........ 1-.. .... to_'I_ l1,lOll) .. I , 

'., ·. 1t ""' ........ IIOII1nI''' .. H ........ 'I' ..... ~b~" .. ''''''..,..,QOT''_UIo_oI." •• ''o _I.H ... _ ,,,""a.,O_ ... Iln ";!<'''''~ .... _ ...... ..,_,.'" .. _'''''' d'''' __ 'o ........ ..., ... t ..... . '''' ..... ""' ... _ ... __ .......... _~ ........ , ............ 'o_._""""'.f' .. fIMt; ... """"""'" 

.. "' ..... ~ .... .." ......... ... 

u.s. Chamber 01 Commerce 
40 

Impl"m<>nl~!lon of allIfI,,, .. iOllally dl,,,,,led p<>lk~' i, now ,,,p,loritized by court o,der> that th" 

ag""cv 311<5 Ih" court 10 Im.e. Once Ih~ couri approllCS the aln,en\ <,Iocree Of J.etli4!menl 

agroomem, EPA I. f''''' to tell COllflress"we are iKling under <XIurt order . nd we mu .. pub~.h a 

new rcgu lalion: 

SUE ANOSmlf M IGRAnS To Ontf RS1ATUTES? 

A major cOncem i. that the Sue and .ettle lact]c, whk/l hal b<!<!n ~ clfeet"" In '"mDYln;; 

control OIl'" the ,ulemaklng process from Cong,e .. _ and placing it ,nstead with private part;"" 

uoder too ."""ooion of fedc",1 ,ourtl-will .pread to olhe, comple. 5latul ... Ih~I have 

statutorily lmpa..ed date. fer ' .. ulnl 'I'gulatiorr', .uch •• Dodd·Fr.n~ 0' Obamaca,e, On April 

22, 2013. the U.S. Di,tricl Court lor the Northern District of California, wh leh na5 belln very 

active in .ue .nd...,nle coon, ilsued an ardor in a Food S;,lety Mode,nl,atlon Act <_that ...,1S 

in motion a new proc",. 10 brlnlsue and,enle actionl under Section 706 ollhe Adminlstrati"" 

procedure Act. In Ct nt'" for Food So~ty v. H~mburg.' the court rl1'COiIniled a statutorily 

Impo,ed deadlln~, bUI also ,eml!nized thai food .. Iety to not alway • ...,rved by ru,lIlnll a 

,cRul~tion to fina lity. In t~i s In'tilote. the couri ordercd the p~rtles to "a rri ve I ~ mutuall~ 

Kuptable !iChedul,,· bc<:au,c "II will be~ooV<! t~e pa' l~s 10 attempt to cOII\>cratc on thl' 

endeavor, a, anV dl1'C],ion by Ihe coo rl will neno.urily b~ arbilrary. The partie. are hereby 

ORDERED to mlMlt "nd cooler, ~nd prep.re "Joint written >lamment .en ing 10rth prD!>05ed 

d"adlin.,., in dClail ,uff",lI.'nllo ""m the ba,i, of an injunct",n: Wilh a r>eW strudure In place 

Illat u..." Ille Admlni.lfal;v" Procedure Acl a. a ba,l, for 'il;z~n .uilS. prillale InlereS! BfOUPS 

and ~ger.c: 1e5 could-without u,~ 01 any other dtllen suit pfOliision- ""lotiate private 

arrange""'nl5 lor hoW an agency will proce«l wilh. new reiulallon, 

THE IMPORTANce OF FIXING THE SUE AND SmLE PROBLEM 

Why " ~ so Important 10 IIx the sue ~nd ,etlle proc".,1 Conile .. ·• abllily 10 act on or 

undertake over<lght of the execullve branch Is diminished and ~rh.ps eliminated Ih'''''llIlhe 

prillate ~grce""'nl' between .gencles and p'iII.le partie •. Rulcmakln~ 10 .cuet, iI pr<Kes, tha, 

COOi''''' abandoned 65 yea'. "SO when it p",,,,d the Admlnl.trati'lle Procedure Act, i, 

dangerou, because It allow. private partie, and willing agencies to ~t "a\l'mal policy OUt <>, t~e 

li,hl 01 publi, ..:ru11ny and the p,ocedural .al~gua,d, 01 the Adminlstratlve Procedure Act. 

P"fhap. tile roost 5ignWant ImpiKI o1l e,<l ~ sue and ...,ttl" ag,eef)'><!nt. 15 I~at by Irtttv glvlT1j! 

away in di"rll1l00 in order 10 .ali.ly private p.arties, on "~ency u,'" <XInsressiomllly 

appropriated lundslo "" 'ev~ the dem ~d5 01 ",ivate partie" This happens even though Ihe'" 

are co ngress","al appropriiltlen' specifying the u"'" o! !ucll lunds, In .,.,eo'", the iIi!~OC'/ 

in tenlionally lranslorms its"lf 110m an independem aclm that has discretlen to perfo,m duti~. 

In. man~er best ",,,,inl the public ioteresllntO an aClor .ub$e",ieot to the bindillfl te,m. 01 

Ille '''tllem~nt "l1"",men". The m"gnltude and ... rlou, consequences 01 the ,ue and .",tie 

problem lIave 'l'Cenlly been rl'Cognlled by allea51 0"'" court, when 1t...,1 aside a .ueand senl" 

• www.sue .... bettil!.com 
41 

ag, .... menl thaI would · p,omulgale a subnanli.1 and pe'man~nl amendment" to an ager.cv 

,ule," 

THE MOSt EHECTIIIE SOLUTION TO SUE AND SmLE liES WIT" CONGRESS 

In Ihe Iinal analv-Is, Cong,e"" al'o 1o blame 1m Ioming 100 sue and ",nle p,aces< Iilke on I 

life free of congrenionill 'eVicw. Mo.1 of I~e.ue and :ll:l1le Iilmuils we,e filed as cililen .ulu 

aUlhori,ed und ... Ihe varioos environmenlal ,talute •. ' B«<Iuw d tilen ,ull pfovt.ion, wore 

included within the environmental tlU .. , olt"" U.S. Code. Congr ... , placed JurisdiclloT1 and 

""".sight of cili,en sui" will! wns,,,,,iooalaulho,iling commincl!i ralne. Ihan with the Hou ... 

and s"nate Judiciary tommiU.,.., . De'pile the laCI thilt th<! ",Ie pu.pose 01 d ll,en .ult,s i. 10 

granl aCcess to Ih ~ lederal courts, which Is the. pi1fJ1ary Ju'lsdlctlon ollhe ludlclary commillt'eS, 

furiodK:lKln wa, in.read placed in wmmittee. Ihal had no e~pertl", in Ihe .ubjec, matler. 

Accordingly. no meiln!nglul """"Ighl ha, b",," COIldurt"" In more than Ioor d""ade' ov'"' Ihe 

u.., and abpse 01 c;lizcn suit aclivity •• uch as sue and s~lIle. 

FortUniltcl~ . however, In 1012. t"" House Judicil'V Commltlee began loo~ng at It>e abu56 of 

the ,ue af)d settle proce". It inlroduced Ihe Sun.hine for AegulalDf'l D<'Q"~ and Sel!icmenl' 

Acl of 2012, which Ihe Hau .... p", ... d a. part of a lar,er bill. Under lhe bUt belOfe ,I1e "I!ency 

~nd au";de grou~ un me a proprn;ed <(>n",nt deoee or >Cttlcmenl SII'eemenl with B caun, 

!he propooed con",nt d""r~e or ,ettlement ha, 10 be publi,hed In Ihe FMi!rQ/ Regi5t r fa, 60 

days to anaw tar public cammcn!. 1\00, atfected p"rtles would be attorded an oppo'tunlty 10 

InleNe"" poor 10 Ihe filing 01 the can",nl ,,1'0 .... 0' "'t!leme nt. 

On April 11, 2013. the Suns "in., 10' Rcgulalary Deer"", and Selllements ..... ct 01 2013 wa, 

Inlroduced In I"e s"nale •• S. 114. and In the House a. " .R. 1491. II 1, a ,tr<l~& bililhill would 

implement the .c and athe. Importan' Cammon-5l!nSl: cha"nllcs. Pas~e of Ihi. legl.liltian will 

clo,etl><! ma .. ive ,ue and ... nle ""'''''Uie In OUr ,egulatary prace ... 

• ""' ....... ,"'" """""'t.<!". 5/00 ...... No, 11 IS'I!I ....... .. 1'1"" 00 . ..... n, JIlUtl"l~ , .. 'Q' __ , .. 10 , ... 

<O«'_ \""_.~",v_""""""""··_""''''·"''''''"'''·''_\·I· '''''''Ioo)''''"'''''_,, [._" .. """"...,.... .. ... ",-.. , .'" ...... , ....... ~ • s.., '.r. at .... "". '1 Y.I C,I _ I 0. ............. 11 u~.c. I l~\; ~"'."'.c-... ......... _ ............. V·H. I&m 

U.S. Chamber of Commerce 
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E·M W-.sucand.e1tle.cam 
43 

Report 

SUE AND SETTLE 

REGULATING BEHIND CLOSED DOORS 

Mav 2013 

INTRODUCTION 

OVer !h~ pa,' several ""'''''. Ihe bu.ln .. " community has "'pre,'ied growing concern abou t 

Inter".t 8'0lIJ)5 uslng law\ ull5 "gainSI feg .. "" allende. a nd lub.eqllent s.eUlemenlS ~ a 

t~"ique to . hape ilIlene;"';' '''IUlalory ",elida •. The overwhelmin8 maJoritv of In,lanc". 01 

."" and "'ltle acllon. f,om 11lO9 10 1011 have occurred In I~ environm"nul reBula'<><y 

conICxl. Til ..... Klion. we r" primarHy brought under 100 dll,en .uit 11,,,,,11;00' of Ihe Clean ""if 

Act, thc CIe<I" Wa'", Aa, and the fndaniered SIINIe. ACI. IO The eIIl, .. n suit provi.Ion. In 

envlromnenlal statutes 51.1Ch as the aU" Air Act provide advocacy g roup. wilh the most direct 

and straighlfurwa rd palh to obl aln Judid"t ,~ ... lew of an agency'. failure to meet a ,lawIOf'/ 

deadline Of perform such olher duty .. plaintilf group believes i. necessary a.nd desirable," 

From ~ new wav"-,,I encl.angered ,p<'de,Ii"ing't" l~e EPA', lederalilalJon ot th ~ Chesapeake 

8"'1' cleanup prog,.tn. 1<1 the ed<>r"I I.~""""r 01 .eg;""", hale prog.am .. ,ec~1 .ue and ""ule 

~".nKement' hi ve ~~lcd lean th.llhe rulcma~illll P'<KI!'5, itself" bcinQ ,~bvcncd 10 M:"'" 

Ihe end. 0,," l..w I.""red Inlerest I'OIJPS. 

8qinninB in 2011, the U.S. Chamber 0' Comme.ce began wDfkl ng 10 bml!f understand the ~1I 

scope and consequenc"" ollhe ,ue and ",ule ;"ue. We set out 10 detl!fmine h()W often 5Ue 

and .etlle actua l;'" hapl)l'n •. 10 IdenUty maiO' ' ue and ",,!lie call'S. and \0 ""'k the type< of 

aBeney actloflS Involved. Compiling information on .u .. and ""It Ie "g.e~m .. n!' lurnl"d oul [0 be 

labor intensive and time consumlnQ. Many .uch agreements are nOl clearly di$(klscd to the 

.. 0... ... "'," u .... o;:. ~ """. w .... "'. " U~L t 110', ............ _ .... IOU H , ,"ooUi. "I ... ~' .. _""" """' ...... ~ ....... _ ""' ..... _.w oI.,. .... ~ .... I .. iNtllool "" ..... _101>01 .... _". ...... ..-.d ... >ctI ... 4f ..... _ . .... __ .... , .. __ "'_ ... <l< ~ ................. _. 

~. ~ r-. utI>'~ """'" ~ Ole. .. , f~' ""'D,<. Q- ,."~u,.,, oI_.,.!Go", o,c. c .... . _ I ... ... _.' ........ ""' .... "N' ... ~'_-. ... .,...""'· .. MV"·''' .. .-........ , ... • .... w ... -...'" 

.. "-"IotIu .... <> .. "", .. <Iu" ... ~ .. " .. [ ... .,.,_"""n ..... "~..,'." ..... ...., ........ _<01 , ... ~_"' ..... ... _ ..... _, .... , ...... , ...... lI .... u ,. .. .... t ......... ~ .... c...,"" .... ,I>o .. _IoI"" _,,_~ .. , ... I01<1_ ... _<a ........... r .... nd .. ~ .... "" ... , .. "'IIO'I>Ilon.~ ............ ... 

.... , ......... _ .... Cto, .. (or ' .... So,.., •. --. ..... c H~lt 1"~~ .11 Col ... ll. 2IIllH_oIO ..... . 

.... ,I>o_on<!O'-" .. _fO_..-IOC' ... J06ofl .. .,·'.'_.,.., . .. _"'I ... '"""~· ...... , _'" _ .... , ........ ""'."'""''''''" 0/ .... """"""" ".", .. _ ... , .. """ .... """ .... ~ ....... _IwIo_'" ........... ""'," ........ __ ... ,.."""'Io> .. ·_ .... _ •• "" ... p.of •• ~"'.t ...... _ .. , ...... ,.".,--... _ ' ...... , '""".' .... ~tol .. '"'" .... ~'" ..... '-"'«""'·1 

U.S. Ch.mber of Commerce _,. 
44 

~ubllc or other pmies until ~ft~r Ihey have tK.en .Igned by a J>ldie a rid the agency hM fegally 

bouJ)d Itsell to lo llow the setlfemcmt te,m" £wm then, agencies do not maintain lists of thej, 

.ue and .enle case. that are PIIblk:iy available. 

Using a combination of .ppro (h~s, the Chamber waS able to compile a dal.ba,,, of we and 

se!lle UI"" and Inelr ,ubsequent rul"ma'i~g oulco"", •. fh;" combined datab. "" whkn 1, 

."mm. ,i."", ftt tne end 01 Ihis report, Indicate. Ihe .ue lind ..,We ca .... lor tile CUfrenl 

admln i"rallon. Tile Chambl!f .Iso devclope<l data on the. uSC! 01 tm. taclk during ea,lI", 

.dmlnlstratiofl';. 

W HAT IS SUE AND SmtE? 

Sue and .ellie o<cu,< when an aiency intentionally relinqui,he. It, .Iatutory discrelion bv 

accepting lawsuIt. (rom outside groups which eff..rnveiY dl~le Ihe prlo<~i£<; and duties 01 Ihe 

aieocv throug~ legally blndlog, c ..... rt·~ppro...ed .elllefl'l<'nts r\<!goliated behirld cI05<>d doorswith no participallon bv othe, .ffected pani ... or Ihe publk." 

A •• ,e..,11 of t M .u<! and S<!Ilie p,o<e", Ihe agency Inlentionally Iran.lorll)'l 1t<<!!II,om an 

Ind"llendenl actor Ihat has dl,crellon to perform il. dutle, In a ,"anne, ~"serving Ihe public 

intme .t int" an aclo< ub5ervient 10 Ihe bindinll Ie,,,,. of setlle"",,,t all''''''''''''!>' whkh 

IrJdudes using cong,,,,.lonally app'D\I,ial1'd funds Ie ach~ Ihe dem~n'" of pedfic ouuide 

g,oups. This P'OCESS also allows agcmies 10 aVold 100 normal protection. built into the 

,ulemal;Ifl8 p,o< .... -, ........ w by the Office 01 Manag"",.nl and Budael (OMS) and othe, 

3j!enc;el. , ..... leM unde, n,,:ullve o<ders, and rey"'w by olher stakeholde ,.-at Ihe c'itlcal 

mo .... nt When tnc agency'. new oblisation. a'e c'"al<><i. 

Bec;au5C Sue and .ertl., l~wlu1t. bi nd an agenq 10 ""'.1 a specific<! dca.dllne for ,cKu lalory 

acticn- a deadline tne agency oft.." cannot In<le!-Ine "I,ee"",nt essentially reo,ders Ihe 

agency', p.iorilies and Its allocation 01 '''$Our"" .. These sue and setl'" ag,,,,,menIS often go 

OOyond ,Imply enforcing statulory deadlin ... and Ihe 'g,ee",enl' IhcmseNes become the leilal 

aUlhorlty lor ". pan.lve 'egulalory aclion wllh no meanIngf ul particlpalloo by """'led p"Mie. 

0' Ihe pub lic. T"" r"alignmenl of an ency·~ duties and prio.ities at the bc!he<t 01 an IndiYldual 

.pecia l inle,en group ,un. counle, to the Ia'ge. public inle,e'" and the ""P"''' will of 

Co ng,ess. 

W HAT 010 OUR RESEARCH R[lJEAl? 

By using Ihe "",thodol"lic5 dl&ribed in Appendi!c A and A~pendlx e, the Chamt>er WiI' able 10 

compile. IIs1 01 s"" 000 settle ClI!oeS I~I occurr!;'d betWf'en early 1009 and 2012. Because 

agencr... a,e nol ,cqui'ed 10 oolitv Ihe public wilen I""V ,eceive nolke. from outside g'D<lP5 of 

"' r""~CIIno<"", ,,, _ •• ,- ,, ,,,,,""""""' '' '' ~<Iluo'' _''I.I< ..... II<oIOIO I ....... '''''It<ll''_' I ... "" .. _ .. o«<v"" .. _ .,_""', .... jo>oot .. """"t.""' .. ""'< __ .. ,.' .. "'''' ... ''''' 

_<do, ..... _.~'""Ib'_ .. "'""V'A S<Y 0</,""I1/_ . .. _ .. ,.., ... , 1l.>lu,oIloo . .. ' IOC.C" "-PI Il.JCIJI 

Mi. www.sueand.etlle.com 
45 

their intent 10 sue, ar, In manv ses, when th~y ,uch teolat .... e ~ettlemenl ~g'eem~n1.O with 

the g,oups, it Is often ext,emely d iffkuh for an In c'~ted party je.g .. a st.te, a ,egulal<!d 

bUI]""ss, the pubnc) 10 kn<>W aboUI a I .. ttle"",nl untH III' linaland 1m. legallv binding eflecl on 

Ihe ageney, Fo, Ihls fUson, we do nOl know ~ the IlIl of Ci'>C1 "Ie ~ve dcvc40pcd is a trulV 

complete ~S1 0 ' ,«cn! Sue and settle ca>eS, Only Ihe aaencies themselves ar>d Ihc Oep:arlmcnt 

01 Ju~ keU really know Ihis_ 

Ou, Irwestigalioo .hoWS" Ihat "0"' 2009 tl> 2012, a Iolal of 7llawsuilS (Ifldudin& ane nOlOw 01 

lnlent 10 ue! were se!tled under circumstar'ICes s uch that they cin be categorized a. sue and 

Uln le c~Se. unde, Ihe Chamber'. definition. These caSt'.! Indude EPA senl .. "",nl. under too 

ann A,i. A,CI ."d the Clean Waler A,ct, along with key fish and W,ldlile Service (FWS) 

s ettiemcmls under Ihe Endangered Spedes Act. Signiticantly. settlement ol tne.c ca.e. dlrL'Ctlv 

",.ulted In more than 100 neW leder.1 rule., many 01 which are major ruOl' with .. ,timal<>d 

compliance to$ts of mo'e than $100 million '!nnually. 

Which Ad~ocaey Groups Us~ Ihe Sue and s.e tU~ ~fS Ih~ MO$I? 

Advoc;w:y GtOUP Rfnitln8'l' MOSI Frequenl Envi,onmenl<ll 

Group Plalntif" 

51<". Club 

'~h'lII Gu_I,,,, 

N"""t flO'""", •• tle/l:"", !;Ol>fl<lj 

Coo,",'''' e>olollcal ~,~ 

("'Ii,""""",, .. ,_,uncl 

>(0,,"'<1,,[ .... """,..,""' .00""""'0 

O\,>O<illioo 01 "",,,.d _ ..,,, 

o.!....-." of Wll<\lile 

\J nodlDr2 

81 Tlodfo, I 

• 

• 

, 

Se'ie,al e~vi'onmCnlal 3<l\lt>(a~y gt<)ups hfve made the sue ;md 5cltle p<ocess J S\Hnlficanl part 

of their legal ' !flItegy. By filing law,ults covering . ignirant fPA ,ulemil kinp and ,eg LJ latory 

inilialives, and tM~n QUickly .~ltlin£ tMe~e groups ha"" been able 1o circumvent IMe "",mal 

,ulemaklng process and effect Immediate reRulatory ;tCt)"" with !he consent OI lhe aKe"C~S 

Ihe""elv!>s. " 

" \lin .. ", .. , . ..... , ... "'" '.00,01...-. ...... od'" &y u.s. 0. •• "", .. ,. '" , .. tloo .11 ........ ... UoI , ... ""'..,~ ." ... -..,I!<a.. ..... _ ., .................. , .. _.,,"' ....... , ........... . ~ Aft'-'" , .. ""',,_ .... ""' .... I. _ .... """ ..... <IM_ ... , .... to .. ,. " ...... oc ... p._ ... _ ..... (>OI'.r ... ',.,. '''''r_' ..... .....,. .• _oI._'oI .... (._ .......... , ........ (OOI ........ \_ 

U.s_Chaml)etofCom"""ce •• 
46 

Court Rankins", Court. Mo'JI tnvolwd In Sue and Soottte ca .... 

~" .. 

Comparing the Use ol Sue and Sooltl e o.. .... the Pan 15 Year. 

Unrokc othc, envi'DnfTK'Jffill law •• Ihc CIc~n Ai, ACI ",,,cifkilHv ",qui, ... EPA 10 publish nOli "" 

01 d,aft c,," ... ,,1 decteM In Ihe FMeral ~Ist~'." These public nOlIc", pvc Ihe Chambe, Ihe 

op portunity 10 Id<!nm.,. Clean Air Act senleJl')enl ag reemenls/CO""'''I d&,ccs going bac~ to 

1997. By e.dwing agr .... menlii re.ultlng f,om ~nf",<emenl ."iom. pe'milting""' .... and OIh", 

"""-We and .enle (ases (e.g., CiSC. ""I InvoMngIhe I., uance 01 rule. 01 Rcne~1 applica bility). 

we haw been able 10 (ompa,e t/le Clean ,1,1, Act 5Ue and settle cases Ihat occurred between 

1997 and 2012_ The fo llowing cha'i (om pare. Clean Air Act <ue and , ,,nle .etlielll<!nl 

3g'''''fTK'nts d oon .. ,'" dCtree.lln.lile<J during Ihal period . 

..... ............. , ... , _I" of 7I1of ......... ' ..... ' ....... 001 ..... 110 ......... ib< •• ""' ... .... 1""" .... 1_, .. _, ..... ,. _, . ........"., .. o, ........... "', .... , ....... , •• "', " ..... , .......... <1<_ ....... "d""" 1nIIoJ<o ... "' .......... .......... .. ~ 11~IIIO< ,0. tIN, ... 4tt,'J u.s." 7'13111."-' , .... -1.1' ... ~ JO •• ,.. ",ro, •• ' .. _ ""'_ or ... , .. __ o'o#."''Ir><I_I ... O'on·.''''I'o"."IcIo ... ~!lot .... . _,( ....... ",' • •• ,lo"._, 

.. _, , ... _ ... "~ ........ _. ' .. ...,.b .. _' ..... boj""' ..... ' .. 'Hm'_ ..... '" .... "' •• "." .... "" _ .. ~,.. .. Iar..-.,., .... "o ....... n .. '._ , . ............ "' .. ,"" .... , .................... " , ... , .. . 

... "' .... "'" '1lIilofI""SoJ ... '."" ~w.I 1U.5 .C. '9&.lII/1I_ ..... __ ..... bk ... ;...oI .... _t<tI .. ' ......... . 

Mi. www.sueandicttlc.com 
47 

Sue llId Settle Cleall AIr Act cases (l997-2011) 

'" 

'" 

" o .. \O~ ",'" J 

1''l'lNOOOI 

"The ,,,,ult •• how that "'" and .... nl~" by 110 mean, a 'lKenl phenomenon" all d that the lactic: 

ha. been ur.ed durlns both Derrocratie "nd llepubl".n admi niWatlon •. "To Ihe e Ktcllt thaI the 

.ue and • .,n le ladlt .kirts 11K> normal noll"" and (omlOOnl ru!emaking proc"ss, wilh Its 

p,ocedural checks and balanCe<, agenc,,", h""e been wi lli", 10< decades to allow ,ue aOO ,enle 

10 vl'iate Ihe ,ulemaklng require"",nl. of the Administrative Procl.'dure Act." Moreover, oUr 

,~.rch found Ihal bu.ines. group. have also taken advanlaie 01 tM sue and .ettle aPl'r"""h 

10 inllueoce Ihe outcome of EPA ;Kllon. While ad'lOCacy StOUpS have u,cd sue and S<lttlc much 

more ohen in r""en! ~ea", blllh Inlefe,' SfOOp. "00 Indu'try niIYl! laken .<lvantase of the 

l;Ktic , 

WHAT AFlfTtlE ECONOM)C IMPLICATIONS Of OUR FINOINGS? 

SinCE 2009, ,,,sulatory ,equ re~nli ,ep,eS<!nti"ll n m""h a. $4SS billion in new COSts have 

Deen Impo<ed by Ihe lederal soY'!rnment. II By ItseW. EPA Is ,eo;pan<lbie II)( adding I"", of 

blll"m. af dalla .. in now ,egulatory costs," Silnifk. nt ~. more Ihan 100 of EPA', (<»t~ new 

rule, Wi'''' Ihe p'Ddu~t cl sue alld ""tic ~gr".,m~nlS. The chart belcw highlights Just I~n cllhe 

most .ignillant ru les thil a'ose trom sue and settle caw" 

.. ' ....... ...t .., ... _ "'_ ..... k<t ...... , ,. "'" 19110>." 1m. "''''' .... 60".,", t<I-.I ........... .,.... 

0...."....., oJ , .. , ....... ~, __ ,",,,,,,d "''' ,"" " .. _ ""' ...... .... , ...... 'h< .. "bOom" ~ ." 01 '''''' .... 

......... oncr .. n_' ......... " .......... ,......,. .......... , ..... "'" "'K'too/'''' ................ .,. .... --., ... _. """ ....... "" .... ,.., .so-.. ........... """..,. .... ", ""-, ...... ""'" 'l' ,.", t<>o • .,.. Ooc>~ ...... n ...... " 

~ .. (M><'" II. )!!Iil. '!U.H __ N""" " 

.. _ ",, l .... "..u. """" r",,",,,. "' ,..-01>0<0.', _ ....... ........ tw< •• " ( ......... , I'. l<)1I1 . 

.. ... MI e.. ............... ll1._.., ........ ......... A!olOI • ....,. ' ... Slll_. 

U.s. (haml)er ofComll1e ree Mf. 
48 

1. UllI!ty MACT Rul~ 

In Oe<em~r 2008, en~irQnmental advocacY g'OUP! sued EPA. SeeKill8 to comPEl the agency to 

l$Sue ma)(!mum iK/lJ<:.lable control t<'l:IIno1011V iMACT) ai, quality standard. tor ha,ardoo. air 

pollutants from powt.>f planu.>CI ln Dc!<:lb", 200!1. EPA lodged a oropo<ed <<In,en' dl'C. ee." The 

i"I""'Com In Ihe "".e. repre,eming Ihe utility industry •• rgued that MACT .t nd.,d •• ""h iI' 

Iho,e o,opo.ed by EPA W",e nO! .... qul'ed by the dean AI, N.I.U 

Utility MACT Wso kMW~ as the Mercury Air Toxies Standard. 0' MATS) lJ 3 prime e.ample of 

~PA ta~inil a<!ion •• In the wake of a .ue and smtle agreemenl. Ihal wer., nol mandated bV the 

CleM Air Act. Ironlcollv, even In this situation, where an alfe<:led party was ible to Intervene, 

EPA and the advocacy t rWl" dld 001 notify or «Insult witM them ,bout the proposed «I!I5tnl 

det:ree. Moceover. eve" 11"'''gll Ihl! Di<lricl Court lor the Dlmic:! of Columbia ","pressed .ome 

COncern about the inlerv"\:nor being ".eluded ".,m the s.ettlemerTi negotl_tkms. Ihe court still 

apPf<>YCd the d<'C~ in the lawsuit," Tho cxtremefy costlv Utlllrv MACT Rule, whko!! EPA Wa, 

not p'eviously r~ulred to i$Sue. il eslimated by EPA 10COSI $9.6 billion annuallv by 1015." 

Z. l u d Renovallon, Re pal. and pai nti ng Ru ~ for Rt .ldenllill Bulldlnt. 

In 2008. numerous environmental group.- ,ued EPA 10 challenge EPA', April 22. 2008. Lead 

Renovation, Rep.llr and Palntiog P'OIIram (LRRP) Rule. i nd these suits w~r~ conSolidated io the 

" A __ ,,,,,, ... _, N • • UJl-<..on .. I.MqII>'u-_.r ............. _ ' .. , .... 

" ...... r_ ~ __ ... ,'" PeI.,4...r. 110<1« or ~ ... ,_ eo- Oo<_ID<I. U,l(M1 "_"""", ... ,' .......... "'_~_"'''".'''' _ ... Q''I'''''''. ''''_ ...... _ .... IJ .... ,4. I009Koo ......... ·"" ............. aw<I ..... , ...... _""'".", ...... "" ...... ,,""' ........ _ ... ", ........... ... _ . ~ ........ ". '. '''''' t~ .. .. "" " ..... , .... __ la_ 1I>i~I" "'" n,.. .. r "'" "tI. _ "', JOI!..", .. 

~, ........ __ " .... ., ... "' .. " ..... "" ... IJ. '" ._ .... No"" ... ,'" •. _. No l':OO~I.I MC'I. D'O \ 1>OGt!lIP,D,t-.", IS, 10101 

"n ... i«l '.»<.IJ06fF». .,IC ; ... _ ....... P, .... _ ..... \ONm.o'ol ............. _I._1Q. 

IO ll ~_~ .. po_~ ..... t .... , ''''''' h..,.loo. ......... ~"(ootht '" ...... ~l "'_ .. _" 

MiM www.suear><beltlc.com 
49 

DoC. CIrcuit (ourt 01 Appeals, EPA eM ...... nO! 10 defend the .ults Ind .etlled with the 

envlronmcl1tal groups on Aua ust 24, 2009, As pari ollhe seillemeni a8reen'll'IJ\, EPA a&,C'(!(! to 

propose .ignlflcam and 'P""iroc: change. 10 Ihe rule, In<ludi"i Ihe elimination 01 an "opt-oot" 

pr(1{rsioo 11\;01 had been included In Ihe 2008 fule , The opt-oul aUlhorlle<!I>CHTH~OWner s withOOI 

childr"n under .iw Of r~ 8nant women r",idi~g in t~e home 10 .. now Ihel. contraclo r to lorgo 

Ihe u.e 01 lead-.ale work practle ... durw,8 the renovation, re pair, and/or painting actillity, 

Remo.i"g Ihe opt-oot provision more than double<! Ih" amounl 01 hOOl ..... ubje.:t 10 Ihe lRRP 

.ule- to an ... timatcd 78 million- and Inerc.'>ed Iiii' cost oIlhe rule bV SSOO million per Vear,U 

To make matler. won", EPA underestimated the numDer 01 cont."",o" w~ would h""e to be 

I,ained 10 comply with Ihe new rule Ind fai"d 10 anllcipate Ihat Ill", .. _.,,100 few I,. in" .. 10 

prepare conlmelor. by Ihe ruW. deadline. 

3, otlandNaturalGlt MACTRule 

In January 2009, enViron menial groups .ul><! EPA 1<> update l<!deral r"8uJatl<>n. limiting air 

emi»ion. Irom 011- and gas-drilling ope,Mlon._ EPA . ettled the di.pute wi th envl'onmentallsts 

on oecembc' 7_ 2009. The 'ettlerTll!nl required EPA 10 review and updale Ihfee .el. 01 

,egulatlon,: (I) new ""uree p"rlDtmance "anc1ard, (NSf'S) for oil and ga, d,illin&. (21 tile 011 

and Gas NI/ICT standard, ~nd (31 tile aIr !o'lies "res1(lual rls~' standards. On Augu" 23, 2011, 

~P/I proposed II <omprehen'iv~ .el 01 update, to Ihes" ruKos, Includinll new "lSI'S and MACT 

'''"Ward,. De.plle concNn. II;' the bu.lnc~ commllnny that EPA had fU,1>ed It5 3na~is 01 the 

oil and ia. 1r!d~ ry' , eml.sions and r"lI~d on fau lty data, EPA is.ued final ru le-s On AUBUII 16, 

lOlL These rule. are e.tlmated by the agency to imp",e up to SHS million In additional 

'cgul~lo"", casu e<K~ Vea r.l1' 

4. Florida NUlrienl Standard. for Est"",";'. and F1ow1 ", Wale .. 

Environmental,rou!" suad EPA In July lOO810 ,CI Waler quality "andard. in florida tha' wouJd 

cut down on nitrogen and phospho,ousl" orde< to fedLl<~ c"ntaminatlon ',om sewage, animal 

wast .. , and ~nil er ,unolf. EPA entered Into a <onsenl d"",,,,, with 100 pi<linlifl. in Augu" 

2009-3 conSent deuce Ihal was opIx»cd bV nine Indu""" inl crvcn"", As pari 01 Ihe 

}cttl cment, EPA air ~ to i.ll", numet.: nUlrlenl llmlt. in p/lal<1S. limits lor Florida', e"uari e. 

and IIo~ng wate" were p,op",~ on December 18, 2012. Final rul .... are r"'lulr~ Ir'1 

Sct>tember 30, lOU_ EPA r«"otly approv!!d fI",ida', proposed nutrient Iland.rd, a. 

substanllally complying wilh the 11!de,.II proposal. The e'limat<!d co" of t he l!!deral ".ndard. 

Is up to S61l million pe r year_" 

.. ~ '001 .... :<O.8'l.:<O.8I1I ..... 0,101tII_ 

a 5<. 1 .. 101 , ..,.., .... ' .""~ ... ",","",. ' ''' .... N .... IG .. _ ... - H __ , .. 1'o1Io."0_ 5,...,.,,,, .. , 

"' .... !'S. ' ... ' 1_4P '0, .. 1111.,11 ...... ''''" .... 1J!U1rIJl4aI . ........ ""K ... ! .... 1<I !20l1!0&5'N ' 10!9+"1" 

"'.;;" _NUl ... ' \I""" .. ,. ............. to.o ........ _""', loo" . . ...... . """"tI W",,,,,, _ .. , lOll," 

""P' " .. , .. , .. '!i .. ,., .. W''","tI ... •• .. !I!!P' ... 't!ld!!I! 

U.$. Chamber 01 (omme"" Wi • 
50 

5. Regional Hate Implemen tation Rules 

EPA'. reg"'n~1 hale IImgram, established dllCadc5 ago bo; the Clean Air A"" ""ek. !O r~medv 

~;slbi ltv Im~irment at federal n~tlonal P<lr~. and wilde",es •• rea •. Because , egOonol h.,e I. In 

ae5lhetk requirement, and r><>I • IIlNIllh standard, Con,.e .. empha,lled lhal .I at o:.-a~d not 

EPA _should decide whkh "",,,,urI" a re """t appropriate III address h.,e within their 

bord".,.,." In.tead, EPA h. ,elied em scltlemenb In a .... bfllU&ht bV o:nviroomental advocacy 

,r<JIjPS to usurp state <lulhoriw and ledo:ra lly Impo", a .tricl ""W ",t m em;..kms contrels 

costIng 10 HI 20 tIm"" more !hal the lechn ... ogv mO)Sen bv !ne stales. BegInning In 2009, 

itdv<XaCV g'oup' filed lawsuit. agaln,1 Ef'A allegIng thai Ihe agency had failed 10 perform I .. 

nondi'oreliana ..... dul'/ 10 acl "" stale regianal h.,,, plans. In r""" .""arale con""nl decr"". 

neaotjalC<l with the group. and, Im~.ntly. w~hou! nolke to the 5late. Ihat would be 

aflected, EPA agreed!O con,mil iI""ltto o;pecllic deadllnes!O ""I on the "al"'" plan •. '" Next, 0" 

the f"IIe mlhe dUd lines II hiOd ""reed 10, EPA delermlne<!tha\ ea<:h mIlle Slale ha'e plans was 

In ""m" w~ procedura lly deficient. lI<!<:iIu,,, the dead lin ... did not give tho: .Iat ... lime la 

resubmit re-.Is.ed plans. EPA ingu~d ltoal it to.d nl> choice bUI 10 Impe"" lIS preferred conlrols 

ledcraUv. EP.6. used ~ue and seTll" to cac~ Into Ihe .Ute ;ua da<lsian·ma~lng prDC .... aoo 

supplant the s!~ " ••• deci.ion make,,-despile lhe prolections of stale prlmacv built Into Ihc 

rellonal ~3'e prtl£ram by Q, ng' '''' . 

.... of 20U, 1M le<laral takeOll ... 01 lhe "atH' regional hille p'OIraom I. proiected to cost aight 

ale~ an estimate<! $2.16 bUlla" WIlr and above whatl~~y l!iOd been prepared la ",,~fId on 

vi.lbility improvemenu." 

6. Chesapeake Bay dean Wate r Att Rul e. 

On January 5, 2009< Individuals and "nviroome"tal ad,,1lClI<)' grouPI filed ~ lawsuit allainst EP.6. 

alleglnA Ihat the agency \YO. not laking neee.,"" ..... rncaiufc'10 p,otO"C1 11Ie ChC$;ipeil~ Bay." 

On May la, 2010, EPA and Ihe groupo; enlere<! inlo a ""ttl .. "",nt agreemenl Ihat would raqulre 

EPA to eUablii/! , trlngenl 10lai ma . imum dally load jlMOl) slanda rds for the Bav. EPA also 

ag,,,,,d 10 e,tabll.h a new storrnwa to:r rl!gime for Iho: wale"hed. The U.S. Oi,trict Court for Iha 

OiW!ct 01 Q,lumbia .igned the selliemcnl agr""menl on May 19, 2010." The 38C1"t'/ late, clled 

the biMlng agre<:ment a, Ih e legal ba,,, lor its nP<ln,i~e action on TMDL.5 and ,tormwiller." 

,,_., u,.c..".'lb~'H 1 

"" •• ,;..,' ........... ' .... ,., __ """ ...... ' ...... ~_ .... No 1." .. O>Il'$OS (D.DC . . ... ' 8. 10111:_"""'. _ , M'. '.'Ik>.wIIHfIlIDO.{ ~"l 'B.Hll1I. _...,,_-.., _, No. hll..-.{10111.0 ..... """loCol 

I ... 1&.1011~ _ .............. ""'<-...... -lIO-CV01 ~1I N.D""" 1'eG. 1I, lnl()j;W*I'ottI' G ... _, ....... ""'. No 

,,'0·£0<11118-"(' .... ID.CO' OoL I .. '0101 .. 5u ........ '"~ ._ .,.. ~_ rtuI<>...,.I_ ~t9i<>t.oI_O/Od,,,.,_'ot.fJo"_(""'XlI>)IOI.I_"" 

.... ""_~ 'o_"' _ ....... "' ..... ...,_ .. 'iO>.-""' .. ,,..." ...... _ ...... , ... ,"", ..... ''''''' ... ,,... 101 ~ ............... , .. '" "su b_l 1 ... 1000'''' ....... "010 .. 

W'".IlIon"",-"", "'"", •• " ........ tIlIoW....,."lIlO1 0 •• Hm<!~ 

_~ll'A,'_ ~ ... CO-'"'I,."·S.IOOf). 

.. _. .I'A.~.'"."' ........... I ..... ".:!<>lOt· .. Sua....., •• ,,'"'' .5t_/I<p<l'!f_rll,,_''''''''IP~~_ .. Oi<g<ilo __ Ill<.'''-'''''''''''_ ~_"'.US._ec-r""""~ ,, "' ''' _''5U/I '' ... I.J(''''''J(l.Wl''''o\iolol<'' 

1il1lJl ............... """*Wr.,!m!£!IIfN' ...... "" ... i'Ic'· • • e."'IW .......... IbrAltt.o. 60). IWjI/6l 

"""""" .M www.sue.nd.ettic.com 
51 

Sev",al lawm ~"r •• in a lOU lette,. a'Rued lhill EPA Wa, tal<ing Inl, ,ub' lantive action even 

though it wn nOl .utMOtI:cd II> \JO so unde, law." furthe' , Iht'y also irg~ Ihal £I'A was 

imprope rly u'ilng settlement. a. Ihe regulalOty aUlhOtity '0' oth'" Oean Wate, Acl action.: 

Wear" concerned that EPA has demonsl"'t"" a disturbing !fend rec~nW, Whereby EPA 

has been entering fnlo S<'ttlement ag,.,..,me'1l' Ihat purpart 10 (o)Ipand fede",1 

re&ulatory aUlhot;ly far beyond Ihe reacn oI lhe Clean Waler Ar.1 and ha' Inen ~E'JI 

citing Ihese settlement ilgreemenl! as HOOfCe 01 regulatOl"1 aul hor!1\i In other mllten 

of a ,Imilar nalure. 

OIle ""ample of this pranke i. EPA', OOI-of·court ... l1le ..... nl agreemenl with Ihe 

Ch",aJl"akc Bay Fou ndallon 'n Mav 20lO. EM has '''' ..... 'ed to that .ettlement as a ba,fs 

for It!; e<labli,hmen! of . f1!dera l Iotal ma>dmum dallv load (TMDlf lot Iheenlire 64.000 

Square-mile Ch",apeake by walershe<! and EPA', u,u'pation of .tatc autho,ity 10 

implemenl TMOl.ln lh8! watershed. EPA also has ."furred 10 Ihal ... Itleme nt a, ~ basi' 

for ilS plan 1o lOlu l.le ~Iormwa er Irom developed and ,ede\teloped ,ile •• Which 

c..., 'l~e EPA', tuIO~ aU hor~y." 

e~weepl~g ""w fedefal progfam for Ine Crn. .. peake Bay (, majOt in II< """I'" a nd l"Conomk 

Impict. T~ program .et. land use-type limltl on businesses, fa'ml. and tommuo~;Cf On the 

Bay b,ned upon ~el . cakul.ted dalty pollutanl di,cha'Se •. EPA', dl.placement of , tale 

aUlhor1ty i< estimated 10 cost Ma~l nd and Virginia up 10 $18 billion" 10 Imp ern~nl. 

The edt'f'llll.~ve. of the (~e~peil<e II...,. prog.am is uoprl"Cedented In 11, scope; how....." 

by relVlng on the .etTlement ag ,eemenl a. the source of its ,egulatory ilulhority tor tile TMOls 

and ,1ormw"te. prog,am, EPA did nol na"" 10 seek public inpul, e.pl.in the stal ulory ba,l. for 

In Klioo. in lile Clean Water Act, Of I!ive~ta eho d"'l an opportunily 10 evaluate Ihc science 

uPOn whkn the agency fcl i6. Beause the ,uINNklflll' ,e.ultcd from a s eltlcm<!nl a!,..emenl 

Ihat "" lighl lime line. lOt action, Ihe public neve r had ace.... 10 Ihe Inlormalion. which would 

have been ncces, ary In orde, locommcnt eff...,1 .... elv On Ihe l'rlOdellnl and the .,sumpliOO' EPA 

Uled . 

.. "",,, t ...... _ " .... , ... "" .... I' ... ... """ " .... ....,.,.., _ "" ....... ,... c-_ a. ...... , .... , '- " "" • . ..... w .... "_'~ _I __ "' ' .. ~ .. .,." ............. (_ ... "' ...... !lllt we"" 

c"""" .... _ .. ."..,.. ....... "'''''' .. ..... ........ w • .., ... w''''r.r ... '"''''''''" .......... .......... ....,.-.. ,..,."V '0, '01> , .. '0<. Of , .. Itt,,. ..,.. .. , .. ,"W """ ... ~ 

."",uw.... .• ",,, ........ .,.,.Iu.iAt .... «"'If., ....... , """" ...... , ........ "'.""" .. '."""0 1t"IKl'f4lUlll,.l¥ ",61.&bBll!b.Mj' .... ,~ ~ ..... V. .. _fI ..... M •• '/lte!tim'" Qq/O!ll!lk· ... I. I!!'!II!6§WI/I!r! .. I'Iq:1tH ... ' ... P· 

!t;;"O:' ... :==."'i:'~~.,:::"'..::P ..... " \.01, .. fide ' ''' "" _ _ .... _"" "" ..... ... C_ "' ...... 1 .... _ a._ .. "' .. , .._~. C)Ir"","'-'" _, :roll .. 

~!C!!Att_IIIOo 1<IirtW6.-".,/!·""""'''''-... OO!htrrrl ........ ,~~~ 

V::.~J~~ .......... r"" _O/ ... "",, ... , .. tI>rd __ ."" .... -..,.,.'l'M.""""" ..... '.J.. l .... 101l ~ OIu.ol'f,O 1 ""'_011.,. ,_.,.1011, .. _ .. Wl!!! !!of"""''' "..,'ffl"Z ,,,,, ... i<le'llli. 

U.S. en.mller 01 Commerco Wi:. 
52 

7. 01 r MACT ~ 

In 2003, fPA ~nd Sieff~ Club emered inlo a [00 ..... 1 ,,&reemenllhal requi,ed EPA 10'1'1 a MACT 

'Ianchrd for maior- and are;,.sour<:e boilers. In 2006, the U.s. Di~t ict Cou rt 10' the Diltrict 01 

Columbia i,wed ~n order ootallin, a ""hedule tor l he . ulemaking. On September 10, 2009, Ap,1I 

3, 2010, a"d Seplemt>e. 20, 2010, EPA and Sierra dub "3.eed 10 eXle.-.d the deadline lor the 

rule. S;"ff~ Club .ub>c:quenllv OPJIO'ed EPA', 'equest to IUrlh ..... xtend t:I>c deadli"" 'rum 

lanuary 16. 2011, 10 April 13, 2012, d5p;le d.,da'ation, bV EPA official. that the agency could 

not meet the Januarv WI I d ... dllne ~a"", 01 tile lime nece,,"'Y to [oMId ... and ""pond 10 

all of the public comments on the proposed ,ule. The D.C. Qi.lrict Court ruled Ihal EPA nad had 

eMuah Ilfl)I! and ,""I' Ihe agency only an addilional month 10 f1na ll,e lhe rule. EPA ~new the 

f,nal rule II had b~n ordered to i~ut' wou ld nOt .u"''''e court ""allen,e. Accord~gly, EPA 

publi.hed a rmllee of recon,ideralion Ine,.me day It finalized the rule: March 21, 2011. 8;osed 

on commenlS iI rel:elved lrom the publi<: as W<!II a. addil;ona l data, EPA ii.ued final 

r"",on,idered rule. on lanua .... 31, 2013, and february 1, 2011. The co,t 01 Ihe 2012 80ller 

MACT lIule Ihal EPA had to iu"e prematurely was eSllmated by Ihe agency 10 be 53 billion." 

I. Standard. lorCoolinl Wlter Intake Slrucl" .... 

On NOllEmbe< 17, 2006, environmental advocacy grOUI" sued tPA. cI,,' ln~ I~atlhe ~gency 

had /ailed 10 """ "s...1 Te<hnoloJ'l Available" wnen It ;,,,,cd a final rule ","I"lI !<Iandard, for 

small, eJCi,tlns coollnl ..... ' Inlake l tru<:!Ures und .... leCIion 316(b) of the Clean Water Act." 

EPA detencktd agajnst t~ l. lawsull. On luly 21. 20lCl, EPA "nd tM group, ag ~ 10 a ~u~lary 

rema nd of the 2001> cooll"ll waler Inlake rule. On NIM'mber n, IDIO. EPA enlered lnlO a 

senlemenl agreement wilh Ihe envlronmenta1li'OU,", to Inlliate a ntw ~lema~lng imd to take 

public comment on I~c app,opfiatencss of lUbil!ctlng small, exl.tina laclljliel 10 Ihe national 

Slandard. d"""loped fot la,ger I""'lilles. EPA p"blished tile proP"S"d ",Ie on APfl120, 2011. 

The proiXY.>al lYO uld In<;rea.e dr.omaTicaUy Ine cost I" .mailer f;)C)l ilie'-suGh as .m.oh uliHlles, 

pulp a nd paper pl."", cllemic:al plan", a nd melal pl""ts-i>; more than $350 mililoo ".ch 

vear.'" 

9. Revlsla n 10 th e Particulate M.II .... (PM .. , ) NAAQS 

EPA ',"Ie,,,d into a conl<>nl deal'<' wit~ ildvoc:a<:y Bro~P' and agr....., 10 is,ue a fina l . Ule i>; 

December 14, 2012, revi""IIlhe NMQS for fine p.rticu a! ~ malle' (PMu). EllEn by EPA', own 

adm;"'on. Ini.d"adline was un ,uil"ic.ln a May 4, 2012, declarallon filed wilh Ihe U.S. Di>t,ict 

Co"rt oIlhe Di'l1k l 0' Columbia, Assi,tant Adminlsl1ator tor Air Regina M~Carlhy ,Ialcd tnat 

EPA ..... ould need unlil AuguSI 14. 20ll, 10 R~~llle lhe PM!.> NMQS due 10 the many Ie<hnic.al 

~nd ~ompl"x I .. ue. Indud<'ll in Ihe p,opmed ,ulema~jnl/.."" Despile tnl. r""'''in itio" ollhe lime 

-e- www.suea",bettic.c"m 
53 

constraint';, EPA ag...ed in the o.iglnal con~nt dec ..... to a UUl\Catl'<l dead II"", p.omislng to 

fpnls~ lho rufe;~ ooly ~a lf Ihe lime 1\ bl.'flevecl It actually n<!<>(led to do the .ulem .. ~;nB p.operly. 

TIm r,nal f11le I, ",tlmated 100001 a. much a, $l8l m,lIion "acl1 vear." 

10. Reconslde.at lon of the 2008 OlOne NMOS 

On Ma~ 23, 2008, ",wlruomcnlal g.oups .ued EPA 10 challenge the final ,ovise<i OIon" NMOS, 

w~ic" Ihe agency had published on Manoh 27, 2008. The 2008 rule had lowe.ed Ihe ~i,ht hour 

primary !ruund·level Olone Sland.,d f.om 84 parts pe. blllkm (ppb) to 75 ppb. On March 10, 

2009, EPA filed a molion ... que,ting Ihat lhe coon hold tile ca, ... in abeyance to allow lime lor 

olfldal. lrum Ihe new adminlsualion to review the 2008 Slanda.d, and determine whether 

they should be reconside red. On January 19, 2010, EPA .. nnOlJnee;; that II hild decided 10 

,ec""sid". the 1O08 0""'" NMQS." Although EPA did not enler InIO" ,enl"menl a,.""m"n! 

or consenl decree with Ihe enl/lronmenUI grOllI'. it readily aC(epted the legal . rguments put 

forth by the group despile available "'cal d.I1len.e . ... The .gency annaunced its Inlenllon to 

p.opose .. reconslde<ed standard ranginB belw .... n 70 ppb .. rod 6S ppb." Although lhe 

rI!Considere<i Olone NMOS w~. not published-ar>d wa, Wit hd rawn by me adm'niOlration on 

s..plem~r 2, lOU -EPA had ~"imilled t~'1 the recansldered IYndard would Impose. up 10 

$90 bill!"" 01 new cosu per yea. on th e.U.!;. «onomv.<' 

QnffR SUE ANOSETT1.E.-6AS£O RUUMAKJNG$ OF PARTICULAR NOTE 

Revhlan. IO EPA'. ~u le on P,otecllcn. for Subject. In HUlTI3n ~ese rch Invalvlnl ..... llcId ... 

