[Senate Hearing 114-33]
[From the U.S. Government Publishing Office]
S. Hrg. 114-33
EXAMINING THE PROPER ROLE OF JUDICIAL
REVIEW IN THE FEDERAL REGULATORY PROCESS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
REGULATORY AFFAIRS AND FEDERAL MANAGEMENT
OF THE
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
APRIL 28, 2015
__________
Available via http://www.fdsys.gov
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona THOMAS R. CARPER, Delaware
ROB PORTMAN, Ohio CLAIRE McCASKILL, Missouri
RAND PAUL, Kentucky JON TESTER, Montana
JAMES LANKFORD, Oklahoma TAMMY BALDWIN, Wisconsin
MICHAEL B. ENZI, Wyoming HEIDI HEITKAMP, North Dakota
KELLY AYOTTE, New Hampshire CORY A. BOOKER, New Jersey
JONI ERNST, Iowa GARY C. PETERS, Michigan
BEN SASSE, Nebraska
Keith B. Ashdown, Staff Director
Gabrielle A. Batkin, Minority Staff Director
John P. Kilvington, Minority Deputy Staff Director
Laura W. Kilbride, Chief Clerk
Lauren Corcoran, Hearing Clerk
SUBCOMMITTEE ON REGULATORY AFFAIRS AND FEDERAL MANAGEMENT
JAMES LANKFORD, Oklahoma, Chairman
JOHN MCCAIN, Arizona HEIDI HEITKAMP, North Dakota
ROB PORTMAN, Ohio JON TESTER, Montana
MICHAEL B. ENZI, Wyoming CORY A. BOOKER, New Jersey
JONI ERNST, Iowa GARY C. PETERS, Michigan
BEN SASSE, Nebraska
John Cuaderess, Staff Director
Eric Bursch, Minority Staff Director
Kelsey Stroud, Chief Clerk
C O N T E N T S
------
Opening statement:
Page
Senator Lankford............................................. 1
Senator Heitkamp............................................. 2
WITNESSES
Tuesday, April 28, 2015
Ronald M. Levin, William R. Orthwein Distinguished Professor of
Law, Washington University in St. Louis, and Chair, Judicial
Review Committee for the Administrative Conference of the
United States.................................................. 3
Andrew M. Grossman, Associate, Baker and Hostetler LLP, and
Adjunct Scholar, The Cato Institute............................ 5
Alphabetical List of Witnesses
Grossman, Andrew M.:
Testimony.................................................... 5
Prepared statement........................................... 52
Levin, Ronald M.:
Testimony.................................................... 3
Prepared statement........................................... 31
EXAMINING THE PROPER ROLE OF JUDICIAL
REVIEW IN THE FEDERAL REGULATORY PROCESS
----------
TUESDAY, APRIL 28, 2015
U.S. Senate,
Subcommittee on Regulatory,
Affairs and Federal Management,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. James
Lankford, Chairman of the Subcommittee, presiding.
Present: Senators Lankford, Portman, Ernst, Heitkamp, and
Peters.
OPENING STATEMENT OF SENATOR LANKFORD
Senator Lankford. Good morning. This is the second in a
series of hearings the Subcommittee will hold examining the
issues and solutions surrounding Federal regulations.
I want to welcome our witnesses. Thank you, gentlemen, for
being here today. We are fortunate today to have two witnesses
who are experts in the field of administrative law. I thank you
for your thoughtful written testimony and look forward to
speaking to both of you.
Today's hearing will focus on the role of the judiciary in
the Federal rulemaking process. Since the founding of this
country, Article III courts have served as the final guardians
of our Constitution, providing independent judgment, applying
law to the facts in the case before them.
In the landmark decision of Marbury v. Madison, Chief
Justice John Marshall articulated the role of judicial review,
declaring it is emphatically the providence and duty of the
Judicial Department to say what the law is. From that moment
forward, it has been established the courts are entrusted with
the duty to invalidate laws that are incompatible with our
Constitution.
However, as the administrative law State has expanded, the
courts have deferred more and more to agencies, substituting
agency judgment for their own. As a result, the modern
administrative State has blurred the lines that once separated
the Legislative Branch, the Executive Branch, and the Judicial
Branch.
For example, with more and more frequency, we see examples
of an Executive Branch agency that creates the rules,
interprets the meaning of those rules, and enforces those rules
according to their own interpretation. We must ask fundamental
questions about the constitutionality of such a scheme.
In the realm of administrative law, Congress clearly
intended for the courts to review delegated agency action. The
Administrative Procedures Act requires the courts to decide all
relevant questions of law and interpret constitutional and
statutory provisions. Today, we have an opportunity to consider
these and other issues in an effort to examine the proper role
and duty of the courts in the Federal rulemaking process.
I look forward to discussing these issues with our members
and witnesses today, and I understand full well these are heady
issues and difficult things to struggle with. We probably will
not resolve this in the next hour---- [Laughter.]
Though if we would, it would help the Nation. But, this is
a great conversation to initiate where are we, how did we get
here, and what are some solutions to get out of this in a way
that actually helps what we are going to do as a Nation and as
we function through very difficult areas of administrative law
and deference in decisionmaking.