In 2006. EPA i .. uoo. fi nal ru ~ on proleclh'll human subjects In 'c .... rCh involving ~s jdde •. " 

lia.ious ad""""",,, g'OIJps .ued EPA, allegIng Ihallhe ,ule did not go fa. ~nough." In Novemb", 

2010, EPA and the ildlio<:a.t'/ g.oup. fi n" liled a S<!nlcment i& .. ,emcm thaI .equircd EPA to 

Includ~ .ped!;': lans 'iI~ !ar a new p.aPD"ed rUle . 

.. ~b! .. 4·. _'10'" NlQ"""',Mo" .... ,' ........... _ ... IP.""" ........... I .. ("'._ ..... ..-4 -.12(11),_,"("""""'" w, 1.r!i!OII10Ilb!!J! .......... " "'" 

""" .. ~ ... U3l.U·41 ... ,g .2C . " .... ,uI't... ........ _,. __ ;.,r .. , ... ..,."._."'._,_., ...... ..-.., .... .,c ........... , ... , • 

...... _oI"~ ....... ""\"P<oI""' ...... ' ... <a .. Wt __ ",.....o/t •• _._ ..... , __ ,_ .... 

"" __ ., ............... "'~r ........... _'"_.-.. .. '""'-'<YI'....,. .... _ .... v...tI>< • ..".,.. 

.. ., ... _"' ..... ""M .. \110-...."., ..... ,_ .... "' ............. "', ..... "'''''' .. --..,tJ. ~"' ...... ., .... ' .... ( .... ' •. lO'"I· .. t.et! ... """"'_ .... " .OW ... IO~ ..... __ I .... JO ,IOUI'''--' ''''' _'''~'''''''''I ..... 1_ ....... _ .,.;u, c.~ ,,, ...... 01 \1 _ ow -." " ... , 1<>\ .. 1100 t. ' ....... Uto 1OO!l 0' .... H .... ~ .,jo .... ,"'" ..... ' ...... 111 .. _ '001 ~._ .. -"""'. ___ . ... -oodt .. '! .. d .. d· ... _':.,.,...jo<t •• _ ..... '" ~ " ...... ""'" _ .""'"'."'_ .... '0'" .... _ , ........... ...;. .......... ' .. 0"'" "I , .. W'" ~O" .. "" _ ...... 1. 1O!l lP~~"_IO_II>I""_"_NAAQS"\O'" 1Ol1 ...... ~2C! •. 

",u .......... IJIIlho. ~.1OO6l 

, .... ,""" .... _ o.r-~ .. ,." ~ •. O6.Qll!l-.t (1. dr.J ~"lICt ..... _ ... "" ,...-low ... 1._ .. 1.1. 1006. 

(ItJo.' -.tited ,.. __ ~to,~ ... , .. ... <>00 ... , • ...-....... ,.., __ .t .. Soat .. o.:"". 

u .s. CIlamber of Commerce .1. 
54 

The advocacy ,roup', inllu ... """ on Ihe . ubsta""e of Ihe .uleo i •• efle<.ted In the la.ct Ihat thel. 

IIl':5i rOO .egu~ ~ Changes we. c dlrKti'i ncoq)Ora ~d Into the Prop05<ld .ule, In tt,.e preamblt 

ollhe l Oll p.opo,ed <ule," EPA wfOle, 

EPA Jlso agrC<1d to propose, at a minimum, mendmen . 10 II>e 2006 rule Ihal are 

substantially coml,teOl with language ne,otiatf'd between the parties and atta.ched to 

the ",," lemenl a'.""ment .... Anhuugh the """fdl,,! Dltlle amendmenl50 p,oposed In InJ. 

document [2011 proposed ,ule] differs In a lew details 01 OOrtSt.uctlon and IY<lrdinB, 

!/l"v are , ubn.ntlalty <011,;"enl with Ihe ,,,,uJalory la nguage ne,ml.led wilh 

PCliUone". and EPA oofl,lde', th...;e ame"dmen\.< 10 add ..... Ihe Petitioners' maJo, 

argume nl..l." 

In fact, there a,e "nIl,,, p ..... ,,,. I,om tn" .-etlle"",m a,,,,,,,,,,,nl Ihal a,e Identical 10 the 

lan8 uag" ,,,,,luded in tne 2011 pr oposed .ule.'" EPA wa. nm miodaled by .lalute to t. ~" any 

itCIlon on the human·t eo,lnll .ule and certain ly was nol .equired to ·CIlI and p;o,;I,," lhe 

langualle sought by the iKlVOC3C'/ gfOUPS. II EPA Wil< con~'ned Ihal Ihe Wle needed to ~ 

cManSe<!. ~ loould have gone through ~ n"'m~1 nolice a nd comment .u~m ng ,athe. than 

wriling the lubst.flCe of h~ proposed ,ule behind cio.ed doD", 

U.S. Fbh nd WildlifeServite jFWSj Endanlered SpeCi es Act UstinBS ~nd CrItical Habltil 

Designation 

FWS agreed In May and July 

2011, fa !INO consenrdecrees 

wilh on e,wirOnmenlOI 

advocacy group requiring the 

ogencr, fO prop05e adding 

more than 720 new 

candidOIe5 to the list of 

endangered species under the 

Endongered Species Act. 

.. 10_.1\0& V",'./OOI""",",,", l. ",III 

fWS ""d a 'en lemenl in lOO9 10 de'lgnale a la'Be 

(filic~ 1 habilal a,U und". , .... End ngc.ed Spec .. , 

Acl." In 2008, ~nv rO/1menlal advocacy i'cuPS .ued 

fWS to protest Ihe &elus"," 01 13,000 aC'es of Mllonal 

lore" iand In Michigan ind Missouri I.om the final 

"(fital ab~a ' dcsiKnatlon lor the endangered Hine', 

eme.akl d.aionfi'i under Ihe Endan MSp«I s Act." 

ni l" I~ , FWS dl.puled Ihe ca",,; howelle" while the 

ca... wn jlIlnding, Ihe new admlnim ali<ln \O<l~ office, 

ch.nBed Its mind, and ..,"Ied wilh Ihe plalnliffs on 

Feb'lilIry 12, 1009." fWS doubled Ihe .Ize of tke 

crillcal ha bltal area f.om 13,000 a.c,eo 10 more than 

.... _r_ ... _'p~ .... p/aI,..IIts~"_ .. ,.,."utII/_.~" .. "'_ •. {P~ OI4UO,(""'c;,.~ 

"...." .... 1. ""0 ..... .... '6 , ..... ... V" ... , ..... ,,., (._, .,., 1. >D" l· 

.. 5H 101' .................. n< b_ EPA .... _IVI. __ leO III ",,,.,01,,,,,,",,,,,,, P</f_ , ....... ,. fH-.Q6.{MlC It' 

c ... ~ ~o .. _ l. lOIO' .... ,,,. '"0_ ....... ,~ ... ~ ... "ll. ~''''. "'0<" 01 .... '"""_ In I~"'''.' .... ,<1 '" "10 ~""M~",~;01 .,,,,,,,,,,,,,,, ,,,.,,,,, __ ",_,,,,, ' ....... __ .. " "<a>...., •. (._ .... q,;< .. ,"'""><o O,"" l40 l~·O.III.I.-"<oo;<""""" ............. . 

Ilr<t<rol ""'"''' .. ' '' .... ..,.,.12. IOO!!I "_~ __ "'"'"'-'"" (~_.r,.. .. t ....... 40'.~rr .. CIo<_."_"'_ ... " .... r. 

"'."" I~ 1001 (N.O. 1.1 "s..,. . ..... l'. 

Mi. www .• ueand.etlle.com 
55 

26,000 acre., a. 'IOIJihl by Ih" advocacy irouP" 1ot Thu., FWS eff""IN"1y re~ a large 

amounl 01 land from devl>lopmenl witlloul att~l('d parties ~itVing any ~ In Ihe process. 

Even tm. leoo,~1 iov,,,nmenl did ""t think FWS was d"arlv mandated 10 doubJe the . i,e rn thll 

crilical habital "rea. 3i evidenced by lhe ",ev"' .... administration's Willi ngness 10 fight til<! 

w.u~ . 

Mo,,,oy",,, rws ~,,,,,d In Ma~ aod July 201110 Iwa con""n1 deere.,. wllh an environmental 

advocacy s,oup, requiring th" agency 10 p'opme a" dlng more Ihan no neW caodidal'" to the 

li<l of endangered IPeele . un"e, Ihe Ef\dang"red Spe<;t", Act .... Agreein! 10 U<I Ihi. many 

.pecl ... all at once Imposes" huge new burden on Ih" ag"ncy. Accord ing 10 Ih"dl,ector rn FWS, 

In fV lOll, fWS was allOC"ted $20.9 million ,'" endangered.J>ecIes lIS1ing and cr~lcal h~bi!3l 

dos,g nation; the agency .pent more Ih..n 7S% at Ihi •• llocalton ($IS.8 million) taking Ihe 

sub<lamiva action. required by courT ",der. or '''lItem"nt "s'oomen" '~,u~inE frorn 

Ilti,,,lloo.'" In other WOfds, . .... and ~ttle t<I~ and other law.uits .'e ettectivelV d'",in& Ihe 

regulatory ~cnda of l!1e Endange,ed Species Act program at FWS. 

THE PUBLIC POUCY IMPLICATiONs OF SUE AND S£TTLE 

By beif1g able to SlI<! aM Influence . ge n-c!es 10 lake 

action. on specifIC r~gul",ory prog,ams. advoc"ty 

K''''''PS use 5"" aod settle to dicta le the policy and 

budl!e(31)' agenda, of an 31"OCV. l'lSt~ d of agenc,,", 

beiog ab le 10 use thei' discretion On ho .... best 10 "'illl~ 

mei, Ijnllled res"",,,,,,,,, Ihey are forced 10 .hlh lhese 

resou..:e, ~1t'/ from crillcal duties In o,de' 10 s.atidy 

Ihe narrow demands of outside g,oupS. 

ThrouSh ,ue 800 sem", ad~ocacy ,roup, also 

significantly affect Ihe regulalory envlron,""nl by 

getllng age",,", 10 Issu" ,ubslant,,,,, requireml'fllS thaI 

are not "'qulred by law. E",," when ~ re&u lallon il 

Arxording to th~ director Qf 

the FWS, if} FY 2011 the FWS 

was allocated $10.9 milliOn 

for endangered speclesll:sling 

and critical hobitot 

des/gnation.: ihe agency :spent 

more than 75% o/Ihis 

a/local/Of! ($lS.8) IOking the 

substontlveoctiofls required 

by court orders or settlemenr 

a"rermenr. resulting/rom 

requl'ed. agencie, can u'" the le,m.ol a sue and . etlle litigation. 

"i,.,..ment '" a lega l ba.i, for allowing .pecl~ intere,ts 

to dlc!ate Ihe dljcrctlonary !""'IS of t he regul.tIonS. Third pml", ha~ a ~ffl dj ff lcu~ time 

challenging the aileney's surrender of it> discretional)' powe, l>ec:ause IMV typicallv cannol 

InteNene, and the cour" olten ,Imply w"nt the c~e 10 be senl('d quickly • 

.. ~" ...... I, ',"" ~ .. , ll,J90 I""'''' til, 20101, .. _.., .. " .. _ ... ....., ."'~ ..... , __ ,_ •• ·$Nun'lc 0.<. ..... 10.l<IIlI . ... ,.."' .. /D<._-. ... ,,. s..bi<>r 10.1) ':'loo~ n, .!OUj. rh. ,_ .... " ,.I<kI ...... ", .. 710 '..-... 1 ...... 10& .. """-'".,......_ld 

....,_"' .. _,o\llt.'''' ................ _''''( ... <D ~.I.l" ... "'_ ...... __ .-.. ''' .... ... ....... ' h._oIulOl<Ol •• _ .. ' .. UI. '!oio_ .... _ , __ .~ .. "'. _ oI lI' td ....... . ""' ,,,w ___ ~" !ll~l!n! "'*""'''''''''~ 

" ''''"''-fOI M .. 0 .. 1, ... _,ot,U S .~ . _ _ r/'_'~<N ~ ...... _"" .. c-.... 1a.-. .. 6,.!Ol1 l 

U.S. Charnber rn Commerce AM 
56 

Likewl.~, when ~dvoc:;acy grwps and genc~. ""gorlate deadline. and 'iChedule. lor rIl'W ru ~. 

~rough I~e Sue and seerle process, lh~ rulemaklnG process can suffer greatly, Dates fOf 

regularory ilCr.m are ctren ,pl'(ified In 51atures, and a,gencie. like EPA a .... rypically unable to 

~I the m.>Jorlty of those dudlines, To a grcat e~tent, thc,e agencies must ule their 

dl'iC,etion 10 I<'t re,ource pri<l<lt~ in Old".. 10 ""'''' their mallY compellnl obligations. BV 

ag,,,,,ing 10 dead line. Ihat a,e unreal"ric and ofterl unachievable, rhe ager><:y lay. the 

foundation for ru.hed, "oppy ru",m;oking tI,.I ctren delav' Or dcle.!! the obJedivc Ihe . geflC'/ 

I, weking 10 oell""'". The.e hurrll'd rulemoklng. typlcalloj require corrKllon Ihrough l!'Chnlcal 

co'recllon., 5ub.seQuenl rPCOMlde,ation,. or court.ordered remands to the agency. Ir",",cally, 

the prace .. oll .. ulnl ""he<!, poorly develo""" rules and Ihen llaving to .""nll II\011lh' 0< yea" 

Instead of agendes being 

able to use their discretion on 

haw belt /0 Utilize their 

limited resources, they are. 

forced to 5fIJlr th~5e resaurr;e.s 

awoy from critical duties in 

order ta satisfY the na" aw 

demands af outside groups. 

10 correct tllem defeats Ihe advocacy ,,,,up's obj!'Crlve 

01 forcing a rulem" king On a tight schedule . • he lime it 

takes 10 ma ke Ihe.se II.e., howeve" doe. nOl change . 

regulaled enllty'! Immediate obllgali"," to comply wllh 

th ... poorly con.lrUct<>d and Inleil5lble rule. 

Moreover. If rt'gu lated partie. are nOl at the lable 

when lIa;ldlir>Cs are :let, an agency will nOl h~vc iI 

reali>lk ,enw oIllIe I5<U3 Invohi<>d in 1m- ,ulem~king 

(e.g .. will there II<! efl<ltJgh time for the agency to 

urlderstand Ihe oomtraints fadns an Indu5lrv, to 

pertorm eml"i,,"' """,,'ro,lng. and to dl'l'elop achie_able standa'ds?). Especially IOIhen II 

comes 10 implementation timet.blcs. agl!flc!cs Jre HI·s ulted lel f"a~e such d«isionl witllout 

slgnificanllcedb""k Irom lho", who ""tually will have 10 complv with a ",~ul.tlon . 

BV ",tlinB a.:eclaraled deildllt1Ci, "3gcncle. very Ollen iNe thcm<elvu insuffiden! time 10 

comply wt1h the important ."alytic. requirem<'m. that Congres' enacted Ie en.ure sound 

pollcymKIng. The,e requirements Indude the Rellulatory fl""ibiilty Act (lIfA)" and the 

Un lund<>d Marldille. RefOlm Art" In iidditiOll 10 undermini"lJ the prot...:tlo". 01 th ...... 

"atutorv reqUirement., ru.hed dead lines can limh lhe reYlew 01 regu lation< under Ihe OMS', 

regulato ..... ,evlew wide, executive orMN;,'" among ot .... , laws. This short-dfl'u~ed procl!lo' 

deprive. Ihe puhll~ (and Ihe agency Itself) 01 ,ritbl information Bboullhe lrue ifllllild of Ihe 

rule. 

UnrC;r.lOnilbloj a(Celcrated deadlines, such a, w~n P~ NMOS. hilve adverse Impacts thaI 110 

well beyond the sP<'cllic .ule al i> • ..e. A. Ass;51. nt Adminl5lrato< McOlrthv noted In he, 

dedarlllion before Ine court In Ihe PM,,,, NMQS caroe di ~'u .. ed above, an ~nfn:lOnablt 

deadline lor on~ rule will draw ,esour<:e. Irom 0111",. ,~gu'atla", that mav al'iO be> under 

"~""" '_"" oIlilll, .. ..".. ....... ._-..Iqo~""I' r"I<><''_f •• _. lI4 01 ", ~U S,c ,, ~~, 

"'"" __ ...... lorm ..... oI l'ffi., I Uj,c. + 1101 .. ... 

.. ~ ~f" 10"", ... "'*' 11.166, ......... , ... 1'10_ .... ~ ..... ~"'lCI. 1"11; E,o"" .. , .. Ordeo nUl, 

. ,_ , ........ ",",",'~, 1m\: DmIO .... 001« 11,211. • .... ...,c_ ....... oc ........ ' ... ~ ....... " oUltt' [ot,,,, so.".., O"V'J>,o'""', '" u .. • 1M .. II, 1OO1!, I ... ",,"' '''''' U.5ll .... 0 ....... ""_ .... _ •• ~ ~ (10 ....... ", 10111 -s- w-.suear><bettle.com 
57 

deadlines.1(! When lhere ~re un",a~'lk dead lln ... , Ihere will be <oIlater,,1 damai" 00 Ihe.e 

ol~er ru~, which wlil loyitc-advocacy group'! 10 ~I EPA's prio(~ies furlher when h~V sue 10 

enlorce l ho,e dead lines, 

In lacl, or><> 01 the primarv rea.ons ddYOCOKy groups 

lavor me and senle agree"","u .ppro.....:! bV a <.01Jrt I, 

Ih 1 the CPUri reI air .. Jurisdictioo ove r II", settlemenl 

and the plainlillll'PUP can ",adily enlOfce percel.....:! 

noncomplla""" witt, the ag.«,ment by th. agern:v. F", 

it. part, th .. agency canMI change any'" the term. pi 

the senk'rnent (e.g., an agreed deadline 10. a 

ruk!ma~lngl without Ihe con ... nl 01 the advocacy 

group. Thus, even when an "!"ncy ,ubseqt>!'ntly 

dl5<:over, proble1Tl5 in comp,,"ng with ~ ,enle"",nt 

agr""menl, 100 .d~oc.cy greup tYpically tan lerce the 

agency to lultill iU promIse, reg.rdles. 01 lhe 

consequence, lor the agency or regulated p~ni .... 

Because a seUlemenr 

al}reemen! dlreCfs the 

stillcture (ord sometimes 

even the actuo/substance) of 

the agency IlIlemaking that 

follows, inleresledparties 

have a very limited ability to 

alter the subsequent 

ruiemaking through 

comments. 

for a ll 01 these .ea""", st>!' and ... ttle ~lol.!,",IOO p.lndp~ Ihal W an agency Is golnllo w.ile a 

.ule, Ih~n the goal ~h!)U ld be 10 develop thi! mo<l effeclivI:. we ll·lall",€'<! 'l,£ulatiPl', Instead, 

.ulema dnil~ that ar" (hi! product 01 sue and senle ag ..... men(s .'" most often .mh€,<!, sloppy, 

;lIId poorly cooceiyed, They usually !:like. great deal of llme.rId effon to cor.cc:~ when the 

ruk! could have ~n done right In Ihe Ilu\ piKe il the .ulemaking p'O«'S~ h.d been comlucte:d 

properly. 

NOTlCE AND COMMfNT AllOWED AFTER A SUE AND S£TTlf AGREEMENT DOES 

NOT GIVE THE P UBUC REAL INPUT 

The oppor U"~Y 10 COmme"1 On tne product of ~ue i nd settle .g"""_fllS, eithe, w~efl the 

agency lakes commenl on • draft "'Idement iIg.eement Of ta~es notlce ilnd commenl on th .. 

subsequenl ,,,Iem"king. is 001 \uflklcnl 10 campeflr.;ote fOf Ihe lack of transparency and 

participation in Ih .. '''tlie"",nl p.oc,",s ft!.ell. In <.ases whem EPA allows publk comment QI1 

d •• ft COMenl decrees, EPA only ra.ely .lter. I~ consenl "greemenl-eyen ah ... It ."""IYes 

adver ... com_nts." 

.. ""' ....... ' 01 .... 1 ...... " ..... ""...-.... >.)_, .. " .. ,0"""' .... " .. 10<''''' ...... , ........ , __ f .. W.r_.u.a.' ... ~o( ...... _ ................... "" .. ..,."' .. r""""'_1np_"""'._ ... ' ... """"' ... "o" ........... " ..... , •• od_lIo"""'"'_wItIo ",""_«I "' .. n_ ........... '_· ...... ,""" """ M'O •• fAA, " ", 1:ll· .. =U. 1:ll..,.oO/I5U, 0.0: ........ 01 ~ ~ 10,0,C, M", •• :10111." IS 

1 ... _-1 

" .. ,I><~ ... "."AAO:S_I1ooW1_""''''''" .. ' ..... '''''_.'''' ... "' .... , .. , __ ' .. _'oI ... .u.._ , .... --....... -""' .. ''I'.-'"'''' ... ,~''' ... -''''_._ ....... I._ _. '''' '_ ..... I .... ' ....... IP.~ .......... ",\1"'or ...... ~ •• _,'". '_ .... I_ .. ' .... ..,_"'.,,. .. .., 

..... 001 ..... .... 

u.s. CIl.mbe. of Commerce At_ 
58 

M~e,. becaur.e u... r.ettiernen! "I"""'lI'nl dl,,,,,u I~e tlme!abJe and the struclu,e (arid 

sometlfl\l" even Ihe actual subslanca" ) ot Ihe "i0ZllCV ,u!ema'InQ Ihal 101Iow •. Interested 

pa"I ... u,ually haw ~ very limited ability to alter the d",lg" 01 Ihe subsequent rulemaklng 

Rather than heorin9 from a 

rOflf}e ofillterested parties 

(md designing the rule with a 

panoply oflheir concerns in 

mfnd, the agency essenllally 

writt5IU fUll!! 10 

accommodate the s(H!clf/c 

delnOflds of a single iMeres/. 

Through sue and.seltie, 

adVocacy grovps achieve 

their narrow goals at the 

eJ/pense of savnd and 

thoughtful public policy. 

through tn.,;/ comments." tn eHed, the "cement" 01 

the agellCV acti.", i. sel and has al,eady IlardenOO lI'1 the time the ,ule is propmed, and It is very difficult to 

cha nge . Onu, an alrocy propose, a r<!i!Ulalion. Ih~ 

agency I, restricted In h_ much it can change lhe ,ul" 

belor" It bKorne, II"al." PIOl"'",d regulation. al" not 

like propor.ed legi.ua tkm, which can be wry "<lid and go 

through seve,.1 ,evision. befo,e being enact...:!. When 

an agency p.opole. a regulation, tholy a.e nOl saVing, 

").,t', ha"" a co' .... e'sation about this is,,,,,: they a re 

saying, -th is is whal _ Intend 10 put Into ei1e<:1 unles' 

the.e Is .ome very i ODd ,uSOn we nave ove,lookl'd 

w~ we unnot: By giving an agency Icedb3C~ du,lng 

the " "flV development .tage about how a (cgul;l!;OO 

will ailed In"'" ,.,.....,ed by ii, Ihe "i""CV learn, f,om 

all stakehc>de" about probJams belore they get Ioc~ed 

InfO Ihe ,egulation. 

Sue and ,ettle "I!,eerrt<'nls cUt this e,1tk31 jlep <'nll.~1y AU! of ~e proo::eu. Rather tMa~ hearing 

from a ,ange 01 Inte,,,"ed panle, and de"gni"3 t~e ,ul" wit h ~ panoply oilMir conce,,,,, In 

mind, the agency l>I.cntlally w,ite> ilS ' ule to ""commodal a tile .pedlle demand. 01 i .Ingle 

Int"''''I. Through ,ue and settle, advocacy group, ac:hfo, .... Ih";, narrOW 11",,1. al Ihe e xpe"", 01 

sound and thoughtful public policy. 

SUE ItNO Srnlf IS AN A8USE OF THE ENVtRONMfNTI\l CITIZEN SUIT PROVISIONS 

Co n8'"'' expr".r.ed coneern 10"3 ago Ihat allowing unlimited dtilen ,u;1> uod", emi,oom"mal 

stalute, to mmpelagency actIon ha, llIe pOlenl)al 10 "",,,,ely dIsrupt ag"nde,· ability to meel 

thei' mO<t pres,lng utorv fe.pon,lblnlles." MatlN' are only made waf", when an ~g erq 

.. 5d .......... , .. "'"~ ...... ' _"",", _~ ...... " ""' .... """""'""11''''"'''''., ......... __ ''''_.O><lo ..... _ .. ..,., ........... """""' .. "'"""" ....,..,_ .... , .. , ... ,,, ................ >&<_.0(0 """~""" ""''' ,,,",om.Ip\Od~ .................... ..--...~, 

, .... "" .. , .. ""..,.,,, .. , .. .,, "I~""""~"'''' '''11'01011",",_ rno_"_ "".--, ...... "", •• ,._' ..... "" ...... 10. ....... ""_ ... _"' ... "".,..~"'_"'_"'-,..- .. _, .rt.. ....... ... 

.. ~ .. _ ......... ""'_ .. ""_.' .... _)UlrunWotI ... ' ....................... HltoOMd""""_1 '.A 

_ ......... 100'.oq"' ....... "'I .... ...-..... ~ • ...,.. '"." ..... r."'" ....... "" •• ..-,"''''.'''' "" .... ,.. ""' ... /lno"' ... , ... ..,._._.' ... ""' .. " .. d ....... ," .... _ .. ~ .... '" ... """ ......... .- """''''''' • .,......,. __ tJomt"', ... -. .. .. _, ........ ""'IIoo""'...-"' .... A"""",,,,,,,,,,,,,,,, ~"'''<C<n'''.''' ... . r .. """ ... ", .. 4.oWI< W.,t. """ ............... IOU, """" ... ' .... Iiou....,," I', , .. 01_", ~ .. , ... ." 01 .... '..... ..... 0<0 .. , ... , ........... _ • • '"_ .. _"' __ ... ..... 

.. 5«500", r.,.",...1 ~ ~ e",. iOH.ld i.I6. m II" a.. 1".11.,..1<01""'-....... tIo<"",.. 'OIl"""' .... "" ..... ~ ..... 

""" .... ~w ..... , ... o;rl,..,'oo_ .. ,""".....- .. t .. c-. .. APP<"'~' ... OIo'''''oIC __ Ut ,~) ..... -w ... C ... """_,'o ...... ,.,lI .... , •• '. 

~ ......... __ ,_"" .... _ .. _""!t~,_""",,, .. ,.""", ... , ... 0<1_ ..... """' ...... .... 

• M WWN,suean<beltle.com 
59 

does not defend It.elf aealnst sue and ",,,Ie lawsuits. ~nd wtlen It willingly .lIow, outo"'e 

RI'O<JPS 10 Jl'p(>O' jtillO iI. agenda and dud ~ for action. 

Most of the I~Bl lali ~e history Ihal gives an understanding of thO! environmeotal citilett l ult 

prO'llll"" COIflC' I'am the COlli,es.ional debate on the 1970 a .... n Ai, Acl. Too ..... i. I~tle 

leillslatiYe h"lory b~yond Ihe a""n .... 1' .... <:1 ... The addition of Ihe cltl ... n , ull prDVision in laler 

statute. wa, perfunctory. nd the statutorv language used w""' genera llv idcntkillto the Q.,ao 

.... i' .... cl l.nguage." 

T~e inclusion 01 a d ti, .... ",II p,ovi"m wa. fa' from a given when 11 was bl'lnll onsid~,1!d in the 

Clean .... 1' Acl. The HoY,e 1'tlf5;on of Ihe bill did flO! Include" dtlzen .u~ provi,ion."The Senale 

bill did Include ,,,,,h. p,ovi'lon. " but ... Mous COm:"," was <!Xprc"ed du.lnS the Senate 1100. 

debale. Seflillor Roman Ii ... ,ka jR·NE). who was '.n~ing member 01 Ihe Senale Judiciary 

Commill"". ,,"p'essed tW<l major conce,n, about Ihe citizen .uil p""'ision; the limited 

oppo<tunlty for Senator; 10 r<'View the pr""i,lon and the failure Ie Involve the Senale Jud kJary 

Committee: 

franklv. I"",much a, thl. ma!!er Ilhe dtllen suit prOVision] came to m~ .ttenllonfor the 

first lime nOi more Ih.~ 6 hour. ago. \t " a little difficult to orde' one', t!!oughl) am:! 

dedde Ille be" coY"e 01 action to lollow. 

HId th~r~ be<!n timely rnltic~ th ot thi' S«tlon was In the bUl. prrhapS . eme Se~alor; 

would have .,lced Ihol the blll be referred to the COmmill .... of the Judiciary 10' 

consideration 01 the implications for our judk1a1 >\'Stem. .. 

Senal<>t lirmka enle.1!d InlO Ih .. ,ecord a memo written by one of his "aft me,nn ..... It 

reiler-lled the proDlem "f ignoring th ~ Judiciary Committee, 

•• ,_. ,.,.'"'.,_~~ ox.. ' ...... IO • ..1.6'JI. IOOWC.CIo, tt"l eo.c .. " "' .. ' ..... """,0110<1> 

, •• ·01! .... _, ... _""'_'~off ...... _of_ ....... """""'-_ .... '....... _"' .... a""" _ .. "'., ............ ~lloo'Ir''''_.'''lO.''''' ... _ ....... oIlM ... ."_Oftoot ... 1 JlI5 ...... u " .. ~'a,,.,,..,'H"'._ .... I ...... -. .. ' ... COOoI' .. _"_s.._ ...... ~ .......... ' .. "".. dH .... .\<t..."",, ..... , Uol l '''.V04 , .. ~1IHI.II '''''' ~ "'_,",,-I" f_"wl""",flol. . "",,,,,,,,,,,.,,,,. ""_"' ..... """'.IJ"'O.o.c 'U,,,,...,.. ....... """ ....... , .... _._ ..... , .................. "", .. '" .... ot, ., , ................................ ~ .. ~ ....... ~ ..... So "" .,~,,....01,,,,,, "_d .. '~ _ ... 01 "' • 

...................... "', ... Go ......... "" ............. rn. ""'."".,"' .. ..".., ,,, __ ................ ..... • -., ,.""' .... " .. _ .. rot""',. ...... · >Io<WIt/I .. _I"' .... "'~lO'""'OO"U h.It~' ........ "'" .......... ,_ .. ""' . .... , ... '_ .. ..... _mokI .... ' ..... od_, .... I" .......... ,. .. _.ltIt' ... d 

........ '"""""''''1'.'' ... ~" ................. _ .......... O«I .. "' ........ ktt' .. .."..,n,_ ... "' •• I' .. _·,_."_ .... ""' .... _r ... '''' _ .. _oI''.c_ .... ,.'''' ... ~ ..... Uto .. ' A'''' '''' ..... ll. 1" 'IlI . ....... ~ •• 0" •• ,,'0 "' ...... _"""'w.s..,, __ ,. ........ """'f .. " """_."''''' r_fot ••. '" w ....... ! ... ~1\o> l II(IWII).,nl. 

" .... or ')J-;llol, J" "5H . ..... ~ .... _ ... ~ .. o'u.eOO •• A#-'-.... I_""'''. !.o<t __ ·.:LIOo>fll'''Co\ft .... 

u.s._ '-.Of!.. I" .. I'J8CI,C ___ . .... t ... ~l"CI&. 

" . .. ... " . ...... .. 5 '11'1" Ifl 

U.$. ChomherolCommerre A'. 
60 

The !ienate Comminee on the loo klary ""S jurisdktlon over, among other things, P) 

ludid.1 proceedings, civil and criminal, ge~ally_ .. (3) f <!deral court and judges,._· The: 

Senate .n.>uld ,,,,pend oollSlder tion of 5e<:tion ]().Illhe citizen suit provision) pendi,,& 

a "udy by 'he Judiciary Commluee of tP>e =Ilon'. probaille Im~CI on the integrity of 

the Judicial 'Y'tem and the ad'<!<abiliry of now opening Ihe doors 01 the coum 10 

Innu""".bH. Citllen, 5uiUi "IIain§! affle",l, charged with the duty af carry1", aut the 

O"an Air Act. 71 

Sen.t", Griffin 'R.MI), al<o • mem~ 01 the Senate Judiciary Com mine<>, nolM the laot of 

crilical I""dback thaI wa. r",~i ..... d rej!a,dinillhe p"'lIi.ion: 

(I)t is dfslu,blna 10 me Ihalthis 1.,-rcKhing provlskln was included In the blll without 

any t""Umony lrom the Jl>dklill Conll'tence, the Department 01 lunice. Of the Office of 

Budget and M~n.B"ment OOO<:l!tnlng the pa<.lble Im~ct Ihis mlghl hiOlie on Ihe federal 

Judiciary. " 

The cltllen suit provision f" 

the Cleon Afr Ad wos never 

considered by eirhe, rhe 

HOUle o~5enate Judiciary 

Commi!lees. The some is frue 

for fhe eiUlen suit provision in 

tilt cleon Water Act, which 

was enoded just two yeOr5 

later. There Il10$ no House or 

Senoff" Judiciary Commitfee 

heoring focused spuificol/y 

on cit/len suitsfOf 4l )'E'OIl', 

doting bock to the creation of 

the first Clfilm sulf provisfon 

in 1970. 

., ..... ". "1Il. .. WI. 

The citizen su11 provi.>o~ in the Cle_n Atr Ac. was never 

considered by eith", the Hou,e Dr !iena!(' Judklary 

COf1'mlltees." Th e same 1$ Irue to<" the d lllen suil 

~oY"ion in Ihe Clean Waler Act, whkh Was enacl..d 

)u<! IWO ""an laler." There was no House or Senate 

Judiciary Committee n.tarlng locU"Sed spccfficalty on 

ci lizen JuiU lor 41 years, dating back to the creation 01 

the ITrst cilil('n .uit provision in 1970.1"' 

fartuOOIlelv however, In lIl12, during Ine 112" 

Cong", •• , Tne Ho".., )udic",ry Committ .... began looking 

at the .bu..... Df Ine '\Ie and ",nle proc~s. 

Repre<entatlve Ben QuaVIe (A·Al) IWoduced H.R. 3862, 

The Sun.hl"" I", Regulatory Dec", ... and Senlements 

Ac. 01 2012. Thi. bill bee"me Title III 01 H.~. 4078, the 

Rro r;, p~ Rl'duaion and Small Bu,iness Job Cr<,ation 

Act, which p .. sro the Hou", 01 Representst;"", on JuJy 

24, 2012, 11'/ a vote of 245 to .172. As part 01 Iho 

Deyelopment of the hn'hlne lor RegulalOfV Dl'uecs 

"·.III""'''.O;''''''' ... ' ... '''' ...... m_ .... ''''''-.. , ..... _ .................... · ... " .... 1"""',.. •. "-'. Goot Pr~ OII. It ... ·'~ T ... """"'J>or ............ _ .. " ...... _ .... .. •• ·.111"'-" .... "~" ... ", ... w_ ""*'"""" c .... "" ",. _. '" '''I. ,_ ,," , $o< ............... "'om.. ""' .... oI~.H .......... ,"' 'n. l"', ko~ ... "" ___ .. _ .... I# ... . 

" .. 1m. , ... Sen'" -..;c_" ....... ' ........ .., Ih. ~'" .. _ ...... Of ",.", 10M .... ''''"''I"''''' "."", """ .... ,." ... '_(S.H'I ". ... I. l ..... ~"._. __ "'M .... W<1I .. ~"' ....... III.""""""". ,_ ..... _,"'. oodjoOll ... d '...., .. 110 .. 111. l'~""""'''''''"'''''''.'_'''_'''''''''''' '' ''<OIId""" .. ",, _c • ...c_~ ...... "".'Yol""", .... , ...... ,.",._ ... _ .... ', .... 1lI)o' .. ~ .... _.....,"'"., 

MM ww.. .• ueafld.ettli!.com 
61 

and Sellle""",', Act, the Hou,e Judiciary Commitlee held e.tensivl! hearin,. on ,ue and settle 

and hsved a committee-report On jUly II, 2012. Under the bill. whkh passed the House as ntle 

II I of H.~. 407&, tM.lore a coun could .ign a PfOll"'OO comenl dl'Clee bet ....... en .. federal ageocy 

and an ouUide ,roop, the prpposed consem decree or sell!emenl must be publl~hed In the 

Fftitro! R~is ~' 10' 60 d.VS lor public <e>mmellt. Aim, affl!Clw panie, W<luld be alfo,dO>d an 

opportunity 10 Intervene prior 10 Ihe f,ro"!! of the con,ent decre" or ""1I!emem.. The 38"""1 

wouid al,o hiIVe to Inform tI'l! coun of it> other mandaiOf'! dUlie5 and ".pt.]n how II", con""nt 

dl!C,e!! would benclil Ihe publk Intere". Unfortunately, the Senat" """cr look action on it, 

....... Ion 01 the sue and ",,"k. bill, ai,,, called the Sun<hl~ f"r RelUl3l0f'! Decree, and 

Setllement. Act of 2012, whid! wa, in t,oouced by Sena orChuc~ Gr."ley "n July 12, 2012. 

On April 11, 2013, tile SUlllnine tor Regulat,,'Y Decre~ and Settlements Act 01 2013 was 

Introduced In lhe Sen3le a. S. 714, and In the H"me a, H.M. 1493. ' he 2013 Act" a ",ong bill 

thai W<luld implemenl Ihese and "Iher important common·sense changes. Pauage '" Ihls 

"'81,lall"n "....1 1 clo!;e the "",ssive Sue and settle loophole In our ,egul~lory proc ..... 

RECOMMENDATIONS 

The regulatOf'! proces< 'hoold IIDI be r3dically allerw ,Imply because of a C""l'I'nl decree 

or 5Cniement agreemenl. ~rer.l\ould "Ill tM.a two-lrllC:>:.sy5ICm th31 allows Ihe publ'" 10 

meaninglully ~r icip~ le in rulcm.kin~. but ~clllde. Ihe publk;. Irllm ~ue and 5Cllle 

negDllalion' whl<.h fesu)lln rulemailng~de<lgne<ll .. bl>neflt ... pe<~lclnle ... SI8fouP Th~ 

,hould oot be "fit! 'y,le'n whcre agellCles can US~ '''''I, dI,crelion to d" ..... kJp ,~Ie. and 

,IIIolher '\'item whe", adv()(OCV groups use. l~wslIl" Itt legdli'j bind iflen<"oe. and 

Imp.roperly hand oo;er Ihelr dls.crcU,,". 

,. NDlIc" 

Federal ~gencie5 ,hoold Inform the public Immed,ately UJIDO re""v'"11 notice'" an 

...tVOCBC'l g"'IIP" Intent to me a law"jit.'" This public IIDtiee shollid De prDVldo-d In a 

promil>l!nl lDeat]"n, .LlCh a< ,he agency', web,lle or through a notice In l/1e FedefO! 

Reqi,te,n By "" ... itlll thb aWanow n"tice. ;llected I'1'nies will h~ve.a beltl!' OPPIlfIun"y t" 

Interve"e In case, and also p'ella,e mme th"ughtlul commen~, 

Federal agenclci should be rcqulro-d 10 SlIbmlt a n"tlce. of a proposed consent decree. or 

-51!lIlement "!!re,,menl beI"r" It ls iIIO>d w~h the COllrt. Thl. nOllee ,hDllld be publl<hl.'d In 

the federol Regl,'e~and illow. rl!a'"nabk;o pe ,lod lor publlc«rmmeotje.8., 45 daY1). 

", •• ~,. ... of '''''''''0''0_ .. _"",,", ... "" .. ! .... ot-...~,_, 001_ .. " ... .... _"" ........ -_ .. . "" ~ ... _"" ..... ' ... I" ........ ~ ...... t. iKelo .. ." '.1> -. , ... ","w of'"'''' ,._ It,.,,,.-, ..... _ .. w .... , ... w_ _~'M ... _"" _ _ ...... " .. U!"'ifI ' ......... , .. '''''' • 

..... "' ...... ...... 

u.s. Chamber of Commerce AJrA 
62 

Currently, bec<luse It Is '0 diHicull fm thIrd p"rtl,,~ til intervene In .uc and ~ettli! ca.e., 

aw", should pr"Sume thaI 1t.1. appropriale ID IllClude a Ihlrd par!'l 3!> ~n inl~rvenor, Thn 

Int~rvenn's should only be e.cloot'd If thl$ W00i2 pr"Sut!'>ption could be rebl.JttN by 

'hawini that the part ..... interest< a,,, adequM ..... rep''''''''letlby Ihe e.inlng partie< In tl>!! 

action. Given that Intervenor~ presentl~ can be e~cluded Irom settlement negotlatioos, 

sometlme$ without <'Vert ~119 notlfi~ oj t/l<negotictiOlU, there should be clarlfation that 

all partie' In the acllon, illcludlnlthe Inle,veno", .r.ould h."" a seat at Ihe negotiation 

lable. 

Ag~n<~ ,I\oU!d 'I'" be able to cede their dl,uetlonary POWI''' to private Inl~'I.<, 

espc;;iall'/ th~ power 10 I"ue regu lations and to ~evelop the content of rules, This problem 

dOOll nOl 1'.;,1 in th. oormal rule making u.oe .. " , Yet. ,Ince rourl!i readily app''''''' con",nl 

decreti thallelallv bind agencies In Ihe SUI' aM settle COnlel!1, thedecrt'f: IlSell becomes a 

... hkle for ale""",, 10 1""'- up Iheir dlscfetlonaf\l ruillrnaking power-aM e .... n 10 de ... '"" 

ru ..... with questionable ,,,,tutory authority. 

Cou", .hould ,evlew IN! staM"", basl5- for agetIC'! action, In <onsenl dec' .... ' and 

~nlement ag'eements in the same m~nr>C' n ~ they were adjudicating a ca'e, For 

e'~fTIlIle. tOOy .hould e'''u", thaI ill agency is required 10 ""rlorm a mafldalory act or duty, 

and, ~, thaI the "8eney is imP!em""ling the act or dulY In a way 111M i<"i~ horilcd by 

statute. 

, Deadlines 

FI!do>r-a1 agend .... ~hould en'ur~ !I'M they (and tt...lr p"rln~rs, Including ,,~t ... and othe, 

agend""l hiVe enoUjlh lime 10 complv with regulol"'" lime line., The public al,o .Muld be 

g~n enough lime 10 me~nlngfully rommen\ on propo"<'d ,eg\ll allon~. and agencil1S should 

IhotflSetves take enough lime to adequately tonduct proper analysls_ Thl, would include 

"gency compliance with the RfA, execud"" ",defS. and DIner requirements designed 10 

prOO'lOle belief leg~li"lo~!" , This is panlcularlv importanl becau~c ~nl rulemaklngs are 

of!C/1 rtlO'e GMflc~gTng to lNaluate In le,ms of scope, complexity. and cost th an earlier 

rulmwere. 

r'OrlUnatclv, there Is D lImple, noncontroversial waf tD ilddre~. the sue Bnd settle problem 

that turrentl~ Ilndermln~ Ihe lundame<1l31 prot«liOllS that e~i,t wilhln our regulal"", 

system. Passage of the S<Jn,hlne for Regulatory Decret'5 and ~Iemcnts Act of 2013 would 

""lve the 51'" and settle prabll!l'n and r",,!Ore th~ protections Df IN! Admlni,!r"I;"" 

p~~~ Act 10;;11 cftllensand stakeholdeo • 

• M WWoH,S ,",and~ett le,co m 
63 

Catalog of Sue and Settle Cases 

Sue and Settle Cases Resulting in New Rules and Agency Actions 71 

(2009-2012) 

c.~ Agency Issue and R~sul! 

, , &. , , 

-- "~:' 

~ 1 ~,,~, ,,", •• 

, .. , , , , "~', 1m, ,, • 

• ",t··_1 

U.oo.l4J lalQ'ialilloted wiL~ , , , , 1l-(0511) (I).D,C.) , , 

... , , ,~~- , " , - , ,; , 

s.r",.,.: IO/2l/l009 , , , ,.I..,doil: 

I~' , , " 

, 

, .. , I~P) ",_,;on f<J'n;\lnS l~g1 PM" 

1'-

'M~"" :=' , , , , , , , , ,,. , .... "'. \.On '''''QUI!1 , , 

O'J-Olll!KI(N.D --, . Col.) , SII' ,evI_ ,,'" ",";11<"'1' 

s.." .. : IO/U/Z009 

.o.r,,,,,,,,,;.,,, 

~ 

" ;;;.- , ... , f ... ....., .. ""'., ........ _, ... CO_"' .... ,._ .. _ .... ' .. IIo<»t' lO ._>Od"' __ ~ ........ , .foIo,_ 

US Ch.mber DI Commerce 

, 

1+ 
64 

,,~ Age.,cv Issue and Result 

114f0D5! I".D. CoL) I R .... M' 1M owN<! to _ . .... 11 ..... i<.obl@., ..... .." ... ' .. ltpoloIlSP\, 

~u~· 81111701l ;W'qu.II .... .......... 

Cftlf<, "" 1I<11of/«11 DMYsll)' ( PA, I ...... ' ~H!i> .1'<1 ""Oin ocidWwi<>o "mle. t~ ClNn W.t .. "" 

~ 

~70Iw.D "'_1 R ...... ' .. I ... ~ ..... " ' .. , ......... ~ ( PA .1' .... to " ...... Ii< tom"""" ""* So<'~,~ I."""" ~"' .; .. mnc ........... _ "" .'"" to 'wr-" __ n .... ff~"'"' """ •. '0" 

• .. ~'Ip" .... ."t .... 

aU" W .... OQ. Oe OIowmoer ~, 1010. in ","",.,., I'A .I,,... ".t .. to 

lOon,ilY .... .,.I"'''''~.., ~ otH" ocicli~a'",," liMo. "'. CI.," w., ... f." .. to it on J/IOIIO!. No,i« 01 _ .......... , .... to I ..... d ... on IX"' ~d r ... tb!. 0.''''''' ","~<>d. tor "''''''O!'1_.uI,J/I' 11(J.. _II,,"", ~ . 'lea ....... "' ... O<l<!'n<-l';"",..,d .. .,,'" <tltt," I", !"o'lte <II""" ........ ~on, ", . . .... 1"11'0< Imp.l<t of I<l<!\n,,\1O!I". "' ...... = .... ..,'. ·I".m~, 

"' 'J"'JII~_". ""' . II .... ' 5o"'lWn (:olit ...... ' '''''' Se<W. "'_"""0.' ~ .. ". 

•• 1.1.5. Dop«t .... " './ Ar''''' ........ 

1-. - 1<- u.ldo .... ' R ..... ''',,~ .. lon .'Gu., ...... u.lo. r."", _ "".,. "" .. , 

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MtM www.suealllbettie.«lm 
79 

Appendix A 

Methodology I for Identifying Cases in the Sue and Settle Database 

To identify th e cases included in t~e currant version of tt>e u~ arKI settle datatla,<" the 

lollowing .pproac~~, w~re u!i<ld: 

Ttw d.taba ... was onlyd"';'ned to Qptur!! ,,~ampl ol major ~u ... and settle ca ...... To 

accompli.h Ihl •• a multljuri'id;ctional fedll",1 <oo.!sureh w.s oonduc!Niln 2011 u'inll. l""isNexi. IookinK al Cilres 2.5 1ea .. bel",,, I~ start at the Ob.m~ admi nistration r>d 2.S vea .. 

after !Ihroullh June 20111. The names of numerous ... nvlronmenlal sroups were lI.ed al)d 

doc~cts of cases Were idl'l1tif.ed. 

for Ih<l'e.,a'>e' Identified thaI """e ,,;11 DPM, Ih"'l were nol P"fOUed""'1 funller beau .... n 

ope" c .... Is by its nalu ~ not a 'ue ands"W" CO"'. If the c .... w •• closed. tllen the case was 

searched on PAUR (www.pacer.gov).lftherewa.asenlement .... Ie.anl ca .... w .. , .. Inc luded in 

• larger dalabne Illal included (h~llenge~ 10 proj«ls. I~ Ihe cun",t ~~Ion ol lhe datal>loo;e. 

cha llenges to projects We", excluded. 

A .lurdl wa, ronducted in the Fall Un~j.ed Agendu lor 2009-2012, "" Eco~omic;llly 

'itlnificant activ<!. comJll~ted. and ""'i-I",m acllons W~re ",.rCIlI!<!. If . cOM<'ntdec'"" 

or .enlc .. "'nt agr"""",nt wa, lin"d ., being connecTed To a 5peclfk ro le, a ca", ",,,,ch 

was condk>Cled to ~rlIV Ih;. inlormation. 

1100'" ACJIOrt U2-S93, Whlen is the House Aepart lor tile SunShine lor ReBuial<I<V 

De<:rees a nd 5eTllernenlS Act of 201l '".R. lU2), inclUded inlormatkln on we and '«!lIte 

~""_ The.e cases were either ;added or cro, .. chec~ed wlTh Ihe. dalab.,c, a, was 

informal"'n from lhe follo .... 1ng House lestimonv, Ariri",,,ing Off Romp ~Ilem nl.'" 

How Leg/5knlOfl Con fnsure Tronsparency, Publit Portklpollon, and Judl<:loi Review In 

RUItmoklngActNlry, Tl!StimanV of AOiC' A. Martella,Jr. beforelh" Hou,e Commilleeon 

Ihe Judiciary. Feb. 2. 2012: and The U", ondAbus .. o/Con",nr Ot!rrtl'!5/n federal 

Rult mol/inQ. TestimonV of Andrt: .... M. Grouman before the House Commltl"" 00 Ihe 

Judi cia"!, feb. 2. 2012, 

Th~ lollowi~i GAO report .... a • .,....:I: GAO. tn'lironll1<'Mol Litlgalion: Co.csAgolrm fPA 

andAuaclotl'd COSl5 Ovtr Time GAQ.I1-6S0(Wa,hlnglon. 0_(.: August, 2011). The U,S. 

Chamoor'I ,eport on '/>lIion.1 t.al~ and we and .ellle .... '" al<o u ... d: EPA'. N~w 

Regulolo"! fronf: Reglonol Hoze and the Takeover of SfOTe PtOIjroms, Chamber 0/ Commert'~ a(tPt UnlredStores; Wi lliam Vealman jAugul! 2012 k In addition. 

u.s. Chamber of Commerce ., • 
80 

""vI,onmenlwl £f'1'u!>' anROUM<! .",nlements-and lamult. "" Ihei'we.bl;tt .... - rhl. 

;f\lor,.-.at)c n scrved -as a r<~s ource 

The di lilbase Indude$ ~nvlronrnent.1I ,e! led oases, ,e£ardle,. of led",,,1 381:11"" or federal 

alule ~, actions that wet" nOl of ",neral appli.ability (<>l\ceptfor W!'l<' fOlAu >MI 

wer" ""dwed, such i . enforcement actio", alld 111 .. II permil uses. 

Mi. WWoH.sue.fI<beltlc.com 
81 

Appendix B 

Methodology II for Identifying Cases in the Sue and Settle Database 

CIN nAI,Act 

(~~n Air Ad $Clllemeol greement5 ~nd we,e compiled USing ~ d~labase ~aJ(h oflne F!!de,,,i 

Reqi.t~, PUfsuantlo acan Air Act .eclion li3(a), all settlcmenl ag,ee""'n!5 "1'd ron..,ol 

decre es mil<l be announced In the Federal Regl"",. The 'l'arch te,ms we"" 

Ai"OCY: ~nvjf"nffil!n!all'ro l!C ion Allene{' 

Title: "Settlement Aere<!ment" Dr ·Cons .. nl Dec re,," 

Dates: 6etweef' ' I/ZOI200t¥' and "'/20/2013" 

All settlement "greemenlsand (oosenl decreel pur,,,.nl to a TlUe V chalOtnge ora" 

enforcement aClion wer" removed In order 10 eosure th;,l lhe ... nlemen! "Il, .. e"","! Dr 

[on",nl <Ie<fee had a general apphr.ab1l1ty. 

It was 1I""lbl" lodetermine whether EPA and the pelilione,. " ll\1 .... I1III1.led Mwenl straight 

to negotiation. bychecklng the case docket ul ing wW'W.parer IQII. 

( lU ll Water A<I 

CI~a" Waler Acl ,en leml'01 38,,,,,mcm, pu"""nl to dtl,e" deadline ,ui" am rlOI an'IQU,,,,etl in 

Ihe Federo/ ~ISler. Two le<:hniQUC, we ,e used 10 find Them. 

Tnefim w30 a dalat.a.e search o! "In,\de EPA: and used lwo ""I.; 01 ",atch te ,ms, 

"Oean Wale, Act" and "Senlcrnem Ag,eement" 

"Clean Water Act" and ·Consent Oe<:ree" 

e .... cood wa, a dal.t>a", .... a'ch ol lhe f~d ,al Reglste,. In<lead of ",",chin, fo, 

annOllncement, of ,e" lemenl agreemenTS (30 had been done for The Clean Ai, Act), ~g la ion! 

pu .. uant 10 Oe3n Water Act..,lIlemenl a,,,·,,,,,,,,,ts or con",nl de<:'"",,, were searched. The 

,earth Ie,,,,, We'" a, follow., 

Agency' "EnvironrnenlBI Protection Agency" 

TiUe: ·Clean Waler Act" 

full Te >(l Of Me",d t. ~ "Settlement Agreement" or "CO'I5e<1 t Occre.e" 

Dale., llelWeen "1/20/2009' and "1/20{20n" 

U.S. Chamber of Commerce .',M 
82 

As WilI1 1h"Cj.,an Air Acl mell>odology, all "'l1lernent.a,reemenlO and oon",nl d",~ 

pUrsuant to .~ entorcement action wert: removed to ensure tha I tile scltjemenl a,RfC'Cment or 

con.e~1 d~cree had ge""",1 appllcabilitv.lt wal "",.ible 10 d~te'mine whether EPA and l~e 

pet\t,oocr, eilher laia.ted or werll st.aiahltO negotljlionl by checking the (;i!e dodet using 

WWW·pilCt··gO'll· 

Mij+ w-.sue.",beWc.com 
83 
84 

Mr. BACHUS. Thank you. 

We have a distinguished panel today, and I will first begin by introducing our witnesses. 

Mr. Bill Kovacs provides the overall direction, strategy, and management for the Environment, Technology & Regulatory Affairs Division of the U.S. Chamber of Commerce. Since he joined the 

Chamber in March 1998, he has transformed a small division concentrating on a handful of issues and committee meetings into one 

of the most significant in the organization. His division initiates 

and leads national issue campaigns on energy legislation, complex 
85 

environmental rulemaking, telecommunications reform, emerging 

technologies, and applying sound science to the Federal regulatory 

process. 

Mr. Kovacs previously served as Chief Counsel and Staff Director 

for the House Subcommittee on Transportation and Commerce. He 

earned a J.D. from Ohio State University College of Law and a 

bachelor of science degree from the University of Scranton, magna 

cum laude. 

I welcome you, Mr. Kovacs. 

Mr. Allen Puckett III is the owner of Columbus Brick Company. 

Columbus Brick was founded in 1890 by Mr. Puckett’s great grandfather, W.N. Puckett, and his friend W.S. Lindamood. Mr. Puckett 

represents the fourth generation of Pucketts to operate Columbus 

Brick, which is now the only brick manufacturer in the State of 

Mississippi. The company is the distributor for many other brick 

companies based in Mississippi, Alabama, Georgia, North Carolina, 

South Carolina, and Virginia. Columbus Brick ships over 140 million bricks each year throughout the Midwest and southern United 

States. And his story I think is quite dramatic and telling, similar 

to other stories I have heard from his colleagues in the industry, 

and I am very much looking forward to hearing your firsthand account of your experience. 

Mr. John D. Walke is Senior Attorney for Clean Air and Clean 

Air Director for the Natural Resources Defense Council in Washington, D.C. As Mr. Conyers mentioned, you all are opposing this 

legislation. And you are responsible, as I understand it, for the National Resources Defense Council’s National Clean Air Advocacy before Congress, the courts, and the U.S. Environmental Protection 

Agency. 

Prior to joining NRDC, Mr. Walke worked for the EPA in the Air 

and Radiation Law Office of the Office of General Counsel. At EPA, 

he worked on permitting air toxics, monitoring, and enforcement 

issues under the Clean Air Act. 

Prior to working for the EPA, Mr. Walke was an associate at 

Beveridge & Diamond here in Washington, D.C. 

He graduated from Duke University with a B.A. in English and 

earned his J.D. from Harvard Law School. 

Joining us by teleconference is Mr. Tom Easterly. He has been 

the Commissioner of the Indiana Department of Environmental 

Management since 2005. After obtaining his M.S. in urban and environmental studies from Rensselaer Polytechnic Institute in Troy, 

New York, Mr. Easterly joined the New York State Department of 

Environmental Conservation where he held various engineering positions in the Air and Solid and Hazardous Waste Divisions. He 

has also worked for Bethlehem Steel Corporation as their corporate 

air pollution expert and as superintendent of environmental 

sciences for Bethlehem Steel’s Burns Harbor Division. He also 

served as President of Environmental Business Strategies, an environmental consulting firm he started in 2002. He is a board certified environmental engineer and a qualified environmental professional. 

As I said, we have very distinguished panel today, and with that, 

Mr. Kovacs, you are recognized for your opening statement. 
86 

TESTIMONY OF WILLIAM L. KOVACS, SENIOR VICE PRESIDENT, ENVIRONMENT, TECHNOLOGY & REGULATORY AFFAIRS, U.S. CHAMBER OF COMMERCE 

Mr. KOVACS. Thank you, Chairman Bachus and Ranking Member Cohen and Members of the Committee, for letting me come 

here today to testify in support of H.R. 1493, the ‘‘Sunshine for 

Regulatory Decrees and Settlements Act of 2013’’ and to discuss 

the Chamber’s recent report, ‘‘Sue-and-Settle: Regulating Behind 

Closed Doors.’’ 

H.R. 1493 is a balanced approach to inject more transparency 

and public participation into the rulemaking process, which has 

been the overriding goal of Congress since 1946. 

If enacted, 1493 would do three simple things, and I think we 

need to keep in mind how simple this bill is. 

First, it would require agencies to publish on their Web site and 

in the Federal Register notices of intent to sue and complaints filed 

against agencies so the public knows when the agency is being 

sued. 

It would require agencies to post on their Web site and on the 

Federal Register the filings of consent decrees before they are actually presented to the court so that the public can comment on the 

consent decree before it is presented to the court. 

And finally, it would allow impacted parties, those who have 

standing—not anyone—those who the courts have—allow—recognized constitutional standing to—to intervene in the court case if 

they can establish that their rights are not being adequately represented by the parties before the court. 

The Chamber’s involvement in this issue started when we started getting a number of growing complaints not only from the business community but from States talking about the fact that they 

were shut out of major regulatory decisions by Federal agencies. 

We decided to investigate the matter, and it became clear that EPA 

and other agencies were not in any manner—all we are asking for 

is that they publish it on their Web site. They were not in any 

manner informing the public of the notices of the lawsuits or of the 

lawsuits brought against the agencies or of the consent decrees. 

Because of this, we saw more and more regulatory activity and 

we asked—and I believe it was—one of the Members referenced 

last year’s hearing where what is the problem, there are not many 

cases. We decided that what we would do is we would literally sit 

down and try to figure what it is out because when EPA was asked 

the questions, they were saying there is no centralized database. So 

we cannot give not the industry, not the environmental group, but 

the Congress even the information on the lawsuits. 

So what we did is for an 18-month period, we used several databases containing court documents, and from these databases, we 

identified 71 separate lawsuits from 2009 to 2012 and the agencies 

that entered into these environmental suits, as well as the environmental groups that were party to the case. 

On May 20, 2013, we published our list of cases which impact 

virtually every industry in the United States, and we have put all 

the supporting materials from the complaint, the consent decree, 

the court order, everything on our Web site. So there is total transparency here because since the agencies have not been willing to 
87 

provide a database, we decided we would. And that is really the essence of what the report says. It is a database. And we are not saying it is 100 percent accurate. What we are saying is this is what 

we could find over 18 months. 

But each case we found followed the same pattern: the NGO and 

the agency negotiated in private a deadline for the proposal of new 

regulation. When they come to an agreement, they prepare, sign, 

and present the decree to the court, and this is before they put it 

out for public comment. In some instances, the court asks the agencies to submit the proposed consent decree for public comment, but 

that very rarely leads to any changes in the consent decree as 

drafted. 

Once a consent decree becomes an order of the court, public policy is forever changed. And that is really the key point because 

once the consent decree is issued by the court, the court retains jurisdiction over the agency and the implementation of the order, 

while in most instances the only group that can enforce the order 

during this time period is the environmental group. 

Agency priorities and the use of its resources are irrevocably 

changed by the consent decree. While a few consent decrees might 

not change agency priorities, when you have 71 consent decrees ordering the issuance of more than 100 regulations, it impacts the 

management of the agency. 

Since the deadlines agreed to by the NGO and by the agency do 

not include industry, what usually happens is in the setting of the 

deadlines with no industry input to the agency, the agency is operating in a fundamental disagreement with the APA because it is 

not gathering the information it needs as to what is to be done. So 

what happens is you get poorly drafted regulations that lead to 

more litigation while all along during this time period of litigation, 

the regulated entity has to try to comply with a poorly drafted regulation. 

And finally, the sue-and-settle process does a lot more. There are 

a lot more compromises than just simply the procedural safeguards 

that might be in any consent decree. The fact that the system is 

rushed by itself, it literally disallows the ability to go through the 

other regulatory statutes that Congress has imposed on agencies, 

such as the Regulatory Flexibility Act, the Informational Quality 

Act, Unfunded Mandates, several executive orders, and OIRA review, all of which we think are important and are in place and are 

statutes now. And one of the things that is mostly ignored are the 

small business panels, and you end up ignoring 26 million businesses in the country and how they impact. 

My time is up. And thank you very much, and I would be pleased 

to answer questions at the appropriate time. 

[The prepared statement of Mr. Kovacs follows:] 
88 

ON: 

TO: 

BY: 

DATE: 

Statement 

of the 

U.S. Chamber 

of Commerce 

LEGISLATIVE HEARING ON H.R. 1493, THE " SUNSHINE 

FOR REGULATORY DECREES AND SETTLEMENTS ACT 

OF 2013" 

HOUSE COMMITTEE ON THE JUDICIARY, SUBCOMMITTEE 

ON REGULATORY REFORM, COMMERCIAL AND 

ANTITRUST LAW 

WILLIAM l. KOVACS, 

SENIOR VICE PRESIDENT, ENVIRONMENT, TECHNOLOGY 

& REGULATORY AFFAIRS 

JUNE 5, 2013 

'I h< "hi., • m''''''' " II> 0lJ",,,,,. hUH .... J'IUIl'''',Iuv"Sh 01' """"",,flU<-

1~~'''<'''0<1 ,,,,,,,1 " .• """ no .... "" "oJ,.,d .. 1 r,,'«I,"" ",,"n"''', ".ti""".""I""'''''''' .,.1 r." .. .'"~t>ol'l) 
89 

The u.s. Chamber of Commerce is the world's largest business federation 

representing the interests of more than 3 million businesses of all sizes, sectors, 

and regions, as well as state and local chambers and industry associations. 

More than 96% of Chamber member companies have fewer than 100 

employees, and many of the nation's largest companies are also active members. 

We are therefore cognizant not only of the challenges facing smaller businesses, 

but also those facing the business community at large. 

Besides representing a cross-section of the American business community 

with respect to the number of employees, major classifications of American 

business-e.g., manufacturing, retailing, services, constmction, wholesalers, and 

finance-are represented. The Chamber has membership in all 50 states. 

The Chamber's international reach is substantial as well. We believe that 

global interdependence provides opportunities, not threats. In addition to the 

American Chambers of Commerce abroad, an increasing number of our members 

engage in the export and import of both goods and services and have ongoing 

investment activities. The Chamber favors strenbrthened international 

competitiveness and opposes artificial U.S. and foreign barriers to international 

business. 

Positions on issues are developed by Chamber members serving on 

committees, subcommittees, councils, and task forces. Nearly 1,900 business 

people participate in this process. 

2 
90 

BEFORE THE COMMITTEE ON THE JUDICIARY OF THE U.S. HOUSE OF 

REPRESENTATIVES, SUBCOMMITTEE ON REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW 

Legislative Hearing on H.R. 1493, the 

"Sunshine for Regulatory Decrees and Settlements Act of 2013" 

Testimony of William L. Kovacs 

Senior Vice President, Environment, Technology & Regulatory Affairs 

U.S. Chamber of Commerce 

June 5, 2013 

Good morning, Chairman Bachus, Ranking Member Cohen, and distinguished Members 

of the Subcommittee. My name is William L. Kovacs and I am senior vice president for 

Environment, Technology and Regulatory Affairs at the U.S Chamber of Commerce. My 

statement provides an overview of the Chamber's May 2013 report, Sue and Settle: Regulating 

Behind Closed Doors. The report provides detailed infonnation on the extent of the sue and 

settle problem, as well as the public policy implications of having private parties exert direct 

intluence on the regulatory priorities offederal agencies through agreements negotiated behind 

closed doors, without public participation. To address the sue and settle problem described in 

our report, the House should pass H.R. 1493, the "Sunshine for Regulatory Decrees and 

Settlements Act of2013." The bill provides for vital transparency and stakeholder/public 

participation in critical reb'Ulatory actions by federal agencies. 

Background 

Over the past several years, the business community has expressed growing concern 

about interest groups using lawsuits against federal agencies and subsequent settlements 

approved by a judge as a technique to shape agencies' regulatory agendas. Recent sue and settle 

arrangements have fueled fears that the rulemaking process itself is being subverted to serve the 

ends of a few favored interest groups. The Chamber set out to determine how often sue and 

settle actually happens, to identify major sue and settle cases, and to track the types of agency 

actions involved. After an extensive etfort, the Chamber was able to compile a database of sue 

and settle agreements and their subsequent rulemaking outcomes. The overwhelming majority 

of sue and settle actions between 2009 and 2012 occurred in the environmental context, 

particularly under the Clean Air Act, Clean Water Act, and the Endangered Species Act.' 

1 Clean Air Act, 42 U.S.C. ~ 7401 et seq.; Clean Water Act, 33 U.S.C. ~ 1251 etseq., Endangered Species Act. 16 

U.S.C. § 1531 et seq. 
91 

What is Sue and Settle? 

Sue and settle occurs when an agency intentionally relinquishes its statutory discretion by 

accepting lawsuits from outside groups which effectively dictate the priorities and duties of the 

agency through legally-binding, court-approved settlements negotiated behind closed doorswith no participation by other affected parties or the public2 

As a result of the sue and settle process, the agency intentionally transforms itselffrom an 

independent actor that has discretion to perform its duties in a manner best serving the public 

interest, into an actor subservient to the binding terms of settlement agreements, including using 

its congressionally-appropriated funds to achieve the demands of specific outside groups. This 

process also allows agencies to avoid the normal protections built into the rulemaking process -

review by the Office of Management and Budget and the public, and compliance with executive 

orders - at the critical moment when the agency's new obligations are created. 

Because sue and settle agreements bind an agency to meet a specified deadline for 

reb'lliatory action - a deadline the agency often cannot meet - the agreement essentially reorders 

the agency's priorities and its allocation of resources. These agreements often go beyond simply 

enforcing statutory deadlines and themselves become the legal authority for expansive regulatory 

action with no meaningful participation by affected parties or the public. The realignment of an 

agency's duties and priorities at the behest of an individual special interest group runs counter to 

the larger public interest and the express will of Congress. 

What Did Our Research Reveal? 

Number o/sue and settle cases between 2()()9 and 2()12 

Our research shows that from 2009 to 2012, a total of 71 lawsuits were settled under 

circumstances such that they can be categorized as sue and settle cases under the Chamber's 

definition. These cases include EPA settlements under the Clean Air Act and the Clean Water 

Act, along with key Fish and Wildlife Service settlements under the Endangered Species Act. 

Significantly, settlement of these cases directly resulted in more than 100 new federal rules, 

many of which are major rules estimated to cost more than $100 million annually to comply 

with. 

2 The coordination bet'iveen outside groups and agencies is aptly illustrated by a Nmrember 2010 sue and settle case 

where EPA and an outside ad\'ocacy group filed a consent decree and a joint mol ion to enter the consent decree \vith 

court on the same day the advocacy 61fOUP filed its Complaint against EPA. Set' De/enders o/Wildlife v, Perciasepe, 

No. 12-5122, slip op. at6 (DCCir Apr 23,2013) 

4 
92 

Comporill!: Ih e I/$i: (>f-~11f! 11,,11 u tile ilI'a ,lie pM' 15 yeti"" 

Unlike other environmental laws. the Clean Air Act slWCifical ly requires EPA to publish 

public notices of draft consent decrees i n the F('!lao/ Hcgh/" r.' These public notices gave the 

Chamber Ihe opportunity !() idenliry Clean Air Act seUlemenl agreements/consent decrees going 

back 10 1997. We \~ere therefore able 10 compare Ihe number of Clean Air Act sue and r.enle 

agreemems between 1997 and 20 12. 

The Chamber's data shows thai .ue lind senle is by no means a recent phenomenon:' the 

laclic has been used during both Democralic and Republitan adminiSlrJliOllS. To the e.~ tent thllt 

tile Slle and SCllle tactic skins Ihe nomul notice and commenl rulemakin!:] process. with ils 

proccdurnl checks Slid balallccs, agencies hal'e bccn willing for dcc~dcs!() allow sue and senle 10 

skin Ihe rulemaking req~,iremems of !he Administrative Procedure Act ~ MoreOver, our Test:arch 

found tllat bu in~s groups h~ve 8.1~ taken advanlage of tile sue and settle approach to innuence 

the outcome of EPA actions While advocacy youps ha ye IISed SlIe and senle mllch more onen 

in recent ye , the tactic has clearly been abused by both sides The followin g chan compares 

theconscm decrees finalized under the Clean Air Act during that period. 

Sue and Settle Cases Between 1997 and 2012 

0 1"1"" Term 1 

(l991-11XXl) 

eu.h ~rm 1 

12001.2(04) 

eu.h l erm 1 

1200S·2(08) 

Obam. rm 1 

12009-2012) 

' Soxuon Il l(g\ of tho Clean Air Acl. '11 U.S.C f 7JI3{~). pro,'ides thll -li lt lea .. JO days borore a COJ1S<nl deere( 

0l 5C1I1~1I ~em.:o" Ofll1Y ~1\11 ull<la- Itl..:: Oean AI! ACIII;, uhieb the Ullluxl 5lalCS Is. pany (olilcr lban 

tnf(lltt(l',,"1 :oc:,ionJ) . (lie Adnl)nlstl"lllOf 5IIa li pm,ide ~ rcascn~blc OPPOt"\\II"'Y 0)' l>O\;ce ," the foderal Rt~,$jcr 

10 perso1" "ho..-. '1Ill named "'p.v!,csonlllcn"nOlsto 100 "lion or m.llcrlO COIlUncnllD ,,,;on& · Oro1llhc 

oilier major coviroomCIII.I !Il"," ~C II. WIly """UOII 122(;) of lbe Superfund low. 2 U S.c. § 9622(0 ,eQu lres :1II 

oquIValctlt public ootjc~ of II SClI1enlClil II!J'XTm!n' 

• The """ and se!,lc problem wi", b;o:~ .11 .. 5110 lbc 1900.. In 1?ls6. Auomc}' C..,1ICr.l1 Edward Moe", III issued" 

Doparmlen' of JIIS'''' polk) n,e'nonndwn. rcfl!m:d 10 IU II\e "Mceo;e Momo." ;)dd"'S"n~ llIe prOO;,lll'luc ..... or COl,.."..1 de"""", iII,d "" ltk:mCllI agn:cmcnt. II) "'.mlJlCl\~ ~ncludln8lhc 'g""cy Jll'l<lIccof lum,n,dl5CfCtlolla" 

rul"""~U1g ""lllonl! mto mondltO')' duties s-te Mee.e. Memor~ ndwn 011 Dopar1ntefll PollC! Regarding COClJo!rtl 

DecIttHlld Sdtlenx;n.t AgrtCnlCl1I,J(MAI'_ Il. 19X(.) ' 5 U.S.C SuJx:hapler II 

, 
93 

The economic impiit:lltions of our findings 

Since 2009, new regulatory requirements estimated at more than $488 billion in compliance 

costs have been imposed by the federal government" By itself, EPA is responsible for adding 

tens of bill ions of dollars in new regulatory costs 7 Signiticantly, at least 100 of EPA's costly 

new rules were the product of sue and settle agreements. The chart below highlights just ten of 

the most costly rules that arose from sue and settle cases: 

Sue an(l Settle Agreements Create Costly Federal.Rules 

1. Utility MACT rule - up to $9.6 billion annual costs8 

2. Lead Repair, Renovation & Painting rule - up to $500 million in first-year costs" 

3. Oil and Natural Gas MACT rule - up to $738 million annual costs!O 

4. Florida Nutrient Standards for Estuaries and Flowing Waters - up to $632 million 

annual costs 11 

5. Regional Haze Implementation rules: $2.16 billion cost!2 

6. Chesapeake Bay Clean Water Act rules - up to $18 billion cost to compl/3 

7. Boiler MACT rule - up to $3 billion cost to compl/4 

8. Standards for Cooling Water Intake Structures - up to $384 million annual costS!5 

9. Revision to the Particulate Matter (PM2s) NAAQS - up to $350 million annual 

costS!6 

10. Reconsideration of 2008 Ozone NAAQS - up to $90 billion cost'7 

G S. Batl.ins. American Action Forum. "President Obama's $4SS Billion Regulatory Burden" (Sept. 19.2(12). 

'ld. Mr. Batkins estimates the regulatory burden added by EPA in 2012 alone to be $12.1 billion. 

8 Letter from President Obama to Speaker Boehner (Aug. ]0, 2(11). Appendix "Proposed Regulations from 

Executive Agencies wiLh COSL ESLimates of $1 Billion or More." 

9 75 Fed. Reg. 2·1,802, 24,812 (May 6. 2010) 

10 Fall 2011 Regulatory Plan and Regulatory Agenda, "Oil and Natural Gas Sector,NSPS and NESHAPS," R1N: 

20GO,AP7G. 

II EPA. Proposed Nutrient Standards for Florida's Coastal. Estuarine & South Florida Flowing Waters (Nov. 2(12). 

I~ William Yeatman, F.P.'1 's -YelP Ref.iulaiOl~V Front: Rexio1lo1 TJazl! and the Takeover (?fS'fate ProJSrams (July 2012). 

n Sage Policy Group. Inc,. The impact of rhase 1 Watershed implementationl'lans on Key 1tiaryland industries 

(ApriI20! !): Chesapeake Bay JournaJ (Jan. 2011). 

H LcLter from Prcsidcnt Obama La Speakcr Boehncr. supra note X. 

" 2012 Regulatory Plan and Unified Agenda. --Standards for Cooling Water Intake Structures:' RIN: 2040-AE95. 

u~ EPA. "Overview orEPA 's Revisions to the Air Quality Standards ror Particle Pollution (Particulate Matter) 

(20 !2). 

JC Letter from President Obama to Speaker Boehner, supra note 8. 

6 
94 

The Pu blic Policy Implications of Sue and Settle 

By being able to sue and influence agencies to take actions on specific regulatory 

programs, advocacy groups use sue and settle to dictate the policy and budgetary agendas of an 

agency. Instead of agencies being able to use their discretion as to how best utilize their limited 

resources, they are forced to shift these resources away from critical duties in order to satisfy the 

narrow demands of outside groups. 

Likewise, when advocacy groups and agencies negotiate deadlines and schedules for new 

rules through the sue and settle process, the ensuing rulemaking is often rushed and Hawed. 

Dates for regulatory action are often specified in statutes, and agencies like EPA very often 

cannot meet most or all of those deadlines. To a great extent, these agencies must use their 

discretion to set resource priorities to meet their many competing obligations. By agreeing to 

deadlines that are unrealistic and often unachievable, the agency lays the foundation for rushed, 

sloppy rulemaking that often delays or defeats the objective the agency is seeking to achieve.'" 

These hurried rulemakings typically require fixing through technical corrections, subsequent 

reconsiderations, or court-ordered remands to the agency. Ironically, the process of issuing 

rushed, poorly-developed rules and then having to spend months or years to correct them defeats 

the advocacy group's objective offorcing a rulemaking on a tight schedule. The time it takes to 

make these fixes, however, doesn't change a regulated entity's immediate obligation to comply 

with the poorly-constructed and infeasible rule. 

Moreover, if regulated parties are not at the table when deadlines are set, an agency will 

not have a realistic sense of the issues involved in the rulemaking (e.g., will there be enough time 

for the agency to understand the constraints facing an industry, to perfonn emissions monitoring, 

and develop achievable standards?). Especially when it comes to implementation timetables, 

agencies are ill-suited to make such decisions without significant feedback from those who will 

have to actually comply with a regulation. 

By setting accelerated deadlines, agencies very often give themselves insufficient time to 

comply with the important analytic requirements that Congress enacted to ensure sound 

policymaking. 

These requirements include the Regulatory Flexibility Act (RF A)19 and the Unfunded 

Mandates Refonn Act20 In addition to undennining the protections of these statutory 

18 In the Boiler MACT mlemaking, for example, EPA asked the court for an additional 16 months to properly 

consider COllllllents it had rccci\'cd and finalize a legally defensible rule. In the face of opposition [rom Lhc advocacy 

group_ the court only granted 3n additional month_ hm:vever. and EPA \vas forced to 111lll1ediately reconsider the rule 

to buy ltsclfmorc time. 

1Sl Regulatory flexibility Act of 1980, as amended by the Small Business Regulatory Enforcement fairness Act of 

1996.5 USC §§ 601-612. 

7 
95 

requirements, rushed deadlines can limit the review of regulations under the Otllce of 

Management and Budget's regulatory review under executive orders,21 among other laws. This 

short-circuited process deprives the public (and the agency itselt) of critical infonnation about 

the true impact of a particular rule. An unreasonable deadline for one rule draws resources from 

other reS'lIlations that may also be under deadlines. Resulting delays will invite advocacy groups 

to reorder an agency's priorities further when they sue to enforce the other rules' deadlines. 

This is illustrated clearly by recent sue and settle agreements entered into between 

advocacy groups and the U.S. Fish and Wildlife Service (FWS). FWS agreed in May and July 

2011 to two consent decrees with an environmental advocacy group requiring the agency to 

propose adding more than 720 new candidates to the list of endangered species under the ESA.22 

Agreeing to propose listing this many species all at once imposes an overwhelming new burden 

on the agency, which requires redirecting resources away from other-often more pressingpriorities in order to meet agreed upon deadlines. According to the Director of the FWS, in FY 

2011 the FWS was allocated $20.9 million for endangered species listing and critical habitat 

designation; the agency was required to spend more than 75% of this allocation ($15.8 million) 

undertaking the substantive actions required by court orders or settlement agreements resulting 

from litigation23 In other words, sue and settle cases and other lawsuits are now driving the 

regulatory agenda of the Endangered Species Act program at FWS. 

Through sue and settle, advocacy groups also significantly affect the regulatory 

environment by getting agencies to issue substantive requirements that are not required by law24 

Even when a regulation is required, agencies can use the tenns of sue and settle agreements as a 

legal basis for allowing special interests to dictate the discretionary terms of the regulations. 25 

Third parties have a very difficult time challenging the agency's surrender of its discretionary 

power, because they typically cannot intervene and the courts often simply want the case to be 

settled quickly. 

One of the primary reasons advocacy groups favor sue and settle agreements approved by 

a court is that the court retains long-term jurisdiction over the settlement and the plaintiff group 

can readily enforce perceived noncompliance with the agreement by the agency. The court in the 

20 Unfunded Mandates Refonn Act of 1995, 2 U.S.c. §§ 1531-1538. 

:1 See. e.g., Exeeulive Order 12,X66, "Regulalory Planning and Review" (Seplember 30,1993); Exeeulive Order 

13132, "Federalism" (August 4, 1999), Executive Order 13,211. "Actions Coneeming Regulations That 

Significantly Affect Energy Supply, Distribution, or Use" (May I R, 200 I): Executive Order 13,563 "Improving 

Regulation and Regulatory Review" (January 18, 20 II). 

" Wi/dearth Guardians v. Salazar (D.D.C. May 10.2(11)' Center{or Biological Diversity v. Salazar (D.D.C. July 

12,2011) 

:3 Testimony of Han. Dan Ashe, Direclor, U.S. Fish and Wildlife Service before Ihe House Nalural Resources 

COlmnittee (December G, 2011). 

2-1 For example, EPA·s imposition of TMDL and stonnwatcr requirements on the Chesapeake Bay \vas not mandated 

bv federal law. 

:5 Agreed deadlines commit an agency to make one specific rulemaking a priority. ahead of all other rules. 

8 
96 

endangered species agreements discussed above will retain jurisdiction over the process until 

2018, thereby binding FWS Directors in the next Administration to follow the requirements of 

the two 2011 settlements. For its part, the agency cannot change any of the tenns of the 

settlement (e.g., an agreed deadline for a rulemaking) without the consent of the advocacy group. 

Thus, even when an agency subsequently discovers problems in complying with a settlement 

agreement, the advocacy group typically can force the agency to fulfill its promise in the consent 

decree, regardless of the consequences for the agency or reb'1llated parties. 

For all these reasons, "sue and settle" violates the principle that if an agency is going to 

write a rule, the goal should be to develop the most effective, well-tailored regulation. Instead, 

rulemakings that are the product of sue and settle agreements are most often rushed, sloppy, and 

poorly thought-out. These flawed rules often take a great deal of time and effort to correct. It 

would have been better-and ultimately faster-to take the necessary time to develop the rule 

properly in the first place. 

Notice and Comment After Sue and Settle Agreements Doesn't Give the Public 

Real Input 

The opportunity to comment on the product of sue and settle agreements, either when the 

agency takes comment on a draft settlement agreement or takes notice and comment on the 

subsequent rulemaking, are not sufficient to compensate for the lack of transparency and 

participation in the settlement process itself. In cases where EPA allows public comment on 

draft consent decrees, EPA only rarely alters the consent agreement, even after it receives 

adverse comments26 

Moreover, because the settlement agreement directs the timetable and the structure (and 

sometimes even the actual substance) of the subsequent rulemaking, interested parties usually 

have very limited ability to alter the design of the final rule or other action through their 

comments 27 In effect, the "cement" of the agency action is set and has already hardened by the 

time the rule is proposed, and it is very difficult to change it. Once an agency proposes a 

reb'1llation, the agency is restricted in how much they can change it before it becomes tinal 28 

Proposed regulations are not like proposed legislation, which can be very fluid and go through 

2fi In proposed settlement agreements the Chamber has conunented on, sllch as for the revised PM~.5 NAAQS 

standard, the timetnble for final mlemaking action remnined unchanged despite our comments insisting thnt the 

agency needed morc time to properly complete the mlcmaking. Even though EPA itself asserted that morc time was 

needed, the mlemaking deadline in the settlement <1b'Teement \vas not modified. 

2'"7 EPA ovenvhelmingly rejected the comments and recolllmendations submitted by the business COlllllllUllty on the 

major rules lhat resulted from sue and settle agreemenls. These rules \vere ultimalely promulgated largely as Lhe)' 

had been proposed. See. e.g., the Chamber's 2012 comments on the proposed PM NAAQS rule and the proposed 

GHG NSPS rule for new clcctric utilitics. 

'" See South Terminal Corp. v. lOrA, 504 F .ld 646. (,59 (1" Cir. 1974 )('logical outgrowth doctrine" requires 

additional notice and comment if final rule differs too greatly from proposal). 

9 
97 

several revisions before being enacted. When an agency proposes a regulation, they are not 

saying "let's have a conversation about this issue," they are saying, "this is what we intend to put 

into etIect unless there is some very good reason we have overlooked why we cannot." By 

giving an agency feedback during the early rule development stage about how a regulation will 

atIect those covered by it, the agency learns from all stakeholders about problems before they get 

locked into the regulation. 

Sue and settle agreements cut this critical step entirely out of the process. Rather than 

hearing from a range of interested parties and designing the rule with the panoply of their 

concerns in mind, the agency essentially writes its rule to accommodate the specific demands of 

a single interest. Through "sue and settle," advocacy groups achieve their narrow goals at the 

expense of sound and thoughtful public policy. 

Sue and Settle is An Abuse of the Environmental Citizen Suit Provisions 

Congress expressed concern long ago that allowing unlimited citizen suits under 

environmental statutes to compel agency action has the potential to severely disrupt agencies' 

ability to meet their most pressing statutory responsibilities 2 " Matters are only made worse 

when an agency does not defend itself against sue and settle lawsuits and willingly allows 

outside groups to reprioritize its agenda and deadlines for action. 

Most of the legislative history that gives an understanding of the environmental citizen 

suit provision comes from the congressional debate on the 1970 Clean Air Act (CAA). There is 

little legislative history beyond the CAA. 1rJ The addition of the citizen suit provision in later 

" Thc Count of Appcals for thc District of Columbia noted in 1974 that "Whilc Congress souglllto encourage 

citizen suits, citizen suits \vere specifically intended to provide only 'supplemental ... assurance that the Act \VOllld 

be implemented and enforced,' Satural Resources De/el1se Council, inc. v. Train, 510 F.2d 692, 700 (D.C. Crr. 

1974). COnb'feSS made 'particular efforts to draft a provision that would not reduce the effectiveness of 

administrative enforcement ... nor cause abuse of the courts while at the same time still preserving the right of 

citiLens La such enforcement of the act.' Senate DebaLe all S. 3375. March 10, 1970, reprinted in Environmental 

Policy Division of the Congressional Research Service. A Legislative History of the Clean Air Act Amendments of 

1970. Vol. I. at3S7 (1974) (rcmar!.s or Scnator Cooper)." Friends o(lhe Forth. el al. v. Potomac FleClric Power 

Co .. 546 F. Supp. 1357 (D.D.C. 1 982)C[T]he agency might not be atfault if it does not act promptly or does not 

enforce the act as comprehensively and as thoroughly as it would like to do. Some of its capabilities depend on the 

wisdom of the appropriation process of this Congress. It would not be the first time that a regulatory act would not 

lurve been provided with sufficient funds and manpo\ver to get the job done .... Not\vithstmding the lack of 

capability to enforce this act suit after suit after suit could be brought. The functioning of the department could be 

interfered \ViLh. and its time and resources frittered away by responding to Lhcsc la\-vsuiLS. The limiLcd resources \vc 

can afford 'ivill be needed for the actual implementation of the act ")(Senator HnIska arguing against the citizen suit 

provision or thc Clean Air Act during Scnatc debatc on S.4358 on Scp\. 21. 1970)) .. 

101 See. e,g. Robert D. Snook. Em!ironnu:'11tal Citizen ,'S'uits and Judicial interpretation: First Time 1 rager':y, Second 

Time Farce, 20 W. New Eng. L. Rev. 311 (1998) at 318. 

10 
98 

statutes was perfunctory and the statutory language used was generally identical to the CAA 

language." 

The inclusion of a citizen suit provision was far from a given when it was being 

considered in the CAA. The House version of the bill did not include a citizen suit provision32 

The Senate bill did include such a provision," but serious concern was expressed during the 

Senate floor debate. Senator Roman Hruska (R-NE), who was ranking member of the Senate 

Judiciary Committee, expressed two major concerns about the citizen suit provision: the limited 

opportunity for Senators to review the provision and the failure to involve the Senate Judiciary 

Committee: 

Frankly, inasmuch as this matter [the citizen suit provision] came to my attention for the 

tirst time not more than 6 hours ago, it is a little dimcult to order one's thoughts and 

decide the best course of action to follow. 

Had there been timely notice that this section was in the bill, perhaps some Senators 

would have asked that the bill be referred to the Committee of the Judiciary for 

consideration of the implications for our judicial systemJ4 

Senator Hruska entered into the record a memo written by one of his staff members. It reiterated 

the problem of ignoring the Judiciary Committee: 

The Senate Committee on the Judiciary has jurisdiction over, among other things,"(l) 

Judicial proceedings, civil and criminal, generally ..... (3) Federal court and judges. 

The Senate should suspend consideration of Section 304 [the citizen suit provision] 

pending a study by the Judiciary Committee of the section's probable impact on the 

integrity of the judicial system and the advisability of now opening the doors of the 

courts to innumerable Citizens Suits against officials charged with the duty of carrying 

out the Clean Air Act." 

Senator Grimn (R-MI), also a member of the Senate Judiciary Committee, noted the lack of 

critical feedback that was received regarding the provision: 

[I]t is disturbing to me that this far-reaching provision was included in the bill without 

any testimony from the Judicial Conference, the Department of Justice, or the Omce of 

Budget and Management concerning the possible impact this might have on the Federal 

judiciary36 

OJ Id. at 313-314. 318. 

"See e.g. "A Legislative History of the Clean Air Amendments, Together with a Seetion-by-Seetion Index," 

Library of Congress. U.S. Go,t. Prim. OIL 1974-1980. Conference Report. al205-206. 11 [d. 

." Jd. Senale debale on S. 435S a1277. 

l' Jd. at 279. 

_'{J Id. at 350. 

11 
99 

The citizen suit provision in the CAA was never considered by either the House or Senate 

Judiciary Committees. 37 The same is true for the citizen suit provision in the Clean Water Act, 

which was enacted just two years later. 18 Until the llih Congress, there was no House or Senate 

Judiciary Committee hearing focused specifically on citizen suits, dating back 41 years to the 

creation of the first citizen suit provision in 1970.'9 

The Sunshine for Regulatory Decrees and Settlements Act of2013 

In 2012, during the llih Congress, the House Judiciary Committee began considering 

the abuses of the sue and settle process. Representative Ben Quayle (R-AZ) introduced HR 

3862, the Sunshine for Regulatory Decrees and Settlements Act of 20 12. On July 24,2012, the 

bill passed the House of Representatives as part of a larger bill by a vote of245 to 172. As part 

of the development of the Sunshine for Regulatory Decrees and Settlement Act, the House 

Judiciary Committee held extensive hearings on sue and settle and issued a committee report on 

July 11,2012. Unfortunately, the Senate never took action on the counterpart bill. 

On April 11, 2013, the Sunshine for Regulatory Decrees and Settlements Act of 2013 was 

introduced in the House as H.R. 1493, and in the Senate as S. 714. These bills would (1) require 

agencies to give notice when they receive notices of intent to sue trom private parties, (2) afford 

affected parties an opportunity to intervene prior to the filing of the consent decree or settlement 

with a court, and (3) publish notice of a proposed decree or settlement in the Federal Register, 

and take (and respond to) public comments at least 60 days prior to the filing of the decree or 

settlement. The bill would also require agencies to do a better job showing that a proposed 

agreement is consistent with the law and in the public interest. The bill takes a measured, 

moderate approach to the sue and settle problem. While some have advocated legislation to 

severely restrict agency settlements themselves, H.R. 1493 would simply ensure that these 

settlements are conducted out in the open and that interested parties can have a seat at the 

bargaining table. 

j'"7 --A Legislative History of the Clean Air Amendments, Together ·with a Section-by-Section Index," Library of 

Congress. U.S. Govt. Print. OfL 1974-1980; The legislative history was also searched using Lexis . 

. '8 "A Legislative History of the Water Pollution Control Act Amendments of 1972. Together with a Section-BySecllon [ndex," Library of COnb'fess. U.S. Gov1. Print. OIL [973-[9n; The leb~s[ative history was also searched 

using Lexis. 

" [n 1985, the Senate Judiciary Commillce did hold a hearing on the Superfund [mpro\emelll Act of 1985 that 

among other things did discuss citizen suits (S. Hrg. 99--J.15). The hearing cmrered a \vide range of issues. such as 

fi.nancing or waste site clean-up, liability standards, and joint and several liability To rind hearing infonnation, a 

comprehensive search was conducted using Pro Quest Congressional at the LibraI"J' of COnb'Tess. The search focused 

on hearings from [970-present that addressed citizen suits. 

12 
100 

Recommendations 

The regulatory process should not be radically altered simply because of a consent decree 

or settlement agreement. There should not be a two-track system that allows the public to 

meaningfully participate in rulemakings, but excludes the public from the "sue and settle" 

negotiation and settlement process that results in rulemakings designed to benefit a specific 

interest group. There should not be one system where agencies can use their discretion to 

develop rules and another system where advocacy groups use lawsuits to legally bind agencies to 

improperly hand over their discretion. 

Notice 

Federal agencies must inform the public immediately upon receiving notice of an 

advocacy group's intent to file a lawsuit. The Department of Justice could also provide public 

notice of the filing oflawsuits against agencies, as well as settlements the agencies agree to. This 

public notice should be provided in a prominent location, such as the agency's website or 

through a notice in the Federal Register40 By having this notice, affected parties will have a 

better opportunity to intervene in cases and also prepare more thoughtful comments. 

Comments (lnd Infen'ening 

Federal agencies should be required to submit a notice of a proposed consent decree or 

settlement agreement before it is filed with the court. This notice should be published in the 

Federal Register and allow a reasonable period for public comment (e.g., 45 days). Because it is 

so difilcult for third parties to intervene in sue and settle cases, courts should presume that it is 

appropriate to include a third party as an intervenor. At present, intervenors can be excluded 

from settlement negotiations, sometimes without even being notified of the negotiations. There 

should be clarification that all parties in the action, including the intervenors, should have a seat 

at the negotiation table. Intervenors should only be excluded if this strong presumption could be 

rebutted by showing that the party's interests are adequately represented by the existing parties in 

the action. 

Substance of Rules 

Agencies should not be able to cede their discretionary powers to private interests, 

especially the power to issue regulations and to develop the content of rules. This problem does 

not exist in the normal rulemaking process. Yet, since courts readily approve consent decrees 

40 Tt is our understanding thai EPA has recently begun to disclose the notices or intent to sue it rccci\,cs rrom outside 

parties on the agenc)'s \vebsite. While this is a welcome de'velopment. this important disclosure needs to be 

statutorily required, not just a vollUltary meanure. 

13 
101 

Mr. BACHUS. Thank you. 

Mr. Puckett, you are recognized. 

TESTIMONY OF ALLEN PUCKETT, III, PRESIDENT, 

COLUMBUS BRICK COMPANY 

Mr. PUCKETT. Chairman Bachus, Ranking Member Cohen, and 

Members of the Subcommittee, good morning. 
102 

I am President of Columbus Brick Company, a small business in 

Columbus, Mississippi. I am a member of the fourth generation of 

Pucketts to own and operate this company. Our fifth generation is 

also working in the company. Our family has been making fired 

clay brick in Mississippi since before the 1890’s. 

I am here today as a small business owner. I do not profess to 

be an expert on the Clean Air Act or on this bill you are considering today. We are an industry of mostly small companies, and we 

look to our trade associations and industry task forces for this kind 

of information. 

I do, however, know how to run a business, and what I have seen 

happening in the past several years makes me extremely concerned 

about my ability to keep our business viable for the future. 

I am also here today on behalf of our industry, our company, and 

the families we employ. 

Over the past 10 years, our industry has been directly impacted 

by two sue-and-settle cases involving air toxic standards being developed by the U.S. Environmental Protection Agency. 

Our first experience with sue-and-settle was a rule that was vacated after we had spent considerable money for compliance with 

the rule. I believe we were harmed by this first sue-and-settle. 

We are understandably concerned about the second round of sueand-settle rulemaking we are now facing. The rules I am referring 

to are the National Emission Standards for Hazardous Air Pollutants, or NESHAP’s, commonly referred to as MACT standards. It 

is my understanding that virtually all original MACT standards 

were completed under either a sue-and-settle court order or the 

threat of a court order. I also understand that most of these rules 

were later subject to litigation by the same environmental groups 

who forced a short schedule, this time complaining that the EPA 

did not properly develop the rule. It appears there may be an obvious correlation between these two facts. 

Recently the EPA restarted the MACT development process for 

our industry and has once again entered into a sue-and-settle consent decree with the Sierra Club for our rulemaking schedule. We 

asked to be included in the discussions of the settlement but were 

again excluded from the negotiations until a draft settlement was 

published in the Federal Register. I do not think anyone could possibly fault our industry for being extremely concerned. 

If the EPA uses the same approach they have followed on recent 

rules as a default to lower litigation potential, Columbus Brick may 

cease to exist after almost 125 years of operation. Based on EPA’s 

numbers I have seen for my company, I expect at minimum to have 

to permanently shut down two of our three kilns. That will mean 

a permanent job loss for 45 to 50 families in our small rural community. 

Unfortunately, my story is not unique in our industry. 

If this burden resulted in some great benefit to the environment, 

it might be worth it. However, the EPA has the data in house that 

demonstrates that there is no great benefit to the environment, 

that our industry’s operations are already within safe levels in 

many, many cases. If there were no other options available under 

the Clean Air Act, it might be unavoidable. However, the EPA has 

the authority under the Clean Air Act to avoid disastrous impacts 
103 

that provide no benefit. The EPA needs to take the time to develop 

the rule correctly. They need to avoid sue-and-settle agreements 

that remove that time. 

We actually have a great deal of faith in the EPA to do the right 

thing if they are allowed to do so, to look at the data and the requirements of the Clean Air Act, and then come to a decision that 

meets the requirements of the Clean Air Act, protects human 

health and the environment, and still allows our industry to continue to operate. 

We are not asking for the rule to go away. We are asking that 

the practice of establishing unreasonable deadlines without input 

from the impacted industry go away. We are asking for the opportunity to be an integral part of a rulemaking process that could 

make or break our industry. We are asking that the time be taken 

to ensure that the public health and welfare is maintained but also 

allow the brick industry to continue to exist. I believe you can ensure that these decisions are made that allow my company to continue and our employees to remain gainfully employed. I would 

hate to see Columbus Brick put out of business because of a rule 

the EPA made it was forced to develop too quickly, especially a rule 

that does not benefit anyone. 

Thank you. 

[The prepared statement of Mr. Puckett follows:] 
104 

COLUMBUS BRICK COMPANY MANliFACT1TRERSOFHRTCK ST:SCF.1ROO 

u.s. House of Representatives 

Committee on the Judiciary, Subcommittee on Regulatory Reform, 

Commercial and Antitrust Law 

Hearing on H.R. 1493, the "Sunshine for Regulatory Decrees and 

Settlements Act of 2013" 

June 5,2013 10:00 am 

2141 Rayburn House Office Building 

Chairman Bachus, Ranking Member Cohen, and Members ofthe Subcommittee, my name 

is Allen Puckett III and I am the President of Columbus Brick Co, a small business in 

Columbus, Mississippi. T am a member of the fourth generation ofPucketts to own and 

operate Columbus Brick Co. Our fifth generation also works in the company. Our family 

has been making fired clay bricks in Mississippi since 1890 and we distribute our bricks to 

more than 15 states. The Columbus Brick company was founded by WS Lindamood and 

my great-grandfather, W. N. Puckett. They were helping build a women's college but 

discovered there was not enough brick for the project, so they started Columbus Brick 

Company 

Like the rest of our industry, Columbus Brick has been negatively affected by the slumping 

economy and housing market in particular. In 2005, we employed 90 people; we currently 

have only 75. We have resisted layoffs and used early retirements and attrition to reduce 

our workforce. The production of brick has decreased at the plant by forty million brick per 

year. This represents about a 30 percent drop, which is actually less than the average for our 

industry 

We believe that most of our success is due to the loyalty and commitment of our employees. 

They have made us what we are. We are committed to our employees and strive to create a 

desirable work environment and culture at our company. We cover over 80% percent of 

employee health insurance premiums including their family, otTer a fully funded protit 

sharing retirement plan, and a 40 lk match program. We also have a nurse practitioner come 

onsite twice a month to have a free clinic for all our employees. We believe that our 

commitment and support of our employees gives the company a long term stable workforce. 

Fifty-seven percent of our employees have 

110 Box 9630 Columbus, :Mi!>sissippi 39705 I P 800.84,i.4931 ! l~ uu:i.(328.49J4 i www.ColumbusBTick.com 
105 

worked with us for over 10 years and we even have one who has been with us for 50 years, 

which is not uncommon. Our employee families have also worked for us for generations. 

Currently, we have several 2nd, 3rd, and even 4th generation employees. We are a good 

corporate citizen and support many social causes. T am here today as a small business 

owner. 1 do not profess to be an expert on the Clean Air Act or on this bill that you are 

considering today. We are an industry of mostly small companies and we look to our trade 

association and industry task forces for that kind of infonnation. 1 do, however, know how 

to run a business and what 1 have seen happening in the past several years mal,es me 

extremely concerned about my ability to keep our business viable in the future 1 believe 

that this bill and a few other changes in how the EPA creates rules would help keep 

Columbus Brick, and the brick industry, alive in the United States 

1 am here today on behalf of my industry, our company and the families we employ Over 

the past 10 years our industry has been directly impacted by two sue-and-settle cases 

involving air toxics standards being developed by the US Environmental Protection Agency. 

Our first experience with sue and settle was a rule that was vacated after we spent 

considerable money for compliance with that rule. We are understandably concerned about 

this second round of sue-and-settle rulemaking we now face. If EPA continues down the 

path that it has presented to us, our company and many other companies like ours will be 

forced to significantly downsize or close. This would mean the loss of jobs in our small 

community. Since Columbus Mississippi already has more than twice the national 

unemployment rate, further job loss, particularly with no environmental benefit, is 

unacceptable. 

The rules I am referring to are national emission standards for hazardous air pollutants, or 

NESHAPs, developed by the EPA under Section 112 of the 1990 Clean Air Act These 

rules are based on the level of control defined as the maximum achievable control 

technology, or MACT, so they are commonly referred to as MACT standards. The EPA 

was required to develop MACT standards for about 175 categories of sources at various 

intervals between 1990 and 2000. The CAA included a requirement, referred to as the 

MACT Hammer, which would make states and industries develop the standards themselves 

if EPA failed to accomplish their requirements Throughout the 90's and into the early 

2000's, environmental groups such as the Sierra Club used the court system to force EPA to 

meet these deadlines, as well. It is my understanding that virtually all original MACT 

standards were completed under either a sue and settle court order or a threat of an 

impending court order. 1 also understand that most of those rules were later subject to 

litigation by the same environmental groups who forced a short schedule, this time 

21 
106 

complaining that EPA did not develop the rule properly I believe there is an obvious 

correlation between these two facts 

Our first rule was no different. Due to its low risk relative to other source categories, our 

rule was in the last "bin" for regulation, with our rule due in November of2000. Our small 

industry worked with EPA from the very beginning, providing data they requested and 

remaining abreast of the issues. As the deadline approached, we heard about the lawsuit and 

the settlement discussions and were concerned, but assured by EPA that they had sufficient 

time to complete our rule. However, with only seven months between the proposed rule 

being published in the Federal Register and the final rule signature date, we were concerned 

that EPA did not have adequate time to fully consider what we believed to be significant 

concerns about the proposed rule. 

This shortened schedule was forced by a "sue and settle" arrangement between the EPA and 

the Sierra Club. We believe we were harmed in many ways by that first sue and settle deal: 

1. EPA did not hold a small business panel we believe was required by the 

Small Business Regulatory Enforcement Fairness Act, or SBREFA. Since 

the majority of companies in our industry are small businesses and many 

were projected to be severely impacted by the rule, we believe a small 

business panel should have been convened. 

2. The Brick MACT was the first proposed rule to mention the possibility of a 

health-based approach for a MACT, a discretionary approach allowed under 

the CAA that is both protective of the environment and has the potential to 

provide more operating flexibility to industry. However, the day after the 

public hearing and just a month after proposal, industry met with EPA to 

discuss the data they would need to pursue this option. We were told by the 

EPA that they had no plans to pursue this option due to time constraints. We 

believe a review of the data then could have saved us the problems we have 

faced since that time. 

3. EPA did not have sufficient time to craft a defensible rule, as evidenced by 

what happened next. A bad rule hurts everyone. 