With that, I would like to recognize Ranking Member
Heitkamp for her opening statement.
OPENING STATEMENT OF SENATOR HEITKAMP
Senator Heitkamp. Thank you, Chairman Lankford.
Today's hearing continues our Subcommittee's examination of
the overall topic of Federal regulatory policy. I look forward
to hearing from both of our witnesses today on judicial review
of the regulatory process and how to best approach that review.
It is critical that Congress continues to review how
Federal agencies operate as well as how Congress interacts as a
body with other branches of the government. This is especially
true on the issue of regulation, regulation today that touches
every facet of our society. In examining this issue, I think it
is critically important to take a look at our current system.
In the regulatory process which has matured over time,
legislative action and judicial review--are those processes
flexible enough to handle most circumstances? Does it offer
fair consideration to concerns of business and everyday
Americans? Does Congress and the Administration, both of which
are elected by and responsible to the people, maintain that
critical role in advancement of regulation?
Those are just some of the fundamental questions we have to
consider any time we delve into reforming our regulatory
process. Our Nation needs both effective and efficient
regulation.
Obviously, a huge part of that regulation is what happens
after those regulations are promulgated and how do we best have
a system of analyzing and reviewing regulation, and as we talk
about judicial review, one thing that we have forgotten is that
once regulations are promulgated, nothing prevents the Congress
from also responding if, in fact, the will of the Congress is
not done. And, so, I think all too often, Congress abrogates
its responsibility on oversight of regulation to the judiciary,
creating further uncertainty and a lack of ability to actually
respond, leaving it up to the judiciary. I think today, we are
in exactly that situation with King v. Burwell.
And, so, I look forward to this testimony. I think that
this is incredibly important, and as somebody who, as a lawyer,
practiced in this area, I look forward to hearing the shortened
version of your testimony and I want to congratulate you both
before we begin at the high quality of the work that was done
on behalf of this Committee in preparing for this testimony.
So, thank you, Mr. Chairman, for introducing this important
subject and I look forward to the testimony.
Senator Lankford. Thank you.
Let me give the introduction of our witnesses and then we
will go straight to your testimony.
Andrew Grossman is an Adjunct Scholar at the Cato Institute
and practices appellate and constitutional litigation in the
Washington, D.C. office of Baker and Hostetler LLP. Prior to
joining Cato as an Adjunct Scholar, Mr. Grossman was affiliated
for over a decade with the Heritage Foundation, most recently
serving as Legal Counsel to Heritage's Edwin Meese III Center
for Legal and Judicial Studies.
Ronald Levin is the William R. Orthwein Distinguished
Professor of Law at Washington University in St. Louis.
Professor Levin also currently serves as a public member of the
Administrative Conference of the United States and Chair of its
Judicial Review Committee.
It is the custom of this Subcommittee to swear in all
witnesses that appear before us, so if you do not mind, I would
like to ask you to stand and raise your right hand. Thank you.
Do you solemnly swear the testimony that you will give
before this Subcommittee will be the truth, the whole truth,
and nothing but the truth, so help you, God?
Mr. Levin. I do.
Mr. Grossman. I do.
Senator Lankford. Thank you. You may be seated. Let the
record reflect the witnesses answered in the affirmative.
We are using a timing system today. We have received your
full testimony, which is extensive, and we appreciate very much
your written testimony for that. We would ask that you keep
your oral testimony to around 5 minutes. I will be graceful in
my protection of the clock today, since we have the two
witnesses.
Mr. Levin, I am very glad that you are here and we would be
honored to receive your testimony first.
TESTIMONY OF RONALD M. LEVIN,\1\ WILLIAM R. ORTHWEIN
DISTINGUISHED PROFESSOR OF LAW, WASHINGTON UNIVERSITY IN ST.
LOUIS, AND CHAIR, JUDICIAL REVIEW COMMITTEE FOR THE
ADMINISTRATIVE CONFERENCE OF THE UNITED STATES
Mr. Levin. OK. Chairman Lankford, Ranking Member Heitkamp,
thank you for the privilege of testifying today.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Levin appears in the Appendix on
page 31.
---------------------------------------------------------------------------
All of us agree, I know, that judicial review of the
regulatory process provides an essential check on abuses by the
Executive Branch. In the past, Congress has from time to time
passed legislation that opened up access to judicial review by
removing unfounded jurisdictional barriers. That legislation
was necessary in its time, and today, the Administrative
Conference is continuing to work on proposals for improvements,
such as the reform of Court of Federal Claims jurisdiction that
I have discussed in my written statement.
On the whole, however, the existing system for judicial
review of regulations is functioning pretty well, in my
judgment, and it does not seem to need a major overhaul. And,
in that context, I am going to discuss two pending ideas for
change that, in my judgment, are not promising.
One of them was advanced by Dr. Jerry Ellig at a hearing of
your Committee 2 months ago. He proposed that the methodology
that agencies use in conducting cost-benefit analysis should be
made judicially enforceable. This is a dubious idea, in my
view, because courts are not expert in the complex and subtle
techniques of policy analysis and also because it is not
necessary.