The Brick and Structural Clay Products MACT was vacated by the courts as deficient in 

2007. Unfortunately, the environmental groups seemed to have control of the timing of that, 

as well. The reconsideration process and then the litigation lasted until almost a full year 

after our industry had come into full compliance with the rule. Our actions included 

increasing the number of controlled sources in our industry by more than 400 percent. We 

believe the vacatur was a direct result of insufficient time to adequately support the 

31 
107 

rulemaking process in the written preamble and insufficient time for critical review by both 

the upper levels of the EPA and the Office of Management and Budget. 

Again, industry asked for more time, pointing out the obvious time crunch. Again, the EPA 

claimed that the schedule was "out of their control." We asked for an extension of the 

compliance date, but that too was largely denied. 

We recognize that environmental groups like the Sierra Club have a role to play in the 

process. However, so should the affected industry and the regulating agency. In this case, 

the control of the rule development was turned over to a third party with EPA agreeing to an 

unreasonable schedule. That same third party then sued EPA because the rule was 

technically deficient. I believe, in most cases including this one, that same third party is 

then paid back for the costs they incur to fight a bad rule that was created due to a shortened 

schedule they encouraged and that EP A did not defend. However, throughout the long 

reconsideration and litigation, no concern was shown for the millions of dollars that my 

industry was spending in good faith to comply with a rule that would later be vacated. Now 

those controls are being used as justiflcation for increasing the stringency on the new 

MACT, potentially by orders of magnitude. 

Recently, EPA has restarted the MACT development process for our industry. They have 

required us to conduct expensive stack tests on the controls that were installed because of 

the now-vacated first Brick MACT. They have changed their approach to establishing 

MACT limits to more stringent methods that would not even be possible with some of those 

earlier, higher risk categories After completing larger priorities like the Boiler and Utility 

MACTs, focus has returned to our small industry. Our rulemaking is haunted by the ghost 

of the now-vacated "Brick MACT", as EPA has frequently admitted. EPA has once again 

entered into a "sue and settle" consent decree with the Sierra Club for our rulemaldng 

schedule. We asked to be included in the discussions of the timing in the settlement, but 

were again excluded from the negotiations until a draft settlement agreement was published 

in the Federal Register. I don't think anyone could possibly fault our industry for being 

extremely concerned 

I. Over the past 10 years, we have spent over 100 million dol1ars installing 

controls to comply with that first MACT and continuing to operate those 

controls in most cases. EPA estimates that this new MACT could potentially 

cost close to TWICE that amount each and every year. 

2 Columbus Brick spent $750,000 to install a control device on our large kiln 

to comply with the first Brick MACT. Each year we incur ongoing 

41 
108 

operational costs because the operation of this control device is still a 

requirement of our air operating permit. 

Before the last rule, our industry had roughly only 20 controlled kilns of over 

300 total kilns. Now we have over 100 out of about 250 kilns. Those newly 

controlled kilns were all installed because of a rule that is no longer on the 

books. Most of those controls remain in operation. 

4. EPA is using the presence of those new controls and new interpretations of 

the CAA to create a nearly impossible standard for our industry. Our 

situation is now the "MACT -on-MACT" scenario. We are concerned that 

EPA does not know how to deal with this scenario which is tluther 

exacerbated by a mandated schedule 

The EPA should be focused on fulfilling the requirements of the CAA and not have their 

priorities dictated to them from a third party. The EPA should be interpreting the statutes as 

provided by Congress, not basing decisions on "what would Sierra Club say." Even now, as 

we have discussions with EPA, they mention that they have to consider the "litigants'" 

position as well. There (Ire no litigants to t!tis rulemaking. Not yet. There are only 

litigants to a lawsuit to establish the schedule for this rulemaking. There is a huge 

difference between the two. But, in a real sense, T think that EP A does see the 

environmental groups as the litigants to the actual rulemaking and it impacts every decision 

they make. 

The CAA clearly gives EPA flexibility to do things differently than they have done on 

previous rules. They can fully follow the CAA, protect the environment AND give our 

industry a chance to exist and maybe even thrive once again. Consideration oft1exible 

alternatives takes time. We are concerned because consideration of these discretionary 

actions tends to go away as the time crunch increases. 

If EPA uses the same approach they have followed on recent rules as a default to lower 

litigation potential, Columbus Brick may cease to exist after 125 years of operation. Based 

on EPA's numbers I have seen for my company, I expect at a minimum to have to 

pennanently shutter two of our three kilns. Given these numbers. even if someone gave me 

fully paid-otT control devices. we would have a difficult time paying to operate the controls 

and remain in business. That will mean a permanent job loss for at least 45 to 50 families in 

our small community. 

51 
109 

Unfortunately, my story is not unique in our industry. Most of the companies that would be 

aflected by this rule are small businesses who face similar fates. Our larger companies in 

our industry will not fare much better. They, too, operate plants in small towns and will 

face the potential ofc1osing those plants. Even large plants will be severely stressed since 

EPA is taking an approach that appears to require development of new technologies and 

investment in technologies that have never been demonstrated as effective. 

If this burden resulted in some great benefit to the environment, it might be worth it. 

However, EPA has the data in house that demonstrates that there IS NO great benefit to the 

environment- that our industry's operations are already well within safe levels in many, 

many cases. If there were no other options available under the CAA, it might be 

unavoidable. However, EPA has the authority under the CAA to avoid disastrous impacts 

that provide no benefit. EPA needs to take the time to develop the rule correctly. They 

need to avoid sue and settle agreements that remove that time. 

We want to be able to make our case for sutllcient time to assess the data while EP A is 

having discussions with the litigants, not after they have made their agreements We are, 

most definitely, "interested parties" to these discussions. 

We actually have a great deal of faith in the EPA to do the right thing, if they are allowed to 

do so. To look at the data and the requirements of the CAA and come to a decision that 

meets the requirements of the CAA, protects human health and the environment, and still 

allows our industry to continue to operate. 

We are not asking for this rule to go away. We are asking that the practice of establishing 

unreasonable deadlines, without input from the impacted industry, go away. We are asking 

for the opportunity to be an integral part of a rulemaking that could make or break our 

industry. We are asking that the time be taken to ensure that public health and welfare is 

maintained, but also allow the brick industry to continue to exist. You can ensure that 

decisions are made that allow my company to continue and our employees to remain 

gainfully employed. 1 would hate to see Columbus Brick go out of business because a rule 

EPA was forced to be developed too quickly, especially a rule that benefits no one. 

Thank you 

61 
110 

Mr. BACHUS. Thank you. 

Mr. Walke? 

TESTIMONY OF JOHN D. WALKE, CLEAN AIR DIRECTOR AND 

SENIOR ATTORNEY, NATURAL RESOURCES DEFENSE COUNCIL 

Mr. WALKE. Thank you, Chairman Bachus and Ranking Member 

Cohen, and Members of the Subcommittee. My name is John 

Walke and I am clean air director and senior attorney for the Natural Resources Defense Council. NRDC is a nonprofit organization 

of scientists, lawyers, and environmental specialists dedicated to 

protecting public health and the environment. 

My testimony today will focus on three main points. 

First, allegations that Federal agencies collude with nongovernmental organizations in the filing and settling of lawsuits are entirely unsubstantiated. 

Second, H.R. 1493’s solutions to this unsubstantiated problem 

would prevent the enforcement of laws that establish critical health 

safeguards. 

Third, this bill ignores the existing administrative and judicial 

safeguards that prevent litigation abuses. 

First, the witnesses at today’s hearing, like their counterparts at 

last year’s, have provided no evidence of Government attorneys 

seeking to limit agency discretion by colluding with plaintiffs to 

settle cases. The U.S. Chamber of Commerce recently issued an entire report on this subject and was unable to identify any evidence 

of collusion, conspiracy, or agencies manipulating settlements or 

laws to carry out improper exercises of authority. 

Instead, critics such as the Chamber have resorted to redefining 

what the term ‘‘sue-and-settle’’ means. The Chamber chose a methodology that focused on all EPA settlements with environmental 

groups but only during this Administration. Now why? First, because this allowed the Chamber to quietly dispense with any need 

to prove collusion or impropriety. Next, because a fuller picture 

that included EPA settlements with industry and Bush administration settlements with environmental groups would have destroyed 

the Chambers’ mythical story. 

What the Chamber and this bill truly target is the legal rights 

of citizens to hold government accountable by enforcing laws designed to protect public health, safety, and the environment. Settlements have led to EPA having to fulfill clear statutory obligations 

that the Chamber would prefer to remain unenforced. 

Second, under H.R. 1493, third party intervenors would be given 

the unprecedented ability to obstruct settlement talks. The result 

would waste taxpayer money as agencies would be forced to take 

more time settling or even litigating cases in which they know they 

have broken the law. H.R. 1493 would give intervenors opportunities to disrupt and obstruct the settlement of lawsuits in ways that 

courts have rejected. In fact, this bill would overturn a Supreme 

Court precedent that made clear that intervenors cannot prevent 

parties from resolving their disputes in settling a case. 

The legal obligations in settlements overwhelming entail requiring agencies to comply with nondiscretionary duties that are clearly mandated by law such as statutory deadlines. These laws protect 
111 

Americans’ health, safety, environment, food supply, investor confidence, and other values. For example, just two overdue clean air 

standards that followed consent decrees attacked by the Chamber 

are projected to save over 10,000 lives annually. If Congress does 

not like the deadlines or safeguards, it is free to amend them. It 

should not be creating end runs around the law. 

Third, H.R. 1493 ignores the legal mechanisms already in place 

to ensure transparency, public participation, and an agency’s maintenance of its discretionary powers and legal responsibilities. Notably, no witness at last year’s hearing or in written testimony today 

has identified a single rule that followed a settlement that did not 

go through public notice and comment. The settlements cited did 

not mandate a result but merely a timetable for rulemaking, meeting all administrative laws. 

Some of today’s testimony conflates and confuses the terms of 

settlements which do not establish regulatory deadlines or mandates with subsequent rulemakings that do establish deadlines and 

mandates but only pursuant to call and comment rulemakings. 

Again, no regulatory outcomes were fixed by any settlements discussed in the witnesses’ testimony, and any criticisms of the regulatory deadlines and measures could have been and in many cases 

were raised during public comment opportunities during these rulemakings. 

Settlements include specific language barring modifications of 

agency authority, and deadlines and settlements can be extended 

by agreement of the parties or unilaterally by the agency with 

court approval. But agency critics ignore these safeguards. Instead, 

the critics have offered H.R. 1493 which would hinder all plaintiffs 

seeking to uphold the law, including States, corporations, and individuals. It is hard to understand why even conservatives would 

back legislation that hinders enforcement of the law, requires agencies to waste money in court on cases they believe they cannot win, 

and would stymie industry and State settlements along with all 

others. 

I urge the Subcommittee to reject this harmful legislation. Thank 

you. 

[The prepared statement of Mr. Walke follows:] 
112 

TESTIMONY OF JOHN D. WALKE 

CLEAN AIR DIRECTOR 

NATURAL RESOURCES DEFENSE COUNCIL 

HEARING ON H.R. 1493, "SUNSHINE FOR REGULATORY DECREES AND 

SETTLEMENTS ACT OF 2013" 

BEFORE THE SUBCOMMITTEE ON REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW, 

COMMITTEE ON THE JuDICIARY 

U.S. HOUSE OF REPRESENTATIVES 

June 5, 2013 

Thank you, Chairman Bachus and Vice Chairman Farenthold, and Ranking 

Member Cohen for the opportunity to testifY today. My name is John Walke, and I am 

clean air director and senior attomey for the Natural Resomces Defense COIDlCil 

(NRDC). NRDC is a nonprofit organization of scientists, lawyers, and enviromnental 

specialists dedicated to protecting public health and the environment. Founded in 1970, 

NRDC has more than 1.3 million members and online activists nationwide, served from 

offices in New York, Washington, Los Angeles, San Francisco, Chicago, and Beijing. 

I have worked at NRDC since 2000. Before that I was a Clean Air Act attomey in 

the Office of General Counsel for the U.S. Environmental Protection Agency (EPA). 

Plior to that I was an attomey in plivate practice where I represented corporations, 

industry trade associations and individuals. Working in each of these three capacities, I 

have represented my clients in lawsuits that resulted in settlement agreements or consent 

decrees involving the EPA. My testimony today draws upon tlIese different experiences 

as well as tlIe experiences of otlIer NRDC attomeys. 
113 

H.R. 1493, the Sunshine for RegulatOlY Decrees and Settlements Act of 20 13, 

arises out of the baseless belief that government lawyers engage in "sue and settle" 

litigation strategies. The "sue and settle" expression alleges that government agencies 

seek to limit their discretion by colluding with plaintiffs to settle cases. This suggestion is 

squarely at odds with NRDC's experience, as well as my own experience as a private 

practitioner and govenunent attorney. In litigation against tile United States over fom 

decades, NRDC attorneys have observed that Department of Justice and agency attorneys 

zealously advocate for the government's position. This has been true under both 

Democratic and Republican administrations. 

Moreover, we fail to see real world evidence of the "sue and settle" phenomenon. 

A careful examination of the record, including testimony by witnesses for the majority at 

last year's hearingl for H.R. 1493 's predecessor, H.R. 3862,2 fails to establish real world 

problems tllat would justify this harmful and heavy-handed legislation. H.R. 1493 

purports to solve problems that do not actually exist. It is a fundamentally flawed piece of 

legislation tllat we mge the subcommittee to oppose for tile reasons discussed below. 

Lack of Factual Foundation for Charges 

The premise of the legislation is unfounded and indeed unsubstantiated. The "sue 

and settle" allegations implicit in the bill and reflected in last year's hearing testimony on 

H.R. 3862 amomlt to sell0us charges of intentional wTongdoing - that federal agencies 

and third parties conspire to settle litigation to advance untoward policy and legal 

objectives. 

Yet last year's testimony on H.R. 1493's predecessor is devoid of any evidence 

whatsoever of tllat allegation. For example, majority witness Andrew Grossman of The 

Heritage Foundation asserted in his written testimony that "[i]n some cases, these 

[consent] decrees appear to be the result of collusion, where an agency shares the goals of 

those suing it and takes advantage of litigation to achieve those shared goals.,,3 Nowhere 

I Hearing on H.1I. 30e/1. the "Federal Consent necree Fairness Act." and H.1I. 3862. the "Sunshinefor 

Re!{ulatorJ' Decrees and Settlemenrs Act" Before the Subcomm. on Courts, Commerce and Admin. Law of 

Ihe H. Comm. onlhe Judiciary, 112'hCong. (Feb. 3, 2012) (hearing notice available at 

http://judiciary.house.govlhearings/Hearings%202012lhear_0203012.html) CHearing on HR. 3862"). 

2 H.R. 3862, 112th Congo (2012) availah1e athttp://www.gpo.gov/fdsys/pkg/BILLS112hr3862rh/pdf/BTLLS-112hr3862rh.pdf 

3 Hearing on H.R. 3862 (Testimony of Andrew Grossman, Visiting Legal Fellow, The Heritage 

Foundation available at 

http:/,tiudiciary.house .govlhearings/Hearings%2020 12/Grossman%20020320 12. pdt). See also. e.,g. the 

2 
114 

in his written testimony, however, does Mr. Grossman furnish evidence backing this 

claim; the most he could muster was the weak statement that this "appear[s]" to be the 

case to him. Similarly, no other witnesses or members at the hearing offered proof that 

rose above their subjective interpretation or speculation. Unsubstantiated charges from 

those with an anti-regulatory political agenda should not fonn the basis for legislation. 

Similarly, the office of Majority Leader Eric Cantor issued a report entitled "The 

Imperial Presidency'" that leveled the sell0us charge tllat tlle cunent administration 

engages in improper and possibly unconstitutional collusive litigation practices: 

The Obama Administration regularly relies on "sue-and-settle" tactics to avoid 

Congressional scmtiny and minimize public participation in the mlemaking 

process, while fast tracking tlle priorities of environmental groups. In practice, 

groups like the Sierra Club and the Natural Resources Defense Coutlcil will sue 

the EPA for failing to meet a nondiscretionalY duty, usually a statutOlY deadline. 

Rather than fighting the lawsuit, EPA officials - mallY of whom used to work for 

the very groups that are now suing - will make enonnous concessions in a settlement agreement that requires the agency to take a particular action. These settlement agreements are the product of closed-door negotiations between the EPA and 

environmental groups - states, industry, stakeholders, and the pulJlic have no voice 

in the process. FUlthennore, these settlement agreements can be legally binding on 

future Administrations, raising serious constitutional concems. 

The first thing one notices when reading this passage is there is no evidence to support 

the charges. No facts, no examples, no footnotes. 

The next striking thing is the basic irony that Majority Leader Cantor is arguing 

that the Executive Branch should defend in COUlt to the bitter end its failure to comply 

with statutory deadlines set by Congress. since statutory deadlines are overwhelmingly 

the "nondiscretionaq duties" at issue in govemment consent decrees and settlements. If 

Congress docs not like a statutory deadline, it can change it. If Congress no longer 

supports statutOlY programs, it may alnend tlwm. But statutory deadlines and 

requirements are the law, and Congress surely does not Wallt the Executive Branch to 

violate a duly enacted law. An administrationlhat defied congressionally enacted 

deadlines or other provisions, even when sued to comply with them, would be thumbing 

majority report accompanying H.R. 3X62 availahle at http://www.gpo.gov/fdsys/pkg/CRPT1121upt593/pdf/CRPT-112hrpt593.pdf. 

4111C Office of Majority Leader Eric Cantor, The Imperial Presidency: Implications for Economic 

Grow/Ii and Job Creation, at 23 available at http://majoritylcader.gov/thcimpcrialprcsidcl1cy/filcs/111CImperial-Presidency-Majority-Leader-Eric-Cantor%27s-0ffice.pdf. 
115 

its nose at Congress-intruding on congressional prerogatives-not the other way 

around. 

Most striking of all is the consistent failure in Majority Leader Cantor's report and 

elsewhere by critics of agency settlements and consent decrees to identity instances of 

collusion or other im propriety, notwithstanding an entire political nalTative developing 

without suppOltive facts. Critics have not identified settlements that dictated particular 

regulatOlY outcomes by skilting required administrative rulemakings. Conservative 

authors of editorials, op-eds and blogs have taken lip this narrative without so much as 

the barest facts to support the charges. 5 The U. S. Chamber of Commerce recently issued 

an entire report" on this subject and was unable to identity any evidence of collusion, 

conspiracy or agencies manipulating settlements or laws to carry out improper exercises 

of authority. My testimony examines the Chamber Report in greater detail below. 

Shifting Arguments 

Faced with the inability to identify collusion or impropriety and the dilemma this 

represents for their agenda, critics have resorted to shifting their arguments and redefining what the term "sue-and-settle" means. The Chamber of Commerce repOlt 

provides a particularly stark example of this shell game. 

The Chamber chose a "sue-and-settle" methodology for its rep0l1 that consists of 

Internet searches identitying all cases in which EPA and an environmental group entered 

into a consent decree or settlement agreement between 2009 and 2012. One Crullot help 

noticing the report's slanted, partisan failure to exrunine any settlements between EPA 

and industry parties or conservative orgrulizations, or any settlements involving the Bush 

administration. EPA regularly enters into settlements with industry parties, and 1 provide 

a list of illustrative examples in a footnote to my testimony 7 Had the Chamber examined 

settlements prior to 2009, the results would have disclosed that the Bush administration 

, See, e.g., Op-Ed., FI'A', hack-room 'sue and settle' deals require reform. WASH. EXAMINER. May 25. 

2013 availahle at http://washingtonexaminer.com/epas-back-room-sue-and-settle-deals-requirerefollll/article/2530505 & Op-Ed., No more back-room deals between bureaucrats and liberal activists, 

WASIl. EXAMINER May 27, 2013, available 01 http://washingtonexaminer.com/national-editorial-nomore-back-room-deals-between-bureaucrats-and-liberal-activists/articie/2530584 (last visited May 31, 

2(13) ("Washington Examiner Op Eds"). 

G U.S. Chamber of Commerce, Sue and Settle: Regulating Behind Closed Doors. May 2013 availahle at 

http://www. usehamber.eom/sitcs/defaultlfiles/reports/SUEANDSETTLEREPORT -Final.pdf ("Chamber 

Report"). 

7 See mji-a n. 37. 

4 
116 

entered into settlements and consent decrees with environmental groups, industry, states 

and other organizations just like the present administration. 

Most striking of allis that by merely compiling EPA settlements (with just 

environmental groups, under just this administration), the report's methodologl quietly 

dispenses with any need for proof of collusion or impropriety in consent decrees or 

settlement agreements. The Chamber cannot remotely back up the charge that collusion 

was involved in all of these settlements, or even in any of them, so tlle report does not 

even try. 

It is not surprising that the Chamber's methodology found instances of settlements 

with EPA, since settlements are a common and long-accepted form of resolving litigation 

over clear legal violations llilder any administration. But the Chamber Report then 

proceeds to assert that these mrremarkable facts are evidence of tbe collusion imagined 

by critics. As such, tlle Chamber Report redefines and significantly expands the already 

politically loaded sue-and-settle allegation to encompass settlements generally, precisely 

because there is no evidence of collusion. 

The Chamber continues this argument-shifting tactic elsewhere in its report. The 

report reveals that one of the Chamber's grievances concerns not just settlements (lacking 

any evidence of impropriety), but even the basic legal rights of citizens (and corporations 

and states, among others) under various federal laws to hold government accountable 

when it breaks the law: "In tlle fInal analysis, Congress is also to blame .... Most of the 

sue and settle lawsuits were filed as citizen suits authorized lUlder the various 

enviromnental statutes.,,9 

These citizen suit authorities are one oftlle longest-standing and proudest features 

of modem administrative laws. Courts have recognized the importance of these suits, 

noting that they represent a "deliberate choice by Congress to widen citizen access to the 

comis, as a supplemental and effective assurance that [environmental laws] would be 

implemented and enforced." 1 0 

S Chamber Report at 46-49. 

o Id. at 8. 

10 Natural lies. f)el Council v. Train, 510 F.2d 692,700 (1974); See a/so Alyeska Pipeline Service Co. v. 

Wilderness Society, 421 U.S. 240, 263 (1975) ("Congress has opted to rely heavily on private 

enforcement to implement public policy''); Penmylvania v. Delaware Val/e)' Citizens' Councillor Clean 

Air. 483 U.S. 711, 737 (1987) (Blackmun, J., dissenting) (noting reasonable fees provisions of 

environmental laws "to encourage the enforcement of federal law through lawsuits filed by private 

persons"). 
117 

The Chamber is taking aim not at collusion, for which it lacks any proof, but 

instead at this "deliberate choice by Congress." The Chamber is directly targeting the 

legal rights of citizens to hold government acconntahle by enforcing mandatory statutory 

duties that agencies have unlawfully delayed or entirely failed to execute. The reason for 

this targeting is plain. The Chamber dislikes the lights that Congress has cOllfened upon 

Americans to protect themselves against health and environmental hazards when the 

government fails in its obligations to do so. The Chamber so dislikes these citizens' rights 

because the result may mean that agencies are required to enforce the law, making some 

of the Chamber's members comply with health, safety and environmental standards. 

Nondiscretiona'Y Statuto'Y Duties 

Consent decrees between federal agencies like EPA and plaintiffs are most 

commonly lodged in federal district comts to address an agency's failme to pelfonn a 

nondiscretionary (or mandatory) statutory duty under federal law. These nondiscretionary 

duties most frequently concern failure to meet one or more plain statutory deadlines.ll 

The Republican co-sponsors of the companion Senate bill, S. 714, recognize the 

nature of these legal obligations. They have noted that the settlement agreements and 

consent decrees targeted by their legislation "[ t lypically" arise in cases where "the 

defendant agency has failed to meet a mandatOlY statutOlY deadline for a new regulation 

or is alleged to have mU'easonably delayed discretionary action." 12 In my expelience, 

consent decrees with federal agencies overwhelmingly concern nondiscretionary statutory 

duties like legal deadlines, and settlements are entered into far less often for nmeasonably 

delayed discretionary actions. Indeed, caselaw tells us that agencies like EPA routinely 

litigate unreasonable delay lawsuits rather than settling them, sometime winning such 

cases, sometimes losing them 13 

II See, e.g, American '"ung Association etal .. v. US FPA. No. 1.12-cv-00243, at 2 (D. D.C. Sept. 4, 

2012) (consent decree in a "suit[] against EPA alleging that the Agency has failed to perfonn a 

nondiscretionary duty required by the Clean Air Act") ("PM" Consent Decree ") available al 

http://switchboard.nrdc.org!blogs/jwalke/PM2.5%20consent%20decree.pdf;AmericanNursesAssoc.et 

al. v . .Johnson. No. 1:08-cv-02198 (D. D.C. Dec. 18.2(08) (consent decree requiring action by EPA to 

issue final regulations relating to toxic air pollution from power plants). 

12 Press Release, Senator Chuck Grassley, "Regulatory Rcfonn Initiative Seeks Sunshine, Accountability, 

and Pro-Jobs Environment," Aprilll, 2013 

http://www.grassley.senate.gov/news/ Artic1e.cfm?RenderForPrint= 1 &customel_ data Page I D _1502=4545 

8 (,"Senator Grassley Press Release''). 

13 Sec, e.g, WildEarih Guardians el al.. v. US EPA, No. 11-02064 (D. D.C. Nov. 17,2011) (Defendant 

EPA currently litigating case brought by WildEarth Guardian, Sierra Ciub, Earthjusticc relating to air 

pollution from coal mines); In re Natural Resources J)ejense CounCil, 645 F.3d 400 (D.C. Cic. 2(11) 

6 
118 

There is a misconception that settlements to resolve agency failures to meet 

statutory deadlines pressure agencies to act hastily and sloppily. This is an unfounded 

concern. First and most obviously, agencies only consent to decrees and agree to 

settlements when the agency believes in good faith that it can meet the specified 

deadlines. Presenting settlements and decrees to judges for approval means an agency is 

making a representation to the court tllat it can satisfY the telIDS of the document. As Witll 

the absence of any proof of collusion, I have seen no evidence tilat agencies agreeing to 

deadlines in settlements are acting in bad faith or making misrepresentations to cOUlis. 

Second, settlement agreements and consent decrees also contain standard language 

allowing the parties to modifY the agreements with mutual consent and court approval, or 

even for tile agency to modifY tile agreement over the plaintiffs' objection if tile court 

approves the modification. 14 Tn my experience, if the agency determines that it needs 

more time then deadlines in these agreements are extended. 15 

Finally, EPA has addressed tllis issue directly and cOlTected the misUllderstanding 

that settlement deadlines pressure agencies. Republican Senators recently submitted 

questions to EPA Administrator nominee Gina McCarthy and asked whether "deadlines 

in settlements sometimes put extreme pressure on the EPA to act.,,16 To the contrary, 

EP A responded: "Where EPA settles a mandatory duty lawsuit based on the Agency's 

failure to meet a statutOlY mlemaking deadline, the settlement agreement or consent 

decree acts to relieve pressure on EPA resulting from missed statutory deadlines by 

establishing extended time peliods for agency action."! 7 

(NRDC case in which FDA litigated, and won, case regarding regulation ofbisphenol A); Chicago Ass'n 

of Commerce and Industry! v. U.S F1'A.S73 F.2d 1025 (7th Cir. 19S9) (EPA litigated and won case 

regarding unreasonable delay on municipal waste agency application for sewage removal credits). 

14 See, e.g., PM, 5 Consent Decree. at 4, "]6 ("'The Parties may extend the deadline established in 

Paragraph 3 by written stipulation executed by counsel for all Parties and filed with the Court on or before 

the date of that deadline: such extension shall take effect immediately upon filing the stipulation. In 

addition. EPA reserves the right to ftle with the Court a motion seeking to modify any deadline or other 

obligation imposed on EPA by Paragraphs 3, 4. 5 or 14. EPA shall give Plaintiffs at least five business 

days' written notice before filing such a motion. PlaintitIs reserve their rights to oppose any such motion 

on any applicable grounds.") available at 

http://switchboard.nrdc.org!blogs/jwalke/PM2.5%20consent%20decree.pdf. 

15 Agencies may detennine more time is needed due to unforeseen circumstances or last -lninute cnmches, 

often leading to relatively short extensions. Sce, e.g., American N1Irses Assoc. el al. v. Johnson, slIpra n. 

11 (consent decree modified on Oct. 24,2011, to allow tinal standards no later than Dec. 16,2011). 

16 Senator Vitter. Questions for the Record, Gina McCarthy Contirmation Hearing, Environment and 

Public Warks Committee. May 6. 2013, at p. 23 avazlahle at 

http://www.cpw.senate.gov/public/indcx.cfin.!FuseAction~Fi1cs.View&FileStore_id~9aI465d3-1490-

4nS-9SdO-7dl nb3dc320 (",Senator Vittcr Questions"). 

17 1d. (emphasis added). 

7 
119 

Benefits of Enforcing Laws to Protect Health, Safety and the Environment 

The statutory safeguards that federal agencies are bound to enforce with 

nondiscretionary duties and statutory deadlines exist to protect Americans' health, safety, 

natural environment, food supply, medication and other consmner products, and financial 

and investor interests. Let me list just two examples of the mytiad ways that enforcing 

statutory deadlines through citizen suits have benefitted Americans: 

• Enforcing the statutory deadline for long-overdue mercury and air toxics standards 

for power plants, which resulted in EPA adopting safeguards projected to avoid, 

evelyyear: 

o Up to 11,000 premature deaths; 

o 2,800 incidents of chronic bronchitis; 

o 4,700 heati attacks; 

o 130,000 asthma attacks; 

o 5,700 hospital and ER visits; and 

o 3,200,000 restricted activity days. IS 

• Enforcing the statutory deadline for overdue clean air health standards for soot 

pollution (fine particles or PM2S), which resulted in EPA adopting safeguat'ds 

projected to avoid, every year: 

o Up to 1,500 premature deaths; 

o Up to 800 hem attacks; 

o Up to 250,000 asthma attacks atnong children; atld 

o Up to 570,000 restrict activity or lost work days.19 

Anti-Enforcement Agenda 

H.R. 1493 subverts the power of the judiciary as well as the obligation ofthe 

executive branch to enforce congressional enactments, as a means of skewing outcomes. 

It is quite revealing that the complaints at last year's Subcommittee hearing on H.R. 3862 

were more about opposition to the underlying statutory matldates thatl to the vehicles for 

" U.S. EPA, Fact Sheet: Mercury and Air Taxies Standards: Benefits and Costs of Cleaning Up Toxic Air 

Pollution from Power Plants, available at http://www.epa.gov/mats/pdfs/2011122IMATSimpactsfs.pdf. 

19 U.S. EPA, Regulatory Impact Analysis for the Final Revisions to the National Ambient Air Quality 

Standards for Particulate Matter, available al hltp:llwww.epa.gov/ttn/ecas/regdataiRIAs/±inalria.pd( at 5-

68 (Table 5-18) 
120 

enforcing those mandates. This opposition to the enforcement ofmandatOlY statutory 

duties and substantive legal safeguards courses tluough the Chamber Report20 

H.R. 1493 creates the unprecedented legal opportunity for third party 

"intervenors" to obstmct settlement talks and prolong illegal, harmful actions when 

federal agencies are sued for violating federal laws. Specifically, the bill mandates that 

non-party intervenors be given the right to paliicipate in federal agency settlement 

discussions. See Sec. 3(b) alld (c). The bill then mandates that all settlement discussions 

be conducted only pursuant to tinle-consuming and open-ended mediation programs 

administration by the federal courts. (The bill carefully avoids placing any time limits on 

this mediation mandate.) See Sec. 3(c). This unprecedented elimination of informal 

settlement opportunities and the speedier resolution of lawsuits, provides intervenors with 

legally rejected21 and heretofore unheard of opportunities to dismpt and obstmct the 

settlement of lawsuits that tlle govenunent believes should not be defended in court. 

This extreme approach would give industry :intervenors the right to participate in 

and prolong settlement discussions to argue that agencies like the EPA have not broken 

the law-even when agencies admit that they have, and when it is inescapable that they 

have. These industry intervenors would be granted the opportunity to oppose rulemakings 

and schedules to remedy the legal violations, over the objections of injured plaintiffs, 

even when the agency is willing to follow the law and conect its illegal behavior. I 

discuss this feature of the bill more extensively in the section-by-section bill allalysis on 

pages 20-24. 

By targeting citizen suits, settlements, and longstanding judicial processes and 

caselaw, H.R. 1493 absolutely would make it harder to ensure that the federal 

government does not break the law or faces required legal remedies when it does. 

Notably, the bill includes no measures to ensure that the federal government does not 

break the law or that it faces the appropriate consequences when it does. Instead, tlle bill 

is a one-way ratchet weakening law enforcement. 

20 Sec generally Chamber Report; Senator Grassley Press Release, supra n. 12; Senator Vitter Questions 

mpra n, 16; Washington Examiner Op-Eds, supra n, 5. 

21 On pages 16-17 of this testimony, I discnss a Snpreme Conrt decision that would be overturned by this 

aspect of the legislation. That decision declared that '"[ilt has never been supposed that one partywhether an original party. a party that was joined later, or an intervenor could preclude od,er parties from 

settling their o"n disputes and thereby withdrawing from litigation," Local Number 93 v, Cilyof 

Cleveland,47X U.S, 50l. 528-29 (1986). 

9 
121 

Disruption of Judicial Processes 

The bill also creates new procedural obstacles to resolving litigation early in the 

process, wasting the time and resources oflitigants and the courts and conflicting directly 

with the expressly stated and longstanding policy of the federal judiciary. The advisory 

committee notes to Federal Rule of Evidence 408 specifically invoke "the public policy 

favoring the compromise and settlement of disputes."ll 

Above all, H.R. 1493 ignores the role of the judiciary in resolving disputes by 

ignoring the reason that many of these consent decrees occur in the first place. In drafting 

legislation, Congress sets deadlines and priorities when it directs agencies to undeliake 

certain rulemakings. When these deadlines are missed, it is the proper role of the 

judiciary to ensure that laws, as written by Congress and signed into law by the president, 

are properly enforced23 The proper role of the judiciary is to enforce the statutory 

deadlines set and written into law by Congress rather than further impede the agency 

from meeting these deadlines. Preventing the judiciary from enforcing statutory deadlines 

is not an appropriate way to alter the regulatory system, and would gradually tum 

regulatory statutes into dead letters. 

This bill, and the majority witnesses' prior testimony, would have one believe that 

these radical shifts in the balance of power are costless and serve only to increase 

transparency in agency decision-making. This could not be further from the truth. This 

legislation creates a judiciary that is required to obstruct settlement agreements and 

consent decrees, increasing transaction costs for all patties and the comts. This would 

mean less efficiency, flexibility and timely enforcement of the law. Costly and protracted 

litigation would meatl that agency wTongs-violations of congressional mandates, mind 

you-would take even longer to be rectified. 

22 See FED. R. EVID. 408 advisory committee's note available at http://www.law. comell 

.edu/rules/frc/rule 408. 

21 Hearing on H.R. 3862, supra n. 1 (Statement of David Shoenbrod, Visiting Scholar, American 

Enterprise Institute) available at 

http:l,tiudiciary.house.govlhearingslHearings%2020 12/Schoenbrod%20020320 12.pdf; See "Iso Richard J. 

Lazarus, The Tragedy ajDistrust in Ihe Implememalian afFederal Environmemal Law, 54 LAW & 

CONTEJ\1PORARY PROBLEMS 311, 323 (1991) (showing that EPA meets only a small percentage of 

statutory deadlines). 

10 
122 

Existing Safeguards and Public Participation Opportunities 

H.R. 1493 ignores the legal mechanisms already in place to ensure transparency, 

public participation, and an agency's maintenance of its discretionary powers and legal 

responsibilities. Notably, the witnesses for the majority at last year's hearing on H.R. 

3862 praise these existing mechanisms at length in their testimony. At last year's heating, 

Mr. Grossman lauded the so-called "Meese Policy" as an exemplary non-pa11isan 

approach that recognizes the appropliate place for the Executive Branch of government, 

yet he failed to acknowledge current practices that limit what the federal government can 

agree to when it enters into consent decrees or settlements regarding discretionary 

duties 24 

Roger Martella, another witness2S for the majority at the H.R. 3862 hearing, also 

praises current administrative processes, identifying "every significant administrative law 

initiative" as having "three inexorable components: the agency's proposed rule, the final 

nue, and the litigation by the loser in the mlemal<ing.,,2<i Moreover, Mr. Martella does not 

think "we can or should endeavor to change those components.,,27 As Mr. Mattella 

highlights, in the rulemaking context an agency may not evade or subve11 required notice 

and comment rulemaking procedures through a consent decree or settlement. 

Notably, no witness at last year's hearing for H.R. 3862 identified rules that 

followed settlements with agencies and did not go through public notice and comment 

under the Administrative Procedure Act before taking effect. For today's hearing, the 

witnesses should be asked whether they Catl identifY any such examples ofmles that 

skirted required AP A procedures and, if so, whether those actions escaped judicial 

review. 

American Nurses Association v. Jackson, a case cited by both Mr. GrosSmatl in his 

testimony on H.R. 3862 last year and in the Chamber Report, provides a perfect example 

of these procedures. I feel compelled to address this case at some length to rebut the 

Memorandum from Edwin Meese III. Attorney General. to All Assistant Attorneys General and All 

United States Attorneys (Mar. 13. 1986): See also Memorandum from Randolph D. Moss. Acting 

Assistant Attomey General Office of Legal COlllsel, for Raymond C. Fisher, Associate Attomey General 

(June 15, 1999) available athttp://www.justice.gov/01c/consentdecrees2.hm: 28 C.F.R. Subpt. Y (2012). 

2' Hearing on H.R. 3862, supra n. 1 (Statement of Roger R. Martella, Jr., Sidley Austin LLP, 'Addressing 

Off Ramp Settlements: How Legislation Can Ensure Transparency. Public Participation. and Judicial 

Review in Rulemaking Activity.") availahle at 

http://judiciary.house.gov/hearingslHearings'l'o202012/Martella%2002032012.pdf. 

Jd. at 1. 27 1

d. 

II 
123 

Chamber's and Mr. Grossman's unfounded charges since NRDC was a plaintiff in that 

lawsuit. In that case, the EPA merely agreed to propose standards by a certain date and to 

finalize standards by a later date. No particular outcomes or substantive positions were 

mandated by the consent decree. The agency provided a fonnal comment pell0d of 90 

days on the proposed standards, but made the proposal publicly available for nearly 140 

days before that comment period closed. And the consent decree was open to being 

modified jointly by the parties or unilaterally by the agency (with cOUli approval), a 

common feature of agency consent decrees 28 FUliher, section 113(g) of the Clean Air 

Act requires that the agency take public comment on consent decrees, providing yet 

another opportunity for public input29 

Moreover, what Mr. Grossman and the Chamber fail to note is that the clean air 

standards at issue in the consent decree already were over a decade overdue based on 

deadlines for action that Congress itself had set when amending the Clean Air Act in 

1990. EPA had violated a nondiscretionary duty to issue these standards by a statutory 

deadline, tile agency acknowledged that it had missed this statutOlY deadline, and the 

court would not have approved the consent decree had the cOUli not agreed that EPA had 

violated a nondiscretionary statutory duty30 Mr. Grossman's testimony leveled 

complaints at the EPA mercury and air toxics standards, but these are all the same issues 

that industry raised during the comment period and are cunently raising in court to 

challenge the final standards. This proves the point, echoed in Mr. Martella's statement, 

that existing administrative and judicial processes provide opportunities for public 

participation and the full exercise of legal rights, without the need for misconceived 

legislation like H.R. 1493. 

Mr. Grossman represented groups opposed to the American Nurses Association 

consent decree and unsurJJ1isingly he repeated that opposition in last year's testimony; 

but at bottom his disagreement is over the substance of the Clean Air Act's standards, not 

any procedural failings. The requirement to issue the standards originated with Congress 

(author of the 1990 Clean Air Act amendments) and was simply enforced by citizens and 

tile comts. 

os See supra n. II. 

29 Clean Air Act section 113(g), 42 U.s.C. §7413(g) (2013). 

," Shortly before promulgation of the final regulations at issue in the consent decree, industry intervenors 

sought to interfere with the decree and unilaterally alter its terms to delav those regulations by a year. The 

court rejected that industry motion. When the industry intervenors sought to re-file an essentiallv identical 

motion a short while later, Mr. Grossman filed a brief supporting the industry intervenors. TI,e court did 

not even bother to rule on tilat repetitive motion, making clear it was no more meritorious ilian tile first 

one. 

12 
124 

Some members of Congress opposed the mercury and air toxics standards in the 

112th Congress, but several House bills to void these standards did not become law3l and 

a Congressional Review Act resolution of disapproval aimed at the standards failed in the 

Senate32 Hatmfullegislation like H.R. 1493 should not be used to obstruct enforcement 

of laws that Congress chooses not to atnend or repeal through regulat· legislative 

atnendments. 

EPA Settlements with Industry Parties 

It is instructive to examine some of the many settlement agreements that EPA 

enters into with corporations or industry trade associations, because these settlements 

confollild the sue-atld-settle mythology atld llildermine the basis for H.R. 1493. What one 

finds in the creation atld content of some of these settlements witll industry is strikingly 

similar to settlement agreements with non-industry patties. 

First, EPA concludes tllat it makes more sense to settle a lawsuit brought by 

industry rather than litigate the case, after the agency weighs the defensibility of its legal 

stance, the expenditure of resources, and the certainty provided by settling. Second, EPA 

enters into private discussions with the industry plaintiffs to craft a settlement agreement. 

(When parties to an EPA lawsuit are public health groups, industry critics hypocritically 

and pejoratively dub these tall(s "back-room negotiations."i3 These private settlement 

talks do not include intervenors or non-industry patties. 

Third, EPA frequently agrees to deadlines to propose and finalize miemakings 

(just like in settlements with non-industry parties)34 EPA commits to schedules that it 

can represent to the court the agency will satisfy. The settlements contain standard 

language allowing EPA to seek extensions in these deadlines, with mutual consent of the 

parties or via unilateral agency motion if the court approves the extension 35 

Fourth, EPA then often agrees to take comment in future proposed mlemakings on 

specific measures included as tenns in tlle industry settlements]o One actually observes 

.1 Transparency in Regll1a:tOlY Annlvsis of Impacts to the Nation. H.R. 2401. 112th Congo (2012). 

32 S.J. Res. 37, 112th Congo (2012). 

33 Sce, e.g., U.S. Chamber of Commerce, Sue and Seille: Regulaling Behind Closed Doors. 

34 See, e.g., inti'o n. 37. 

3' See. e.g. FnerNOC, Inc. V. Us. FI'A., 2013 WL 655313 (D.C. Cif. Feb. 6. 2(13) (Obama EPA 

settlement agreement described infra n. 37 modified twice): FnKine Mfrs. Ass'n V. US. FPA, 2006 WL 

1825298 (D.C. Cif. June 16, 2006) (~3: "TI,C partics may extcnd the datcs set forth in Paragraphs 1 and 2, 

or otherwise modifY this Agrcement"). 

36 See. e.g.. Am. I'etmleum Inst. V. Us. N'A. No. 95-1098 (D.C. Cif. Feb. 9, 1995) inji'o n. 37. 

13 
125 

this practice more in EPA settlements with indusUy than in settlements with public health 

groups37 The reason is that industry litigants often have very specific regulatory 

approaches or test methods that they want EPA to present for comment in proposed 

mlemakings. This practice inches closer to the line that critics charge (enoneously) that 

EPA crosses in settlements with public health groups: committing to substantive 

regulatory outcomes in settlement agreements. But in these indusUy settlements just as in 

those with public health groups, EPA does not cross that line: agreeing to take comment 

on a very specific proposed regulatory outcome "substantially similar" to the terms in a 

settlement agreement still preserves the EPA Administrator's discretion to reach different 

decisions in final rules. And it still preserves the rights of the public to comment on and 

oppose the proposal reflecting that industry-preferred outcome. 

Fifth, as discussed above, the subsequent proposed and final rulemakings satisfy 

all procedural requirements under the AP A and the pertinent organic statutes-just as 

with rulemakings following settlements with health and environmental organizations. 

There is nothing improper about this sequence of events. EPA and the indusUy 

plaintiffs are using long-accepted and even favored judicial tools. Industry is resorting to 

lawsuits under statutory citizen suit authorities and reaching private settlements with a 

federal agency to vindicate the industry plaintiff's legal interests. The settlements do not 

include intervenors. But they do not hanll non-parties because the agency is not limiting 

its legal discretion, it is not committing to substantive outcomes, and the agency is not 

bypassing procedural requirements for public participation in rulemal(ings. 

Chamber of Commerce Report 

The Chamber Report takes aim at the Obama administration and accuses federal 

agencies of engaging in collusive litigation practices with public interest groups (a 

practice they disparage as "sue-and-settle" litigation). As discussed above, tlle very 

methodology of the Chamber repOli reveals its misleading nature because it merely 

17 See. e.g.. Am. I'etm/eum Ins!. v. US N'A. No. 95-1098 (D.C. Cir. Feb. 9, 1995) (Clinton EPA 

settlement agreement with American Petroleum Institute agreeing to propose and take comment on 

amendment to certain federal regulations); Engme Mfrs. Ass'n v. US. EPA, 2006 WL 1825298 (D.C. Cif. 

June 16,2006) (Bush EPA settlement agreement Witil a number of industry groups to propose. and one 

year later tinalize, standards relating to heavy duty diesel engines);; Wisconsin Builders Assoc. v. US 

/CPA. No. 09-4113 (7th Cif. Dec. 28,2(09) (Obama EPA settlement agreement with industry groups 

requiring proposed final nile, comment period. and final nile); FnerNOC Inc. v. US. FPA., 2013 WL 

655313 (D.C. Cif. Feb. 6,2013) (Obama EPA settlement agreement requiring proposed and tinal 

rulemakings by certain dates). 

14 
126 

compiles settlements with one type of private pm1y whose views the Chamber does not 

share. 

Early on, the report authors slip and rcveal one of the secrets behind the 

Chamber's political enterprise. The Chamber confesses that its "major conccrn" is that 

agency settlements with private parties "will spread to other complex stahltes that have 

statu/ariZ)! imposed dales for issuing regulations.,,38 

This tells us that the Chamber knows what's really going on and why it is 

resorting to misrepresentation throughout its report. Namely, the Chamber understands 

that the agencies it excoriates are entering into settlements and consent decrees to carry 

out stahltorily required obligations for which the agencies lack discretion. 

Here are some of the core falsehoods in the Chmnber Report. 

Chamber Fiction: "Perhaps the most significant impact of these sue and settle 

agreements is tllat by freely giving away its discretion in order to satisfY private parties, 

an agency uses congressionally appropriated funds to achieve the demands of private 

parties.,,39 

Facts: The legal obligations in these agreements involve nondiscretionary duties 

written into laws passed by Congress. Agencies lack discretion as a matter of law to 

ignore or contravene these mandatory stahltory duties. Most of these obligations concern 

stahltory deadlines. For example, the Clean Air Act requires-lO EPA to review national air 

quality standards evelY five years. The Chamber Report does not begin to explain where 

EPA enjoys discretion to miss this deadline, even though the report lists iliis as a prime 

example where EPA has discretion to do something other than what the law says.-ll 

Indeed, the Clean Air Act spells out in unmistakable language the basis for citizen 

suit lawsuits against the govemment: lawsuits in federal district court are permitted only 

when the act or duty to be performed by the EPA Administrator is "not discretionary.,,-l2 

The report's misrepresentation ofllondiseretionalY statutOlY duties for agencies ends up 

confirming tlle Chmnber's agenda to prolong govenllnent violations of stahltOlY health 

and safety obligations. 

3S Chamber Report, at 7 (emphasis added). 

W Jd. 

"" Clean Air Act section 109,42 U.S.c. §7409 (2013) availahle at 

hllp://www.law.comell.edu/uscode/text/42/7409. 

41 Chamber Report, at 43. 

"' Clean Air Act section304(a), 42 U.S.C. §7604(a) (2013) available al 

hllp://www.1aw.comell.edu/uscode/text/42/7604. 

15 
127 

Take a recent EPA consent decree relating to soot pollution (fine particulate) 

standards43 from the Chamber's hit list.44 EPA agreed to a date to finalize its review of air 

quality standards for soot pollution, after the agency missed the mandatory 5-year 

deadline. The decree contains the following language-typically included in similar 

decrees-that suggests that (he Chamber might not even be reading the settlements it 

condemns for allegedly stripping agencies of legally preselved discretion: 

Nothing in this Consent Decree shall be constmed to limit, expand, or otherwise 

modify the discretion accorded to EPA by the Clean Air Act or by general 

principles of administrative law, including the discretion to alter, amend or revise 

any final action EPA takes [relating to soot standards]. except the deadline 

specified therein. EPA's obligation to [revise soot standards 1 by the times 

specified therein does not constitute a limitation, expansion or other modification 

of EPA 's discretion within the meaning ofth1s paragraph. 

Amazingly, the Chamber report highlights this consent decree as one in which EPA is 

denied discretion and mle outcomes are dictated45 This is demonstrably wrong. 

Cham ber Fiction: "The practice of agencies entering into voluntary agreements 

with private parties to issue specific mlemaking requirements also severely undercuts 

agency compliance with the Administrative Procedure Act ... ,,4(, 

Facts: The Chan] ber does not begin to show that thc enhy of a settlement 

agreement or consent decree violated adminish'ative laws in the report's catalogue of 

examined cases·7 Nor does the repOli back its charge that the agreements in these cases 

committed agencies to adopt specific rulemaking requirements that violated 

administrative laws. The report resOlis to mere assertions again and again because the 

Chamber knows (or should know) that its claims are legally unsupported. 

The Chamber Report proposes to "fix" these problems through promoting 

legislation such as I-LR. 1493. However, the "Sunshine for Regulatory Decrees and 

Settlements Act of 20 13" is a dangerous piece of legislation. In addition to obstructing 

enforcement of safeguards, flouting traditional concepts of separation of powers and 

limiting the role of the judiciary, the proposed legislation casually overturns conh'olling 

", PM" Consent Decree, availahle at http://switchboard.nrdc.org!blogs/jwalke/PM2.5 consent decree.pdf 

44 Chamber Report, at 43. 

Id. at 19. 

"6 Jd. at 6. 

"7 Id. at 30-42. 

16 
128 

Supreme Court precedent. In I>ocal Numher 93 v. City oreleveland, 478 U.S. 50 1,528-

29 (1986), the Court stated that: 

It has never been supposed that one party - whether an original party, a party that 

was joined later, or an intervenor - could preclude other parties from settling their 

OW,1 disputes and thereby withdrawing from litigation. Thus, while an intervenor 

is entitled to present evidence and have its objections heard at the hearings on 

whether to approve a consent decree, it does not have power to block the decree 

merely by withholding its consent. 

The Chamber dislikes this established legal understanding because it prevents 

industry intervenors from obstructing agency decisions to follow statutory obligations 

that some of the Chamber's member corporations might wish to remain m1enforced. 

So let's review the list ofvillains in the Chamber Report: 

• Congress is to blame for its nerve in giving citizens the right to hold government 

accountable when federal agencies break laws: "In the final analysis, Congress is 

also to blame ... Most of the sue and settle lawsuits were filed as citizen suits 

authorized under the various enviromnental statutes.,,48 

• The cOU1is are to blame for "rubber stamping" agency agreements that remedy 

govemment agencies' law-breaking. The Chamber even charges Urat "generally it 

does not matter to courts if the decree or agreement is not required or authorized 

by statute.",19 This is a very serious charge, made all the more outrageous by the 

Chamber's absolute failure to substantiate it. The report identifies no instances of 

courts approving consent decrees or agreements requiring agencies to mldertake 

actions contrary to statutes. 

• And finally, of course, citizens and public health groups are to blame for having 

the nerve to hold governmenl accountable, enforcing laws passed by Congress 

using means long authorized by Congress. 

One will have anticipated this by now, but who remains blameless? The Chamber 

and its member corporations. They are only demarlding the right to obstruct enforcement 

of laws on the books. They are only seeking to allow harmful levels of pollution and 

financial abuses to continue because they don't like the laws that curtail these hanns. The 

Chamber and its member corporations are happy to vindicate Ureir legal interests by 

entering into settlements with federal agencies. 

", Chamber Report at 8. 

"' Id. at 4. 

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129 

In the final analysis, the Chamber of Commerce report ends up being a thinly 

veiled attempt to promote ~ political agenda to obstmct enforcement oflegal safeguards 

that protect Americans against harmful corporate activities, 

EPA Consent Decree Conccming Air Toxics Standards for Brick Manufacturers 

One ofthe majority's witnesses for today's hearing, l'vlL Allen Puckett, is 

President and CEO of the company Columbus Blick Co, Columbus Brick submitted 

comments opposing an EPA consent decree addressing Clean Air Act air toxics standards 

for "brick and structural clay products manufacturing facilities". It is instructive to review 

the facts associated with this consent decree to understand how the public is harmed by 

the failure to enforce the law (or worse), and to examine how consent decrees begin to 

remedy those harms, albeit belatedly. As I will show, the actual facts associated with this 

consent decree don't even fit the story line of "sue-and-settle" collusion. 

The Clean Air Act required EPA to adopt standards reducing toxic air pollution, 

including carcinogens like arsenic and chromimn, from the brick manufacturing industry 

no later than November 15, 2000 50 EPA did not get around to issuing those standards 

until 2003. In 2007, the D.C. Circuit Court of Appeals vacated those standards for being 

unlawfully weak and unprotective and remanded the rulemaking to EPA for fmiller 

proceedings. 51 

In unusually pointed language, the judges rebuked EPA for defying the court's 

legal precedents by relying upon the same deregulatory legal argmnents in the brick case 

that the court had already rejected repeatedly. 52 The industry should not have been 

sm'jJlised by this decision, given previous court rulings on the same dispositive legal 

Issue. 

As a result of the prior administration's unlawful actions, and the vacatur of the 

standards, there currently are no federal air toxics standards in place for brick 

manufacturers. The industry is in the 13th year past the time that Congress expected toxic 

pollution from these industrial facilities to be covered by Clean Air Act standards. 

42 U.S.C § 7412(e) 

'I Sierra Club v. 1<-l'A, 479 F.3d 875 (D.CCir. 2007) 

Id. at SS4 ("Ifthe Environmental Protection Agency disagrees with the Clean Air Act's requirements 

for setting emissions standards. it should take its eoncems to Congress. If EPA disagrees with this court's 

interpretation of the Clean Air Act, it should seck rehearing en bane or file a petition for a writ of 

certiorari. In the meantime, it must obey the Clean Air Act as written by Congress and interpreted by this 

court.") 

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130 

In 2008, when EPA had not so much as proposed brick toxic standards that were 

by then eight years overdue, the Sierra Club filed a lawsuit over EPA's failure to perform 

a nondiscretionary statutory duty and promulgate standards by the required 2000 

deadline, 53 EPA then moved to dismiss the Siena Club's lawsuit, with the agency having 

the chutzpah to argue that the plaintiff's lawsuit was too late and the case should be 

dismissed under the federal statute of limitations. The court denied the EPA motion. Only 

after that COUlt ruling-leaving EPA with no defense to its failure to meet the 

nondiscretionary statutory deadline-did the agency then agree to enter into settlement 

discussions with the plaintiffs. This is hardly an example of "'sue-and-settle" col1usion. 

EPA published the consent decree for public comment in accordance with the 

Clean Air Act. Columbus Brick opposed the consent decree and urged that the schedule 

for issuing the long overdue standards be delayed further 54 The company's primary 

argument was that "there is not enough time for EPA to develop health-based standards, 

which allow EPA to tailor the level of the standard so that it protects health without 

imposing urrnecessarily stringent standards."ss 

As a clean-air attorney working on air toxic standards for over 15 years, allow me 

to translate what a "health-based standard" is. It is an exemption from the law's rigorous 

technology-based air toxics standards to which all other industries aTe subject. EPA has 

never adopted such an exemption for the toxic pol1ution emitted by brick manufacturers, 

for the simple reason that neither the law nor science justifies such exemption. Notably, 

not even the Bush administration adopted this exemption for brick standards that were 

vacated in 2007. At any rate, EPA has had at least six years since 2007 to develop such 

an exemption if it caTed to, and the agency has given no sign that it believes such an 

exemption is wananted56 

This industry-specific, situational desire for an exemption is unjustified under the 

Clean Air Act on multiple grounds. But it is a far cry from providing any justification for 

the harmful legislation that is the subject of to day's hearing. The brick manufacturing 

industry has been effectively exempt from the rigorous safeguards required by the Clean 

'1 Sierra Club v. Us. /CPA, No. 1:08-cv-00424-RWR (D. D.C. Mar. 11. 2(08) (Consent Decree entered 

on April 18, 2013) 

54 Lcttcr from Alan Puckctt III, Columbus Brick Company, to EPA Dockct Ccnter (Jan. 7, 2012). 

" Jd. 

'6 While tbe name "healtb-based standard" may sound laudatory and desirable, it is in fact an exemption 

from the law' s more rigorous standards; Congress intended the so-called "health-based standard" only for 

hazardous air pollutants with hcalth thrcsholds below which no hanlls arc known or believed to occur. 

TI1C hazardous air pollutants that brick manufacturers want to excmpt do not meet this standard. 42 U.S.C. 

§ 7412(d)(4) 

19 
131 

Air Act's toxics program for over 13 years, in clear violation of mandatory statutory 

duties given to EPA. 

The American people have been subjected to excessive levels of highly toxic air 

pollution from brick manufacturers for far longer than the law allows, while other 

industries have been meeting required standards for one to two decades. The unfairness 

here is certainly not an accelerated rulemaking schedule. And the only thing that gives 

the public any assurance of seeing the law enforced and toxic pollution reduced will have 

resulted from the legalllght that citizens have to hold govemment accountable: first with 

a lawsuit to overturn badly unlawful standards in 2007, and then to hold EPA accountable 

for failing to meet a nondiscretionary legal duty. 

Section-by-Section Analysis ofH.R. 1493 

H.R. 1493 would lead to a selles of harmful consequences that we hope are 

unintended. But the bill's fundamental flaw is that it offers irresponsible, ideological 

"solutions" to a problem that, as noted above, does not exist. Passage ofH.R. 1493 would 

prolong litigation, undermine law enforcement and legal protections for health and safety, 

and further overburden the courts, creating incentives for unlawful agency activities. 

Section 2: Definitions 

The definitions for "covered consent decree" and "covered settlement agreement" 

reveal the incredible breadth and ill-considered design ofH.R. 1493. These telIDS are 

broader than "covered civil action." For example, in addition to lawsuits against federal 

agencies contemplated in the definition of "covered civil action," the term "covered 

consent decree" also encompasses the following: 

(3) (B) any other consent decree that requires agency action relating to a 

regulatory action that affects the rights of--

(i) private persons other than the person bringing the action; or 

(ii) a State, local, or tribal govemment. 

This coverage sweeps in not only suits against govelmnent agencies for failure to meet 

deadlines or perform mandatory duties, but also an ill-defined and potentially much 

broader category of actions as well. 

20 
132 

For example, this language would encompass consent decrees or settlements of 

actions to challenge permits issued by government agencies (including permits to 

individual sources where the agency has not delegated the state authority), including a 

company's challenges to its own pelmits. Settlement of a permitting dispute would 

require "agency action relating to a regulatOlY action .... " This would result in 

intervenors-such as citizens groups, labor IDlions, or competitors to the companybeing granted tile legal right to participate in court -mediated settlement discussions 

involving tile company and tile federal permitting agency. These intervenors would have 

the opportunity to block and delay resolution of permitting disagreements, even if the 

company and permitting agency reached an agreement. 

Another example of this provision's far-reaching disruption would include consent 

decrees or settlements involving government enforcement actions, including settlements 

favorable to corporate or mIDlicipal defendants. One common example IDlder tile Clean 

Water Act involves consent decrees that EPA negotiates witil municipalities that violate 

the Act by discharging untreated sewage during overflow events. EPA and tile 

Department of Justice frequently use negotiated consent decrees to relieve local 

governments of obligations associated with strict compliance with the Clean Water Act. 

Environmental organizations sometimes challenge these decrees for their alleged 

leniency, often without success. H.R. 1493 now confers upon envirOlunentalistintervenors tile legal right to derail settlements that EPA and municipalities have 

negotiated historically to relieve tile latter of costlier compliance obligations. Now these 

intervenors can compel tile mIDlicipaiities and EPA to enter into open-ended mediation 

overseen by the courts, witil tile avowed purpose of blocking any settlements that relieve 

the local governments from strict compliance with the law. By opening up this Pandora's 

Box to differently motivated intervenors, this is what tile autilors of H.R. 1493 invite. 

Section 3(a)(2) 

Section 3(a)(2) prevents entry ofa consent decree or a court's dismissal pursuant 

to a settlement agreement or consent decree, stating that "[a] party may not make a 

motion for entry of a covered consent decree or to dismiss a civil action pursuant to a 

covered settlement agreement until after the end of proceedings in accordance with 

paragraph (1) and subparagraphs (A) and (B) of paragraph (2) of subsection (d) or 

subsection (d)(3)(A), whichever is later." The section operates to prevent entry of a 

consent decree or settlement agreement until the federal agency publishes notice of a 

proposed consent decree, accepts comments, responds to tilose comments, and holds a 

21 
133 

public hearing on the consent decree, if it chooses to. This provision ignores statutory 

mechanisms already in place in many statutes that require a version of just such 

procedures. However, by adding more procedural hoops in this provision and requiring 

that consent decrees and settiement agreements not be entered wltil whichever of tilese 

procedures is last completed, the bill would delay enforcement of federal statutes and the 

vindication of valid legal lights, while wasting public and judicial resources. As written, 

this provision could produce lengthy, even indefinite delays in litigation, with a 

corresponding burden on both the court and the paliies'-including the taxpayers'-

resources. 

Section 3(b) 

The preswnption required by this section subverts the current wlderstanding and 

evidentimy fowldation regarding inadequate legal representation. Moreover, as noted 

above, it would upend Supreme Court precedent, as seen in Local Number 93. Section 

3( c), below, continues this trend. 

Section 3(c) 

Section 3( c) subvelts law enforcement mid tile rule oflaw. It allows parties tilat 

oppose such law enforcement tile unprecedented opportunity to obstruct and delay 

requirements to follow federal law. Consider the situation in which a federal agency 

commits a gross violation of a federal law and a state challenges that lawbreaking in 

court. Today, tile state and federal agency have the ability to resolve that obvious legal 

violation and to do so through a consent decree or settlement agreement, promptly, 

without wasting judicial resources. while ensuring federal law is upheld and the state's 

valid legal interests safeguarded. 

Section 3( c) tilwalts all of ti13t. The bill mlOints third parties tilat support the 

perpetuation of tile grossly wllawful behavior with the light to obstruct mid delay a 

plaintiff state's legal right to ensure tilat the law is followed and the plaintiffs valid 

interests protected. It matters not under the bill whether those plaintiffs are individuals, 

corporations, nongovernmental organizations or any special interest, nor does it matter 

whether those third party interests are illegitimate and illegal, or whether the plaintiff is 

prejudiced mid hanned. In all cases in which these third palties gain intervenor status, 

cowts must delay and deny enforcement of the law by referring tile case to a mediation 

progrmn or magistrate judge to "reach ml agreement on a covered consent decree or 

22 
134 

settlement agreement" that must include the plaintiff, defendant agency and all 

intervenors. Thus, the bill jettisons the proper enforcement of federal statutes and the rule 

oflaw into a purgatory of continuing lawlessness. And intervenor(s) dedicated to the 

perpetuation of illegal behavior are granted legal standing to negotiate, obstruct or delay 

the obligation to follow the law, over the strong objections of the injured plaintiff(s). 

Exactly how do the bill's drafters imagine that settlement discussions will occur 

involving a defendant agency that broke the law but was willing to con-ect that 

wrongdoing; an intervenor committed (for whatever reason) to the continuing violation of 

the law and opposed to such correction; and a plaintiff whose interests and legal right 

concern the upholding of the law? This process will guarantee the prolonging of the 

illegal behavior and the continuing injury of the plaintiff. 

Pelversely, section 3( c) even forces plaintiffs to participate in costly mediation 

activities, with the bill making no provision for their costs to be paid, of course, tllereby 

imposing an wlprecedented legal and financial burden on tile legitimate interests of 

states, individuals, businesses and other groups that want to ensure that the federal 

government follows the law. Requiring parties to enter into and pay for mediation could 

substantially burden the public right of access to the courts, and in doing so impinge on 

this fundamental First Amendment right. Section 3( c) fails to specify the duration of the 

mediation or any ability to opt out if tile mediation is not working. In the real world all 

these defects are a recipe for failure and prolonged unlawfulness. 

It bears emphasizing that the bill's indiscriminate anointment of intervenors to 

exercise this marmer of obstruction and delay will hmm plaintiff corporations, state and 

local governments, nonprofit groups and individuals alike, when they or their interests 

have been hmmed by federal agency lawbreaking. The bill guarantees equal opportunity 

unfairness and injustice for all plaintiff classes seeking to uphold the law. Worse, the 

legislation inexplicably mld ilTesponsibly sides with pmties supporting continued 

lawbreal<ing against paIties seeking to require the upholding of laws, legally protected 

interests, mld the rule of law itself. 

Section 3(d)(l) 

This section, like section 3(a)(2), underscores the extent to which this bill ignores 

current mechanisms in the law that prevent parties to a lawsuit from interfering with the 

rights of nonparties. The bill entirely ignores existing statutes' relevant provisions that 

specifically allow for input from nonparties to a consent decree. For exmuple, section 

I 13 (g) of the Clean Air Act requires that the EPA Administrator publish in the Federal 

23 
135 

Mr. BACHUS. Thank you. 

Next testifying by video conference is Commissioner Thomas 

Easterly, Indiana Department of Environmental Management. At 

this time, Commissioner, we welcome you to our hearing and look 

forward to hearing your opening statement. 
136 

TESTIMONY OF THOMAS EASTERLY, COMMISSIONER, 

INDIANA DEPARTMENT OF ENVIRONMENTAL MANAGEMENT 

Mr. EASTERLY. Well, thank you, Chairman Bachus and Ranking 

Member Cohen, for inviting me. I would also like to thank Congressman Clay for letting me use his office here in St. Louis. 

I am representing both the Environmental Council of the States, 

which is a nonpartisan, nonprofit organization of State and territorial environmental agencies and their leaders, and the State of 

Indiana in this testimony. The Environmental Council of the 

States—I refer to them as ECOS. They represent the States and 

together the States and the EPA implement the national environmental statutes. And we have a partnership to do that, and the 

partnership works because we communicate with each other. EPA’s 

primary role is to provide national standards, conduct research on 

issues, and then based on their statutory authority and that research, implement regulations that we do on the ground, and then 

of course, conduct oversight of our activities to make sure that they 

meet the requirements and see that the environment is improved. 

And we both work together to have discussions on deploying the 

amount of resources that actually exist to make sure that the environment is protected. 

As the States are the boots on the ground—and just to give you 

an indication of how much we do, we do—96.5 percent of the Federal environmental programs are actually implemented by the 

States, and that means that EPA does the rest. And EPA does 

some pieces of the programs that are delegated to the States because they just want to make sure there is good quality and things. 

But still, the States do over 90 percent of the work, whether it is 

inspections, enforcement, data collection, and other things. 

Also, the States fund most of the work. Over 80 percent of the 

actual cost of delivering environmental protection in the United 

States is paid for by the various States and the rest comes from 

the Federal Government. 

So we have a constant dialogue on how to do this best, and the 

dialogue breaks down when these consent decree activities happen 

because we are not at the table. So it is sort of like a marriage. 

So you need to work with your spouse and you have discussions 

and you come to conclusions. In this case, our partner, EPA, is having discussions with other people we are not a party to. They come 

to these agreements and we have to do the work even though we 

may not be capable. And at the very minimum, it requires us to 

divert resources from things that may be more important. 

So I will give you a couple examples of Indiana, actually probably 

one now because I am talking too long. I am sorry. 

There was Federal litigation over the deadlines in what is called 

the Visibility SIP’s, and it is to make sure that the air—you can 

see through it and it does not obscure your views. And this is an 

important thing. It is a long-term action. And the reason that the 

States did not have—including Indiana—turn in their plans by the 

dates required in the original regulations is because there has been 

incredible uncertainty due to litigation over what the regulations 

for power plant emissions are. And these same controls on power 

plant emissions are the things we need to protect the visibility. So 

there was the Clean Air Interstate rule which was first overturned 
137 

by the courts—or vacated they call it—and then it was temporarily 

put back in place for EPA to do the other rulemaking for a better 

rule. That resulted in the Cross-State Air Pollution Rule, or 

CSAPR, which has been overturned by the courts. So the right answer for what is called best available retrofit technology, which we 

need to have in these plans, is that it equals these power plant controls. But we have to not do that because we do not have the answer. Those regulations continue to be overturned by the court, and 

they are saying we do not have an adequate plan. So you would 

say, well, that seems like sort of a tale of woe, but the challenge 

is we are diverting resources from protecting human health and 

the environment to deal with these legal issues that are not done. 

So since I have used up most of my time, I will tell you two 

things. The Environmental Council of the States has reviewed this 

proposed bill, and it is consistent with the resolution we passed on 

this issue because this issue is important to all States. But they 

do not support general bills, but the State of Indiana believes this 

is an excellent bill. 

And thank you for your indulgence. 

[The prepared statement of Mr. Easterly follows:] 
138 

Testimony 

Thomas Easterly, Commissioner 

Indiana Department of Environmental Management 

to 

Committee on the Judiciary 

Subcommittee on Regulatory Refonn, Commercial and Antitrust Law 

Hearing on H.R 1493, the "Sunshine for Regulatory Decrees and Settlements Act of 2013" 

June 5, 2013 

I am Thomas Easterly, the Commissioner of the Indiana Department of Environmental 

Management and the Chair of the Environmental Council of the State's Compliance Committee 

I thank Chainnan Bachus and Ranking Member Cohen for inviting me to testify today. I am 

representing both ECOS and my own state. ECOS is the national non-partisan, non-profit 

organization of the state and territorial environmental agencies and their leaders. Today I will be 

commenting on our organization's position on the Environmental Protection Agency's use of 

"consent decrees," and the impact this has on the operations of state environmental agencies. I 

will present some examples from my own state, but no national statistics on the impacts because 

we have conducted no study on these as yet. I will explain why in my testimony. 

States implement most of the national environmental statutes. States and EPA have a 

partnership in implementing the nation's environmental statutes. EPA's primary role is to 

provide national standards, conduct research, issue rules based on statutory authority, conduct 

oversight of states, and implement those programs not delegated to the states. The states' role is 

to implement the national acts (and each state's own statutes), to issue pennits, conduct 

inspections, conduct enforcement, set standards, monitor the environment, and, in general, to be 

the "boots on the ground." According to data gather by ECOS, states now implement 96.5% of 

the federal programs that can be delegated to the states. State agencies conduct over 90% of the 

environmental inspections, enforcement, and environmental data collection, and issue a similar 

amount of all the environmental pennits. States also supply most of the funding for the 

implementation of the delegated federal programs - typically 80% of the actual cost. 

EPA and the states have a constant dialogue on how best to implement the national 

environmental statutes. This dialogue is a necessary part of our partnership. However, from 

time to time, EPA does not conduct this dialogue. Sometimes this is by choice, but sometimes 

this stems from its actions on court cases in which a state or the states as a body are not a party. 

Not everyone of these cases presents a problem for states, but sometimes they may. These cases 

are often settled through the entry of "consent decrees." Consent decrees are between the 

plaintiff and EPA, and the state environmental agencies are not usually parties in them. 

However, we are often affected by them. These Consent Decrees can result in unexpected costs 

to states and cause difticulties in implementing environmental programs. 
139 

These Consent Decrees that EPA negotiates with parties sometimes impose requirements 

on states without notice to, or participation by, the impacted states. At times, these requirements 

are beyond those clearly articulated in rule or statute. While the states' goals are clean air, clean 

water and clean land, the reality is that neither Congress nor the state legislatures have provided 

sutllcient funds for states to meet every requirement of each federal environmental statute. 

When Consent Decrees between EPA and plaintiffs require states to change their rules to 

incorporate new requirements - often without the input of states on either the substance or timing 

of those changes - states must necessarily adjust their programs to meet the new requirements 

and deadlines. In Indiana, and in other states, diverting resources to meet these unexpected 

federal requirements often comes at the expense of other pressing environmental priorities the 

state would like to achieve. 

I will provide information on three examples where EPA Consent Decrees have adversely 

impacted Indiana. These examples are the regional haze requirements, and the Startup, 

Shutdown, and Malfunction emissions SIP ca11', where EPA committed to a regulatory 

timeframe that does not give the states sufficient time to properly follow their own administrative 

processes and meet the deadlines committed to, and subsequently required by, EPA. In my other 

example, the ozone air quality designations, EPA committed to a schedule that did not allow 

sutllcient time for EPA to perform a reasoned rulemaking with the necessary input from states. 

In the case of the regional haze requirements, in early 2009, EPA published a notice of 

failure to submit SIP revisions incorporating the regional haze requirements for thirty seven 

states including Indiana. These SIP revisions were originally required to be submitted by the 

states by December 17, 2007. The reason Indiana, and a number of other states were not in a 

position to submit their SIPs is the continuing confusion over whether the requirements of the 

Clean Air Interstate Rule (CAIR), which was initially vacated and then remanded by the DC 

Circuit Court of Appeals, and the replacement Cross States Air Pollution Rule (CSAPR) also 

vacated by the same court could be relied upon to meet the visibility SIP requirements for the 

sources covered by the rule. While EPA has made formal proposals to allow the reliance on the 

emissions reductions from those regulations since 2005, there has not been a time of judicial 

finality long enough to allow states, like Indiana, to process rulemakings and SIP revisions 

through the public notice and environmental rulemaking process. Without a state regulation to 

implement any proposed limitations as part of the visibility SIP, the proposed SIP is not 

approvable (because there are no enforceable state regulations). Since the SIP process must 

necessarily follow the state rulemaking process which needs to follow the judicial finality on the 

regulation of power plant emissions under the yet to be proposed CAIR replacement rule, this 

settlement imposed a requirement on many states (those with electrical generating units subject 

to CAIR) that those states simply cannot meet. However, the EPA settlement did not give states 

1 A "SIP call" occurs when EPA instructs a state to revise its Clean Air Act plan for attainment of a national ambient 

air quality standard. "SIP" means "state implementation plan." 
140 

sutllcient time to complete the required SIP revisions in light of the continuing uncertainty over 

the regulation of emissions from electrical generating units. Instead, the EPA notice to meet the 

terms of the Consent Decree required state submission of SIP revisions under an abbreviated 

time frame 

The regional haze (visibility) requirements also provide an example of a federal action 

detracting from more important environmental regulations necessary to protect human health. 

The regional haze requirements are a welfare-based standard with a target date of 2064. Indiana 

has been making progress on the standard, but when EPA published its notice for failure to make 

SIP submittals, and required states to make submissions with an abbreviated timeframe, it took 

important resources away from more pressing matters. In this case the more pressing matter is 

that Indiana and other states must also constantly revise their air pollution control programs to 

meet the ever tightening National Ambient Air Quality Standards or NAAQS, which is a healthbased standard. The requirements to meet these health based standards must also be adopted 

through the state rulemaking process so that they are enforceable and can be incorporated into 

permits. Given the specialized technical and legal expertise required to process a regulation into 

the Indiana Administrative Code, arbitrary new deadlines and adjustment of historical 

timeframes by EPA often detracts from and thus slows down more pressing matters such as the 

development of rules to incorporate new NAAQS that protect public health. 

Similarly, the recent SIP call related to Startup, Shutdown, and Malfunction emissions 

provides only eighteen months for the states to complete their submissions to EPA. Indiana's 

rulemaking process cannot be completed in this limited window. Indiana has mandatory notice 

and comment periods, as well as public hearings and review process for the final rule that must 

be completed before its rules can be changed. While this process normally can be completed in 

about 18 months, it cannot be started until Indiana has reached some informal agreement with 

EPA on what would satisfy the SIP call In the case of the Startup, Shutdown and Malfunction 

rule, we have not yet received any guidance on what would be acceptable to resolve any actual 

deficiency in our existing previously approve SIP. 

A third example of the impact of consent decree deadlines on Indiana is in the 

designations for the 2008 ozone NAAQS. As a result ofa citizens' suit, EPA agreed to finalize 

ozone designations by a date certain but allowed submission of data for determining the 

designations up to three months before that deadline. In Indiana's case, EPA sent the Governor 

the required 120 day letter stating that only a small portion of the state near Cincinnati Ohio 

would be non attainment and the rest of the state would be attainment. After sending the 120 day 

letter, EPA received data from lIIinoi s in December of 2011 that EPA believed required the 

creation of a new non attainment area in Indiana only a few months before the designation 

deadline. Due to the Consent Decree deadline, EPA informed the state about this new data in 

March of 2011 and proposed a nonattainment area that included four Indiana counties. In spite 

of additional information and objections filed by Indiana, EPA signed a final rule designating 

additional Indiana counties as nonattainment for the ozone standard in May of 20 11 depriving 
141 

Indiana of the 120 day consultation required by the Act, but meeting EPA's Consent Decree 

obligation. Indiana believes the abbreviated schedule EPA had committed to did not include 

sutllcient time for either the states to respond to the new data provided by illinois or for EPA to 

properly review the arguments and data presented by Indiana. As a result, Indiana believes the 

boundaries of a new nonattainment area and the inclusion of the Indiana counties were made in 

error. Indiana and several other states are currently challenging the 2008 ozone designations 

before the DC Circuit Court of Appeals. 

Roughly two years ago, ECOS expressed its concerns about EPA's use of consent decrees 

to the agency's leadership and asked that the agency provide us a list of suits it has received that 

may affect our operations. We excluded many consent decrees from our request, such as those 

used to settle enforcement cases. What we wanted to focus on were the cases that would be most 

likely to affect the manner in which one or more states implemented the various environmental 

statutes. EPA ultimately agreed to provide such a list, but this took well over a year. We finally 

got the list last year, but the contents were already a year old and were simply a copy of material 

that had been presented to Congress in 20 II While we were glad to get the list, it was of limited 

value to us. 

Finally, the impact of the consent decrees adversely impacting states happened often 

enough to enough states that ECOS drafted a resolution regarding our opinion on their use. We 

considered and passed that resolution at our recent March 2013 national meeting. This 

resolution presents our knowledge and opinion about the need for reform and state participation 

in EPA's consent decrees which settle citizen suits. I have attached our resolution as an 

appendix to this testimony, along with a comparison ofECOS' resolution's findings to the 

contents ofHR 1493 

Overall, the bill provides more judicial oversight and increases court processes around 

settling notice requirements and participation opportunities for non-parties before allowing EPA 

to settle citizens groups' lawsuits. In general, the greater legal process that the bill requires 

benefits states in that we would have more notice oflawsuits and settlements that affect us. This 

would atTord states more time to consider intervening in the lawsuits, or, at a minimum, more 

time to prepare for how we will deal with the settlement tenns. However, for those cases where 

the state actually intervenes, more court legal process would also mean more resource 

expenditure for states. So, we have to balance the benefit of more fonnalized notice with the 

cost associated with those cases that we are a party to 

While ECOS generally does not endorse specific billiallb'llage, we tind that the bill and 

our resolution are not in conflict. Our resolution is, of course, not written in the format of a law. 

The ECOS resolution and HR 1493 as currently written appear to have the same intent and 

consequence - that atTected parties in lawsuits against federal agencies have more notice of the 

lawsuit and proposed settlement agreements. The bill formalizes this process which our 

resolution does not - but they are not in contlict. 

4 
142 

In my role as Commissioner of the Indiana Department of Environmental Management, I 

do endorse this bill as a good approach to addressing the unintended consequences of the current 

use of Consent Decrees to settle litigation between EPA and interested plantiffs. 

Now T will move to the comparison in more detail. The items in bold are quotations trom 

the current (May 31 2013) version of the bill. The items in italics are our comments, based 

I argel y on the contents of our resol uti on. 

Purpose: To impose certain limitations on consent decrees and settlement agreements by 

agencies that requires the agencies to take regulatory action. 

Definition: 

"Covered Civil Action" - a civil action seeking to compel agency action: alleging that the 

agency is unlawfully withholding or unreasonably delaying an agency action relating to a 

regulatory action that would affect the rights of (1) private persons other than those 

bringing the action: or (2) state, local or tribal government. 

Requirements: 

In any covered civil action, the agency against which the covered civil action is brought 

shall publish the notice of intent to sue by making it available online not later than 15 days 

after receiving the notice. 

in the case where lil'A is sued, this would be helpji" to states, ill that as 10llg as they monitored 

the EPA website, they would have immediate notice ofa third party's intem to sue EPA, and 

ther~fore, they could hmJe time to assess, early in the process, whether they are (!t!ected and 

whether they should inten!ene. 

A party may not make a motion for entry of a covered consent decree or to dismiss a civil 

action pursuant to a settlement agreement until after the end of proceedings. 

This provision seems to discourage quick early settlement in favor of longer court proceedings. 

if a state agellcy was all interl'enor to the sllit, the danger is greater resources .spellt ill cOllrt. 

The henefit would he that issues raised hy intervening parties might have a hetter chance of 

being heard before a settlement is reached (getting at the issue of regulatory burden being 

placed on states throllgh settlements without states' input). 

Efforts to settle a covered civil action or otherwise reach an agreement shall (1) be 

conducted pursuant to the mediations or alternative dispute resolution program of the 

court: and (2) include any party that intervenes in the action. 

Part one olthis provision/orces the parties to use the c01lrt system. The second piece is 

favorahle to state agencies who imervene in cases, hut would also henefit orherparties in their 

interl'ention (whose interests may be adl'erse to the state '0) and could delay settlement. 

5 
143 

Not later than 60 days before the date on which a consent decree or settlement agreement is 

filed with a court, the agency seeking to enter one of these shall publish in the Federal 

Register and online (A) the proposed consent degree or settlement agreement; and (B) a 

statement providing (1) the statutory basis; and (2) a description of the terms of the 

agreement. 

This would benejit other agencies and parties in that they would be assured that they could see 

the proposal and possibly voh;e COll(:ern or inten'ene. 

An agency seeking to enter a consent decree or settlement agreement shall accept public 

comment on any issue relating to the matters alleged in the complaint and an agency shall 

respond to any comment received. 

As far as states are concerned, if a federal agency wanted to enter imo a settlement agreement, 

this would ensure that state agencies have a chance to comment without having tofbrmal1y 

intervene (and incur the attorney cos,s of doing so). this would generally delay proceedings 

though, which mayor may not be in a state agency's interest. 

When moving that the court enter a consent decree or settlement agreement or for 

dismissal pursuant to one of these, an agency shall (1) inform the court of the statutory 

basis, (2) submit to the court a summary of the comments received and the agency's 

response and (3) submit to the court a certified index of the notice and comment 

proceeding and make the record available to the court. 

Thisprovisiol1 ensures a complete recordfor the court. The benejitto intervenors and public 

commenters is that it could mean that a court would not approve a settlement that significantly 

bllrdens states based on reading states' comments. Basicafly, this would aflow the cOllrt to take 

a more active role in the settlement proceedings ilit chose to. A more actire role could benefit 

or burden a state depending on the circumstances. 

Each agency shall submit to Congress an annual report that, for the year covered by the 

report, includes the number, identity and content of civil actions brought against and 

consent decrees or settlement agreements entered against or into by the agency. 

This provision would benefit state agencies in that each year they could look at a comprehensive 

list ofthefederal lawsuits and the settlements reached If the states had heen unaware of the 

suits and settlements as they progressed, at least they would see them in a comprehensive list 

oflce per year instead of requesting themfrom lil'A. 

Conclusions 

States are in the best position to detennine how to allocate their scarce resources to 

advance the interests of clean air, clean water and clean land. Addressing requirements imposed 

upon the states by consent decrees or settlement agreements entered into by EPA with a citizens 

group on a single issue diverts state resources from their larger goals - and actually can slow 

states' progress in improving our environment. 

6 
144 

Thus, states urge reform and state participation in EPA's consent decree process which 

settles citizen suits. In general, greater legal process would benefit states in that we would have 

more notice oflawsuits and settlements that affect us. This would alford states more time to 

consider intervening in the lawsuits, or, at a minimum, more time to prepare for how we will deal 

with the settlement terms. 

7 
145 

Resolution 13-2 

March 6, 2013 

Scottsdale, Arizona 

As certified by 

R. Steven Brown 

Executive Director 

Appendix 

ECOS Resolution Relevant to H.R. 1493 

THE NEED FOR REFORM AND STATE PARTICIPATION 

IN EPA'S CONSENT DECREES WHICH SETTLE CITIZEN SUITS 

WHEREAS, federal environmental programs may be, and generally are, authorized or delegated 

to states; 

WHEREAS, in addition to authorization and delegation, states are provided certain stand alone 

rights and responsibilities under federal environmental laws; 

WHEREAS, the United States Environmental Protection Agency (US. EPA) may be sued in 

federal court by citizens over the alleged failure to perfonn its nondiscretionary duties, such as 

taking action on state environmental agency submissions, promulgating regulations, meeting 

statutory deadlines, or taking other reb'lliatory actions; 

WHEREAS, state environmental agencies may have information that would materially benefit 

the defense of a citizen suit or the reaching a settlement, and may have interests that should be 

considered in the evaluation ofa settlement; 

WHEREAS, state environmental agencies are not always notified of citizen suits that allege U.S 

EPA's failure to perfonn its nondiscretionary duties, are often not parties to these citizen suits, 

and are usually not provided with an opportunity to participate in the negotiation of agreements 

to settle citizen suits; 

WHEREAS, the agreements US. EPA negotiates to settle citizen suits may adversely aiTect 

states; 

NOW, THEREFORE, BE IT RESOLVED THAT THE ENVIRONMENT AL COUNCIL OF 

THE STATES 

Affirms that states have stand alone rights and responsibilities under federal environmental laws, 

and that the state environmental agencies are co-regulators, co-funders and partners with US. 

EPA; 

Urges the US. EPA to devote the resources necessary to perform its nondiscretionary duties 

within the timett-ames specified under federal law, especially when required to take action on a 

state submission made under an independent right or responsibility (e.g., State Implementation 

Plans under the Clean Air Act). 

Specifically calls on US. EPA to notify all atTected state environmental agencies of citizen suits 

filed against US. EPA that allege a failure of the federal agency to perform its nondiscretionary 

duties; 

8 
146 

Believes that providing an opportunity for state environmental agencies to participate in the 

negotiation of citizen suit settlement agreements will often be necessary to protect the states' role 

in implementing federal environmental programs and for the administration of authorized or 

delegated environmental programs in the most effective and efficient manner; 

Specifically calls on U.S. EPA to support the intervention of state environmental agencies in 

citizen suits and meaningful participation in the negotiation of citizen suit settlement agreements 

when the state agency has either made a submission to EPA related to the citizen suit or when the 

state agency either implements, or is likely to implement, the authorized or delegated 

environmental program at issue; 

Believes that no settlement agreement should extend any power to U.S. EPA that it does not have 

in current law; 

Believes that greater transparency of citizen suit settlement agreements is needed for the public 

to understand the impact of these agreements on the administration of environmental programs; 

Affirms the need for the federal government to publish for public review all settlement 

agreements and consider public comments on any proposed settlement agreements; 

Encourages EPA to respond in writing to all public comments received on proposed citizen suit 

settlement agreements, including consent decrees. 

9 
147 
148 
149 

.£''0 .. .. _ 
150 
151 

Mr. BACHUS. Thank you. We look forward to you being with us 

for questions too. 

The first question is to Mr. Kovacs. Mr. Kovacs, listening to Mr. 

Walke, his view of sue-and-settlement litigation, it seems to be that 

it is really as simple as that an agency’s—if there is a broken deadline, then a court needs to fix that as soon as possible and can do 
152 

that. What is your response to that view or that the agency will 

extend the deadline? 

Mr. KOVACS. Well, you know, Congress establishes the deadline. 

We are not here to talk about the deadlines at all. That is something you have decided to put in the statutes. 

What we are here to talk about is the fact that we do not know 

about any of the sue-and-settle agreements or the notices of intent 

to sue. So our concern is, one, there needs to be some very simple 

transparency. For example, let me show you how easy it is. 

We had been complaining for years on the fact that we had no 

notice of intent to sue. We do not even know how many lawsuits 

are brought against our Government. I think you ought to know 

that as just Members of Congress. But during the Gina McCarthy 

hearings, for example, one of the commitments that was made was 

that they would begin to finally post the notice of intent to sue, 

which is only one of the points. But it was up on the Web site in 

literally a week or so. So it can be done quickly. And the fact is 

that the notices of intent to sue and the lawsuits and the consent 

decrees are really something the American public are entitled to 

know because they are going to result in regulation. 

And some of the regulations that are moving forward—all we are 

asking is that the affected parties, those who have constitutional 

standing, should have an ability to try to intervene if none of their 

interests are being protected. And there are some issues, especially 

on the MACT standards, for example, where had EPA been able to 

get the additional time, you would not have been in an additional 

10 years of litigation. Really, it is about transparency and the right 

to intervene if we are not being represented and provided we have 

constitutional standing. 

Mr. BACHUS. You know, at our last hearing—I know Ranking 

Member Conyers mentioned we have had other hearings on this 

matter, and I know today and earlier he and my other colleagues 

claimed that there was not really any evidence or sufficient evidence that sue-and-settle litigation practices were a problem. You 

know, they were not a major concern. 

What are some of the important findings revealed in your new 

study of sue-and-settlement cases regarding whether this is—I 

think one of my colleagues referred to it as a fictional problem. 

Mr. KOVACS. Well, the first thing I want to say because the 

term—I am not going to use the ‘‘C’’ word, the word ‘‘collusion.’’ 

There is absolutely no allegations anywhere in our report on that. 

What this is about is at the last hearing, my recollection was— 

actually there have been two hearings, one last year and this year. 

My recollection was that the sue-and-settle was not a big issue. 

They were only a few of the cases. And what we were hearing from 

the brick manufacturers, the cement manufacturers, the boiler 

manufacturers, virtually every industry in the country is how did 

this process get started so quickly and we were not involved in the 

process. We thought, under the Administrative Procedure Act, we 

were supposed to be involved and get notice and comment. And the 

deadlines are very important because the deadline is how you bring 

technology into the system. 

That is what started the report. And we did not know if we were 

going to find five cases or if we were going to find 100. What we 
153 

found is between 2009 and 2012 that there were 71 cases resulting 

in 112 rules. And in some of the cases, for example, the States like 

North Dakota and New Mexico—they were sued. Just to give you 

an idea on notice, they were sued without notice in Oakland, California. And the order that impacted those western States—so you 

may all think that notice is really not a big deal, but when you are 

being a regulated industry and you do not have notice of where 

your Government is going, it is a big deal. So it may be a simple 

concept, but to us it is a very important concept and that is why 

we did the report. 

Mr. BACHUS. All right. 

Mr. Walke, Mr. Kovacs identifies sue-and-settlement rulemakings that would impose mandates that are expensive on many regulatory—I mean, many regulated industries and entities. How can 

you assert that these industries should be ignored? Does your organization and a regulatory agency ask a court to order the rules and 

timetables under which such regulations will be imposed? 

Mr. WALKE. Thank you, Chairman Bachus. 

It is important to be very precise about what is happening here. 

The statutes passed by Congress established these obligations in 

the form of deadlines and mandates. The consent decrees merely 

enforce overdue, nondiscretionary duties that Congress has imposed. The consent decrees do not create any requirements. Those 

were done by Congress. What then happens is the consent decrees 

or settlement agreements merely provide for schedules for rulemakings which then happen with notice and comment involving 

the public and establish the actual regulatory obligations and deadlines and requirements of law. Consent decrees do not impose requirements of law upon third parties. They merely facilitate the enforcement of statutes passed by this body. 

And so it is very important to understand what the Chamber report said and what it did not say. It did not say that there were 

settlement agreements or consent decrees improperly creating legal 

requirements by skirting rulemakings or public participation opportunities. 

Mr. BACHUS. Mr. Cohen is recognized for 5 minutes. 

Mr. COHEN. Thank you, Mr. Bachus. 

Mr.—is it Walke or Walke? 

Mr. WALKE. It is Walke. 

Mr. COHEN. How many sue-and-settle collusive settlements that 

have been sanctioned by the Government are you aware of? 

Mr. WALKE. None. 

Mr. COHEN. None? I am shocked. 

Mr. Kovacs, how many are you aware of? 

Mr. KOVACS. Well, based on what we said in the report, we put 

the number at 71 where there was no transparency and no notice. 

And second, just to correct the record, all the sue-and-settle arrangements are not necessarily deadline cases. For example, the 

Chesapeake Bay—— 

Mr. COHEN. Let me stop you for a minute because your answer 

was 71 and that was my question. 

Mr. Walke, are you familiar with these 71 situations the Chamber cites? 
154 

Mr. WALKE. Yes, sir. What the Chamber did was Internet 

searches to find all settlements between EPA and environmental 

groups. They did not look at industry settlements because there 

were plenty of them. They did not look at the Bush administration. 

Settlements are a natural and long-accepted area of the law. 

They happen across all of our different statutes involving agencies. 

They happen in enforcement cases. They happen between municipalities and Federal agencies. If one is to take the rather astounding position that all settlements involving the Federal Government 

are evidence of sue-and-settle, then the world has been turned up 

side down because every Administration in the modern administrative era has been entering into settlements with parties under Republican and Democratic administrations, and never has that been 

deemed improper per se. 

Mr. COHEN. Let me ask you. You worked at the EPA during the 

Clinton administration. Is that right? 

Mr. WALKE. That is correct, sir. 

Mr. COHEN. And you have been at the NRDC. Tell us about some 

of the settlements that you are aware of in those areas and time 

periods and in the areas of your expertise that have benefitted the 

public and how. 

Mr. WALKE. Absolutely. Let me just mention two that were in my 

testimony because they are under the clean air laws, and both of 

them share some very interesting features, which are actually true 

in explaining a phenomenon that has been discussed here today. 

The Bush administration EPA had issued unlawful rules that defied the plain language of the Clean Air Act, one to regulate soot 

pollution and one to regulate mercury and toxic pollution from 

power plants. Courts found those rules to be squarely unlawful. As 

a result, the Obama administration inherited the legal obligation 

to follow the law. 

Now, when the Obama administration took office, the duty to follow those laws were 5 years and 10 years overdue. So they had a 

nondiscretionary statutory deadline they had to meet. My organization brought a lawsuit in one of the cases but not the other, and 

we negotiated a consent decree to meet those overdue statutory 

deadlines exceeding 10 years in one case, and consistent with the 

Clean Air Act, those consent decrees were noticed for public comment. Some of the witnesses at last year’s hearing for the minority 

opposed not just the consent decree but the rule in question to 

clean up mercury and toxic pollution from power plants. The judge 

rejected that opposition out of hand and entered the consent decree 

because it was appropriate. 

EPA then went through notice and comment rulemaking. No one 

was prevented from submitting comments. No outcome was dictated by either consent decree. The proposed rules were offered. 

People weighed in. Now they have been finalized, and in just those 

two examples, EPA has projected that over 11,000 lives will be 

saved, hundreds of thousands of asthma attacks will be avoided, especially among children, and heart attacks among adults will be 

avoided. 

Mr. COHEN. Those are all pretty commendable things. 
155 

Mr. Kovacs, how would you suggest that we should deal with the 

asthma attacks that children have and the other health problems 

that would have occurred but for this particular settlement? 

Mr. KOVACS. Well, first of all, I just want to clear up a few statements. One is—— 

Mr. COHEN. I only have about 30 seconds. Would you answer my 

question please? 

Mr. KOVACS. Well, we think that there should be regulations. We 

have never opposed regulations. What we are saying is that as you 

do the regulation, there needs to be—— 

Mr. COHEN. What is the Chamber’s position on climate change? 

Mr. KOVACS. The Chamber has specifically said that on the climate change issue, we have not opposed—we opposed WaxmanMarkey because it was an unworkable bill that cost an enormous 

amount of money. But we do not have a line in the sand on the 

climate change issue. 

Mr. COHEN. Do you have a line anywhere? Has the Chamber 

come out in any ways to resolve the problem that the earth faces 

with climate change? 

Mr. KOVACS. Well, first of all, if the regulatory process were 

working in the way the Administrative Procedure Act would like it 

to work and was intended to work and there was public participation and there was transparency in the system, we would not be 

here having these kinds of discussions. 

Mr. COHEN. But the issue is has the Chamber done anything to 

address what is the world’s number one issue, climate change? 

Mr. KOVACS. Absolutely. We have been—years before any of the 

environmental groups were in there, we were in there with the 

Bush administration pushing and pushing and pushing on the development of new and energy efficient technologies and alternative 

technologies for the Bush administration. We put out—— 

Mr. COHEN. Which Bush administration? 

Mr. KOVACS. The second one. We put out our—— 

Mr. BACHUS. The gentleman’s time has expired. 

Mr. KOVACS [continuing]. Five-year energy impact analysis and 

we pushed DOT. We went to the Administration about energy savings performance contracts. So we have pushed and pushed and 

pushed on that issue. 

Mr. COHEN. Thank you. That is commendable. 

I yield back the balance of my time. 

Mr. BACHUS. The time is already gone. [Laughter.] 

All right. Thank you. 

Mr. Collins is recognized for 5 minutes. 

Mr. COLLINS. Thank you, Mr. Chairman. I appreciate it. 

And moving back to the actual legislation and the discussion 

here, Mr. Puckett, I have a question. In your comments and in your 

testimony, you have talked about how you work with this now just 

having input and how it has affected business. I want to get back 

to how this actually affecting companies. 

In your company, if you were able to intervene in a case such as 

the brick litigation, would you bring valid concerns to the table, a 

constructive effort? Because there has been a discussion here today 

that all you wanted to do is obstruct. All you wanted to do is put 

off or in some cases has been accused of killing kids in a sense by 
156 

being obstructive. What was your ultimate goal to be in wanting 

to be a part of this transparency? 

Mr. PUCKETT. Well, I think, one—and we have already done 

this—is provide accurate data of what our stack emissions are and 

what we are doing as an industry. The main thing is just to have 

a place at the table so we know what is going on, but I think we 

can provide—instead of modeling and guessing at the data, we 

have already done this accurate stack testing on just about every 

facility that is in our industry. 

Mr. COLLINS. And so you are currently looking out for what you 

are doing and being a responsible citizen is what I am hearing you 

say. 

Mr. PUCKETT. Yes, sir. You know, under the first EPA mandate, 

the industry came into compliance. We were in compliance before 

the rule was vacated, and we are still operating those control devices. We cannot get rid of them because they are in our air operating permits. So we are still incurring the cost of operating those. 

And I think our industry is operating at pretty safe levels. 

Mr. COLLINS. Well, from your perspective—and you had mentioned this in your testimony, that given some of the impacts—the 

practices being discussed here—elaborate a little bit further. You 

know, you talked about closing a kiln and you talked about the impact financially. What is it not only financially to the people who 

work in your facilities and the economic impact of the jobs that we 

are talking about today, which I think is a matter that Congress 

needs to address because everyone is talking about jobs and these 

kind of issues. Tell me more. Explain more to the Committee about 

that. 

Mr. PUCKETT. From what I understand the new proposed rule requires—and the EPA sent numbers on my facility through our association to me. They asked to come into compliance would cost $8 

million, a capital expenditure, and close to $2 million a year to operate these. Now, they also suggested that we go borrow this 

money to put in the control devices. Now, most of our industry, 

anyone connected with the construction industry, is out of favor 

with lenders, and if I walked into any bank and said loan me $8 

million on a project with no payback and really creates a negative 

cash drain, we will get laughed out of there. 

So in two of our kilns, we could not support the expenditure. It 

would put the operation in a negative position. And that is the 

plants that we have most of our employees in. So just to get to 

where we could make it, we would have to eliminate 50 jobs. You 

know, these are real people. They are families. In a small southern 

rural town, the last thing we need, especially in Mississippi, is unemployed people. I do not think that is what the Congress wants 

either. 

Mr. COLLINS. Thank you. 

Mr. Easterly, can you hear my question? 

Mr. EASTERLY. Yes. 

Mr. COLLINS. I know this has been discussed and our friends 

from across the aisle talked about this is another hearing that we 

are having on this. But do you see right now, especially in light of 

even what was in The Washington Post just in the last couple days, 
157 

the rise of the fourth branch of Government which, by the way, Mr. 

Chairman, I would ask that it be submitted for the record for that. 

Mr. BACHUS. Without objection. 

[The information referred to follows:] 
158 

817/13 The rise of the fourlh brsnch of govarnment - The Washington Post 

blame fur rules that are abusive or nonsensical Of course, agencies owe their creation and underlying legal 

authority to Congress, and Congress holds the purse strings. But Capitol Hill's relatively smallstalIis incapable 

of exertiog oversight on more than a small percentage of agency actions. And thc threat of cutting funds is a blunt 

instrument to control a massive administrative state - like running a locomotive with an on/off switch. 

The autonomy was ffilgnilied when the Supreme Court ruled in 1984 that agencies are entitled to heavy 

deference in their interpretations of laws. The court went even fi.rrther this past week, ruling that agencies should 

get the same heaw deference in determining their own jurisdictions - a powcr that was previously believed to 

rest wirh Congress. In his dissent in Arlington v. FCC, Chief Justice John Roberts warned: "It would he a bit 

lllilch to dcscribe the result as 'the very definition oftyranny,' but the danger posed by the growing power of the 

administrativc state cannot be dismi<scd." 

The jndiciary, too, has seen its authorjty diminished by the rise of the fuurth branch. Under Articlc III ofthc 

Constitution, citizens fucing charges and fines are entitled to due process in our court system As the mnnher of 

tederal regulations increased, however, Congress dccidcd to rclieve the judiciary oflIKlst regulatory cases and 

create administrative coruis tied to individual agencies. The result is that a citizen is 10 times more likely to be 

tried by an agency than by an actual court. hl a given year, federal judges conduct roughly 95,000 adjudicatory 

proceedings, including trials, whilc fcdcral agencies complete more than 939,000. 

These agency proceedings are often mockeries of due process, \vith one-sided presumptions and proccdural 

rules fuvoring the agency. And agencies increasingly seem to chafe at being denied their judicial authority. Just 

ask John E. BrennalL Brennan, a 50-year-old technology consultant, was charged ,vith disorderly conduct and 

indecent exposure when he stripped at Portland International Airport last year in protest of invasive security 

measures by the Tmnsportation Securjty AdministratiolL He was cleared by a fedemljudge, who ruled that his 

stripping wos a furm offrce speech. The TSA was undeterred. After tbe ruling, it pulled Brennan into its own 

agency coruis undcr admini,trative charges. 

The rise ofthe fourth branch has occurred alongside an unprecedented increasc in presidcntial powers - from 

the power to detel111ine when to go to war to the power to decide when it's reasonable to vaporize a US. citizen 

in a drone strike. In this new ordcr, infurmation is jealously guarded and transparency has declined sharply. That 

trend, in tmn, has given the fuurth branch even greater insularjty and independence. When Congress tries to 

respond to cases of agency abusc, it often finds officials walled ofTby claim" of expanding executive pri\.ilege. 

Of coursc, fedcral agencies officially report to the White House lUlder the umbrella of the executive bmnch. But 

in practice, ti,e agencies have evolved into largely independent entities over which the president has vcry mcd 

controL Only I percent offedeml positions are filled by political appointees, as opposed to career officials, and 

on average appointees serve ouly two years. At an individuallcvcL carccr officials are insulated from political 

pressure by civil service mles. There are also entire agencies - including thc Securities and Exchange 

Commission, the Federal Trade Commission and the Federal COllmnmications Commission - that are 

protected from Whitc Housc interference. 