The administrative law system has for many years operated
with a better alternative. Studies that are produced through
regulatory analysis are routinely included in the
administrative record and courts do consider whether the
ultimate rule is reasonable in light of that record. Well,
experience shows that review can be quite probing and it gives
agencies a strong incentive to conduct their analyses
carefully.
The second topic that I have been asked to address is the
doctrine known as Auer deference. Essentially, this doctrine
means that the Federal courts should generally hesitate to
overturn an agency's interpretation of its own regulation.
Agencies do not get a blank check, but they do get some leeway
to allow them to implement their mandates effectively.
Since 2011, however, several Justices of the Supreme Court
have called Auer deference into question, most recently in
Perez v. Mortgage Bankers Association last month, and so I want
to briefly describe why I disagree with their critique.
Justice Scalia, who has led this charge, has criticized
Auer deference on separation of powers grounds as well as
policy grounds. The constitutional argument is that fundamental
separation of powers principles are offended when the task of
writing laws and interpreting laws rests in the same hands.
It is true that administrative agencies routinely write
regulations and interpret them later, but they have done this
for decades and the court has never seriously questioned the
constitutionality of that arrangement. Of course, the
Constitution does mandate some divisions of responsibility
among the branches, such as between the roles of Congress under
Article I and the President under Article II. But, Justice
Scalia's principle has not been traditionally recognized in the
very different context of the relationship between courts and
agencies.
So, if we are going to adopt a new principle of this kind,
we need to ask whether the extension of doctrine would serve a
convincing modern day purpose. And, supposedly, it does.
Critics of Auer argue that the doctrine gives the agency an
incentive to write vague regulations because the agency can
then interpret them without the restraints of rulemaking
procedure, but still receive deferential review.
Well, the problem with that theory is that its proponents
have never cited any evidence that agencies actually do write
vaguer regulations because of this incentive. The incentive may
exist, but so too does a rulemaking agency face countless other
incentives pressing in various directions, ranging from the
political program of the Administration to the desire to
satisfy stakeholders. We simply have no clear sense of how much
difference the Auer incentive makes, if it makes any at all.
And, to me, that abstract argument against deference is far too
weak to justify throwing out a judicial review doctrine that
has been well accepted for decades.
Finally, even if it were a good idea to abolish or modify
Auer, I believe Congress should leave that job to the courts.
Case by case development of doctrine can be sensitive to the
enormous variety of situations that can arise in this area, but
a statutory response is likely to be too inflexible and give
rise to unintended consequences.
That completes my statement and I will be happy to respond
to your questions. Thank you again for asking me to testify.
Senator Lankford. Thank you. Mr. Grossman.
TESTIMONY OF ANDREW M. GROSSMAN,\1\ ASSOCIATE, BAKER AND
HOSTETLER LLP, AND ADJUNCT SCHOLAR, THE CATO INSTITUTE
Mr. Grossman. Mr. Chairman, Ranking Member Heitkamp, and
Members of the Subcommittee, thank you for holding this hearing
today and for inviting me to testify.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Grossman appears in the Appendix
on page 52.
---------------------------------------------------------------------------
My statement today, like my written testimony, focuses on
the intersection of the constitutional separation of powers and
administrative law. This is, I think, a surprisingly hot topic
of late, and it should be.
As the Chief Justice wrote in a recent dissent, the Framers
could hardly have envisioned today's vast and varied Federal
bureaucracy and the authority administrative agencies now hold
over our economic, social, and political activities. We must be
attentive, he said, to, quote, ``the danger posed by the
growing power of the administrative State, and it is Congress,
in particular, that must pay attention, because it is Congress
that authorizes the components of the administrative State and
it is Congress whose intentions are thwarted when agencies come
to view their authorizing statutes as springboards and
statutory restrictions as speed bumps. The citizen confronting
thousands of pages of regulations,'' the Chief Justice
observed, ``can perhaps be excused for thinking that it is the
agency that is really doing the legislating. That should be no
small matter to the actual Legislative Branch.''
I agree with the Chief Justice that deferential judicial
review of agency actions is responsible, in part, for this
phenomenon. Congress, after all, plays no role in the execution
of the laws, and so it is the courts that provide the vital
check on agencies to ensure that they carry out Congress's
will. Yet, for so many years, that aspect of judicial review
took a back seat to concerns over judicial activism, which, to
be fair, was and is a real concern. But, it is possible that
the courts over-corrected and went beyond mere judicial
modesty, and now, slowly but surely, the pendulum seems to be
swinging back the other way.
The most visible sign of this is the Supreme Court's
growing uneasiness with so-called Seminole Rock or Auer
defense, which applies to agencies' interpretations of their
own regulations. I tend to agree with Professor John Manning's
view. The deference of this sort raises serious separation of
powers concerns because it allows a single body to both make
and execute the law.
One would expect this to encourage vague regulations so
that agencies maintain maximum interpretative flexibility, and
there is some evidence that this has actually been the result
in certain instances. Other consequences include the
elimination of any independent check on policymaking, reduced
notice of the law to the public, fewer restraints on agencies
when enforcing the law, greater variation in application of the
law, and reduced accountability, as agencies hide major
policies in open-ended language or discover them there.
These criticisms have found a receptive audience on the
Supreme Court, as Professor Levin has described. To date, four
Justices have written separately to express their willingness
to reconsider Seminole Rock. Of course, it takes five to tango
on the Court. There is no way to tell at this point whether the
next case will topple Seminole Rock.
Yet, the Supreme Court does not have the final word on
these things. Congress does. And, Congress could, by statute,
direct the courts to defer to agency interpretations only to
the extent of their power to persuade, that is, the old
Skidmore standard. As discussed in my written testimony,
rejecting Seminole Rock would have the benefits of fortifying
the constitutional separation of powers, improving notice of
the law and ultimately advancing individual liberty. It is a
reform at least worthy of serious consideration.
Another issue worthy of consideration, and one that cannot
be rectified by the courts, is the Administrative Procedures
Act's (APA) exemption of interpretative rules from ordinary
rulemaking procedures, including notice and comment. The great
breadth of this exception made good sense in the 1940s. If this
Congress was trying to rein in agency excesses and regularize
their conduct, it recognized the value in providing informal
guidance.
But, as Justice Scalia explained in his recent separate
opinion in Perez, by supplementing the APA with judge-made
doctrines of deference, the court has revolutionized the import
of interpretative rules' exemption from notice and comment
rulemaking. Agencies may now use these rules not just to advise
the public, but also to bind them.
The solution, I think, is to align the scope of the
exception with its purpose by limiting judicial defense to
rules promulgated through notice and comment. Again, such
interpretations could still receive deference according to
their power to persuade, but there is no reason to go beyond
that.
Finally, let me address Chevron deference, which counsels a
court to defer in certain circumstances to an agency's
reasonable interpretation of statutes it administers. First,
let me say that the mood of deference that accompanies Chevron
has lately worked a sea change among executive agencies. The
search for meaning in Congress's commands has been replaced
with a hunt for ambiguities that might allow the agency to
escape its statutory confines.
In my practice, I see this quite regularly of late with the
Environmental Protection Agency (EPA's) major rules, which seek
out, or sometimes invent, ambiguity as an escape hatch from
seemingly clear statutory language. And, it is not just the
EPA. The Federal Energy Regulatory Commission (FERC), the
Internal Revenue Service (IRS), the Federal Communications
Commission (FCC), and others have all adopted this non-
interpretative interpretative approach to bring to fruition
regulatory policies that just a few years ago were considered
dead because they could not pass Congress. How quaint that now
seems.
Chevron's impact on judging, however, is more difficult to
pin down. That said, the Chevron formula does have a certain
logical appeal. If actual gaps in statutes are to be filled up
between the courts and the agencies, I know which I would
choose to do it. But, the problem is that there are not gaps
every single time a court chooses to defer. So, what to do
about it.
Well, I agree with Justice Scalia, Chevron's chief advocate
and not one known for excessive deference, that the fox in the
hen house syndrome is to be avoided not by abandoning the idea
of deference, but by taking seriously and applying rigorously
in all cases statutory limits on agencies' authority. But, how?
One way to do that is to pack the Federal bench with more
Scalias. Another is to avoid capacious authorizations of agency
power and trim back those that rely more on unstated
understandings than text.
But, what about changing Chevron? Well, nothing I have seen
suggests that it would do much good. That does not mean,
however, that it is not a fit topic for discussion and debate.
It surely is. At the very least, it would be a worthwhile task
to identify and consider reforming those statutes that are the
most subject to abuse. More hearings like this one will be
necessary for Congress to begin to reclaim what it has lost.
Again, I thank the Committee for the opportunity to offer
these remarks and I look forward to your questions.
Senator Lankford. Thank you for your input.
We are going to have one more formalized round of
questions, and in the second round, I will be more open and we
will have a more open dialogue as we walk through this
together. I appreciate very much this ongoing conversation.
There is a real challenge that we have to face on this, and
that is the difference in separation of powers and that where
we are going. It is not where we are and where we have been,
but it is also where we are going.
You gentlemen are extremely aware of where we have been on
this. The question is, what is the next step? How far does this
go? With new rules dealing with interpretative rules, the
agencies continue to make decisions. Mr. Grossman, as you had
mentioned, the search for ambiguity in statute to try to pass
things in policy through agency action that could not have
passed through Congress, it seems to be an ongoing push to
happen with agencies, and now the challenge is, does this
continue to go this way?
My opening question to you is do you see that pattern where
the agencies are seeing more of the gaps than they are seeing
what to actually do with an existing statute?
Mr. Grossman. Mr. Chairman, once the genie is out of the
bottle, I think it is very difficult to put it back in, and
what we have seen of late is agencies, to varying extents,
abandoning the traditional understandings that served as a
restraint on agency power.
It was always the view that big policy decisions, and there
is some disagreement over what necessarily constitutes big, but
the big decisions were channeled through Congress, and there
were political reasons for that, but there were also reasons of
simple restraint and understanding. Those informal
understandings were not necessarily things that were expressed
in clear statutory text. They are there by implications and
they reflect the inherent authority of agencies, in other
words, the boundaries of their actual power that Congress has
authorized them to exercise.
When those limitations, those traditional understandings,
fall away and the courts are sometimes wary of enforcing them,
although sometimes they do, the agencies, in many instances,
have taken that as a carte blanche to undertake questions that
previously would have been channeled through Congress.