Some agencies have gone so fur as to reJiJSe to comply wilh presidential orders. For cxamplc, in 1992 President 

George H.W. Bush ordered the US. Postal Service to withdraw a lawsuit against the Postal Rate Comni"ion, 

and he threatened to sack members of the Postal Service's Board ofGovemors who denied him. The courts 

ruled in mvor of the indcpcndencc of the agency. 

It's a small pcrccntage of agency rmtten; that rise to the level of presidential notice. Thc rcst remain the sole 

..... m.washingIOllfX!st.comloplnloos/tlla-rlsa-of-the-fourth-branch-of-gO\ernmentI2013105i241c71'aaadO-c2ed-11e2-9fe2-6ee52dOeb7c1Jlrint.html 214 
159 

Mr. COLLINS. Thank you, Mr. Chair. 

Is there a more compelling reason today to pass this legislation 

than what we have seen maybe even in the past? 

Mr. EASTERLY. The issue is coming up more often. Let us put it 

that way. 

I think part of the problem is that you are dealing with acts that 

are 20, 40 years old, and the deadlines in those acts have passed. 

And so this allows outside groups to set the priorities for action, 

and I do not think they are the priorities that will result in the 
160 

best protection of human health and the environment. But once the 

court speaks, we have to follow the dictates of the court and use 

our resources for those things until the next lawsuit comes and 

moves it around again. 

Thank you. 

Mr. COLLINS. Thank you. 

Very quickly because my time is coming up. Mr. Kovacs, does 

H.R. 1493 limit in any way the ability of citizens to hold the Government accountable? 

Mr. KOVACS. No. 

Mr. COLLINS. Mr. Walke, do you agree with that? 

Mr. WALKE. No, sir, I do not as detailed in my testimony. 

Mr. COLLINS. Can you explain why? Is there anything here that 

stops your organization or any from doing anything that you have 

currently done? 

Mr. WALKE. Sure, it does. 

Mr. COLLINS. How? 

Mr. WALKE. Absolutely it does. 

Mr. BACHUS. The gentleman’s time has expired. 

Mr. WALKE. It prevents us from having private talks with the 

Government to resolve a case where they have broken the law. 

Mr. COLLINS. Thank you, Mr. Chairman. I will hold back, but I 

think the evidence is profoundly that this does in no way stop the 

citizen from holding the Government accountable to deadlines or 

other things. It just goes back to an issue of transparency and 

openness. 

Mr. BACHUS. Thank you. 

Mr. Conyers is recognized for 5 minutes. 

Mr. CONYERS. Thank you, Mr. Chairman. 

Can we not just let the witness finish his—he was asked a question. Our colleague ran out of time, and I am going to give up some 

of my time to get the fuller response from Mr. Walke. 

Mr. WALKE. Thank you, Ranking Member Conyers. 

As I said, the bill requires that really an unlimited number of 

outside parties be allowed to join settlement talks in contravention 

of governing Supreme Court law and provides them with an opportunity through open-ended mediation that the bill very carefully 

has no deadlines to govern, no timetables, allows them to draw out 

the settlement discussions indefinitely that under current law 

occur exclusively between the parties to litigation, whether that is 

industry, States, or environmental groups, and the Federal agency 

on the other hand. That is a very clear and harmful change to not 

only governing judicial case law but legislation and consistent practice under administrative law for 4 decades. 

Mr. CONYERS. Thanks, Attorney Walke. 

How do consent decree practices that have resulted in beneficial 

settlements for all parties, including corporations, and have produced good environmental outcomes—is that a fair conclusion to 

draw? 

Mr. WALKE. That is absolutely fair. Taking just the Clean Air 

Act as an example, Congress expected Americans to be safeguarded 

against hazardous air pollution, including carcinogens, from all responsible industry sectors by the year 2000. That has not happened 

and the only reason it has happened faster, reducing hundreds of 
161 

thousands of tons of pollution and saving tens of thousands of lives, 

is because, first, citizen lawsuits that overturned unlawful rules by 

the Bush administration and, I would add, the Clinton administration, as well as consent decrees that accelerated the obligation to 

meet these overdue laws and to safeguard Americans. 

Mr. CONYERS. Now, we cannot have a hearing like this without 

mentioning the Koch brothers and their roles in contributing to the 

Competitive Enterprise Institute which received $700,000 to come 

up with the Chamber of Commerce report. What is the problem 

here? 

The Chamber of Commerce report, as I have been advised, is a 

pretty flawed study. Is that too critical of them? 

Mr. WALKE. That is my respectful view, Mr. Conyers, and I detail 

it extensively in my testimony. I cannot and will not speak to any 

funding or motivations behind the report, but what I do know is 

that there has been a really concerted ideological campaign with op 

eds timed in the paper this morning, in fact, to correspond to a 

story line which has also been picked up to block the nomination 

for the head of EPA by Republican Senators that has seized upon 

this just factually and legally false story line about so-called sueand-settlement practices that, when you get down and read the 

Chamber report, are just broad side attacks on settlements in general and the right of citizens to hold Government accountable for 

violating the law. 

Mr. CONYERS. Well, like you, I was not reading any implications 

in by the Koch brothers’ contribution to the study, but you can 

draw your own suspicions, if you want. 

Why does our legislature, the Congress, allow citizens to file 

suits against other agencies? 

Mr. WALKE. Congress recognized that there was a very powerful 

incentivizing role to ensure enforcement of the law and safeguards 

by giving the public the right to hold Government accountable. And 

this is an evenhanded right for all citizens of this country. It has 

been praised by admirers across the globe. Corporations may do so. 

States and municipalities and public health groups. The Government, for whatever reason, does not always comply with the law 

and it is a laudatory feature of our democracy that we allow citizens to hold the Government accountable when they do not follow 

the law. 

Mr. CONYERS. Thank you, Chairman Bachus, for this opportunity. 

Mr. BACHUS. Thank you. 

Mr. Holding? 

Mr. HOLDING. Mr. Chairman, I am going to yield a minute to my 

colleague, Mr. Collins, so he can attempt one more attempt to get 

a direct answer from Mr. Walke. 

Mr. COLLINS. Mr. Walke, I appreciate it and I appreciate your 

last comment because it basically answered the question. And 

sometimes we ask inartful questions. I will ask it a little more directly. 

What my question was a moment ago—and I appreciate the 

Ranking Member giving you a chance to elaborate. But my question was very simple. It was does it stop the ability to bring the 

initial lawsuit. 
162 

Mr. WALKE. No, sir. 

Mr. COLLINS. Thank you. 

And it also does not affect the informal discussions before a lawsuit is brought. 

Mr. WALKE. No, sir, that is incorrect. That is what I disagreed 

with in my earlier answer and my response to Mr. Conyers. 

Mr. COLLINS. It does, and before the lawsuit is brought, you can 

still brought, you can still have conversations. This legislation does 

nothing to affect that. 

Mr. WALKE. What it does is it prevents the entry of the consent 

decree into all manner of parties that have the ability to obstruct 

the settlement of the lawsuit over a plain and indefensible violation 

of law. And so—— 

Mr. COLLINS. I think we are talking about two different—if you 

could answer my direct question, I would appreciate it. I yield back 

to Mr. Holding. 

Mr. HOLDING. I will reclaim my time. 

This question is for Mr. Easterly. Mr. Easterly—is he still on the 

line? 

Mr. EASTERLY. Yes. 

Mr. HOLDING. There he is. All right. 

Mr. Easterly, it must take a lot for an organization of 48 States, 

the District of Columbia, and Puerto Rico to agree on a specific set 

of reforms as the Environmental Council of the States has regarding the sue-and-settle reforms. I would like to ask you just how serious and deep are the States’ concerns about how much the States 

and the regulatory systems’ needs and effectiveness are being compromised by the current sue-and-settle practices. 

Mr. EASTERLY. I think we are all concerned that—you are right. 

It takes a long time. It took about 2 years of understanding the 

problem and talking about what possible solutions to the problem 

are because we agree people need to hold their Government accountable, but we believe we also need a seat at the table for 

things that impact us. And this passed at our last meeting this 

spring and it passed unanimously. So all the States believe this is 

an issue, believe that it needs to be addressed, and we appreciate 

that the Congress is trying to do that. 

Mr. HOLDING. Now, a follow-up, Mr. Easterly. In your view in the 

long run, can optimal environmental benefits be achieved if the expertise and views of the State co-regulators are not heard and accounted for when consent decrees and settlement agreements to establish new regulations are framed? 

Mr. EASTERLY. I am sorry. I missed the first half of the question. 

There was not any audio. 

Mr. HOLDING. Certainly. In the long run, if you are trying to 

achieve optimal environmental benefits from regulations and you 

do not consult with State co-regulators, if they are shut out of the 

process, just how successful are these regulations going to be at 

achieving optimal results for the environment? 

Mr. EASTERLY. Well, we do not think very much because if you 

impose a requirement that we are not capable of doing, well, okay, 

then my friend, John Walke, comes and institutes litigation. But 

you need to be able to actually do the things. You need to have the 

proper science. You need to have the proper guidance, which is a 
163 

Federal EPA responsibility usually, because we all want to improve 

the environment. We all want clean air, clean land, and clean 

water, and the science is one of the issues. The science and law are 

not always completely in alignment. When you have discussions 

with EPA, you can usually get them to do the science until they 

are sued, and then they have to fall back on what the law says, 

whether it actually makes sense today or not. 

Mr. HOLDING. And science and law, whether they are aligned or 

not—it is certainly the case that when you are dealing with 49 different States and two territories, you know, the situation in each 

of those places is not uniformly the same. So a one-size-fits-all 

piece of regulation coming out of the EPA might not work well all 

across the country. Would that be correct? 

Mr. EASTERLY. Yes, that is correct. One of the benefits of there 

being 10 EPA regions and each region knowing more about the 

States that are in their region—and then you do have discussions 

on how best to meet the environment requirements. 

Mr. HOLDING. Thank you very much. 

Mr. Chairman, I will yield back. 

Mr. BACHUS. Thank you. 

Ms. DelBene? 

Ms. DELBENE. I just want to thank all the witnesses for being 

here and taking the time to be with us today. 

Mr. Walke, you talked about three things in terms of the issues, 

no substantiation in terms of the cases, the third party intervention in terms of the number of folks who could comment and that 

being unlimited, but you also talked about the bill ignoring existing 

safeguards, and I wanted you to elaborate on what those safeguards are. 

Mr. WALKE. Thank you very much. 

Well, first of all, under a longstanding Department of Justice policy, agencies are permitted from entering into settlements or consent decrees that negotiate away authorities reserved to them by 

Congress. This so-called ‘‘Meese memo’’ is discussed in my testimony, and it is a safeguard against abuse of consent decrees. And 

Mr. Cruden at last year’s hearing discussed this at length as well. 

The product of settlement agreements and consent decrees is 

simply the initiation of a process that is not closed. It is a rulemaking process involving notice and comment opportunities for the 

public, public hearings, the submission of comments, the obligation 

of the agencies to respond to comments, all consistent with the Administrative Procedure Act. 

So the obligations under law that bind third parties and do the 

things that we are hearing complaints about here are fixed like 

bookends by the statute passed by Congress and the regulations 

issued by agencies. The latter go through a full panoply of procedural opportunities consistent with the law. It is the middle of the 

bookcase, the consent decree, that concerns just the failure to meet 

a mandatory statutory duty and that does not fix any obligations 

upon third parties that are not open for reconsideration by the 

agency during the subsequent rulemaking process. 

Ms. DELBENE. And so feedback, for example, from industry, et 

cetera would come as part of the rulemaking process. 
164 

Mr. WALKE. Absolutely. And in these very rulemakings and consent decrees that we are hearing complaints about, industry participated fully. Industry filed lawsuits, all things that they are allowed to do under the law. 

I just want to note one thing. I wish my friend Tom were here 

so I could shake his hand. But the ECOS resolution is very instructive because it is equally unanimous in not supporting industry 

intervention in agency settlement talks. It does not support that, 

and yet that is what this bill does. It also does not support, as he 

noted, the codification of legal obligations for States to join settlements. I know that the organization does not support—endorse legislation, but I just wanted to get into the record that there is zero 

support and, in fact, implied opposition to my mind to allowing industry intervenors to join and obstruct settlement talks from 

ECOS. 

Ms. DELBENE. Thank you very much. 

Mr. Easterly, given Mr. Walke’s comment and the fact that the 

definition right now in bill, an intervenor merely needs to be a private person who is affected by the regulatory action that is the subject of the lawsuit, so as this is written, it would allow someone 

who breathes air to intervene in a case that has the Clean Air Act 

rule at issue. Mr. Easterly, I was wondering do you think that is 

a good thing. Are you comfortable with the nearly unlimited intervention right? 

Mr. EASTERLY. As John said, the Environmental Council of the 

States does not do specific legislation. We are very concerned about 

our ability—we are self-interested just like everybody else—to be at 

the table when the settlement is going to impose responsibilities on 

us or affect our existing responsibilities. We did not take a position 

on any other part of your question. I would say that 50 States 

would have at least three different views on that. 

Ms. DELBENE. Thank you very much. 

I yield back. 

Mr. BACHUS. Thank you. 

Let me just clarify something. You are saying that the employers, the people that hire American workers—your position is they 

should not have a seat at the table? 

Mr. WALKE. They fully have a seat at the table when rules that 

affect their business interests are being discussed. Mr. Puckett’s 

testimony was extremely sympathetic, and I really feel for the situation with—— 

Mr. BACHUS. But I am talking about in consent settlements. I am 

just asking. Is it your position from responding to Ms. DelBene 

that the employers, you know, the people that represent the employees, you know, who hire the people in those industries, that 

they should not have a seat at the table in these consent settlements? 

Mr. WALKE. That is correct. They are not parties to the lawsuit, 

and even as intervenors, consistent with longstanding Supreme 

Court case law—— 

Mr. BACHUS. Well, yes. 

Mr. WALKE [continuing]. Given that right. 

Mr. BACHUS. So, I mean, but yes, the Supreme Court. But I am 

talking about your position clearly is that the folks who hire Amer-
165 

ican workers in these industries—they should not have a seat at 

the table for these consent settlements. 

Mr. WALKE. Mr. Bachus, I will tell you that in my experience it 

has really been the Washington trade associations that are the 

most active—— 

Mr. BACHUS. Well, yes, but I am not talking about them. 

Mr. WALKE. And I frankly do not think they always represent 

the interests of the businesses—— 

Mr. BACHUS. Yes, but those businesses, you know, do hire people 

out there. 

Mr. WALKE. Well, sure they do. 

Mr. BACHUS. Do you think they ought to have a seat at the table 

for these consent settlements? I mean, I am just trying to get 

some—I think I heard you said no, you do not—— 

Mr. WALKE. My answer was no. 

Mr. BACHUS. Okay, thank you. 

Mr. Johnson, you have seniority, and I think on your side you 

all go by seniority and not who comes first. So you are recognized 

for 5 minutes, although Mr. Jeffries has been here forever. [Laughter.] 

All right, thank you, Mr. Chairman. 

Now, this bill is The Sunshine for Regulatory Decrees and Settlements Act of 2013. I think it is misnamed, Mr. Chairman. It should 

be the ‘‘Sunset for Regulatory Decrees and Settlements Act of 

2013.’’ This bill has the Koch brothers’ fingerprints all on it. And 

passage of this bill would have a dramatic and dastardly impact on 

air and water quality. This is an anti-regulatory bill drafted by the 

American Legislative Exchange Council, also known as ALEC. The 

purpose of the bill is to paralyze the enforcement of clean air and 

clean water legislation and rules and regulations. 

Now, for those of you who do not know ALEC, ALEC, as revealed 

by Lisa Graves of The Nation—Ms. Graves wrote as follows: ALEC 

gave the Kochs its Adam Smith Free Enterprise Award and Koch 

Industries has been one of the select members of ALEC’s corporate 

board for almost 20 years. She wrote that the company’s top lobbyist was once ALEC’s chairman. And she also wrote that as a result, the Kochs have shaped legislation touching every State in the 

country. Charles Koch fellows and interns stock ALEC and have 

gone on to direct ALEC task forces. 

Mr. COLLINS. Would the gentleman from Georgia yield? 

Mr. JOHNSON. No, I will not, not now. 

Like ideological venture capitalists, the Kochs—— 

Mr. COLLINS. Would you yield later? 

Mr. JOHNSON. Perhaps if I have time. 

Like ideological venture capitalists, the Kochs have used ALEC 

as a way to invest in radical ideas and fertilize them with tons of 

cash. 

Now, ALEC is an organization that is composed of corporate 

members and State and Federal legislative members from across 

the country, I think every State in the Union, many of which—the 

majority of those Members on the Republican side of the aisle are 

members of ALEC. And I dare say that perhaps some of those who 

sit on the other side of this dais today are or have been ALEC 

members. 
166 

And what ALEC does is puts the legislators and the business 

community together. The business community supplies the legislation. The legislators then go back and introduce the legislation either in their State legislatures or in some cases here in the Federal 

legislature. 

Now, I would like to ask Mr. Easterly. Are you familiar with the 

American Legislative Exchange Council, sir. 

Mr. EASTERLY. I know that there is such a place, yes. 

Mr. JOHNSON. And you have attended meetings affiliated with 

ALEC or sponsored by members of the coal industry. Have you not? 

Mr. EASTERLY. I have been invited to speak at one meeting that 

I am aware of, yes. I speak to everybody. I speak to environmental 

groups. I speak to business groups. 

Mr. JOHNSON. Well, you spoke also to an ALEC conference on 

November the 18th of 2012. Did you not? 

Mr. EASTERLY. Yes, I did. 

Mr. JOHNSON. And the title of your comments were ‘‘America’s 

Clean Air Success Story and the Implications of Over-Regulation.’’ 

Is that not a fact? 

Mr. EASTERLY. That is correct. 

Mr. JOHNSON. And that conference was sponsored by members of 

the coal industry. Is that not correct? 

Mr. EASTERLY. I do not know that. 

Mr. JOHNSON. You would not be surprised if it were, though, 

would you? 

Mr. EASTERLY. I do not know. I was invited to come by one of 

the members of the Indiana legislature, and I try and do what they 

ask me to do. 

Mr. JOHNSON. Did they pay you for your comments? 

Mr. COLLINS. Would the gentleman yield from Georgia? 

Mr. JOHNSON. No, I will not. 

Did they pay you for your comments, sir? 

Mr. EASTERLY. No. 

Mr. JOHNSON. I thank you. I will yield to the gentleman. 

Mr. COLLINS. I thank my friend from Georgia. 

Mr. JOHNSON. For a quick question. 

Mr. COLLINS. For a quick question. 

Well, the quick question that I have at this point in time is again 

with the questions and the way it was designed with some of us 

being members. There are also—it was named earlier by, I believe, 

the Ranking Member—organizations that probably you have been 

affiliated or others. I am trying to get legislation—— 

Mr. JOHNSON. I have never been associated with an organization 

like ALEC. 

Mr. COLLINS. The NAACP? 

Mr. JOHNSON. No way that it is like ALEC. 

Mr. COLLINS. No. I am just asking. What I am saying is organizations on both sides of all issues. The question I have here is coming back to my reason—— 

Mr. JOHNSON. Well, at this point, ALEC is an organization that 

specifically puts legislators together with corporate interests and 

then takes them off to exotic locations for seminars and training, 

if you will, and indoctrination. And then it supplies the legislators 

with legislation which they then come back and introduce. And 
167 

thereafter, they are able to get campaign contributions from those 

interests that they have duly represented. And I believe that 

this—— 

Mr. COLLINS. At this point in time—— 

Mr. JOHNSON. Excuse me, sir. I am going to reclaim my time. 

Mr. BACHUS. Yes, and the time has expired. 

Mr. JOHNSON. I believe that this legislation is a clear example of 

the influence of the Koch brothers and the American Legislative 

Exchange Council on the work that this body is doing through this 

Committee. 

And I will yield back. 

Mr. BACHUS. Thank you. 

I think the Bill of Rights gives everyone the right to have their 

political views known. I may want to get that out and review it. 

Mr. JOHNSON. May I respond? 

Mr. BACHUS. You have heard some of the back and forth. Do you 

have any comments? You are the only representative at the table 

who actually employs large numbers of individuals and provides 

them, as I noticed your testimony, with profit sharing, with at one 

time—I do not know. Do you still have a free health clinic? You 

used to have a free health clinic and health benefits and insurance. 

Do you have any comments? 

Mr. PUCKETT. Well, it has been eye-opening listening to all of 

this. And respectfully to both sides, I hear what you are saying, but 

there is a problem. There is a problem. And I am not sure how to 

fix it, but I know for our industry, the previous process has not 

worked. If it had worked like it had claimed, the first rule would 

have been fine. We did not have access to any of that, and it came 

down to because of time. Now, regardless of what caused that, 

these 50 folks I may have to lay off do not care. You know, they 

just want a way to make a living. So something needs a fix. And 

I have heard a lot of comments that have credibility from both 

sides. But it is just very difficult when it continues to mount on a 

small business owner to try to just keep it afloat. 

Mr. BACHUS. I understand. I think every Member of Congress 

has heard that a thousand times from small businesses and large 

businesses in their district. I know, Mr. Walke, I think whatever 

the cause, there is a problem. 

Let me ask you this, Mr. Puckett. From what you know of Mr. 

Collins’ legislation, do you think—it may not prevent the problems 

that we have, but do you think going forward it could have a positive effect or will have a positive effect? 

Mr. PUCKETT. Yes, sir, I do think so. 

Mr. BACHUS. Thank you. 

Mr. Easterly, the Chamber of Commerce’s study says that sueand-settle cases are funneled heavily into just two courts, and that 

is the District of Columbia court here in Washington and the 

Northern District of California. Does that give you any unease? Do 

you think those courts, as opposed to, say, a Federal district court 

in Indiana or Illinois would be better positioned or be able to grasp 

or account for the needs of, say, the State of Indiana, its employers, 

its employees, even from a health standpoint? You testified earlier 

you did not think optimal environmental benefits to the citizens 

can be achieved without the participation of State environmental 
168 

regulators. But does that give you some unease, the fact that you 

were shut out of these decisions and the settlement negotiations 

that go into these consent settlements? 

Mr. JOHNSON. Mr. Chairman, a parliamentary inquiry please. 

Mr. BACHUS. Okay, go ahead. The gentleman is recognized. 

Mr. JOHNSON. Thank you. My question is when a Chair of this 

Committee who has been asked to take the Chair by the Chairman 

who then departed and the current Chair, having already received 

5 minutes for questions, then—— 

Mr. BACHUS. The gentleman is right. The gentleman is absolutely right, in fact, and I apologize. The proper procedure is to recognize Mr. Jeffries and then to go a second round of questioning. 

So I apologize. I will cease my questioning. The gentleman has a 

valid point. 

Mr. Jeffries is recognized. 

Mr. JOHNSON. Thank you. 

Mr. BACHUS. I think that is what you were gong to ask. 

Mr. JOHNSON. Yes. 

Mr. JEFFRIES. Thank you, Mr. Chair, and thank you, Representative Johnson. 

Mr. Kovacs, with respect to your testimony and your presence 

here today, it is my recollection that the Chairman of the Judiciary 

Committee in his opening statements characterized consent decrees 

as a deal under the cover of litigation. Do you recall that statement? 

Mr. KOVACS. I think you should just have the record read back, 

but I do not recall that. 

Mr. JEFFRIES. Do you think that the consent decree phenomenon, 

as you understand it, is properly characterized as deals under the 

cover of litigation? 

Mr. KOVACS. In our report, we did not make any accusations at 

all about anyone. We did not call it collusion. What we said was 

that you have a process which eliminates—— 

Mr. JEFFRIES. Okay, reclaiming my time. Notice and transparency. 

Mr. KOVACS [continuing]. Eliminates—— 

Mr. JEFFRIES. Reclaiming my time. 

With respect to the allegation that what the consent decree explosion represents is collusion between regulated Federal agencies 

and plaintiffs who sue those agencies, is collusion a fair characterization of what is going on? 

Mr. KOVACS. We have never characterized this as collusion. The 

first time I heard of the word ‘‘collusion’’ was when I read some testimony that was submitted by Mr. Walke. Prior to that time, we 

had not used the word and it is not in the report. And so that 

should be made very clear. 

What we are talking about is a hole in the process whereby 

the—— 

Mr. JEFFRIES. Okay, reclaiming my time. 

With respect to your report, now this legislation is designed to 

cover consent decrees in multiple areas. Is that correct? 

Mr. KOVACS. It covers agencies, yes. 

Mr. JEFFRIES. Right. There is no limitation on the Environmental 

Protection Agency. Correct? 
169 

Mr. KOVACS. It covers Federal agencies. 

Mr. JEFFRIES. Okay. Now, does your report provide evidence of 

issues with consent decrees in any other area than in the area related to environmental regulations? It is a yes or no question. 

Mr. KOVACS. Yes. 

Mr. JEFFRIES. It does provide evidence. 

Mr. KOVACS. Yes. 

Mr. JEFFRIES. Beyond the environmental area. 

Mr. KOVACS. Well, the first case that moved out of the environmental area was a consumer case on the Food Safety Modernization Act and rather than being pivoted—resting on a citizen suit 

in an environmental statute, it rested on section 706 of the—— 

Mr. JEFFRIES. The 71 cases that you document where there were 

consent decrees, those 71 cases were in what area? 

Mr. KOVACS. Fish and wildlife, forests, land management, air, 

water, Chesapeake Bay, food safety. So it was a broader group than 

just—— 

Mr. JEFFRIES. So essentially it was in the environmental area 

plus one food safety case that you mentioned. 

Now, let me ask you this. Do you think that in the absence of 

any evidence in other areas, is it prudent for this Committee to 

move forward with legislation that would cover consent decrees, for 

instance, in the area of antitrust? 

Mr. KOVACS. Congressman, we have a right to transparency as 

American citizens. We have a right to know when our Government 

is not obeying the law. We have a right to—— 

Mr. JEFFRIES. Okay, reclaiming my time. 

You have got no evidence of consent decree problems in the antitrust area. Correct? 

Mr. KOVACS. We did not do the report—we did the report for the 

consent decrees that we found where there was no transparency, 

and every one we found was put in the report. There was reference 

that we somehow—— 

Mr. JEFFRIES. Reclaiming my time. 

No evidence—— 

Mr. KOVACS. We did not—— 

Mr. JEFFRIES. Reclaiming my time. 

No evidence of consent decree problems in the area of civil rights, 

even though this legislation would affect it. Correct? 

Mr. KOVACS. That was not the purpose of the study. The terms 

of the study were specifically put in the cover of the study and 

what it was that we covered. 

Mr. JEFFRIES. Reclaiming my time. 

No evidence of consent decree problems in the area of voting 

rights, even though voting rights consent decrees would be covered 

by this legislation. Correct? 

Mr. KOVACS. We did not look at voting rights. When you have 

private parties versus private parties, they would not have been 

covered by the report under any circumstances. 

Mr. JEFFRIES. Right, but it will be covered by this legislation. 

Correct? 

Mr. KOVACS. If large segments of the country that had standing 

to sue and were injured, it would cover them, yes. What we are 

talking about is giving some notice to people who have constitu-
170 

tional standing and have been harmed. If they have been harmed, 

they should have notice, and if they have been given notice, then 

they should have a right not to intervene but at least to have the 

court hear why they have been injured. This is about transparency 

and it is about the right to intervene if you are injured. 

Mr. JEFFRIES. One last question. 

Mr. BACHUS. And your time has expired, but I am going to let 

you go on. 

Mr. JEFFRIES. Okay, thank you, Mr. Chair. 

One last question. Even though this legislation will cover the 

consent decrees in the area of disability or employment discrimination or voting rights, which I believe I mentioned, your study is 

narrowly focused on 71 particular instances, but is being presented 

today as evidence to support legislation that would cover a wide 

range of areas under Federal jurisdiction with respect to agencies. 

Is that right? 

Mr. KOVACS. There is so much secrecy in Government in how it 

handles lawsuits, whether it be these cases or the judgment fund 

or anything else, that spending 18 months to try to find out when 

our Government was sued and when they went into a settlement 

without public notice is a very difficult process. That is something 

the agencies should be doing. That is something we have asked for, 

and there is no reason why a Federal agency should not inform the 

Congress that they have been sued X number of times and that 

they have paid attorney’s fees and that they were in the wrong and 

that they agreed to do something. The American public have a 

right to know. All we are talking about is a right to know that they 

are being sued, a right to know that they are going to go into a 

consent decree and change the rights of the American people, and 

a right, if we are one of the injured parties, to intervene in that 

case. 

I do not think asking for those basic rights is something that 

should be so debated in this Committee. This is a basic right to 

know what our Government is doing, and this is all we are asking. 

I do not know why this is such a debate. 

Mr. JEFFRIES. Thank you very much for that extended statement. 

Mr. BACHUS. Thank you. 

At this point, we will go into a second round of questioning, and 

I actually had started out and had consumed 2 minutes of time. So 

we have the clock. We will put 3 minutes on. I would like to continue with my line of questioning and then other Members are 

going to be offered a second round of questioning. 

I think Mr. Jeffries brought up the Chairman of the full Committee’s remark where what he said was: far too often costly new regulations are issued directly under the authority of consent decrees 

and settlement agreements to force Federal agencies to issue new 

rules. Regulators often cooperate with pro-regulatory organizations 

to advance their mutual agendas in this way. The technique used 

is simple: an organization that wants new regulations alleges that 

an agency has violated a duty to declare new rules. The agency and 

the plaintiff work out a deal under the cover of litigation. The deal 

puts the agency under judicially backed deadlines to issue the rule. 

These deadlines often give the public and even States that co-administer regulations little opportunity comment on proposed rules. 
171 

So with that having been said—and it said those to be regulated 

frequently do not know about these deals until the plaintiff’s complaints and proposed decrees or settlements are filed in court. 

Mr. Easterly, let me ask you this question. Chairman Goodlatte 

said: these deadlines often give the public and even States that coadminister regulations little opportunity to comment on proposed 

rules. Do you find that to be true? 

Mr. EASTERLY. Yes, we do. The amount of time it takes to prepare competent technical comments is not small. In many cases— 

if I had more time, I would get my notes out and tell you, but we 

wind up with abbreviated public comment periods and neither can 

we get in all the information we would like to get in and then EPA 

does not have, because they have an abbreviated schedule to issue 

the final rule, time to properly consider and respond to those comments. 

Mr. BACHUS. Thank you. 

And I would say to my colleagues you have talked about people 

that have no interest being able to intervene. Mr. Collins drafted 

this legislation to say if they have constitutional standing, which 

means they have to prove to the court that under the Constitution 

they have the right to be informed of the negotiations. And we do 

not do away with the constitutional—they still have to meet the 

dictates of the Constitution. 

Mr. Easterly, I was talking about that most of these cases or a 

heavy number of them go into the District of Columbia or the 

Northern District of California. Do you think those courts are well 

positioned to grasp and account for the needs of State co-regulators 

all across the country if the States are shut out of the litigation 

and consent decrees or settlement negotiations in those courts? 

Mr. EASTERLY. I am not a lawyer. I am an engineer. 

We are used to dealing with the D.C. Circuit because the Clean 

Air Act requires most, but not all, Clean Air Act suits to be filed 

in the D.C. Circuit. We were absolutely caught flat-footed when a 

case out of California—and it probably was the Northern District. 

I told you I am not a lawyer—required EPA to act on our Visibility 

SIP’s and the fact that they were not done because we were waiting for other things. We did not see that coming and we were not 

there. 

Mr. BACHUS. All right. Thank you. 

I am going to yield to Mr. Collins the balance of my time. He has 

been, I think, quite effective. My time has expired, but I will yield 

every bit of that expired time to you. 

Mr. Johnson? 

Mr. JOHNSON. Thank you. 

Mr. Kovacs, have you ever heard of the Competitive Enterprise 

Institute? 

Mr. KOVACS. Certainly. 

Mr. JOHNSON. And you make reference to the Competitive Enterprise Institute in your written statement to this Committee. Is that 

correct? 

Mr. KOVACS. Could you tell me what page? 

Mr. JOHNSON. Page 1. 

Mr. KOVACS. Oh, okay. We recognized they had done some research for us. 
172 

Mr. JOHNSON. Okay. And are you familiar with Koch Industries 

and the Koch Foundations? 

Mr. KOVACS. Actually I have heard of them, but I have very little 

knowledge of them. 

Mr. JOHNSON. Are you aware that the Competitive Enterprise In- stitute received more than $700,000 from various Koch brothers affiliated organizations? 

Mr. KOVACS. I have no knowledge of that. 

Mr. JOHNSON. If that were true, do you think that such contributions could influence the policies of the Competitive Enterprise Institute? 

Mr. KOVACS. Well, first of all, even you do not know—I do not 

know. Maybe you know it. So I do not know that it is true, and 

I am not going to guess about something I do not know. 

Mr. JOHNSON. Well, I am just asking you assuming that the Koch brothers have contributed more than $700,000 to the Competitive 

Enterprise Institute, is it not logical to think that they would have 

some influence on the results of the research that that entity produced, which you are relying upon today? 

Mr. KOVACS. Well, first of all, Congressman, with—— 

Mr. JOHNSON. Is that a—if you could answer yes or no, and then 

I will allow you to explain. 

Mr. KOVACS. No. They would have no influence on this. 

Mr. JOHNSON. The $700,000 would not matter? 

Mr. KOVACS. They would have no influence. We hired one specific 

person who was able to do—let me just be really clear. This one 

person did a word search of the Federal Register to pick up certain 

pieces of litigation as a means of checking what we found in our 

legal search. So the search went on two ways. One was we produced it from LexisNexus, Westlaw, PACER, and we assembled it, 

and then we asked one simple thing. We knew that there were 

some reports out—— 

Mr. JOHNSON. So you are going far afield of my question. 

Mr. KOVACS. No. I am telling you how the report was done—— 

Mr. JOHNSON. I am just asking whether or not you think that the $700,000 from the Koch brothers had any influence. 

Mr. KOVACS. I know in this instance in this report, it had none. 

I personally supervised this report. 

Mr. JOHNSON. Thank you, thank you, thank you. 

What is your stance? Let us see. You are the Senior Vice President for Environmental, Technical & Regulatory Affairs at the U.S. 

Chamber of Commerce. What is your view on the issue of global 

warming? 

Mr. KOVACS. I think I spent a long time with Mr. Cohen on that 

issue. And we have been, over the years, very active in promoting 

alternative technologies, energy—— 

Mr. JOHNSON. Well, do you believe that climate change actually 

exists? 

Mr. KOVACS. We have pushed as many forms of technology, energy efficiency, and other ways in which to minimize electric use 

as any institution in this city. Years before the environmentalists 

picked up energy efficiency or alternative technologies, we were 

lobbying the Bush administration to move in that direction. We 

were the organization that pushed the energy savings performance 
173 

contracts literally from an inception into being one of the smartest 

ways in which to reduce energy. So I will put on the record against 

anyone’s record on that issue. 

Mr. JOHNSON. Okay. All right. Thank you, sir. 

Mr. Walke, is it not a fact that this legislation would give the 

Koch brothers and their industries a right to intervene in any regulatory action that could be brought, given their interest in the energy field? Is that not correct? 

Mr. WALKE. Yes, Congressman, I believe it is. The breadth of the 

language in the bill is astonishing and would allow a really unlimited array of business interests, whether they be the Koch brothers 

or others, to intervene. It is clear that the Koch brothers systematic 

anti-regulatory agenda is evidenced by the very interesting structure of this bill and also evidenced by really kind of the open admission to how the Chamber went about doing its report. It was 

not looking for impropriety. It was looking for Internet searches of 

settlements in one particular area of the law where the Chamber 

has historically been highly opposed in court and in Congress and 

that is environmental protection. So that speaks for itself that this 

has been driven by an anti-enforcement agenda which we see the 

Koch brothers devoted to with very high dollar support for groups 

that share its ideological agenda. 

Mr. JOHNSON. Thank you. 

Mr. BACHUS. Wow. Before I recognize Mr. Collins, you know, I 

think it is very important for Members not to impugn the honesty 

or the character of other Members or witnesses. And I am not saying that anyone did that. 

I will say that Mr. Easterly referred to that he was entertained 

in an exotic location with ALEC, which kind of brought my antenna up. And for the record, we are all enjoying the exotic location 

of where that hearing was located. It was Washington, D.C. So I 

am so glad that I get to work in an exotic location. 

Mr. JOHNSON. We do have some exotic locations in Washington, 

D.C. 

Mr. BACHUS. Truly, the beach, the sun, the lack of humidity. 

Mr. JOHNSON. The beautiful Chesapeake Bay is a great spot to 

go and fish. 

Mr. BACHUS. We have got to work even though we are in the 

midst of a resort. 

Mr. Collins? 

Mr. COLLINS. Thank you, Mr. Chairman. 

I just want to follow up briefly on that last question. This provides an ability for those who have constitutional standing to come 

forward and be a part of this, and it also has to prove that it has 

standing with the court. It also has to prove the Government was 

not representing its interest. So that would affect anyone, including 

the aforementioned Koch brothers to be a part if they meet constitutional guidelines. Is that not true, Mr. Walke? You said yes 

just a second ago. I just want to confirm it. 

Mr. WALKE. That is true. 

Mr. COLLINS. Thank you. 

I yield back, Mr. Chairman. 

Mr. BACHUS. Actually you have been recognized for your 5 minutes. Oh, you are through? Okay. 
174 

Mr. Jeffries, you will have the last opportunity for questions. 

Mr. JEFFRIES. Thank you, Mr. Chair. 

Mr. Kovacs, am I correct that it is your testimony that there is 

no evidence of collusion between plaintiffs initiating these litigations that result in consent decrees and Federal regulatory agencies? 

Mr. KOVACS. We did not even look for collusion. The first time 

that word was ever brought up was today. The purpose of the study 

was to literally do a search, a legal search, to find out how many 

of these cases existed, and that search got started by the very simple fact that at a prior hearing, one of the other sides said, well, 

there are very few of these. There are only a handful. And we 

asked the very simple question, how many. And then we started 

hearing—— 

Mr. JEFFRIES. Thank you. No. I asked the question simply because in public comments that have been made by Members of this 

body not necessarily present here today in support of this legislation, the allegation has been made that the problem the legislation 

seeks to address relates to back room deals or collusion or conspiracy that has taken place to undermine the capacity of American citizens or others to be involved in the rulemaking that takes 

place at these Federal agencies. But I am thankful that you are 

saying that that is not a position that you agree with. 

Now, would you take the position that under the Obama administration there has been an explosion of consent decrees, unlike in 

previous Administrations? 

Mr. KOVACS. Well, look, consent decrees have been going on— 

these types of agreements. And we would argue that when the 

business community does it—they should not do it any more than 

the environmental community. We have a problem with the process 

because we think that transparency should be in the process. 

During the Reagan administration, Attorney General Meese outlawed the process with a very strong memorandum which has later 

been morphed into some administrative language in the CFR, but 

it really does not do anything. The old Meese one is gone. 

The records only go back, just so you know, only to 1995. So that 

was the best we could do. And using computers to find them what 

we were able to do using just the Clean Air act, is it seemed that 

it was around 20 to 30 bopping around Bush, Clinton, then—— 

Mr. JEFFRIES. Well, thank you. I am familiar with the process. 

Mr. KOVACS. Then in Obama it went up to around 60. So it doubled or tripled. 

Mr. JEFFRIES. Now, let me ask a question about consent decrees 

just so that we have it in the record. Consent decrees are essentially settlement agreements backed by a judgment. Correct? 

Mr. KOVACS. That is correct. 

Mr. JEFFRIES. In other words, those consent decrees are judicially 

approved. Is that correct? 

Mr. KOVACS. That is correct. 

Mr. JEFFRIES. So there really is no back room deal. This is a 

courtroom agreement. Correct? 

Mr. KOVACS. Well, that is exactly where the problem comes in, 

and this is why we are so concerned because in so many of these 

what we would call ‘‘deadline cases,’’ the real concern is how you 
175 

set the schedule. It is not really an administrative decision there. 

It is really a discretionary decision because that is how the rule is 

going to be put into effect and that is how they are going to determine what they are going to do. 

Mr. JEFFRIES. Now, there has been some reference to our constitutional fabric, including in testimony that you previously gave 

as it relates to what our citizens should be legitimately demanding 

from the Federal Government. Now, consistent with that constitutional fabric, am I correct that under Article 3 of the Constitution, 

the Federal courts have the authority to interpret the law? Is that 

a fair statement? 

Mr. KOVACS. Actually if you are talking about the Federal courts 

and you are talking about how we are structuring it here, the Federal courts are courts of limited jurisdiction, and the jurisdiction 

that they have comes from Congress. Right now—and this is—— 

Mr. JEFFRIES. So you do not believe that the Federal courts have 

jurisdiction as it relates to Federal agency regulation? 

Mr. KOVACS. Pardon? 

Mr. JEFFRIES. You do not believe that Federal courts have jurisdiction as it relates to how to interpret regulations that Federal 

agencies have issued or should issue pursuant to congressional 

statute? 

Mr. KOVACS. When a case is before the Federal court, they certainly have the constitutional authority to interpret the law and to 

interpret the regulations. The difficulty that you have with these 

consent decrees is the court is treating these the same as it would 

treat a private party. For example, if you and I had a contractual 

dispute and we came to a settlement agreement, we would just file 

that with the court, get a consent decree, and it would be enforceable by the both of us. 

Mr. JEFFRIES. Let me reclaim the balance—— 

Mr. KOVACS. Because I think this—— 

Mr. JEFFRIES. Let me just reclaim the balance of my time. I want 

to give Mr. Walke an opportunity to respond to that statement that 

was made. 

Mr. WALKE. Sure. I direct your attention to page 17 of my written testimony. You know, the Chamber report resorted to some eyebrow raising language for me impugning the Federal courts, accusing them of ‘‘rubber stamping agreements between Federal agencies and outside plaintiffs.’’ And I just think it is unsubstantiated 

in the report, first of all, but it is kind of of the same flavor that 

permeates their indictment of Congress for passing these laws that 

give citizens the right to hold Government accountable and courts 

rubber stamping them. 

You know, everyone seems to bear a lot of fault except for the 

industry parties that want to get into these settlements and prevent the law from being enforced. I mean, this is what this is 

about. It is not about transparency. EPA has started putting up 

their notices of lawsuits on the Web. I think they were late coming 

to that. I actually agree with Mr. Kovacs about that. We should 

have transparency. We should not have obstruction of law enforcement, and that is what this bill does. 

Mr. JEFFRIES. Thank you, Mr. Chair. I know my time has expired. 
176 

Mr. BACHUS. Thank you. We appreciate our witnesses’ testimony 

today. 

Members now have the right to introduce into the record any 

matter they would like to. And I have dusted off an old Law Review article that I am familiar with since I wrote it. It is called 

‘‘Federal Policy Responses to the Predicament of Municipal Finance.’’ And it was again published recently in the Cumberland 

Law Review under the title of the ‘‘Jefferson County Sewer Debacle: A Case Study in Law, Public Policy, Municipal Finance.’’ 

Now, there were many reasons for the largest municipal bankruptcy in the history of this country since Orange County, California. One of the contributors to that was a consent settlement 

that pretty universally went beyond EPA dictates and environmental dictates. It was made between the county and environmental groups and resulted in about a $4 billion expenditure and 

what would have complied would have been about a $2.5 billion expenditure and resulted in bondholders, some of which were—California held some of those bonds. Teacher retirement boards in 20 

different States lost their money. 

And I am certainly not saying that that was the sole cause. 

There were numerous causes including dishonesty, waste, incompetence, structure of the government, but the consent settlement 

certainly played a major role in it. There were a lot of people that 

were not at the table that got hurt as a result of that. 

So without objection, I would like to introduce that Law Review 

article. 

[The information referred to follows:] 
177 

FEDERAL POLICY RESPONSES TO THE PREDICAMENT OF 

MUNICIPAL FINANCE 

INTRODUCTION 

Jefferson County's debt crisis provides policymakers the opportunity to reconsider the 

role of the federal government in the regulation of municipal finance markets, and whether 

changes in federal reb'lliation alone are enough to prevent municipalities from running into the 

same problems that Jefferson County encountered. That analysis must begin with an 

examination ofthe causes ofthe crisis. The external causes of Jefferson County's financial 

implosion have received considerable attention and are well understood: credit rating agencies 

downgraded the bond insurers that had guaranteed the county's variable-rate bonds, which 

accelerated the county's debt, coupled with the county's hedging strategy that turned out to be a 

losing bet on interest rate spreads. Although it is tempting to blame the county's parlous fiscal 

condition entirely on these external factors, blaming the municipal finance markets alone would 

be a mistake. Regulatory reform that focuses only on these external factors runs the risk of 

missing the political fragmentation and weak governance inside the county that set the stage for 

the county's fiscal collapse. l Improving the reb'lliation of the municipal bond market is a task 

that is as important as it is timely, but until local governance is made effective and accountable to 

taxpayers and ratepayers, regulatory improvement is, at best, only a partial solution 

Jefferson County's descent into financial calamity begins with a grimy problem: raw 

sewage. After the county put off sewer system upkeep for decades, heavy rains overwhelmed 

the county's dilapidated sewer lines and sewage overtlowed into the Cahaba and Warrior river 

lRobert J. Landry & Cynthia McCarty, Causal Factors Leading 1o Aiunic:ipa[ BankruptciC's: A Comparatiw! CasC' 

Study, 2X MlINICIPA], FINA"\C,", JOlJRNAI. 19, 30 (20(H) (noling common systemic prohlems lhal have contrihuted to 

t\\'o different municipal bankmptcles) 

[I] 
178 

basins. As a result of the county's deferral of sewer maintenance and its failure to build adequate 

treatment facilities, the county was sued under the Clean Water Act. The county settled the suit 

by entering into a consent decree that required the county to rehabilitate the sewer system 

deficiencies in an impractically short period of time. The consent decree required the county to 

remedy decades' worth of neglect within twelve years and to assume responsibility for 

maintaining additional sewer lines that had formerly been administered by cities within the 

county" 

To pay for the improvements mandated by the consent decree, Jefferson County turned to 

the municipal finance market. Although local governments frequently tap the municipal finance 

market to raise funds to pay for long-term projects, conflicts of interest and complexity in the 

municipal finance market can sometimes trap the unwary, particularly when local officials lack 

the expertise to independently assess the tenns of the financing structures proffered by 

sophisticated underwriters. But Jefferson County's flawed tonn of county governance magnitied 

these risks inherent in the municipal finance market. The county's fragmented political 

leadership and feckless governance structure laid the foundation for risky borrowing and stymied 

fiscal responsibility. Had the county enjoyed the benefits of effective leadership during the 

initial financing and refinancing of its sewer debt, the impact of systemic problems in the 

municipal finance markets might have been avoided or mitigated3 

This paper begins by summarizing how the county's governance structure set the stage 

for fiscal disaster. Following that, the paper focuses on the systemic problems in municipal 

finance markets that hastened the county's fiscal implosion and considers possible federal 

December 9 1996 Decree of the COUl1 in the cases of AIPP, et af v. Jeflerson C01l1l~}', No. CV -93-G-242-S illld 

v. J(!jJenwn Coun(v, No. CV-94-G-2947-S (heremafter "Se\ver Consent Decree") 

I.andry & McCarly, supra, note 1 at.32 (dc~crihing ho\'I' clTcclivc leadership cOLLld have helped pn.:;\'L,:nl 

bankmptcy in other Immicipalities) 

[2] 
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responses to address those problems. These systemic issues include: (i) the prevalence of 

negotiated pricing rather than competitive pricing; (ii) the role of unregulated market 

participants; (iii) failures in the auction rate security (ARS) and variable rate demand obligation 

(VRDO) markets; (iv) inadequacies in the municipal disclosure regime; and (v) a lack of 

transparency in municipal swaps. Where applicable, possible reforms at the federal level to 

address these issues are suggested. 

T. THE ORIGINS OF JEFFERSON COUNTY'S PREDICAMENT 

To understand the events that led to Jefferson County's debt crisis, one must first 

understand the county's commission form of government and how that form of governance first 

facilitated the county's neglect of its sewer system and then abetted the county's risky and 

irresponsible borrowing strategy. 

A. COUNTY GOVERNANCE 

Jefferson County governs itself through a County Commission fonn of government, in 

which legislative, executive and administrative responsibilities are exercised collectively by the 

County Commission. Commissioners administer these responsibilities through departmental 

subdivisions, and different departments are responsible for different areas of county services. 

The county's form of government is the product of a 1985 federal consent decree stemming from 

a lawsuit brought under the Voting Rights Act 

Before 1985, the Jefferson County Commission consisted of three at-large members, each 

of whom was elected by the entire county, and each of whom represented and was accountable to 

the entire county. This arrangement was challenged on the grounds that it diluted the votes of 

minority voters, and, in 1985, a federal consent decree changed the structure of the county 

commission to allow for greater minority representation on the commission. The consent decree 

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replaced the three-member, at-large commission with a five-member, single-district commission 

in which commissioners were elected by and represented a single district. 

The consent decree provided that "immediately following the 1986 elections, the new 

five member commission would distribute the powers and duties conferred by law upon the 

county commission and the members thereof as they deem fit and efficient.,,4 As the first order 

of business, the newly elected commi ssioners divided responsibility for county government 

among five departments: (1) Department of Finance and General Services; (2) Department of 

Roads and Transportation; (3) Department of Environmental Services; (4) Department of Health 

and Human Resources; and (5) Department of Community and Economic Development. Each 

commissioner individually assumed responsibility for one of these areas' 

Because each commissioner represented an individual district, rather than the county as a 

whole, this arrangement fragmented the administrative responsibility for Jefferson County. 

Dividing the commissioners' responsibilities along departmental lines led each commissioner to 

focus on the narrow, parochial responsibilities of his particular department. Moreover, each 

commissioner viewed his department's responsibilities through the prism of electoral selfinterest. The four county commissioners who were not directly responsible for the sewer system 

had no incentive to raise the issue of sewer maintenance; sewer system maintenance wasliterally-not their problem. The county commissioner who was responsible for sewer system 

maintenance also had no incentive to raise the issue; he would be blamed individually for rate 

increases necessary to pay for repairing the system 

The tendency to avoid action and ignore problems inherent in the single-district system of 

govemance was exacerbated by the fact that not all of the districts were equally served by the 

-1- TayloJ'v. Jefferson County Commission, No. CV-84C-I 730-S al2 (N.D.Ala. Aug. 17, [985) (con~cnt decree) 

5 See Yeldell v. Cooper Green !/ospital, Inc., 956 F.2d 10S6 (11 tll Cir 1992) (dcscTihing structLLTC or COLlllly 

govenunent) 

[4] 
181 

county's sewer system. Most of the county's high-income residents live in suburbs where septic 

tanks are common. Commissioners representing these suburban districts would have little 

incentive to worry about the disrepair into which the sewer system had fallen. By fragmenting 

responsibility for county-wide problems among individual commissioners, Jefferson County's 

commission form of government all but guaranteed that the county's sewer system would fall 

into neglect, necessitating more extensive and more costly repairs at a later date. 