So, yes, I think that we are going to see a lot more of
this, and I fear that it is something that is going to occur
not just in Democratic administrations, but also in Republican
administrations. I do not see how you go back.
Senator Lankford. I do not know how to fix the
predictability of law and of regulations to do business and to
do investment. That is the concern, is if it is a Democrat
executive and all the regulations suddenly turn this way, and
then a Republican executive and everything shifts back the
other way, there is no stability and predictability. You can no
longer go to Congress and try to get some insight of where we
are going in policy. It moves by the whims of the executive,
and that, to me, is a real concern for planning and for
business and for our free market system. The predictability and
the boundaries of that is very significant.
Let me just bring up a ``for instance.'' It is fairly
unlikely, I would say, in 1972, that Congress contemplated the
Waters of the U.S. regulation that is now coming down from EPA
and from the Corps of Engineers. The administrative agencies
have twice brought out a Waters of the U.S. rule, twice been
knocked down by the courts. It is coming out in a new version
again. It is difficult to read the Clean Water Act and to find
this new version of navigable waters included into it, but yet
there it is, suddenly within an agency promulgation.
Where does this continue to go in the days ahead? Mr.
Levin, do you want to comment on that?
Mr. Levin. Yes. I have a somewhat different perception of--
--
Senator Lankford. Sure.
Mr. Levin [continuing]. Of the big picture from Mr.
Grossman's, I think. I do not know when this earlier era was in
which agencies never tested the limits of their authority. I
think they always have done it and it is what an executive
agency naturally would do, and it is, therefore, the role of
the courts to bring some appropriate standard of review to bear
in order to provide some check on what they do.
Now, Chevron has emerged as one of those accepted checks in
our system, and Auer has served for years as its regulatory
counterpart. In the days when Chevron first came out, it was
promoted primarily by Republican-appointed judges. Mr. Grossman
points this out in his testimony. It was hailed as the right
way to go. These days, you are getting more criticism of
agencies and the assumption that Chevron is not up to the job,
but I really suspect that if a Republican wins the Presidency
and starts promoting deregulatory measures, that you are going
to see a newfound appreciation for the virtues of deference. A
lot has to depend----
Senator Lankford. Which is, by the way, my concern, is that
we constantly have this back and forth, as I just mentioned.
You cannot do long-term investment on a project if you really
do not know what the regulations are, or if they are based on
just the whims of the executive.
Originally, we are basing everything on statute, and now it
becomes who is the smartest person, and the courts seem to have
this new approach--and you can correct me if I am wrong here,
but the approach is you know more about this subject than I do.
I am going to defer to you because you have greater knowledge
and insight on the subject. But, that also assumes that they
have taken into account all the rest of it.
Notice and comment is not just about acquiring quantity and
saying you have done your due diligence because you have a
thousand different letters that you have responded to and you
know more about this subject than I do. There seems to be more
to it than that in the notice and comment and the interaction
between, does this line up with the statute? Is this what is
the least expensive, best available, I mean, all the different
dynamics that we have with administrative law that you know
extremely well. That is the ongoing challenge, is where does
this go?
Mr. Levin. Right. So, I think we have the rulemaking part
and we have the judicial review part. The rulemaking process
does have built-in steps in it, as you describe. The judicial
review part comes in as a check based on some standard of
review. The Chevron test or Auer test is generally seen among
administrative lawyers as the relatively predictable standard
of review.
If you substituted Skidmore review for it, then you have
what Justice Scalia calls the totality of the circumstances
approach, in which you cannot predict very well at all how a
court would respond to a given administrative ruling. And if
you took away all deference and just left decisions up to the
unfettered decision of judges, I think predictability would be
impaired even more. So, we have some degree of stability in our
system right now that tends toward what you are driving at.
Senator Lankford. I am going to defer to the Ranking
Member, but I wanted to say, when we come back around, I want
to get a chance to talk about agencies and the appeal process,
because we also have an issue with agencies now receiving--and
it has been for a while, but if someone wants to appeal a
rulemaking, they appeal that rulemaking to a person literally
sitting in the cubicle next door to the person who made the
previous rule and made the previous decision, and trying to get
an outside opinion is becoming more and more difficult. And,
so, I want us to be able to talk about that some as well as
multiple areas.
But, I want to recognize Ranking Member Heitkamp.
Senator Heitkamp. Thank you, Mr. Chairman.
Very complicated history and a very long history and how
you look at this, unfortunately, frequently, as through maybe
too political of a lens than what it should be as we are kind
of looking at predictability. And, one of the concerns that I
have is that we are focused on, in this discussion, on judicial
review. Why is judicial review necessary if, in fact, the
agency makes a mistake?
Congress plays a role in correcting agency mistakes, it
seems to me, and that is one thing that if you are on the court
and you are trying to figure out what congressional intent was
and whether, in fact, congressional intent was followed through
these kind of interpretative rules or rulemaking process, you
must be extraordinarily frustrated, thinking, why can Congress
not cleanup their own mess? Why do we have to do it? And, I
think that is one of the frustrations that I have in all of
this. I think, many times, the issues that are deferred to the
agency are issues that are too controversial or too difficult
for Congress to decide themselves.
And, I am going to build on the Chairman's example, Waters
of the United States. We recently had a hearing in the
Agriculture Committee to talk about Waters of the United States
and I asked a simple question. After a lot of critique about
that rule and about the rulemaking process, I asked a simple
question, which was, what are Waters of the United States? Not
one person could offer an answer. It is incredibly complicated.
And, I am not pleased with the process that was used in the
controversy around that rule, but I am sympathetic that,
frequently, this body spends way too much time kicking the can
down the road by taking something that is very controversial
and putting it in the lap of the agency as opposed to doing our
due diligence and our responsibility.
But, I want to talk a little bit about interpretative
rules, because it has become the buzzword for agency overreach.
And, having been involved in an earlier life in the tax world,
I guess I would ask you, Mr. Grossman, do you think IRS letter
rulings should be subject to rulemaking standards?
Mr. Grossman. I think the answer is yes, to the extent--
that they are going to be given any greater degree of deference
than Skidmore deference. That said, I think an IRS letter
ruling, given the way that the tax code is structured, is
something that in most instances--not all instances, but most
instances--is something that is going to hold up.
Senator Heitkamp. Are you concerned at all--with that
answer, are you concerned at all that it will, in fact, even
further delay certainty to a businessman who simply says, I
want to know if I do this what the long-term tax treatment will
be, and I understand that you might be saying things that could
be more broadly applied and representing your interpretive
rule, but I need this answer today, not 3 years from now.
Mr. Grossman. Yes. Senator, I certainly do take into
account that concern, and it is a real and a legitimate one. I
think I would have two responses to that.
One is to identify with your earlier remarks that a lot of
these areas where there is uncertainty in the law is due to
either complexity wrought by Congress or to vagueness or
ambiguity wrought by Congress. The tax code, I think, is a
capital example of that in terms of its complexity.
Second, Congress can, in some instances, affect the way,
legitimately, that judicial review and deference is
operational. If Congress decides that certain types of tax
rulings are entitled to a greater degree of deference to
promote certainty, that is fine. That is something that
Congress has the authority to do. That does not necessarily
mean that it needs to be the case across the board. I think
that is a policy issue for Congress to decide.
Senator Heitkamp. I think one of the concerns that I have
about all this is where we have burdensome and unnecessary
regulation, we also have delay in providing regulatory
certainty, and that delay could be further extended if we, in
fact, look at every instance of interpretation of a statute as
being subject to the rulemaking process. Would you not agree
that we could have the potential of actually delaying critical
certainty if we expand the way you are suggesting we expand the
definition of what constitutes a rule subject to rulemaking?
Mr. Grossman. No, actually, I would not agree with that,
and the reason is because the rules that--litigation, when a
court applies a particular standard of deference or standard of
review, really applies to relatively very few cases and it sets
the rules and the framework that an agency works under going
forward and that governs people going forward. And, so, when
there are understandings of the way that statutes work and the
way that courts are going to resolve them, it is actually very
few interpretations and very few instances that are involved in
legal controversies----
Senator Heitkamp. Yes----
Mr. Grossman. It is the tip of the iceberg.
Senator Heitkamp. Mr. Levin, what would be your response to
my question?
Mr. Levin. I think I would agree with what I took to be the
thrust of your question, which is that people need guidance,
and they have questions in their mind. They want to know where
the agency stands. They do not want to wait for an agency to
conduct an entire notice and comment proceeding in order to get
an answer. They want an answer immediately. Agencies will
respond by putting out informal statements that say, here is
the position we would take. You are not bound by it, but at
least you know what our position is.
If we were to say that those statements have to go through
the notice and comment process, you would see many fewer of
them and that would be less responsive to the public's need for
an understanding of what the agency's position is and,
oftentimes, they do not want to fight it, they just want an
answer.
If you were to say, well, those statements can be issued,
but they have no weight because the courts will not defer to
them, then the recipient of the advice would say, well, this
does not do anything for me because I have not gotten
anything----
Senator Heitkamp. It is kind of worthless.
Mr. Levin. Right. So, if I can only trust what comes out
through the notice and comment process, it is saying I cannot
trust what the agency told me. If you are hostile to the
agency, you would say that is great because they will not get
deference, but if you just want an answer, you want to know,
how can I conduct my business in a way that the agency will not
challenge, then it is not good news.
Senator Heitkamp. And, not to delay it, but controversial
opinions or controversial decisions from agencies can always be
reviewed by Congress. We know what they are. But, there is a
reason why controversy exists, and frequently, this body is the
most at fault for not providing certainty in terms of direction
to agencies.
Mr. Levin. I agree.
Senator Lankford. Senator Portman.
Senator Portman. Thanks, Chairman Lankford, for holding
this hearing, and thank you, gentlemen, for giving us your
wisdom here this morning.
The Code of Federal Regulations (CFR) is now about 180,000
pages long. It is increasingly complicated. We deal with
complicated issues in Congress, understandably. A lot of those
go to the agency for decision. Congressional oversight is rare,
let us be frank, and so the agencies have taken on more and
more responsibility and power and, by the way, have created, as
Ranking Member Heitkamp said, a lot of uncertainty out there. I
just had a meeting yesterday on some of this uncertainty as it
affects my State of Ohio and our economy.