B. CLEAN WATER ACT CONSENT DECREE 

Years of neglect, sewage backup, and overflows developed into a serious environmental 

problem, a problem made even worse when other municipalities within Jefferson County 

connected their sewage facilities to the county's sewer lines. The county's sewage problem 

resulted in a suit brought under the Clean Water Act against the county. In 1996, the county 

negotiated a consent decree with the U. S. Environmental Protection Agency, under which the 

county agreed to correct decades of deferred maintenance within twelve years and to assume 

responsibility for all sewer lines in the county, many of which were in dire need ofrepair(' 

Given the impracticality, if not outright impossibility, of complying with the terms set 

forth in the consent decree, one can surmise that the commissioners were in "crisis mode" when 

they accepted the court's mandate. At the time the consent decree was entered into, the local 

media and editorial pages were pressing for a resolution that would solve the county's sewage 

problem. Anyone who questioned the financial prudence of agreeing to the terms of the consent 

decree - no matter how onerous - was pilloried by the press as "pro-pollution" or "antienvironmenta1.,,7 The local media did not protest the county's acceptance the consent decree, 

the terms of which were impossible to meet, or the county's risky borrowing to finance an 

6 Seyver COllsent Decree, supra, note 2 

~ Hditorial, Common Ground: County and r"'nvil'Onmentalists '/void /.onK f:iKht }1'ilh a .')'ensihle Settlement Sl/it ave]' 

Raw Sewage Releases, THE BIRMIKGHAlvl NEWS, Aug. 3, 1995. at lOA 

[5] 
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unworkable project.' Accountability and good fiscal management became a concern to the 

journalists only when the house of cards came down. At the best of times it can be ditllcult for 

fragmented governance to produce good policy, but it is doubly ditllcult when controversial 

issues erupt 9 

Notwithstanding the media's militating in favor of a quick settlement, some county 

otllcials tried to sound an alarm about the burden that would eventually be borne by the county's 

rate payers. At the time the county commission accepted the tenns of the consent decree, the 

county's Department of Environmental Services expressed maj or concerns to the county 

commissioners about the feasibility of complying with the consent decree without increasing 

rates exponentially to pay for repairs. 10 These concerns went unheeded. Because no single 

county otllcial was responsible to the county as a whole, tackling enonnous projects like those 

called for in the consent decree required a level of coordination that was ditllcult to obtain with 

the tragmented commission form of government. The entanglement of executive, legislative, 

and administrative responsibility made oversight of county-wide problems an impossible task. 

C. SEWER SYSTEM FINANCING 

The County Commission form of government resulted in the county's assumption of an 

impossible mandate; it also facilitated the county's disastrous foray into the municipal finance 

market. The cost of the extensive improvements mandated by the consent decree was originally 

estimated to be around $1.5 billion. Additional projects and expansions inflated the county's 

8 See. e.g, Pditorial, Common Ground: COlln(v und FnvironmenJa/isis. ']void '"ong Pight "wiih {j Sensihle 5,'eulemenl 

Suit over Raw Se>1lage Releases, IHJ:, BllU.."llNGH,L\l NE\\;S. Aug. 3, 1995, at lOA: Kurin Meadol,vs. Interest Rate 

$3.1 Milliolljor COlllltV. TIlE I3IRMINGIIAM NEWS, Dec. 30, 1997, at 1I3 

eg, Carol R()hil1~oll, .HcVail' Touts 5,'ey1'e1' Plan, TTirs Cahaha .1dvocates Suit, THE RTRh-HNCiHA \-1 NEWS, 

Mrry20. 1995, at SA: Steve Visser, Lightmflg Rod: Love Her or Hate Her, Het~J)e FlI1c Collffls ~\f1fst He Reckolled 

With, TIlL I3IRMINGIIA,! NEWS, Nov. 24. 1996. at 1A 

to 5,'ee Jefferson COl/nty Sewer Consent J)ecree: /1 Heport h}' Commissioner .Jim Carns (availahlL at 

h.i1t2;/jl,'i\Y\\. jir1.1t.:an1s comlpdfs/cxcc:mmm:UT .I)(i±) 

[6] 
183 

sewer debt to over $3 billion. The disparity between the project's estimated and final cost 

provides yet another example of the unwieldiness inherent in the county's governance structure. 

Jefferson County's sewer debt is not a general obligation of the county. Instead, the 

county's sewer debt is payable solely out of sewer revenues, and not from county taxes or other 

revenue. Thus, an increase in the amount of sewer debt would result - all other things being 

equal - in rate increases on the users of the sewer system. 

At inception, 95% of the county's sewer debt took the form oflong-tenn tlxed rate 

warrants. ll To obtain lower interest rates, the county refinanced its sewer debt and replaced its 

fixed rate debt with variable rate debt. Perhaps more importantly, given the political pressure on 

county commissioners not to raise fees, refinancing the county's debt also permitted the county 

to avoid the rate increases necessary to fund sewer improvements. After the refinancing, the 

county was left with $2.09 billion of auction rate securities, $951 million of variable rate demand 

obligations, and $234 million of tradi tional fixed rate bonds-a total of about $3.2 billion. 12 

The refinancing of the sewer debt depended upon highly-rated bond insurers acting as 

third-party financial guarantors, and all of the sewer debt issuances were guaranteed by bond 

insurers. These guaranties from bond insurers with high credit ratings increased the market's 

perception of the credit quality of the county's debt, which provided the county with lower 

interest rates; the lower interest rates, in tum, pennitted the county to avoid raising fees on users 

of the sewer system13 

The interest rate on the auction rate securities was reset weekly through an auction. 

Existing holders and potential investors were to take part in a competitive bidding procedure 

II LclLc'T rrom C01l11l1issiol1crRdtyL Fine Collins, Pn:siJc1l1 JdrCTson County Commission, to Mary T Schapiro, 

Chairman u.s Commission 3, at 

(heremafter "Collms Lette{') 

11 Id. 

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184 

Buyers specified the number of securities they wished to purchase with the lowest interest rate 

they were willing to accept. The interest rate paid by the county was set by the lowest bid at 

which all the securities could be sold at par. If there were too few bids to purchase all the 

securities, the auction failed and existing investors had to keep their securities The interest rate 

would then be set at an alternate rate determined by a formula in the indenture. The designated 

broker-dealers could act as bidders oflast resort and purchase warrants on their own account to 

prevent the auction from failing.'4 

The interest rate on the variable rate demand obligations was also reset weekly, based on 

market conditions. But, unlike the holders of the auction rate securities, who were compelled to 

hold their securities if the auction failed, the holders of the VRDOs had the right to tender their 

securities to a commercial bank on seven days' notice. The terms of the indenture required a 

stand-by purchase agreement from a commercial bank to secure the payment of the repurchase 

price upon tendering of the VRDO. If the bank purchased the VRDOs that were tendered to it, 

the stand-by purchase agreement required the county to retire the variable rate demand warrants 

over four years rather than thirty. The stand-by purchase agreement also gave the bank the right 

to terminate the stand-by purchase agreement if the bond insurers that guaranteed the warrants 

were downgraded below investment grade.l5 

The county's debt service was supposed to remain "synthetically fixed" by combining the 

variable rate debt payments on the bonds with interest rate swaps. The county was to make 

periodic fixed rate payments to a swap counterparty and to receive periodic variable rate interest 

payments from the counterparty, based on a percentage of an interest rate index. In theory, this 

11 ,See, Song llan and Dan Li, Llqlmilfy Cnsls, Runs, and Sl!c/Jn~J) J)esign-Lessons .If-om the Co/lapse (~fthe AuctfOlI 

RatC' S(!(;uriti(!s Aiark(:'i, federal Reserve Board DIVISIOll of Research and StatIstIcs, :reb. 15,2008 (avaIlable at 

t~'1I,J!!i:'IlL:d)1:u.{:;)Y,lIE"!_=U(d2:21) (c:\amining systemic risks 1caJing lo collapse or ARS mar1.ct) 

C.U.Lllll' L""'''. supra note 11 

[8] 
185 

structure was a hedge by which Jefferson County could protect itself against the risk offuture 

rises in interest rates. Because the variable payments received by the county on its interest rate 

swaps were supposed to otTset the variable interest payments made by the county on its sewer 

warrants, the swap payments to the counterparty should have been the county's only cost-if the 

swaps worked as planned. 16 

At first, the county's refinancing and hedging appeared to have been in the county's 

interest. Retinancing pennitted the county to obtain a lower interest rate, and hedging protected 

the county against interest rate fluctuations. But with the onset of the recession in 2008, the 

latent risks in the structure of the county's sewer debt became painfully apparent. The credit 

ratings of the county's bond insurers were downgraded, which caused the interest rates on the 

county's auction rate securities and variable rate demand obligations to skyrocket. And central 

banks cut benchmark borrowing costs to fight the recession, which caused the floating rate 

payments that the county received under the interest rate swaps to plunge. Terminating these 

swaps, which had ceased to be an effective hedge, would have cost the county hundreds of 

millions of dollars. Hence, the instrument meant to protect the county from fluctuations in 

interest rate movements had become a crippling liability. 

D. A PRELIMINARY ASESSMENT. 

Events in the wider financial markets combined with this risky financing structure to 

produce a fiscal catastrophe for Jefferson County. The county's leadership failed to perceive the 

perils in its tinancial engineering, and that failure was the result of poor decision-making brought 

about by a t1awed county governance structure. Looking at the responsibilities of the 

commissioners, one can easily understand how they could become so immersed in administrative 

1b Id. 

[9] 
186 

detail that there was no time for coordinated policy planning. lt is difficult for five people to 

manage etliciently, on a collective basis, a budget of approximately $809 million while 

providing varying levels of supervision to about 3,600 employees. The county-commission form 

of government resulted in the county's adoption of complex programs, like the sewer upgrades 

and accompanying financing, without fostering a sense of priorities or an appreciation of the 

long-term consequences. '7 

II. SYSTEMIC PROBLEMS IN MUNICIPAL FINANCE MARKETS 

While the root causes of Jefferson County's ill-advised borrowing strategy can be traced 

to the county's fragmented form of governance, the consequences of the county's weak 

governance were amplified by system-wide problems that plague municipal tlnancial markets as 

a whole. Two lessons can be drawn from Jefferson County's disastrous foray into the municipal 

finance markets. First, unre6'l1lated, third-party "financial advisors" that advise municipalities on 

the issuance of bonds or the use of derivatives should be free from conflicts of interest, or at a 

minimum, fully disclose actual or potential conflicts of interests. Second, municipal issuers 

should provide more reliable, standardized disclosure to investors, which would help lower 

issuers' borrowing costs and reduce burdens on taxpayers and ratepayers. 

A. BACKGROUND 

1. The Market and Its Participants 

There are over 55,000 issuers of municipal securities, including towns, cities, counties, 

and states, as well as other state and local government agencies and authorities-such as 

Ii For all interesting study 011 how lo achieve b'TCatLT dTicicncy and accmmlahilily in cmmty go\'(:rnmcnl see b'RA"\K 

J. COPPA. COUNTY GOVERNMENT: A GUDE TO EFFICIENT AND ACCOllNTABLE Gm'ERNMEKT. Praeger (2000) 

[10] 
187 

hospitals and colleges-that issue securities for special purposes." No other direct capital 

market has as many borrowers as the municipal finance market, and the sums raised by local 

governments are often much smaller than those raised by corporations. Local governments use 

funds tapped from the capital market to pay for proj ects ranging from bridges and schools to 

hospital wings and community parks. 

Municipal securities have evolved into highly complex structures. Extensive variation in 

the laws among the fifty states, as well as in local ordinances and codes among the tens of 

thousands oflocalities, results in an enormous diversity of Hnancing structures. These variations 

in reh'lllation affect the authority of local governments to borrow, to lend credit, to impose taxes 

and special assessments, to enter into contracts related to municipal debt, to budget for debt 

service, and to conduct other necessary functions.'9 

The volume of municipal securities outstanding has multiplied. In 1975, yearly issuance 

of municipal securities was $58 billion, mostly in the form of general obligation debt with fixed 

interest rates and maturities 20 Annual issuance of municipal securities in recent years has 

averaged $458 billion and the total principal value outstanding is $2.7 trillion 21 Historically, 

municipal securities have been considered safe investments, and the major credit rating agencies 

have conferred investment grade ratings upon municipal debt. In 2002, Moody's Investor 

18 Council of State C;ovemments, Resolution on Rating Agency Refonn and Preserving the Tmver Amendment, at p 

2 (,I\'ailuble ul 

http://\v\vw.csg.org/events!annualmeeting/documentslResolutionRatingAgencyReformandTmverAmdt.pdf) 

195,'ee regis!ative !Tearing on Transparency and Regulation afthe .Hunicipal S'eCUl'itles .Harker: nefol'c the 5,'enare 

COlllmlffer all Banklflg, HOIJ,sfllg, and Urball A . ..tl(JII~~, 111111 Congress (2009) (statement of Ronald A. Stack) at 12 

(heremafter at "Stack Statement") 

2() ['Hi", BON]) HI rYERfl'HO\1S0N Fr'JANcIAI, 2004 Y Garboo1. at 10 

::!l Stack Statement, supra note 19, at 30-31 

[II] 
188 

Service concluded that the default rate for investment grade municipal debt over a ten year 

period was .03% compared to 2.32% for investment grade corporate debt22 

But these low default rates mask the fact that not all municipal bonds are created equal 

when it comes to default risk. Municipal bonds are classified as either general obligation bonds 

(GO bonds) or revenue bonds. When a municipal borrower issues a GO bond, the bond is 

secured by the full faith, credit, and taxing authority of the municipal borrower. The 

municipality commits, if necessary, to impose higher taxes on its residents to meet debt service 

requirements. So long as the issuer has a viable tax base, the likelihood of default is low. Many 

states, however, limit the total amount of GO debt that their political subdivisions may have 

outstanding. Alabama is one of these states. Because Jefferson County's sewer debt exceeded 

Alabama's limit for GO bonds, the county financed its debt through the other major type of 

municipal obligation-revenue bonds 23 

The debt service on revenue bonds is secured by anticipated user fees from the 

underlying project being financed. Because revenue bonds are backed by a specific stream of 

revenue, default risk varies with the strength of the underlying revenue source. If the fees from 

the underlying projects financed by the revenue bonds tum out to be unpredictable, these bonds 

can be extremely risky. 

Although individual investor participation in the municipal securities market is quite 

high, the market remains an over-the-counter, dealer market. 24 There are no central exchanges, 

22 Moody's Rating Service, "Special Comment: Moody's US Municipal Bond Rating Scale" (Nov. 2(02), availoble 

at http/lw\v\v.moodys.com 

23 Cite AI, code 

::!4 Stack Statement, supra note 19, at 13 

[12] 
189 

specialists, or fonnal market maker designations. Approximately 2,040 securities firms and 

banks were authorized to act as brokers and dealers in municipal securities at the end of 2008 25 

2. Municipal Securities Regulation 

Even though individual investor participation in the municipal bond market is quite high, 

municipal securities are exempted from the registration requirements and civil liability 

provisions of the Securities Act of 1933 ("Securities Act,,),2(, and periodic reporting requirements 

under the Securities Exchange Act of 1934 ("Exchange Act")27 Transactions in municipal 

securities are subject to the antifraud provisions of Section l7(a) of the Securities Act, 28 Section 

lOeb) of the Exchange Act,29 and Rule IOb_5 3o These antifraud provisions prohibit any 

person-including municipal issuers, brokers, dealers and municipal securities dealers-from 

making a false or misleading statement of material fact, or from omitting any material fact that 

would make a statement not misleading, in connection with the offer, purchase or sale of any 

security3l Brokers, dealers, and municipal securities dealers are subject to regulations adopted 

by the Securities Exchange Commission, including regulations adopted to define and prevent 

fraud. However, the SEC's authority to require affirmative disclosure from municipal issuers is 

limited. 

Municipal securities dealers are also subject to rules promulgated by the Municipal 

Securities Rulemaking Board32 The MSRB is a selt:regulatory organization established by 

"[d. 

'" Seem;ties Act § )(a)(2); 151J.S.C. § 77c 

" lO"change Ad § 3(a)(12)(A)(ii); 15 U.S.C 78c(a)(12)(A)(ii) 

cs 15 USC § 77q 

"151J.S.C. § 78j 

", 17 em. § 240.IOb-5 31 Id. 

32 15 lJ.S.C. § 780-4; Ll~a M r'airchild and Nan S. I-]lis, Hille 15c2-12: .'/ Vlawed Hegl/Jat01}' rJ'ame11!orkCreates 

Pittilllst"r Municipal Issuers, 55 W,\SH. U. J. OF URBflK AND CO'CTEMPORARY LAW 587, 623 (1999) 

[13] 
190 

Congress in 1975 under Section 15B of the Securities Exchange Act." The MSRB's mission is 

to develop rules for securities tirms and banks that underwrite, trade, and sell municipal 

securities. Although the Exchange Act provides the MSRB with authority to regulate dealers in 

connection with their transactions in municipal securities, the MSRB does not have the authority 

to regulate other participants in the municipal finance market, such as independent financial 

advisors 

MSRB rules are "principles-based." For instance, MSRB Rule G-17 requires every 

broker, dealer, and municipal securities dealer, in the conduct of their municipal securities 

business, to deal fairly with all persons and not to engage in any deceptive, dishonest, or unfair 

practice. Under the "suitability rule," dealers must have "reasonable grounds" to believe that the 

securities they market to investors are suitable for those investors. Two particularly important 

rules are G-37 and G-38, which specifically address pay-to-play issues and the use of paid 

political operatives to obtain municipal securities business. 

The MSRB does not have the authority to enforce its rules. Enforcement authority has 

instead been given to the Financial Industry Regulatory Authority (FINRA), the SEC, and the 

federal bank regulators.'" 

B. NEGOTIATED DEALS AND POTENTIAL CORRUPTION 

In negotiated financings, also known as noncompetitive financings, a municipality 

communicates privately with an underwriter about public financing and negotiates an interest 

rate and price with the underwriter. By contrast, in a competitive deal, the municipality posts a 

public notice asking underwriters to put in bids and awards bond work to the bidder who otTers 

" lhe Securitie, Act Amendments of 1975.l'ub. L. No. 94-29, 89 Stat. 97(codified as amended 15 U.S.C. § 780-

4(b) (2009» 

31 S'ee Lisa M. \-<airchild and Nan S. Elli~, Rule 15c2-12: .'/ flawed ReKulatmy Framework Creates Pi{fallsfor 

Ail/flleip"i Issuers, 55 WASH. U. J. OF URB,\N ,\ND CONTEMPORARY L.eW 587. 623 (1999) 

[14] 
191 

the lowest costs. Jefferson County has not used competitive financing for more than a decade." 

Jefferson County is not unique in its reliance on negotiated t1nancing; today most municipal debt 

is sold through negotiated financing36 In 1978, 54 percent of all municipal bonds were sold 

through negotiated sales. Today, it is up to 90 percent 37 

The increasing prevalence of negotiated financing is troubling because it creates the 

opportunity for municipal officials and underwriters to strike deals that are not subject to public 

scrutiny, which increases the municipalities' susceptibility to being overcharged." For example, 

until 2005, underwriting firms often employed fonner politicians and lobbyists from local 

markets as consultants to help win municipal bond sales39 In Jefferson County, politically 

connected consultants earned over one million dollars for persuading county officials to choose 

Bank of America as one of the parties to its interest rate swaps."') Even more egregious, J.P. 

Morgan is alleged to have paid as much as eight million dollars to friends of county 

commissioners to influence its selection as underwriter and swap provider 41 The cronyism and 

bias encouraged by negotiated financings that take place in private are intolerable when local 

taxpayers are at risk of being overcharged. 

Selling debt in private, without requiring competition, has made public officials 

vulnerable to underwriters' sales pitches. Open and competitive deals, on the other hand, make it 

more difficult for issuer otl'icials to direct deals to favored parties. Thus, the potential for deal 

participants to use hidden payments or favors to obtain business is minimized in a competitive 

deal. Empirical studies have found that political favoritism in municipal bond issuance results in 

35 Martin 7 Draul1, et al The Ranh Thai Jlle(!ced AI(Jhama, DT 001vInFRfl MARKFTS 52, 54 (Septemher 2(05) 

36 Id. 

r Arthur Levitt, Taxpa,vers Fleeced When Leaders Tap ~\1uni Afarkets: Arthur Levitt, BLOO:tvlBERG NE\VS (Oct. 21_ 

2(09) 

"Id. 

3()Tn 2005, the MSRR changcd Rule (+-38 Lo an outrighl han on hroker/dcalcr LL~C or such consultants 

'1() Braun cL al., sl/pra note 35, at ()() 

.!Il ,See ;r!/i-a note G8-G9 Jnd Jccompanying text 

[15] 
192 

greater credit risk, higher bond yields, and greater use of external credit enhancement, all of 

which result in a greater debt service burden for municipalities and taxpayers42 

C. UNREGULA TED FINANCIAL ADVISORS 

In addition to negotiated financings, the role of unregulated financial advisors also 

exposes municipalities and taxpayers to potential abuse. Municipal issuers often rely on these 

unreb'lilated financial advisors. Some issuers rely on unreb'lilated financial advisors for all 

aspects of a bond transaction, while others employ unregulated financial advisors for more 

limited purposes 4 .l Because the precise role of an unregulated financial advisor is determined 

by the advisor and the issuer hiring the advisor, the duties performed by the unregulated financial 

advisor can vary widely from deal to deal. 

The term "tlnancial advisor" is not defined in municipal securities regulation. MSRB 

Rule G-23(b) defines a "financial advisory relationship" for brokers, dealers, and municipal 

securities dealers, but the MSRB Rules are not applicable to fmancial advisors who are not 

brokers, dealers, or municipal securities dealers. Independent financial advisors were 

unregistered in approximately two-thirds, by par amount, of the municipal otIerings in 2008 in 

which such advisors otIered assistance. These unreb'lilated financial advisors are not subject to 

any constraints on "pay-to-play" -the conflict of interest created when participants in the 

municipal bond underwriting process make contributions to political leaders in exchange for 

being chosen to participate in future negotiated bond sales. Although the MSRB implemented 

rules to prevent broker-dealers from making such political contributions in 1994, those rules do 

not apply to unregulated financial advisors 44 

,12 Alexander W. Butler. et aL COrt1fptlOIl, Foflflcal Connect/ons, andAlulIIClpa{ Jiff/alIC!!, AliA 2008 New Orleans 

Meetmg Paper (avmlable at http://papers.ssm.com/so13/papers.cfm?abstract_ld=972471&dO\vnload=yes) 

'13 S'ee, e.g .. In .Matter o.lPl/hlic Finance Con.witants, Inc., I!f al., Sec. r'ih:: No. 3-11465 (Fch. 25,20(5) 

"MSRB Rule G-37 

[16] 
193 

Unregulated financial advisors have significant influence on issuers and earn significant 

fees from arranging bond issuances and swaps. A truly knowledgeable and disinterested advisor 

can help guide issuers through the regulatory and financial complexity of issuing their bonds. 

Ideally, these advisors are independent-without connection to dealers or underwriters-and can 

preclude dealers or underwriters from being selected if the advisors determine that the 

underwriting charges are too high, bond tenns are unfavorable to the issuer, or the underwriter's 

services are inadequate. 

But if advisors are not subject to a strictly imposed fiduciary duty, they may fall prey to 

perverse incentives. For instance, a financial advisor might advise an issuer to structure an 

offering in a particular way, even though that structure is not in the issuer's best interest, because 

the financial advisor receives payments from a third party, such as the provider of a swap or 

guaranteed investment contract." 

Regulators have grown increasingly concerned about the role of unregulated advisors in 

the sale of derivative products to municipalities, particularly interest rate swaps46 Derivative 

products carry numerous embedded risks that may not be easily understood by less sophisticated 

issuers, such as interest rate risk,"7 tennination risk,"" and counterparty risk"9 Recent market 

conditions in which municipalities found themselves losing millions of dollars on interest rate 

swaps-and were unable to exit these swaps without paying exorbitant tennination fees-

'15 5,'ee I,egis/alive Proposals to Impmve the f}ficiency of(Jversight of.HlInicipa! Finance: !fearing! I.H. 2549 

the House Committee 011 Financial SerVIces, III rh Congo (2009) (statement of Mmiha Mahan IIaines) 

regis/alive Hearing on TransparenG}' and Regulation (?flhe i'Junicipa/S'ecuriiles i'JarkeJ: Rej(Jre the 5,'enaLe 

Commiliee on Ranking H0118ing, and [lrhan /1Ifairs, 111th Congress (2009) (statement of Ronnld A. Stack) at 30-3 [ 

'17 In JdTerson County -s cust':, interesl rate risk means the nsk of a mismatch in inleresl puyment'j received from lhe 

sv.:ap counterpart;' and the interest payments o\ving on the outstanding se\ver bonds 

-18 TLilnination ri~k mean~ the ri~k that a countL:rpart), may face a large Lcmlination fcc to exit a sVI"ap thaL i~ 

Imfavorable 

-'19 Counterpart;, rIsk IS the nsk that a cOlUltelpmiy wIll default \vhen suffenng large actual or potenhallosses on ItS 

posiLion. SLLCh a dcfaull \>""OLLld mean thaL the other cOLLlltL:JTIarLy wOLLld have to go Lo the market to replace it~ 

contract at less favorable terms 

[17] 
194 

highlight this concern. Even many sophisticated issuers face large swap termination fees due to 

changes in short ternl interest rates. Jefferson County itselffaced a swap termination fee of $647 

mil1ion 50 The extent to which many issuers have underestimated the potential ternlination fees 

associated with interest rate swaps is disturbing, and raises questions about the failure of 

financial advisors to warn municipalities about these embedded risks. 

Within the scope of their employment, independent financial advisors to municipalities 

should be bound by the highest duties of care and loyalty to the municipal issuers they advise. 

The municipal officials who engage an advisor are themselves fiduciaries. They are bound to the 

population of the municipality; the money they raise and spend belongs to the people in the 

municipality. Hence, these municipal officials are under an obligation to use the funds they 

borrow for the benefit of residents and to receive the best advisory services for the least amount 

of cost. These obligations mean that leaders must select the advisors who are most trustworthy 

and qualified.'l 

At a minimum, there should be a wall of separation between financial advisors providing 

services to a municipality and the municipality's counterparties in derivative transactions 

Currently, advisors are often paid by the municipality's swap counterparty, which creates at least 

the appearance of a conflict of interest. When the financial advisor is paid by both the 

municipality and the counterparty, it is impossible to detennine conclusively whether the 

financial advisor is representing the interests of the municipality or the swap counterparty. 

Because the fees that financial advisors receive depend on concluding a swap agreement, a 

~() Martin 1. Braun & William Sehvay, JFJlorgoll c'nds ,'S'};(' Alabama SHlap Probe for $ 722 .AidllOn, BLOO'vIBERG 

NEWS (November 4,2009) 

5] S'ce lamar Franl.cL "I,et Ale .'ldvise You I!011 il/uch to Pay Ale'" 5,'uhverting Fiduciary f)uties and Hules, 2X 

Ml'''ICIPAL Fl':. J. 53. GO (2007) 

[18] 
195 

strong temptation exists for financial advisors to market swaps by emphasizing the benefits of 

the swaps and minimizing the risks'2 

All financial advisors should be held to minimum standards of conduct that protect 

issuers, taxpayers, and investors. Rules should be established to achieve the following: (i) 

prohibit fraudulent and manipulative practices: (ii) restrict real and perceived conflicts of 

interest; (iii) ensure rigorous standards of professional qualification; and (iv) promote market 

eftlciencies. Preventing manipulative practices and eradicating contlicts of interest are necessary 

steps for ensuring that financial advisors protect their municipal clients from taking on excessive 

and inappropriate risks. 

D. A TOXIC MIX: RATING AGENCIES, BOND INSURERS, AUCTION RATE 

SECURITIES AND VARIABLE RATE DEMAND OBLIGATIONS 

1. Auction Rate Securities and Variable Rate Demand Obligations 

Because short-term interest rates have historically been lower than long-term rates, many 

municipal borrowers issue bonds with an interest rate that periodically resets. In other cases, 

municipalities issue variable rate bonds and use swaps to convert their variable rate borrowing to 

a net fixed interest rate. Jefferson County used this strategy to ill effect. 

Auction rate securities (ARS) and variable rate demand obligations (VRDOs) have been 

the most prevalent fonn of variable rate borrowing used during the past two decades. With ARS, 

investors' ability to sell their securities at par depends on the success of a periodic auction 

process. With VRDOs, issuers offer investors the opportunity to sell their securities at par 

through a designated "remarketing agent." But unlike ARS, ifthere are insufficient buyers to 

~2 ,Set' A 5;pecwl illVl!stlgatlO/1 a/flU! Bethlehem Area School Dlstncf: A Cas!! S'f1U~.v a/fhe lise ofQua/~lil!d interest 

RatC' l\fanagement AgreC'ments (",')'waps ') b}) Local Clovemment [Tniie in Fenns;vlwmi(J. 1-nth RC'conulH:'ndations. 

Novcmhcr 2009, pg. 42-4.3 (relating c()nc1LL~iolls and recommendations regarding decepLive tactics o['markct 

advisors) 

[19] 
196 

cover all VRDO offers, investors have the right to tender their securities to a third-party 

liquidity-provider. Banks typically act as third-party liquidity providers under standby purchase 

agreements obligating them to purchase, at par, any VRDOs that cannot be resold through the 

remarketing process. The interest rate paid by the issuer when the VRDO is tendered to the 

liquidity provider increases to a pre-determined maximum. After some defined period, usually 

90 days, VRDOs put back to the bank-called "bank bonds"-require accelerated 

amortization. 53 

2. Bond Insurers: Only as Good as Their Credit Ratings 

One of the factors that determine the interest rate paid by municipalities on bonds they 

issue is default risk. The greater the risk that the municipality will default on the bond, the 

higher the interest rate it must pay investors to compensate them for that risk. To lower the risk 

of default, the municipal finance markets have turned to bond insurers, which guarantee 

repayment of the bonds in exchange for premiums. Before the financial crisis, most of these 

bond insurers were rated triple-A by the major credit rating agencies. By wrapping their bonds 

with a guaranty from a triple-A rated insurer, municipalities were able to transfer the insurer's 

rating to the municipal bond. Municipalities were thus able to rent the balance-sheet strength of 

the bond insurer-and the bond insurer's investment-grade credit rating-in exchange for a 

premium. By transmuting their bonds into investment grade quality through this balance-sheet 

alchemy, municipalities lowered their borrowing costs 54 This credit rating magic, however, 

depended upon misdirection and prestidigitation: rather than rating the underlying municipal 

bonds, the credit rating agencies instead relied on both the balance-sheet strength of the bond 

~, ,Set' LegislatIve Froposa{s fa improve fhe ~jficfency (~fOVl!r:}fghf ofAlulIIClpal Fff/allce: Heanllg all H.R. 2549 

Be/ore ihe House CommittC'(;' on Financial ,,)'ervicC's, 111 th Congo (2009) (statement of MIchael J. Marz) 

51 l.eJ~islative Proposals to Improve the rfficiellc.v a/OverSight o/il4unicipal f-'inance: !fearing on I rH. 2549 lJefore 

the House COll/mittee on Filial/cia! ,,)'ervices, lilTh Congo (2009) (statement of David W. Wilcox) 

[20] 
197 

insurers as well as the bond insurer's underwriting to assess the creditworthiness of the 

municipal issuers. 

As long as the bond insurers maintained the robustness of their balance sheets, the 

arrangement worked well But bond insurer's balance-sheet impregnability proved short lived 

Beginning in 2000, the bond insurers diversified their business beyond providing insurance 

against bond defaults to providing guarantees for collateralized debt obligations (COOs) and 

securitizations of various asset classes that were built from subprime mortgages." As tlnancial 

markets became aware of the risks associated with subprime mortgages and their securitization, 

the rating agencies required the bond insurers to increase the cash reserves they held against 

asset-backed securities that were increasingly perceived as risky. Because the bond insurers had 

failed to anticipate losses resulting from plummeting house prices and the effect of those losses 

on their liabilities, they were not prepared to respond to the rating agencies' calls for greater cash 

reserves. As losses materialized and the bond insurers were unable to satisfy the increased 

reserve requirements, the credit rating agencies downgraded them rapidly. 56 

When the bond insurers that had guaranteed Jefferson County's bonds lost their triple-A 

credit ratings, the bonds also lost their high ratings, and investors shunned the bonds because 

they were no longer perceived as safe investments. Bids for the auction rate warrants dried up, 

and the broker-dealers were no longer willing to act as bidders oflast resort to keep the auctions 

from failing. When the auctions failed, holders of the ARS could not liquidate their investments, 

and interest rates on the ARS soared. The declining credit-worthiness of the bond insurers also 

55See. e.g PMT Group f onn [O-K filed March 11, 2005 at 85 (Tn 2004, [<GTC, the hond insurer guaranteeing the 

TIl<ljority of JelTerson County's debt, beg<ll1 to exeo:.;ule upon its husiness plan of explmding into nevI,' markets und 

broadening its presence in existing ones. In 2004, [Gre, on a selective basis, broadened its presence in the U.S 

PLLhho:.; finance area to inclLLdc sLLch sectors a~ health can: instiLutions, TIlunio:.;ipal electric uLiliLies, and invesLor O\vTIL'd 

utilities Also in 2004, Fll-le begun to broaden its presence in the stnlctured finance market to include classes of 

consumer-based and lllvestment-grade corporate asset-backed secuntIes, 1ll addItIon to Its establIshed product lInes 

\\'ithin the lllortgage-hae1.ed seeLLrities sedor.) 

__ b ,Scc Martin Z. Braun, Bond InsIJral1C1! Turns Toxic/orAfullis as Rates S'oar, BLOOtvIBERG NEWS (Feb 11,2008) 

[21] 
198 

affected the VRDOs. Many holders of VRDOs tendered their bonds to the remarketing agent 

when the bond insurers that had guaranteed the VRDOs had their credit ratings downgraded.'? 

Among the investors that beat a hasty retreat from the county's bonds were money 

market mutual funds. Money market mutual funds were compelled to dump their VRDO 

holdings because Investment Company Act Rule 2a-7 requires them to invest in short-term 

securities with minimal risk; VRDOs met that objective so long as they had a triple-A credit 

rating. '" But when the ratings agencies downgraded the bond insurers, the VRDOs lost their 

status as eligible investments for money market funds and the money market funds "put" the 

VRDOs back to the banks, who soon discovered that the VRDOs could not be remarketed to 

other funds. 59 

With no new investors to buy the VRDOs, the banks were obliged to purchase all the 

VRDOs under the stand-by purchase agreements. The banks' purchase of the VRDOs under the 

stand-by purchase agreement in tum accelerated the amortization schedule on all $850 million of 

the country's VRDOs, requiring Jefferson County to fully repay its debt in four years instead of 

thirty 

3. What to Do About Bond Insurers and Rating Agencies? 

At its height in the early 2000s, the municipal bond insurers guaranteed more than half of 

all municipal bond offerings. Now that share is only 1O%. Two years ago the market for bond 

" Id. 

58 17 erR § 270.2a-7. Under Rule 2a-7, money market mutual funds (l'v11vfMl's) must meet stJict portfolio quality, 

diversification, and maturity standards \vhieh are meant to limit the pos:..ibihty of significant deviation between the 

share price of a fund <lnJ its per share (lssel value. MMW s are limited to investing only in securities pluced by at 

least t'ivo NRSROs in one of the t'ivo highest shOli-tenn rating categories. Also, Ml'vllvffs generally may not acquire 

any inslTLLtnCnL having an remaining maturity of greater than 397 days and may not maintain a dollar-wcightcJ 

average portfolio maturity of more than 90 days. The pUl1)ose of the maturity provisions is to limit the exposure of 

I'vllvfMPs to lllterest rate nsk 

59 .')'ee l.eKislative Proposals to Improve the rjliciency ofOvel'siKht ofAfullicipal rlnance: Ileal'inK on I f.H. 15-19 

Before the House Committee all Financial ,)'ervices, III til Congo (2009) (statement of Mary .To Ochson) 

[22] 
199 

insurance had seven viable players; today only one company is writing business."() As a result of 

this contraction, low-rated municipal issuers attempting to refInance have been unable to tlnd 

guarantors for their municipal debt61 

Some have suggested that the collapse of the municipal bond insurance market can be 

addressed through temporary reinsurance provided by the federal government for municipal 

bonds covered by a primary policy from a private bond insurer."2 Under this proposal, the U.S. 

Treasury would otTer $50 billion of reinsurance to bond insurers and charge them risk-based 

premiums in return for this coverage. After the financial markets have stabilized, the reinsurance 

program would be privatized. Although such a program could benefit troubled municipal issuers 

in the short term, fiscal conservatives are dubious about extending yet more federal guaranties to 

private market participants. 

Others have suggested that it would be preferable to restore confidence in the bond 

insurance market through long-tenn reforms aimed at making the bond insurance market more 

transparent and stable. Disclosure-based reforms would restore confIdence in the bond market 

while avoiding moral hazard and the risk that taxpayers would be left holding the bag in a federal 

reinsurance program. 

Currently, third-party financial guaranties of municipal bonds are not regulated under the 

federal securities laws. Given the crucial roles that third-party financial guaranties play in the 

municipal securities market, more comprehensive disclosure about the companies offering such 

guaranties would be useful. One way to ensure better disclosure would be to require ongoing 

f,() V,eHpomf: Revitalize AlulU Hond illsurance J.tlarkl!f, AldERICAN BANKER, Oct. 28, 2009 

61 S(!e Legislative Proposals 10 Improve the Efficiency ojUvC'rsighl ojA£unicipal Finance': Hearing on H.R. 2589 

IJefore the Ifouse Committee on Financia/.')'efi.!icl!s, 111lh Congo (2009) (statement or }-kTIJard Heal) 

" II R. 2589. 111 th Congo (2009) 

[23] 
200 

shelf-registration for entities that offer third-party financial guaranties for municipal securities."] 

The annual registration statements of the bond insurer would then be incorporated into the 

official disclosure statements for the municipal security guaranteed by that bond insurance 

company. This increased disclosure would give investors the information they need to enforce 

market discipline on the bond insurers 

Reforming the practices of credit rating agencies is an important task in encouraging 

transparency and market discipline. There were two separate but interrelated errors in judgment 

on the part of the credit rating agencies. First, the rating agencies had been free-riding on the 

bond insurers' assessments of the financial stability of municipal issuers. The rating agencies 

believed that if the bond insurers had already signed off on the municipality's credit worthiness 

by insuring the municipal issuance, then there was little point in the agencies' independent 

evaluation of the issuance. This state of affairs might have continued unnoticed but for the rating 

finns' second great blunder; they also failed to recognize the bond insurers' exposure to 

securitized assets cobbled together from subprime mortgages. 

The magnitude of the effect that ratings downgrades of bond insurers had on municipal 

securities suggests the need for more meaningful disclosure of ratings criteria, especially for the 

criteria used to rate complex structured securities. The Credit Rating Agency Reform Act of 

2006,64 which required that credit rating agencies seeking "nationally recognized statistical rating 

organization" (NRSRO) status register with the SEC, was a halting step towards greater ratings 

transparency. However, the Act requires that only general information about the agencies' rating 

methodology be given to the public. Congress did not require greater disclosure out of concern 

68 Jeffrey A. Nemecek, Alunicipu[S'ecuriti(;'s und Financial Institutions. Proposals jar RC'jorm, 30 MC-:\ICIPAL 

f']'~NCI, .10' JRNA], 61,65 (Spring 2(09) 

M Pub. L. 109-291. 120 Stat. 1327 (codified 15 U.S.C § 780-7 note) 

[24] 
201 

that full disclosure of ratings criteria might compromise proprietary models.'" But this 

solicitude about proprietary models notwithstanding, providing only general infonnation about 

rating methodologies will not provide the investing public with sutlicient data to evaluate the 

agencies' procedures and methodologies 

Instead, Congress should require that actual rating procedures and methods for specific 

types of securities be made available to the investing public. The lack of transparency for 

complex tinancial products and the companies that insured them was a major contributor to the 

crisis in the municipal securities markets66 Only through full transparency of the ratings criteria 

can public confidence in credit ratings be restored. Full disclosure and public evaluation will 

provide market discipline in the ratings process and minimize reliance on shaky ratings criteria. 

E. LACK OF TRANSPARENCY IN MUNICIPAL SWAPS 

As the ARS and VRDO markets became distressed, many municipalities, including 

Jefferson County, faced further pressure because the interest rate swaps that the county bought to 

hedge against rising borrowing costs completely backfired. It turns out that the "synthetic fixed 

rate" that the swaps were supposed to achieve were only "fixed" so long as market conditions 

behaved in a certain way. 

When the insurance companies guaranteeing the county's debt lost their AAA credit 

ratings, and investors shunned those insured securities, interest rates on the warrants exploded 

But the floating rate payments that the county received under the interest rate swaps plunged at 

the same time, as central banks cut benchmark borrowing costs to counter the tinancial crisis. 

Jefferson County's swap transaction demonstrates the risk that municipalities take when they 

fJ5 5,'ee .Tcrrrcy A. Nemecek, 11 funicipal 5,'ecU1'iries and Financial Tnsriw[ions: Proposals for ReIon}], 30 MlTNICIPAT, 

FIKANCE JOURNAL C, 1. 77 (Spring 2009) ("lhe SEC Release No. 34-SSgSg specifically cites this policy of restricting 

publIc access to ratmgs cntena, 1ll part, to '3YOld the dIsclosure of propnetary mfOI1natlOll' and to aVOId the 

disclosLLrc or 'propndary moueb-;. ---) 

(-,b Id. at 68 

[25] 
202 

gamble on interest rate spreads. The county's financial advisors should have warned county 

oftlcials about the risks of hedging with swaps; clearly they did not. 

There is, in fact, a growing perception that banks and advisors conspired to overcharge 

local governments on derivatives. As already discussed, issuer oftlcials may not be well-served 

by supposedly independent advisers who receive kickbacks from the banks selling the deals. 67 

But issuer oftlcials themselves have also been implicated in scheming to overcharge on swaps. 

For example, the SEC has alleged that the chief underwriter and swap provider in Jetferson 

County's 2002 and 2003 refinancings, JPMorgan, made undisclosed payments to local brokerdealer firms whose owners were friends of county oftlcials in order to enlist the local firm's 

"political support" for the county's hiring of JPMorgan. The payments may have totaled up to 

eight million dollars.'" The SEC alleged that JP Morgan passed the cost of these payments on to 

the county by charging higher interest rates on swap transactions. Without admitting or denying 

the SEC's allegations, JP Morgan has agreed to forfeit the $647 million the county would have 

had to pay to terminate the swaps69 

It is estimated that Jefferson County overpaid by $100 million for its swaps, based on 

prevailing rates at the time 70 Overpricing is difficult to detect because the fees charged by swap 

providers are not obvious to issuer oftlcials (or anyone else for that matter); these fees are built 

into the swap interest rates. The swap provider charges a "spread fee"-the ditference between 

mid-market interest rates observed at the time of pricing and the rates finally agreed to by the 

counterparties. This spread is what the swap provider earns on the transaction. The banks that 

act as swap providers use complex mathematical models, based on present values at the exact 

(J; S'ee Martin Z. BraLL1l and Vi,Tilliam Selway, TTidden S'wap Fees hy.lP.Horgan, IHo1'f!.an STan/e.v!Tit School T3oards. 

BLOO'vlBERGNEWS (Feb. 1. 200g) 

68 SEC v. LeCroy. e/ al., CV-09-U-2238-S (ND. Ala. flied Nov. 4, 2009) 

09 In the .Halter ofJ.P.Morf!,an Secllrtilies lne .. SHe RclL:a~L: No. 907X (Novemher 4,20(9) 

'(I Ken Wells. Armageddon in Alabama rroves rarable j(H Loca! [-"S, Governments, BLOO:\JBERG. (Oct 19.2009) 

[26] 
203 

moment of pricing as well as other variables, to calculate the spread fee 71 Without independent 

advice, issuers cannot be sure that these fees have been fairly calculated because issuers cannot 

easily evaluate the terms of their swaps against comparable ones done by other municipalities 72 

Churning-entering into multiple swaps against a single bond issuance in order to make 

more fees-is another problem that affects the sale of derivatives transactions in the municipal 

finance market. Jefferson County appears to have been a victim of churning. When entering 

into interest rate swaps, municipalities typically match the notional value underlying the swap to 

the amount of the debt to be hedged. Jetferson County, however, had swaps valued at a notional 

$5.4 billion, but its debt was only $3.2 billion. While swapping interest payments on $3.2 billion 

of debt would lock in a fixed cost for the county's borrowing, the only conceivable purpose of 

exchanging interest payments on an additional $2.2 billion would be to profit from rising future 

interest rates. The county's swapping interest payments on the $2.2 billion was akin to 

purchasing fire insurance on a building one does not own and then hoping the building goes up 

in flames 73 

The current regulatory regime does not address the problems posed by the sale of 

derivatives to municipal issuers. Interest rate swaps entered into by municipalities are treated as 

private transactions between two counterparties, not subject to regulation under the current 

rules74 The SEC does not have the authority to impose or enforce rules, standards, or disclosure 

-] S'ee .'/ S'pecial Investigation a/the nethlehem .'/rea S'cIlOol /)istrict: .'/ Case S'tudy of the Use ofQual(/led Interest 

Rate lHanagemenf Agreements (",)\t'aps") by Loca! Govemmenf [Tnite ;n PeflllsJImllia, Hiltll Recommendations, 

Novemher 2009, pg :B-J5 (relating information ohtained on intervie\vs \vlth school district financial advisors) ., Id. 

73 Craig Karmin & T.i7 Rappaport, How .Je.fferson ('olln,-v GoL Cmnched; S'LraJeK)-1 io CUI Cos/.\' InsLead. 'Impl~fied 

Risk; S'maJ'! IHove or Gamhle?, 'i}.,lATJ. STREET JOCRNAJ., March 7, 200S, al C.I 

'4 See Commodity futures ModermzatlOn Act of 2000, Pub. L. 106·554, § l(a), 114 Stat. 2763, 2763·A, as amended 

(coulflcu 7 U.S.C. § 5 et seq.) (CFM/\") I he CFMA cxpressly maul.' swaps ami olher ovcr-lhc-coun1Lr ucn\·alivc 

transactions not subject to the Commodity' Exchange Act. 7 U.S.C § 1 et seq .. and declmed that federallmv 'would 

[27] 
204 

requirements to prevent fraud in any kind of swap agreement 7 ' However, "security-based swap 

agreements" are subject to the anti-fraud, anti-manipulation, and insider trading provisions of 

Section 17(a) of the Securities Act and Section 1 O(b) of the Exchange Act. A "security-based 

swap agreement" is defined in Section 206B of Gramm-Leach-Bliley Act as a swap agreement 

"of which a material term is based on the price, yield or volatility of any security, or group or 

index of securities, or any interest therein.,,76 

Tn 2008, the SEC tiled an action involving municipal swap contracts in SFC v. h7flKfiJrd 

asserting its jurisdiction over swaps for the first time. The SEC argued that interest rate swaps 

based on the Securities Industry and Financial Markets Association Municipal Swap Index are 

security-based swap agreements and, therefore, subject to the antifraud provisions of the federal 

securities laws77 The SEC brought this case over objections by industry groups that the interest 

rate swaps were not security-based swap agreements and, thus, were not subject to the SEC's 

jurisdiction78 

"preempt the field'- of the regulalion of the LL:)C of uC'Tivati\L';:) St"e Lynn A. Stout, Rt"gulare 01'C Der(vativt"s l~y 

Dereguiating Them, 32 REGULATIO); 30 (2009) 

~5 Secmities Act Section 2A(h); Pxchange Act Section JA(h) 

ISH.S.C § 78c definitions 

S};C v. Langford, ct al., CV-1I8-13-1I761-S (N.D. Ala. filed Aug. 7. 200R) (Ihe court has jurisdiction in 

connection \vith the s\vap agreements because they \"ere security based s\vap agreements. Security-based s\vap 

agrcl:1l1cnt~ arc Lldincu in Section 206R or the Crra1l1111-Lcach-Rliky Ad, a~ amcnucu hy the Commodity Futurc~ 

Modernization Act of 2000, as agreements "of which a lllaterial term is based on the price yield. value. or volatility 

of any secmity or group of securities, or any interest therein." The tenns of the s\vap agreements stated the County 

v.'as entitled lo recei\'e lloating intL'Test rale payments rrom JPMorgan Chase Hank hased in parl on the \alue or the 

Bond Market Association's C'BI\t1A") Municipal S\vap Index, an index of securities used to establish the i10ating 

rate yield (the Gond Market Association is now known as the Securities Industry and Financial Markets 

Association). 'J hLLs, the lransactions conslltuted securily-hased swap agreements hecause a malcriallerm in each 

agreement 'ivas based on "price, yield, value, or volatility of ffily security or any group or index of securities, or any 

interest therein. ") 

~8 nneffor STrMA as Anllci Curiae Supportlng Respondents, TanK/on/, el a/., No. CV-08-076J-S (N.D. Ala. filed 

Aug. 7, 200g). (The CFMA I Commodity Futures ModemiLation Act I amemhnenl'j to the Securilies Act Imd the 

Exchange Act did provide that "security-based s'ivap agreements," 'ivhile not securities, are nevetiheless subject to 

the anti-rraud, anti-manipulalion, insidL'T trading and short-s\ving profit prO\,isions or the Securilies Acl and the 

Exchange Act. In contrast "non security based s·wap agreement~;' are not subject to the anti-traud. antimampulatlon, lllsider tradlllg or short-S'iVlllg profit provIsIOns of these statues. To dIstmgmsh between the t\VO types 

or swap ab'Teements, the statLLle defines a "security -hased swap agreement" as an agreement "or v.'hich a ma1\..nal 

tenn is based on the price. yield. value, or volatility of any security or any group or index of securities, or any 

[28] 
205 

If the swaps that Jefferson County entered into are not security-based swaps, then they 

are not subject to the anti-fraud rules against misleading or manipulative practices. Furthermore, 

such swaps may not be subject to the MSRB's rulemaking authority by-way of Exchange Act 

Section ISB(c)(l)79 Section ISB limits the scope ofMSRB rules to transactions in municipal 

securities-a category of transactions which would include neither security-based swaps nor 

non-security based swaps. 

The /,ang-fiJrdlitigation highlights the confusion that exists over thejurisdictional status 

of swaps and securities-based swaps. It is for Congress to clarify that confusion. Congress 

should empower the MSRB to adopt, and the SEC to enforce, protective market-conduct rules 

that would regulate the sale of over-the-counter (OTC) derivatives to municipalities. These 

market conduct rules should help ensure that municipalities participating in the OTC derivatives 

market understand the benefits and risk of doing so'"o 

Even if Congress clarifies that the sale of swaps are subject to market-conduct rules, to 

ensure that municipalities better understand the transactions they are entering into, there still 

remains the problem of termination risk, which is the risk that one of the counterparties may be 

forced to pay a large termination fee to exit a swap that is unfavorable. When a municipality 

wishes to exit an unfavorable swap, it has to pay its current liability from the contract to the 

11ltL:n:~l 1h'-lci11." f IfJowevcl', S)1!ap agreements under which pa)mlcms are hosed on the 5,'/1--'.-\//1 Swap Index arc not 

"security-based swap agreements." First the SIF11A Swap Index is an illdex of il/terest rates, not an "index of 

securities" Second_ a s\vap agreement lUlder "'ivhieh payments are based on the SIfMA S\yap Index is not based on 

"the price yield. value. or volatility or any securily or any group or indc:\ or sec uri lies." IT Ihe court shOLLld rCJect the 

SEC's erroneous attempt to asseli claims involving non-security based s'ivap agreements.) 

~9151J.S.C. § 78o-4(c)(1) (No hroker, dealer, or municipal securities dealer shall make llse of the mails or any 

means or instrumentality of interstate commerce to effect any transaction in, or to induce or attempt to induce the 

pUfchuse or sale or, any municipal security in conlru\ention or any rule or the IMunicipal Securities Rulemaking I 

I3oard.) 