So, for better or worse, in my view, the most effective
line of defense against executive overreach is often the
courts, and the question is, what should the courts' rule be,
and you all have differed this morning on what you see as
appropriate. I feel strongly that Congress should do more in
terms of writing legislation that is clear. That would be good.
Often, by the way, even when we try to do that, as in the case
of the Affordable Care Act, the Administration tends to come up
with its own, not just interpretation, but changes in statute
by executive action. But, that is what this debate is all
about.
There are regulatory guidelines already in place and I
think the public, rightly, expects agencies to make decisions
based on an informed and objective manner. Executive Order (EO)
12866 is the famous one. It requires agencies adopt a
regulation only upon reasonable determination that the benefits
of the intended regulation justify its costs, and that agencies
design regulations in the most cost effective manner to achieve
the regulatory outcome, and that they tailor its regulations to
impose the least burden on society.
And, having been Director of the Office of Management and
Budget (OMB) at a time when the Office of Information and
Regulatory Affairs (OIRA) struggled with some of these issues,
this is incredibly important that we have some guidelines for
the agencies.
I will say that there is a lot of research out there,
including some research that you all have done, indicating that
some of this regulatory analysis is completed, some of it is
not. Often, the agencies just fail to use the robust economic
analysis, particularly independent agencies, of course, who are
not subject to it because they are not within the ambit of the
executive.
So, that is what we are focused on here, or at least I am,
and the Regulatory Accountability Act (RAA), as you know, is
bipartisan. It is something we worked on the last few years
that attempts to put some more balance in here and to provide
more judicial review in an effective way to be sure that 12866
and other standards are actually met. The idea of the
Regulatory Accountability Act is to, frankly, get the courts
more involved in ensuring that these standards are met.
And I know in your comments, Professor Levin, you said that
the proposals that, quote, ``would empower the courts to
invalidate a rule based on the basis that an agency did not
sufficiently comply with the procedural requirements,'' such as
those I just mentioned, you have concerns about that. Your
reason seems to be, I think, that courts are generalists and
they do not have the ability or the expertise to be able to
evaluate questions like--did the agency conduct an analysis?
Was the analysis adequate given the circumstances and
information available? Has the agency provided a factual basis
for its conclusions or has it simply stated a summary
conclusion unsupported by facts?
I guess my opinion is that we do need the courts to do
that, and I know you also say that the courts should be able to
review Regulatory Impact Analyses, which are sometimes
extremely long and technical documents, as you know. If the
courts can review those, I guess my question for you would be--
and you say they should be able to review them to determine
whether there is a rational basis for the court action. If
courts have the competence to do that, I guess, why do you not
think they can do the kind of analysis on the technical side
that would be involved with an approach that I support, the
RAA-type approach? Will not the adversarial process, aided by
experts, if necessary, help distill some of these issues for
judicial review? And, I guess, the final question is, do the
courts not already conduct similar analyses under these
statutes--the Regulatory Flexibility Act, the National
Environmental Policy Act (NEPA), NEPA has this. If not, how
does that task differ, in your opinion?
Mr. Levin. Thank you for that question, Senator Portman. As
I mentioned in my statement, I have publicly supported a bill
that you have offered to extend the OIRA process to the----
Senator Portman. Independent agencies.
Mr. Levin [continuing]. Independent agencies.
Senator Portman. Yes. Thank you for that.
Mr. Levin. At the same time, I have also participated in
comments, along with the American Bar Association (ABA)
Administrative Law Section, on various versions of the
Regulatory Accountability Act. Some points we made there--and
this was primarily directed at the House bill, but had some
overlaps with your bill from last session, S. 1029--a concern
is that if you add new procedural requirements across the board
on agency rulemaking, you will be adding unwarranted complexity
to the administrative process because of all the additional
mandates that agencies would need to perform.
What we have today is a process in which the court can look
at the analysis documents that were generated through the
executive oversight process; and also, those documents go into
the record and the stakeholders from all sides can critique
them, can add their own evaluation. Those comments are also
part of the rulemaking record, and so the court has quite a bit
of input from multiple directions on the issues raised as to
the regulatory analysis process.
So, I do not think there is any lack of input to the courts
as to things they could look at, but if you add on top of all
that additional mandates to the agencies to conduct the
following studies, make the following findings, and you do it
in the across-the-board way that much of the RAA did, I think
that adds unwarranted complexity to the process.
Senator Portman. I guess what I would ask you is, do you
think that under statutes where the court does have that
ability to actually enforce its opinion as to the Regulatory
Impact Analysis, do you think that the Toxic Substances Control
Act (TSCA), for instance, or the Federal Insecticide,
Fungicide, and Rodenticide Act (FIFRA), or Safe Drinking Water
Act, do you think that in those areas where the courts already
have the ability to review the regulatory costs and so on, do
you think those are not working? Do you think the court does
not have the ability to carry that out? And, if you do not
believe that, then why would it not apply to other regulations?