811 Such huslness comiuct nLies \vOLLid, among oLhL'T thIngs, n::qLLln:: dlsclosun:: of: (1) InformatIon ahouL the material 

risks and characteristics of the s\vap; (ii) the source and alllount of nny fees or other material remuneration that the 

s'i\-ap dealer and s"wap adVISor \yould dIrectly or mdlrectly expect to receIve III cOllnectIoll \vlth the s\vap; and (m) 

any other materIal l11cenLl\es or conJllcls or Interest thal the swap ueak'T or s\vap auvlsor may have In connectIon 

\vith the swap 

[29] 
206 

counterparty. [fthe municipality's tennination fee is too expensive, it has to stick with the swap 

arrangement and keep paying interest rates that are disadvantageous. To preclude such a 

miserable situation, Congress could require municipalities to obtain insurance against financial 

risks that may arise when a swap is tenninated 

There are at two advantages to this proposal. First, this kind of "swap termination" 

insurance can provide a stressed municipal issuer with the necessary funding to exit a swap 

agreement. Second, and more importantly, requiring this kind of insurance may prevent 

municipalities trom entering into overly risky swaps in the first place. Lack of financial 

sophistication and poor negotiation on the part of municipal officials may leave a municipality 

exposed to considerable risk oftennination payments. Requiring insurance protection would 

force a municipality to quantify ex ante, through premium payments, the risk of early termination 

of the swap. If the municipality cannot negotiate a swap contract that avoids a substantial risk of 

early tennination, insurance will be prohibitively expensive and the municipality will be deterred 

from entering into the disadvantageous swap arrangement8l 

E. THE CONFUSING NATURE OF THE MUNICIPAL DISCLOSURE REGIME 

I. Why Municipal Securities Differ from Other Securities. 

Retail investors in the municipal market do not enjoy the same transparency readily 

available in corporate debt or securities markets. Many of the problems in the municipal 

financial crisis stemmed from inadequate disclosure about risks associated with products and 

market participants, such as liquidity problems facing municipal ARS and the ratings 

downgrades of municipal bond insurers Yet the securities laws do not mandate disclosure 

81 5,'ee Alexander HLLchanan, IJealing with.'\ funicipal S'wap H.isk~, 26 ML 'ICIPA]. r'["\ ANCE JOLRNAI. 36,43-43 

(2005) 

[30] 
207 

about these kinds of risk multipliers."' The regulatory framework could be amended to provide 

investors with better information."' One prominent market participant has described the 

disclosure that state and local governments provide to investors as being in the "dark ages. ,,84 

Federal securities regulation is disclosure based, and issuers of securities are responsible 

for the disclosure" Municipal securities regulation differs, however, because, unlike other 

issuers, municipalities have no shareholders and are not managed to produce profits. Rather, 

municipalities are managed for the benetlt of their constituents and only incidentally to pay those 

investors who purchase their debt. Nonetheless, disclosure and transparency in the municipal 

markets are important for the protection of tax and rate payers. Poor disclosure and lack of 

transparency about municipal bonds result in higher debt service payments for municipal issuers, 

which in turn results in higher taxes and rates that are passed on to residents of the municipality. 

Municipal investors demand higher returns because of the elevated risks that come with lack of 

infonnation due to slipshod disclosure practices 86 Better disclosure removes some of the risk 

stemming from uncertainty, and should lower the interest rates municipalities pay on their debt. 

2. The Limited Powers ofthe SEC and MSRB over Municipal Securities. 

Although the SEC is authorized to take enforcement action against issuers of municipal 

securities that violate the antifraud provisions of the federal securities laws, it cannot require 

:":2 The secUl-ities laws focus mainly on disclosures about the i ~suer itself and the behavior of underwriters and 

broker-dealers: these la\vs are not geared towards disclosure of risk inherent in the structure the transactlon (e. g 

liqLLidity ri~k wilh AI{S. illtL:n::~l ralc risk \vith dcrivati\·cs). See JclTrcy A. Nemecek . . \/linicipal 5,'ecl/rities and 

Financial Institutions: Proposals for Reform, 30 MlJ1\ICIPAL F['.l",\NCE JOCR:\,\L 61,68 (Spring 2009) 

83 S'ee Tesiimony Concerning Rnhancinx TnvesJor ProieCliol1 and Regula/ion (?flhe Securilies AlurkelS: Before 

Senate Commiilee on Runking, Housing, and Urhan .'lfrairs, [[ [til Cong (2009) (Statement of Mary T.. Schapiro. 

Chainnan, Seo:..:urities and t.\.change Commission) 

:":--1 DalTell Preston, Governments never in Dejtutlt Pay Afore Interest Thall Companies, DLOO:tvIDERG (Oct. 28, 2009) 

85 ChrisLopher Co:\, Chaimlan, U.S. Sce. & Exch. Comm'n, Speeo:..:h hy SEC Chairman: InLegriLy in Lhe MLmio:..:ipal 

Market (July 18.2(07) Ihereinaiier Cox Speechl, available at 

http://www.sec.gov/news/speech/2007/spch07l807cc.htm 

86 Arlhur [.c\·iu, taxpayers Fleeced H hen !.eade1's Tap .Huni Alal'kets: . '/1'tl1111' !.evitt, HI .oorvlHERCJ NE\VS (Oct. 21, 

2009) 

[31] 
208 

affinnative disclosure from municipal issuers."7 Federal regulatory forbearance in municipal 

securities can be attributed to an issue as old as the Republic itself: federal versus state 

sovereignty. To reinforce the concept of intergovernmental comity, both the SEC and MSRB are 

prohibited from requiring issuers of municipal securities to file registration documents before 

municipal securities are sold. This prohibition, codified in Exchange Act Section 15B(d), is 

known as the "Tower Amendment," after Senator John Tower," and fonns the structural 

foundation of the municipal securities regulatory scheme. It provides as follows: 

(I) Neither the [SEC] nor the [MSRB] is authorized under this 

title, by rule or regulation, to require any issuer of municipal 

securities, directly or indirectly through a purchaser or prospective 

purchaser of securities trom the issuer [i.e. an underwriter of an 

offering of municipal securities], to file with the Commission or 

the Board prior to the saJe of such securities by the issuer any 

application, report, or document in connection with the issuance, 

sale, or distribution of such securities; (2) The Board is not 

authorized under this title to require any issuer of municipal 

securities, directly or indirectly through a municipal securities 

dealer or otherwise, to furnish to the Board or to a purchaser or a 

prospective purchaser of such securities any application, report, 

document, or information with respect to such issuer89 

Given the strictures of the Tower Amendment, the SEC and MSRB can impose disclosure 

requirements only on municipal securities brokers and dealers. To the extent that municipalities 

can be compelled to disclose infonnation to investors, that disclosure comes about indirectly, by 

means of the antifraud provisions of the securities laws, which are applicable to municipal 

issuers 90 Although the SEC has brought enforcement actions in a number of high profile cases 

l-:i Andrew Ackennlm, llaines: S}'{' Can"f Set Up C'01]Jorafe-Sty!e l)isc!osure Regime forJ1unis, j HJ:o: .1:30:\0 BUYl::J{ 

iUllici)Ja/Se(;(Iri'lie., A"aricel: 5iame Pmhlems No Solutions, 21 DEL. J. CORP. L. 427, 433 

(1996) 

[32] 
209 

in recent years,"' it is not currently able to address ex ante the disclosure problems exposed by 

those enforcement actions against municipal issuers92 

3. Indirect Disclosure 

While the Tower Amendment prohibits the SEC from imposing disclosure requirements 

directly on municipal issuers, the Exchange Act grants the SEC regulatory authority over brokers 

and dealers who underwrite issuances of municipal securities or otherwise engage in municipal 

securities transactions. Exchange Act Section lS(c)(2) grants authority to the SEC "[t]o detine 

and prescribe means reasonably designed to prevent" fraudulent, deceptive, or manipulative acts 

and practices, and fictitious quotations by brokers and dealers. Pursuant to that authority, the 

SEC adopted Rule ISc2-12 to improve transparency in the municipal markets 9 ] The rule 

indirectly results in initial disclosure, periodic disclosure, and secondary market reporting from 

municipal issuers by requiring underwriters that participate in an offering of municipal securities 

to obtain the agreement of the issuer to make those disclosures. More specifically the rule 

requires participating underwTiters purchasing or selling municipal securities in primary 

offerings to reasonably determine that an issuer will undertake to make disclosure statements 

available to investors. As a result, new underwriters in primary offerings must obtain, review, 

and distribute copies of the issuer's Official Statement. The Official Statement is analogous to 

the prospectus distributed prior to corporate issuances and contains all information "material" to 

the bond issue. The participating underwriter must also determine that the issuer has undertaken 

to make certain continuing disclosures annually and on the occurrence of certain material events 

9] See, e.g .. In the .\faller o(rhe City o(Sall TJiego. SEC Release No 34-54745 (No,. 14. 21l1(6); III rhe Marter o(the 

Ct(v o..r\luJ/llI, Flonda, SEC Relense No. 34-47552 (Mar 2L 

92 S(!e Disclosure and Ac:c:olflliing Praciices Secunhes and Exchange ('OIllIlllSSlOll. 

W'hitc Paper lo Congrc~s, JLLly 2007 (a\·ailah1c 

Y> 17 C.F.R. 240.15c2-12 

[33] 
210 

to the MSRB's Electronic Municipal Market Access system."4 Thus, the SEC is able to force 

disclosure from municipal issuers, albeit in a round-about way. 

But these indirect measures to force transparency have failed to keep pace with the 

extraordinary growth and increasing complexity of the municipal bond industry. Complex debt 

instruments today contain new kinds of risk-risks that were not present in 1975 when the 

Tower Amendment was passed."5 Nonetheless, the SEC and MSRB have tried to keep up with 

the market's added complexities. Indeed, the SEC has recognized the need to modify Rule 15c2-

12 as a result the changing municipal securities market. For instance, VRDOs are currently 

exempted from Rule l5c2-l2's continuing disclosure requirements, notwithstanding that VRDOs 

accounted for 38% of municipal trading volume in 2008. The SEC has proposed amendments to 

the regulation that would eliminate this exemption for VRDOs% The MSRB has also taken 

action that should enhance transparency in ARS and VRDOs, the hardest hit sectors of municipal 

finance. The MSRB has proposed amendments to Rule G-34( c) that would require ARS 

"Program Dealers" to disclose "ARS bidding information" for orders placed by an ARS Program 

Dealer97 Requiring disclosure of dealer orders will provide the market with information about 

how the interest rates are determined in a successful auction and the extent to which the auction's 

success is dependent on dealer bids. Participants in the municipal ARS markets will be able to 

calculate "bid-to-cover ratios," similar to Treasury auctions, that would indicate the liquidity of 

ARS in a particular auctions. In addition, the MSRB rule amendment would require the VRDO 

remarketing agent to report the identity of all liquidity providers for VRDOs. This amendment 

':11 Cite 15c2-12 here: See Lisa M. Fairchild & Timothy W. Koch, "Municipal Securilies:- chupter 6 in lhellandbook 

of;l!odern Finance, edited by Dennis Logue and James Se\vard, "Vaneil, Gorham & Lamont, 2003 at AG.08[4][a] 

95 S'ee T,isa M. Fairchild and Nan S. F.lli~, Rule 15c2-12:.1 Flawed Regu/army Framewol'kCreares Pl(fallsfor 

~\llfmcfpal issuers, 55 WASH. U. J. OF URB,\N ,\ND CONTE:t\'lPORARY LlW 5~n_ 623 (1999) 

96 Proposed Amendment 10 l\1unic:ip(J/ Securities Disclosure, Exchange Act Release No. 34-60332 (July 15, 2009) 

97 "Program Dealer-- is derined RLL1c Ci--34(e) a~ a dealer thal ~uh1l1ils an ordc'T directly to an Auction Agenl ror it~ 

0\\'11 [lccount, or on behalf of another account, to buy. hold. or sell ARS through the auction process 

[34] 
211 

would allow market participants to determine the extent to which the VRDO remarketing agent 

or liquidity provider holds a position in the VRDO at the time of the interest rate reset'"" 

4.The Need for Mandatory Standards 

Despite the SEC's and MSRB's proposed improvements to the municipal securities 

disclosure regime, much of the disclosure remains limited and non-standardized 99 Other than 

the threat oflitigation by the SEC or private parties for violations of the anti-fraud laws, there is 

no regulatory mechanism to ensure that disclosure in the official statement is adequate or timely. 

Beyond initial due diligence necessary under the MSRB suitability rules, underwriters have no 

duty to see that issuers continue to honor their contractual promises to provide continuing 

disclosure. 'oo Issuers often lack the means to ensure accurate and complete disclosure in their 

offering documents and ongoing reports. In contrast to public companies, municipal issuers are 

not legally required to certify the accuracy of their financial statements in ongoing reports. 

Notwithstanding the size and importance of the municipal securities market, municipal issuers 

are not required to follow uniform accounting standards and disclosure requirements when 

preparing, presenting, and discussing their financial statements. 101 And although some municipal 

issuers voluntarily present detailed information about risk from interest-rate swaps or other 

hedging, they are not required to do so. 

Disclosure in the current system is weal( because the Tower Amendment prohibits the 

SEC and MSRB from imposing disclosure obligations directly on municipal issuers 102 The SEC 

98 5,'ee Requesl/or Commenl on. 'lddiliol1al Tncreases in Transparency (~f.HlInicipal.'luc1i()n RaLe Securilies and 

J 'ariable Rate Demand Obligations, MSIU3 Nolice No. 2009-43 (JulY, 14,2(09) 

99 See, e.g. Darrell Preston, Afuni Bonds Lag 13 Years BehilldCorporate Disclosure, DLOO:\JDLRG NEWS SERVICE 

(.T LLllC I 2, 2009) (a vail ah 1 c at lL!J12.:iLlt!yJ:~1:l0( nn b~;":UlEQIIUlill112?./]l~~1ILLQ::fiXi7 OnQl&:-ii g=-JlUiG'S.IZ~]J.JQ:u. 

WI Sec Ann Judith Ci-ellis,Jlurucfpa/ ,S'eClfrttll!s ~\darket: Saml! Frob/ems-No SolutIOns, 21 DEL. J. CORP. L. 427. 

473-4 (1996) 

lol While Paper 

HJ::! ,')'€'I! S'EC White raper, supra note 9, at 4 

[35] 
212 

and MSRB have reached the statutory limit of their authority to provide investors in municipal 

securities with adequate disclosure. 

Nonetheless, there are complications with applying the corporate model offull 

registration and reh'lliation to state and local governments. Because municipal issuers are 

themselves governments, SEC review of the disclosure documents of municipal issuers could 

present thorny issues of intergovernmental comityH" Moreover, the SEC could be overwhelmed 

by such a task, owing to the sheer number of municipal issuers. The resources that would be 

needed for the SEC to fully review the ofTering statements of 55,000 municipal issuers could 

outweigh the benefits of such an undertaking. 

A more attractive approach would be to require standardized otlicial statements and 

continuing disclosures which could be accessed by the public from a central location. The SEC 

should be given authority to bring enforcement actions not only for fraud but also for the failure 

to make disclosure in the requisite form. 104 Tax and rate payers will benefit from a reduction in 

municipal borrowing costs resulting from increased transparency. Investors may be willing to 

accept lower interest rates if greater transparency reduces the perceived risk of an investment. 

CONCLUSION 

Two problems, one internal and one external, coalesced to bring financial disaster to 

Jefferson County. At the internal level, poor governance brought about by political 

fragmentation fostered an environment where decision makers could not assess the long-term 

consequences of day-to-day decisions made for politically expedient reasons. Without the ability 

11)35,'ee Theresa A. Gahaldon, Financial Federalism and the ShorrlTarry l.(fe of.HunicipalS'ecurities Regularion. 34 

J. CORP. L. 739, 754-5 (2009) (discussing the concept of intergovernmental comity and its role in federal regulation 

of'mulllcipal SeClITlt1es) ("Intergovemmental COIllIty roughly translates mto 'makmg lllce to another 

government ---) 

ll).!j Id. at 7GG 

[36] 
213 

to set durable policy objectives, the County Commissioners were vulnerable to the other, 

external problem-the pitfalls inherent in the municipal finance markets. The county 

commission acted on bad financial advice and fell prey to the sales pitches of bankers and 

underwriters 

Reforming the county governance structure to facilitate effective government is an issue 

that should be, and can only be, addressed at the state level. But the federal government can 

make changes to its regulatory regime for municipal bonds that could mitigate the etTect of poor 

governance at the local level. hnposing fiduciary standards on financial advisors to 

municipalities and enhancing the quality of disclosure for municipal securities are two changes 

that would significantly improve the state of municipal finance Sound and impartial financial 

guidance will help other municipalities avoid Jefferson County's fate. Improved disclosure in 

municipal securities will attract more investors to the market and lower debt burdens for 

municipalities and their citizens. 

But reforming the municipal finance market to provide better disclosure to municipalities, 

taxpayers, and investors-though timely and necessary-should not be thought of as a cure all 

for all of the problems that manifested themselves in Jefferson County. Recognizing both the 

limits and dangers of government intervention, Federal securities regulation is based upon the 

view that if investors are given aJl of the necessary infonnation, they can make wise investment 

decisions. But responsibility for making those wise investment decisions rests with individuals, 

not government. As Louis Loss, regarded by many as the intellectual father of modem securities 

law, so aptly put it: "Congress did not take away from the citizen his inalienable right to make a 

fool of himself. It simply attempted to prevent others making a fool ofhim.,,105 

l()"' Louis Loss, FUlldamentals ojS'ecurities Regulation 3G (1983) 

[37] 
214 

Mr. BACHUS. But I do want to say I am not trying to simplify 

it. I am not trying to say that that was the sole reason, but it obviously was a contributing factor. But the county had failed to properly clean up their waste, and so I am not accusing those who 

brought the suit of any animus. But there were some unintended 

consequences of consent settlement. 
215 

And I am not saying this legislation would have solved that, but 

I am saying that if more people had been at the table and more 

time and thought had been taken, we could have avoided what was 

a debacle. 

This concludes today’s hearing. Thanks to all of our witnesses for 

attending. 

Without objection, all Members will have 5 legislative days to 

submit additional written questions for the witnesses or additional 

materials for the record. 

We now have a whole lot cleaner rivers and streams in Birmingham, Alabama too. 

This hearing is adjourned. 

[Whereupon, at 12:11 p.m., the Subcommittee was adjourned.] 

(217) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD
218 

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I'ublic L"nd~C",,,,cil 

Nali<)nal Call1cmCrl'~ Bttf A~socilllk,,' 

Am~rican Sheep IJldU51I}' Aswcialion 

A.,oci.,ion of)\'ation.i G .. !!l.ndl 
220 

f

~ e D 5 

a...I<d .... 1J.,l 

~I "" • . 'I J 

~ ..... " ... I> mtilil.n,' It "',,...., _ 

~"''''''' '' ... IT ilE NEED FOR RE~'O RM ANI> STATE PARTICIPATION 

IN EPA'S CONSENT DECREES WHICH SETTLE CITIZEN SUITS 

WHEREAS. f<:dellil cmimllmcnlal prIlgr.lIllS may be, ood gencmlly prc. authorized ordclcgaled 10 staleS: 

WHEREAS, In additIOn to 3ulhooZ31ion and dcl~g.'Ilion , "rues arc prmidcd Ce ILlIn sl.:md alone "gilts and 

rcspon~ibilirics under fcd.:rnl cn~ironmcnlal la" ~ 

WHEREAS. 1~ Unucd Stales 1011\ ironmcmal ProICClIOO Agency (U S. EPA) may be sued in fcd<:ral OOUfi 

b)' clllzcn~ O,()t lhc.alkgcd f.lH"n:; 10 perfoml ils nnl,d,s..::n:lioolll) dUlieS. such as tak illS :lCliOlI on Slate 

",,"vironmcnl.:iI a£Cncy submissions, promulg:Umll rcgul:rtions. ",,'Cling 51:J.IUIOI)' dcadlincs, or l:!k.ng Olhcr 

reg ulal!>,)-' :lClIOns: 

W~ EAS. Wile cn~"on"'"'nt:d ag~nClt:!i rna)' ha,e mfonnation tb:u would matenally bolldilthc 

defense or a citi~n liuil or dlC rc...:hil1!1 J scnJcIn~nl.;md I!la~ ' haw IOlereSlS Ihal should be co",.,d~('I.'<I in 

lhe c,alu3lion Ofll5<.'1llcl!lcnr. 

WHEREAS. Slalc c,",'lrorllncnl:ll a!!~ucl~S arc oot always nolified ofcllizcn .u;l, Ihat a1le!lC U.S EPA's 

failure 10 pcrfornl liS nond,scrclion:lI'y dulles, are ollcn nor p:u1ICS 10 IheSt: ell,,,,,n suils, ;md are ",-,mil.,' 

nOI pronded \1 1111 U!\ appoll!II1ily 10 p:u1idpalc 10 Ihe negOliul1on of;yeemcnl& to s<:n!c cilizen 5UII$; 

WHEREAS. !he a£recmclllS U S. EPA Dcgolislc. 10 "'"l11c elllzen swu; 1113)' :ldn:rsdy arreci stales-. 

NOW. ntEREFORE. BE IT RESOLVED ltIAT um ENV1RON~ ENTALC UNC OF THIi 

STATES 

Affums Ih3Ili!:lIC ~ ha,,, sl:md alone righlS alld rospclTlsibihlies und rf~dc rnllOll"lrollmelll:\l13wS.:md thai 

tlle Slale e""ironmcnlm agencies ~ co-"'gubto~ co-fundcl'!i and p.~nlle ... ",th U,S. EPA. 

Urges lhe U,S. EPA 1<1 de"OIC lhe rcsourttS nCCl'ssal)' 10 pcrfoml Its nllOldis,,",\'liona,) dUlies \I Ithin lll~ 

li",cfrn",cs specified U!!dCT fc-dcral law, CSIJI,;clall)' "hen rcqulrcd 10 lake actio" on a S!:lle submission 

mad~ under an IOdcpcnd~m I1ghl or rcsPOll",bllil~ (e_g., Stale Implementation Pb". undcr the Clean All 

Act). 

Spcdficall)' calls 0,)11 U.S EPA 10 "onf), all affectcd stalC cnviroruncnlal agcndcllof ciuz.cn suits fI led 

:lg:linsl U.S. EPA Ihal alleliC a fmlure of the f~&:r:tJ :lgency 10 pcrfonn liS nondiscrcllOn:uy duIICS: 

Bc!lc\'Cs Ihal pn)\'iding an 0PIlO"unity (or St:~c em ironll1Ctllal :ij;C1lCics 10 JXI"ic'P.1IC jtl Ihc r>Cgollalioll of 

citizen suil ~lllcmcnl agrecmcnts ,,-ill often be: nCIlCss:lJ)' lo prolccllhe Slales· role in Impkrncntinl', 
221 

f 

federal environmental programs and for the administration of authorized or delegated envirOimlentai 

programs in the most effective and efficient malmer; 

Specifically calls on U.S. EPA to support the intervcntion of state cnvironmental agencies in citizen suits 

alld mCllilingful participation in the negotiation of citizen suit settlement agrcemcnts whcn thc state 

agcncy has cither madc a submission to EPA related to the citizen suit or when thc state agcncy either 

implements, or is likely to implement, the authorized or delegated environmental program at issue; 

Believes that no settlement agreement should extend any power to U.S. EPA that it does not have in 

current law; 

Believes that greater transparency of citizen suit settlement agreements is needed for the public to 

understllild the impact of these agreements on the administration of enyirolllnental programs; 

Allinns the need for the federal govemment to publish for public review all settlement agreements alld 

consider public comments on ally proposed settlement agrccmcnts; 

Encourages EPA to respond in writing to all public comlllents received on proposed citizen suit 

settlement agreements. including consent decrees. 
222 

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Subcommittee on Reb'lliatory Reform, Commercial and Antitrust Law 

Hearing on 

HR. 1493, the "Sunshine for Regulatory Decrees 

and Settlements Act of2013" 

June 5, 2013 

Questions for the Record 

Question from Ranking Member Steve Cohen for John Walke 

1. During the hearing, Mr. Kovacs stated that limitations on standing should be 

sufficient to curtail the scope ofH.R. 1493's intervention provision. What is your 

response? 

Constitutional limits on standing do not curtail the hannful scope of H.R. 1493, nor do 

they provide any argument for the bill becoming law. Any bill passed by Congress must of 

course abide by the Constitution. Congress may not alter or displace the minimum constitutional 

standing requirements found in Article III. As such, H.R. 1493's scope is in no way curtailed by 

constitutional standing requirements-and constitutional standing is not the problem with H.R. 

1493. 

Though it may not violate the Constitution, H.R. 1493 is based on faulty premises, 

purports to solve a problem that does not exist and creates harmful obstacles to enforcing federal 

laws. It represents deeply flawed public policy. The legislation would burden the judicial 

process with processes that would lengthen litigation, interfere with law enforcement, and make 

it more dim cult and expensive for parties to enforce the law. The bill would mean that federaJ 

agencies would be held accountable less often when they fail to follow the laws written by 

Congress. 

As an initial matter, no witness at the hearing was able to show, through either their 

written or oral statements, any proof of improper behavior between the government and third 

parties in settling lawsuits through consent decrees or settlement agreements. Moreover, it has 

been acknowledged that these settlements most often arise out of violations of nondiscretionary 

duties such as statutory deadlines.' If Congress does not like that particular statutes impose 

deadlines, it may change those deadlines. But Congress should not resort to irresponsible 

legislation like HR. 1493 as a tool to prevent or impede enforcement of duly enacted laws. 

Further, Mr. Kovacs, and the Chamber's recent report, have defined any lawsuit resulting 

in a consent decree or settlement agreement between the federal government and environmentaJ 

1 See, e.g., Thc Officc of Majority Lcadcr Eric Cantor, The imperial Presidency: implications/or 

liconomic Growlh and Job Creal ion, at 23 available al 

http://majorityleader.gov/theimperialpresidency/tiIeslThe-1mperial-Presidency-Majority-Leader-EricCantor %27s-0mcc.pdf. 
225 

groups as evidence of "sue and settle," painting law enforcement activities as detrimental to 

governance. This is not the case. Citizen suit authorities are one of the longest-standing and 

proudest features of modem administrative laws. They represent a "deliberate choice by 

Congress to widen citizen access to the courts, as a supplemental and effective assurance that 

[environmental laws] would be implemented and enforced."2 

I-LR. 1493 would interfere vliith the federal government's ability to settle cases (such as 

those relating to statutory deadlines) that it knows it cannot win. It would force the government 

to spend limited time and resources litigating a case or going through endless rounds of 

settlement negotiations, and it would have the effect of making litigation prohibitively expensive 

for many citizens groups. 

The bill ignores the role of the Judiciary and upends traditional judicial processes. Courts 

currently police settlement agreements and consent decrees, and ensure that federal agencies do 

not commit to substantive outcomes nor improperly relinquish their discretion. Further, 

longstanding Department of Justice policy outlines the boundaries of this discretion.' The bill 

reflects a bias in favor of industry intervenors obstructing settlement agreements between federal 

agencies and third parties, ensuring protracted litigation and the continuing failure to uphold 

federal laws. 

Lastly, it is important to remember that settlement agreements and consent decrees 

remedy government lawbreaking. These agreements have ensured that landmark public health 

mlemakings are undertaken, and have led to less smog, soot, and neurotoxic mercury and lead 

pollution, to name just some o[the benefits. After decades of missed statutory deadlines, 

consent decrees and settlement agreements secure rulemakings that will save tens of thousands 

oflives once fully implemented. When our federal government does not enforce public health 

laws as written, consent decrees and settlement agreements provide a mechanism to hold 

government accountable. H.R. 1493 would erect serious obstacles to ensUling federal laws are 

upheld, leaving Americans less able to enforce laws on the books to protect our air, water, and 

health. 

Constitutionallimitatiolls on standing do nothing to remedy the multitude of harms 

actively created by this legislation. 

2 Natural Res. Der Council v. Train, SIO F.2d 692, 700 (1974); see also Alyeska Pipeline Servo CO. V. 

Wilderness Soc y, 421 U.S. 240,263 (1975) ("'Congress has opted to rely heavily on private 

enforcement to implement public policy"): Pennsylvania V. Delaware Valley Citizens' Council/i)/, Clean 

Air, 4SJ U.S. 711, 737 (19S7) (Blackmun, 1., dissenting) (noting reasonable fees provisions of 

environmental laws '10 encourage the enforcement of federal law through lawsuits tiled by private 

persons''). 

1 Memorandum from Edwin Meese lll, Attorney General, to All Assistant Attorneys General and All 

United States Attorneys (Mar. 13, 1986). 

2 
226 

2. Under what circumstances does an agency typically agree to settle when it is sued 

for failure to issue a rule? 

Federal agencies most commonly enter into consent decrees with plaintiffs to address an 

agency's failure to perform a nondiscretionary (or mandatory) statutory duty under federal law. 

These nondiscretionary duties most frequently concern a failure to meet plain statutory deadlines 

set by Congress. Republican co-sponsors ofH.R. 1493's companion Senate bill, S. 714, have 

recognized as much, noting that the settlement agreements and consent decrees targeted by their 

legislation "[t]ypically" arise in cases where "the defendant agency has failed to meet a 

mandatory statutory deadline for a new regulation or is alleged to have unreasonably delayed 

discretionary action.,,4 Put another way, agencies typically settle such cases when they have no 

chance of winning the case because the violation (a missed statutory deadline) is so clear. In my 

experience, with respect to discretionary statutory provisions-which involve legal 

responsibilities but not ones governed by specitic statutory deadlines-agencies are far more 

likely to litigate a case than settle it. So, H.R. 1493 would shift this landscape, either inducing 

agencies to "litigate and lose" cases regarding nondiscretionary duties that they have identified 

as unwinnable, or obstructing settlements and delaying law enforcement in lawsuits agencies 

believe should not be defended in court. 

Nondiscretionary duties such as statutory deadlines are written into law by Congress. If 

Congress does not like a statutory deadline. it may change it. If Congress no longer supports a 

particular statute, it may amend it. But without these explicit acts of Congress, surely the 

Legi slative Branch wants the Executive Branch 10 follow duly enacted laws. HR. 1493 would 

interfere with enforcement of the very laws Congress has written. 

3. Citing an American Action Forum study, Mr. Kovacs says that since 2009, new 

regulatory requirements totaled $488 billion in compliance costs. What is your 

response? 

Though I can't speak to the study in its entirety, it's instructive to look at some of the 

EPA rules cited by Mr. Kovacs in furtherance of this point. For example, on page 6 of his 

testimony, Mr. Kovacs cites EPA's Mercury and Air Toxics Standards for the premise that "Sue 

and Settle Agreements Create Costly Federal Rules." The first and most obvious response to this 

mistaken premise is that these federal standards were created by a law passed by Congress, the 

Clean Air Act. The consent decree that preceded the standards set deadlines for EPA actionsdeadlines nearly a decade after the statute required-because EPA had failed to comply with a 

nondiscretionary statutory duty, established again by Congress. That consent decree was entered 

by a federal district court judge. 

Mr. Kovacs' testimony highlighted that the standards will cost up to $9.6 billion dollars 

but failed to acknowledge that the monetized benefits of the standards exceed the costs by three 

to nine times: EPA estimates that the health savings alone would be worth $37 to 90 billion per 

4 Press Relcase. Senator Chuck Grassley, "Regulatory Rcfonn!nitiativc Seeks Sunshine. Accountability. 

and Pro-Jobs Environment," April!l, 2013, available at http://www.grassley.senate.gov/news/ 

ArticIe.cfill')RenderForPrint~ ! &customel_ dataPagelD _lS02~4S4S8. 
227 

year. Moreover, the agency acknowledges that it did not monetize a number of benefits, 

meaning that the benefits from the rule are likely much higher. Looking only at the cost of the 

standards while ignoring the benefits misrepresents what is at stake from enforcing the law to 

minimize the harms that pollution causes Americans. 

Finally, and most disturbing of all, not only do the Chamber's claims ignore the net 

monetized benefits of all of the stated regulations, but they entirely ignore the very real human 

health benefits that make up those monetized figure. The health standards criticized by the 

Chamber will prevent tens of thousands of deaths each year. They will mean fewer heart attacks 

and asthma attacks, and fewer children sent to the hospital with breathing problems" These 

standards will mean less mercury pollution - a dangerous neurotoxin that harms fetuses and 

children's developing brains. They will also reduce acid gases, cancer-causing dioxins, smog, 

soot, and many other pollutants. These historic clean air standards will mean cleaner, safer air for 

all Americans, which is why Congress directed EPA to reduce dangerous pollution to protect 

Americans. 

4. In his written testimony, Mr. Kovacs cites 10 examples of supposed "sue and settle" 

agreements that resulted in costly federal rules. Are you familiar with any of these 

examples? If so, what is your response to his charge that these settlements are 

examples of how "sue and settle" tactics have been a costly phenomenon for 

business? 

Mr. Kovacs' list of ' 'sue and settle" agreements that are "costly" is found at page six of 

his testimony. I will speak only to the clean air standards, as that is my primary area of 

expertise. First, as discussed above in question three, his testimony does not mention or 

acknowledge the benefits of any of these standards. One cannot understand the true "costliness" 

of a standard without knowing its benefits and the costs that will continue to be imposed on 

Americans in the absence of the standard. As an initial matter, all of the clean air standards listed 

have monetized benefits that greatly exceed their costs 7 

5 U.S. EPA "Benefits and Costs of Cleaning Up Toxic Air Pollution From Power Plants," 

http//www.epa.gov/mats/pdfs/2011 1221MA TSimpactsfs.pdf 

6 Sec i}~fra. TI. 5. 

1 See, e.g" n. 5; U.S. EPA. "Overview of Final Amendments to Air Regulations for the Oil and Gas 

Industry" http//epa.gov/airquality/oilandgas/pdfs/20120417fs.pdf("·TIle estimated revenues from selling 

the gas that currently goes to waste are expected to offset the costs of compliance. while signifIcantly 

reducing pollution from this expanding industry. /CPA's analysis of the rules shows a cost savings ofS!! 

to $19 millionlVhcn the rules arcfidly implemented in 2(15) (emphasis added):U.S. EPA, "Fact Sheet: 

Adjustments for Major and Area Source Boilers and Certain Incinerators," 

http//www.epa.gov/airquality/combustion/docs/20 121221_sum _overview_boiler _ ciswi Js.pdf 

("Americans will receive $13 to $29 in health benefits for every dollar spent to meet the final standards"); 

U.S. EPA, "Overview of EPA's Revisions to the Air Quality Standards for Particle Pollution (Particulate 

Matter)." http//www.epa.gov/pm/20l2/deefsoverview.pdf("EPA estimates that meeting the annual 

primary fmc particle standard of 12.0 ~g/m3 will provide health benefits worth an estimated $4 billion to 

$9.1 billion per year in 2020 -- a return of$12 to $171 for every dollar invested in pollution reduction. 

Estimated annual costs ofimplcmenting the standard are $53 million to $350 million.") 

4 
228 

Second, while Mr. Kovacs charges that all of these standards result from improprieties 

that he pejoratively dubs "sue and settle tactics," several points are quite revealing. Mr. Kovacs 

does not-and cannot as far as I am aware-identify any evidence of collusion, wrongdoing or 

any impropriety whatsoever on the part of EPA or the private parties involved in any related 

settlements. Of the clean air standards on Mr. Kovacs' list, all involved EPA's failure to meet 

nondiscretionary statutory deadlines set by Congress. Mr. Kovacs' testimony levels serious 

charges of wrongdoing with a pejorative label that has not been backed by facts or evidence in 

his testimony or at the June 5"' hearing. EPA complied with notice-and-comment rulemaking 

requirements and all other procedural obligations in issuing these standards. Neither Mr. 

Kovacs' testimony nor any other witness or member presented any evidence to the contrary. 

As I elaborated on in my written testimony, painting any consent decree or settlement 

agreement as "sue and settle" wrongdoing by a federal agency is baseless and unfair. The clean 

air standards listed in Mr. Kovacs' testimony are in many cases years overdue or the result of a 

court decision instructing EPA to rewrite standards found to be unlawful and insufficiently 

protective of human health. And in conclusion it bears emphasizing a response to an earlier 

question: these federal standards were created by a law passed by Congress, the Clean Air Act. 

EPA had failed to comply with statutory deadlines set by Congress and, in some instances, 

issued unlawful standards that needed to be re-issued pursuant to court directives. 

I wi11 briefly summarize the clean air standards in Mr. Kovacs list below: 

1. EPA's Mercury and Air Toxics St(tndards 

See pages 11-13 of my written testimony. In short, these standards were finalized 

pursuant to a timeline memorialized in a consent decree beNieen EPA and health and 

environmental organizations after the agency had missed a statutory deadline to promulgate 

standards by more than a decade. The decree was approved by a federal district court judge, and 

EPA complied with the Administrative Procedure Act in adopting the standards. 

2. Toxic Air Pollution Standards/or Oil and Natural Gas 

EPA's toxic air pollution standards for oil and gas were first issued in 1999. Sections 

112(d)(6) and (f)(2) of the Clean Air Act require EPA to review and revise, as appropriate, 

promulgated toxic air pollution standards every eight years. Under these sections of the Act, 

EPA should have taken these steps by 2007. As such, EPA's recently finalized standards were 

five years overdue when issued. At the same time, so-called "New Source Perfonnance 

Standards" for the sector, which were also issued with the 2012 air toxics standards, are required 

to be revised every eight years. These were last updated in 1985. Since EPA was years overdue 

on both these standards, environmental groups sued the agency in 2009. In 2010 EPA entered 

into a judicially-approved consent decree acknowledging the agency's duty to undertake 

rulemakings for both of these standards and establishing enforceable deadlines for those 

rulemakings. Congress set the deadlines for EPA action in the Clean Air Act. 

5 
229 

3. Regional Haze implementation Rules 

Regional haze requirements for Class I areas of pristine air quality were established in 

1999. State Implementation Plans (SIPs) for this program were due in 2007. In 2009, EPA 

made a finding that 37 states, the Virgin Islands, and the District of Columbia failed to submit all 

or a portion of their SIPs. In 2011, EPA agreed to a schedule to take action on 45 of these 

overdue plans after states still had failed to make the required submissions. Again, these 

deadlines were written into the law by Congress, and in agreeing to take action on these plans, 

EPA is merely carrying out the overdue requirements written into the law. 

4. Toxic Air Pollution Stllndardsfor Industrial Boilers 

The Clean Air Act requires EPA to set toxic air pollution standards for Industrial Boilers. 

These facilities emit neurotoxic mercury, acid gases, hydrogen chloride, and cancer-causing 

dioxins. EPA first promulgated standards for this sector in 2004, but those standards were struck 

down in a 2007 court decision. When EPA failed to move forward with revised standards as the 

statute required it to do, the agency was sued and entered into a consent decree requiring action 

by 20 II. At that point the agency was over a decade late promulgating lawful standards. EPA 

complied with the Administrative Procedure Act in adopting the standards. 

S. Revisions to National Ambient Air Quality Standard5 for Particulate Matter 

The Clean Air Act requires EPA to adopt national "primary" ambient air quality 

standards for particulate matter requisite to protect public health with an adequate margin of 

safety. 42 US.C §7409(b)(l). The Act further requires EPA to adopt national "secondary" air 

quality standards requisite to protect public welfare, including vegetation and wildlife. Id 

§7409(b)(2). EPA must review these standards every five years, and revise them as appropriate 

based on the latest scientific information. Id §7409(d)(1). 

EPA last updated the previous annual PM2., standard in 1997, setting the standard at 15 

/lg/m.l The administration at that time examined the scientific literature on PM2., during its 

statutory review process in 2006, but the then-EPA Administrator defied the scientific evidence 

and consensus views of the agency's Clean Air Science Advi sory Committee (CASAC)" and 

declined to update the unprotective annual PM,s standard of 15 /lg/mJ At that time, all seven of 

the standing members of the CASAC committee and 20 out of 22 members of CASAC's 

Particulate Matter Review Panel had voted to recommend that EPA strengthen the annual PM2 , 

standard to between 13 and 14 /lg/m'. Nonetheless, the Administrator iss:led final standards .. 

maintaining the annual PM2.5 standard at 15 /lg/m3 

Public health and environmental groups filed lawsuits challenging the 2006 Bush 

Administration decision to maintain the unprotective annual standard. In 2009, the US. Court of 

Appeals for the D.C Circuit invalidated the annual PM2.5 standard of 15 /lg/m3 and remanded the 

standard to EPA. The court found that EPA's decision to maintain the annual standard at 15 

, Congress established the Clean Air Science Advisory Committee (CASAC) and its critical role advising 

EPA on national ambient air quality standards in the Clean Air Act Amendments of 1977 (see 42 U .S.c. § 

7409(d)(2» 

6 
230 

[lgim3 was "contrary to law and unsupported by adequately reasoned decisionmaking." The 

court directed EPA to address this and other deficiencies during the agency's next review of 

PM25 standards, scheduled for 2011. 

EPA failed to propose any rulemaking afterthe 5-year statutory deadline expired in 

October of 2011. At that time environmental and public health groups filed a lawsuit over the 

agency's failure to meet the nondiscretionary statutory deadline. EPA subsequently entered into 

a consent decree that required it to propose standards no later than June 14,2012 and finalize 

them on December 14,2012. The EPA Administrator signed the tlnal standards on December 14, 

2012, after complying with the Administrative Procedure Act in adopting the standards. 

6. Reconsideration of2()()8 Ozone NAAQS 

As with particulate matter, the Clean Air Act requires EPA to adopt national ambient air 

quality standards (NAAQS) for ozone requisite to protect public health with an adequate margin 

of safety. 42 U.S.c. §7409(b)(l). EPA must review these standards every five years, and revise 

them as appropriate based on the latest scientific information. Id. §7409(d)(2)(B). 

In 1997, EPA set the ozone NAAQS at 84 parts per billion (ppb). The ozone NAAQS 

were not updated again until March of 2008. Prior to that, in 2006, EPA's Clean Air Scientific 

Advisory Committee (CASAC) found that the pre-existing health standard of 84 ppb, established 

in 1997, was far too weak and unprotective. CASAC unanimously recommended that EPA 

strengthen the standard to somewhere between 60 to 70 ppb. Specifically, CASAC 

recommended that "the primary 8-hr NAAQS needs to be substantially reduced to protect human 

health, particularly in sensitive subpopulations. Therefore, the CASAC unanimollsly 

recommends a range of 0.060 to 0.070 ppmfix the primary ozone NAAQS.,,9 (emphasis in 

original). 

On March 27, 2008, however, then-EPA Administrator Stephen Johnson disregarded the 

unanimous CASAC recommendations and signed a final rule revising the primary ozone 

standard to 75 ppb. '° When the Obama Adminstration took office, then-EPA Administrator Lisa 

Jackson noted that she was going to reconsider the 2008 ozone NAAQS because they were "not 

legally defensible given the scientific evidence."ll During that reconsideration process, CASAC 

reaffirmed its scientific recommendations12 In 2011, like in 2006, the 1997 standards were in 

drastic need of updating. 

9 Letter from Dr. Rogene Henderson. Chair, CASAC, to the Hon. Stephen L. Johnson, Administrator, 

U.S. EPA (Oct. 24, 2(06). available at http://ww>v.epa.gov/sab/pdf/casac-07-001.pdf. 

lU 73 Fed. Reg. 16,436 (Mar 27,200S). 

11 Letter from Lisa P. Jackson, Administrator, U.S. EPA, to the Hon. Thomas R. Carper. U.S. Senator 

(July 13, 2(11), available at http://www.eenews.netiassets/2011/07114/documentJlw_03.pdf. 

" Lcttcr from Dr. Jonathan M. Samct, Chair, CASAC, to thc Hon. Lisa P. Jackson, Administrator, U.S. 

EPA, (Mar. 30, 2011). available at http://yoscmitc.cpa.gov/sab/ 

sabproduct.nstlRS SRecentHappeningsCASA ClFOSBEB4 SC 1139 E2AS5 25 n 5 E006909 A CI$F ile/EP ACASAC-II-004-unsigncd+.pdf. 

7 
231 

Under EPA's most recently announced schedule, a proposed ozone rulemaking could not 

occur until some unknown time after March 2014, following preparation of a proposal to reflect 

CASAC's input. 

By now, Americans have been living with ozone health standards deemed unhealthy by 

the scientific community and legally indefensible by the EPA Administrator for over 16 years 

years. In the absence of an enforceable consent decree to hold the agency accountable for 

violating its statutory deadlines, Americans have lived with unsafe ozone standards for almost 

two decades longer than they should have. The history of the EPA's ozone standards 

demonstrates the critical importance of consent decrees in securing the full protection of our 

environmental laws 

5. Mr. Kovacs says that because of "sue and settle" tactics, instead "of agencies being 

able to use their discretion as to how best utilize their limited resources, they are 

forced to shift these resources away from critical duties in order to satisfy the 

narrow demands of outside groups." What is your response? 

Settlement agreements ensure that agencies fulfill duties that Congress, not advocacy 

groups, has deemed mandatory and enacted into federal statutes. Agencies lack discretion as a 

matter ofla\v to ignore or contravene these mandatory statutory duties. It is simply false to say 

these Congressional choices are the "narrow demands" of outside parties, when Congress has 

deemed the duties "critical" enough to be the subject ofnondiscretionary, mandatory statutory 

obligations. 

Settlement agreements still provide agencies with considerable flexibility. The 

agreements and consent decrees contain standard language allowing the parties to modify the 

agreements with mutual consent and court approval, or even for the agency to modify the 

agreement over the plaintiffs' objection if the court approves the modiflcationU Agencies of 

course continue to maintain the full discretion atforded by law to propose and finalize 

rulemakings that carry out federal statutes, including consideration of alternative approaches that 

include the decision not to adopt any given regulation. Stated differently, settlements do not 

commit agencies to any particular rulemaking outcome. Finally, it is my experience that if an 

agency like EPA determines that it needs more time than it initially believed necessary, then 

deadlines in these agreements are extended. 14 

13 See, e.g.. PM" Consent Decree, at 4, 1 6 ("The Parties may e,1end the deadline established in 

Paragraph 3 by written stipulation executed by counsel for all Parties and filed with the Court on or before 

the date of that deadline; such e:\1ension shall take effect immediately upon filing the stipulation. In 

addition, EPA reserves the right to file with the Court a motion seeking to modify any deadline or other 

obligation imposed on EPA by Paragraphs 3, 4, 5 or 14. EPA shall give Plaintiffs at least five business 

days' written notice before filing such a motion. Plaintiffs reserve their rights to oppose any such motion 

on any applicable grounds.") available at 

http://switchboard.nrdc.org!blogs/jwalke/PM2.5%20eonsent%20decree.pdf. 

'" Agencies may determine more time is needed due to untoreseen circumstances or last·minute crunches, 

otten leading to relatively short extensions. Sec, e.g.. American Nurses Assoc. v. Johnson, No. 1:08-ey02198 (0 D.C. Dec. 18,2008) (consent decree modified on Oct. 24, 2011, to allow tinal standards no 

later than Dec. 16,2011). 

8 
232 

6. Mr. Kovacs says that "when advocacy groups and agencies negotiate deadlines and 

schedules for new rules through the sue and settle process, the ensuing rulemaking 

is often rushed and flawed." What is your response? 

This is an unfounded concern. And it is revealing that Mr. Kovacs' testimony does not 

bear out this charge with actual facts. First and most obviously, agencies only consent to decrees 

and agree to settlements when the agency believes in good faith that it can meet the specified 

deadlines and is prepared to commit to that publicly and before a federal judge. Presenting 

settlements and decrees to judges for approval means an agency is making a representation to the 

court that it can satisfy the tenns of the document. As with the absence of any proof of collusion 

entering into settlements, I have seen no evidence that agencies agreeing to deadlines in 

settlements are acting in bad faith or making misrepresentations to courts. Nor would it be in 

their interest to do so. 

Second, as noted above, settlement agreements and consent decrees can be modified with 

mutual consent and court approval or even over the plaintiffs' objection if the court approves the 

modification. Again, in my experience, if the agency determines that it needs more time then 

deadlines in these agreements are extended. 

Finally, EPA has addressed this issue directly and corrected the misunderstanding that 

settlement deadlines pressure agencies. Republican Senators recently submitted questions to 

EPA Administrator nominee Gina McCarthy and asked whether "deadlines in settlements 

sometimes put extreme pressure on the EPA to act."" To the contrary, EPA responded: "Where 

EPA settles a mandatory duty lawsuit based on the Agency's failure to meet a statutory 

rulemaking deadline, the settlement agreement or consent decree acts 10 relieve pressure 011 F;PA 

resulting from missed statutory deadlines by establishing extended time periods for agency 

action.,,16 

7. Mr. Kovacs says that advocacy groups get agencies to issue substantive 

requirements that are not required by law through sue and settle tactics. What is 

your response? 

Substantive regulatory requirements are not established through settlement agreements. 

And Mr. Kovacs has presented no evidence or examples to back this charge. The majority of 

consent decrees address an agency's failure to perform a nondiscretionary (or mandatory) 

statutory duty under federal law. These nondiscretionary duties most frequently concern failure 

" Senator Vitter, Questions for the Record, Gina McCarthy Confirmation Hearing, Environment and 

Public Works Committee, May 6, 2013, at p. 23 available at 

http://www .epw. senate. gOY fpu bliclindex. dill? F useAction~ Files. View &F ileS tore _id~9a1465 d3-14 90-

4 788-95dO-7d 1 nb3dc320 (""Senator Vitter Questions"). 

16 ld. (emphasis added). 

9 
233 

to meet one or more plain statutory deadlines. 17 The consent decrees merely establish a new 

deadline for the agencies to perform these nondiscretionary duties; the substance of the actual 

regulation is not decided by a consent decree or a settlement agreement. That comes later 

through a process involving the public, in a rulemaking conducted pursuant to notice-andcomment under the Administrative Procedure Act. Moreover, a decree could not commit an 

agency to a particular statutory outcome. In fact, any such effort to dictate the substantive 

outcome of a rulemaking process would be subject to invalidation in the courts. Courts police 

these decrees for precisely this reason, and the practice that Mr. Kovacs claims to fear is already 

prohibited. 

8. Mr. Kovacs says that notice and comment rulemaking is insufficient to give the 

public the opportunity to comment on rules that result from sue and settle 

agreements. What is your response? 

This is incorrect. Regulations that result from settlement agreements go through the same 

notice-and-comment procedures as all other regulations, with no shortchanging of the public's 

opportunity to comment on rulemakings. Agencies may not subvert the procedures required by 

the Administrative Procedure Act through a consent decree or settlement. Neither Mr. Kovacs 

nor any other witness or member identified any rulemaking that followed a settlement and 

provided the public with any less opportunity to comment during that rulemaking than under any 

other rulemaking conducted in accordance with the Administrative Procedure Act. 

9. Mr. Easterly suggests that a lack of notice about citizen lawsuits against agencies can 

lead to consent decrees and settlement agreements that impose onerous requirements 

on states. What is your response? 

I believe that to be incorrect. As an initial matter, it bears repeating that consent decrees 

and settlements do not impose requirements on any non-agency parties, including states. And 

none of the provisions in agreements commit federal agencies to substantive outcomes that 

impose requirements on states. Any requirements that follow settlements may be created only 

pursuant to notice-and-comment rulemakings where states enjoy full participation opportunities 

like other members of the public. States remain free to object to perceived onerous requirements 

in public comments on proposed rulemal<ings. States have the right to file lawsuits challenging 

perceived onerous requirements that they believe to be contrary to federal law or arbitrary and 

17 See, e.g .. American Lung A"'ociation etal .. v. US. EPA. No. 1:12-cv-00243, at2 (D. D.C Sept. 4, 

2(12) (consent decree in a "suitrl against EPA alleging that the Agency has failed to perf0n11 a 

nondiscretionary duty required by the Clean Air Act") ("PM2.5 Consent Decree") availahle at 

http://switchboard.nrdc.orglblogs/jwalke/PM2.5%20consent%20decree.pdf: American Nurses Assoc. v. 

Johnson, No.1 :Og-ev-0219g (D. D.C Dec. 1 g, 200g) (consent decree requiring action by EPA to 

issue final regulations relating to toxic air pollution from power plants): Press Release, Senator Chuck 

Grassley, "Regulatory Reform Initiative Seeks Sunshine, Accouutability, 

and Pro-Jobs Environment" April 11,2013, availahle at http://www.grassley.senate.gov/news/ 

ArticIe.cfm'lRenderForPrint=1 &customel_dataPagelD _1502=45458 ("The sue-and-settle problem has 

occurred primarily in litigation against regulatory ageucies over allegations that agency action has been 

lawfully withheld or unreasonably delayed. Typically, the dctcndant agency has failed to meet a 

mandatory statutory deadline for a new regulation or is alleged to have unreasonably delayed 

discretionary action."). 

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