Mr. Levin. What I am saying--excuse me, what the ABA Ad Law
Section said, and I was a part of it, I am not speaking for
them today, but I am reviewing what was said in the document--
--
Senator Portman. Yes.
Mr. Levin [continuing]. Is that in those particular
contexts, Congress itself made a judgment that there is a
specific need for a certain set of criteria to be applied,
certain evidentiary standards to be used, and the like. And, I
do not actually mean to argue that in those situations where
Congress found that need, that it is a bad piece of
legislation, and it is a fact that the courts have enforced it.
I have, on the other hand, thought that to apply this across
the board to the entire regulatory apparatus is an unwarranted
extension, because now you would be adding more layers of
analysis without regard to a specific finding that that agency
has problems that justify that treatment.
Senator Portman. Thank you. My time has expired. Thank you,
Mr. Chairman, for the deference, and again, I thank you both
for your testimony and thanks for working with us on this. We
want to get this right, and the notion is to have cost-benefit
analysis, but also have it be enforceable through some kind of
judicial review, and I think it is urgent that we find that.
Thank you.
Senator Lankford. Senator Ernst.
Senator Ernst. Thank you, Mr. Chairman. Thank you,
gentlemen, for appearing before us today. I do appreciate your
testimony.
You may be aware of the case in front of the U.S. Court of
Appeals for the D.C. Circuit on EPA's clean power plant that
Attorneys General (AG) many States are challenging, and I had
recently read an article that mentioned a letter sent by the
State of West Virginia to the D.C. Circuit and they were
concerned about comments from the EPA Administrator Gina
McCarthy, and the comments that she made basically were
insinuating that the administration has thought for quite some
time that they do have the authority to force States to
implement these energy plans and that it is only a matter of
time before the EPA's proposed rule becomes final. So, she
seems to believe that she can go ahead and force States to do
this, even before the proposed rule is final.
And, then, this is really concerning to a number of folks
who have written, they have entered their comments, they have
submitted those public comments, and they are hopeful that the
agency is actually reviewing those comments and will take them
into consideration before the final revised rule. And, in this
case, a number of States contend that the EPA altogether lacks
the authority to issue the regulation at issue.
So, I would just like to get your perspective on this
issue. I know Senator Lankford had already addressed the fact
that--and I believe that agencies are really exploiting the
alleged ambiguity and relevant laws, really, to get to their
point. But, particularly in instances where the head of an
agency forecasts the content of a final rule, do you think it
is appropriate for courts to wait on a final rule, then, before
addressing the merits of the rule if the agency is already
stating they are going to implement it?
Mr. Grossman. Senator, first of all, the example that you
put forward, EPA's clean power plant, is truly an exceptional
example and I think it exemplifies the problem with the mood of
deference and how that has affected agency operations.
The court case you are talking about, Murray Energy, before
the D.C. Circuit, the Department of Justice (DOJ) on behalf of
the Environmental Protection Agency has adopted, or has put
forward four or five separate rationales as to why it is they
believe that the statute is ambiguous, some of which defy
commonly understood notions of grammar and meaning. And, the
interpretive mission that the agency has embarked on there, in
other words, to search out ambiguity in any possible way they
can find it, under a rock, behind a tree, is something that
really ought to be of concern.
Now, what makes this an extraordinary case, and I think
possibly a very rare exception from the ordinary rule of
finality, is the fact that the agency is actually acting right
now. Although EPA has only put forward a proposal, the agency's
Administrator, has said that they do plan to go forward with
the final rule, but not only that, the agency has outlined
deadlines for States and for regulated parties that force them
to begin taking major and expensive action at this time before
a final rule is released. This is a very unusual circumstance.
And, when I say it requires them to, I want to put emphasis
on the word ``requires.'' It is not possible to comply with the
rule as EPA has proposed it and as EPA has indicated it intends
to finalize it, without taking substantial action concerning
billions of dollars' worth of investment right now at this
time.
So, in these very unique and very strange circumstances, I
think there is a case for judicial review prior to finalization
of a rule. In general, that would be a far-fetched proposition,
but this may be the one instance that proves the rule.
Senator Ernst. Thank you.
Yes.
Mr. Levin. Your comment about the letter from the Attorneys
General made me think of a case I teach every year in
Administrative Law called the Association of National
Advertisers v. FTC, decided by the D.C. Circuit back in 1979,
which essentially said that there is virtually no such thing in
the rulemaking context as prejudgment of the kind that we would
talk about in the context of adjudication. Agency heads always
have opinions. They are expected to have opinions. They could
not function without a policy direction about where they want
to go. It would be an abuse of discretion to launch a
rulemaking proceeding if you did not have some context of where
you wanted to go.
So, the courts simply will not say the agency head
expressed a strong opinion, therefore, it is an impropriety.
Rather, they say, go ahead, take the position that you are
going to take, but remember there will ultimately be judicial
review of whether it stands up on the merits.
So, I do not think it was improper for the Administrator to
make the comments. There is a separate question, whether the
plan itself is legal, which will ultimately be sorted out and
judicial remedy will be available.
Mr. Grossman is right that it is not commonplace to bring a
case before the courts while it is simply a proposal, and I
guess the case remains to be decided as to whether it is soon
enough. All I know is the press reports in which judges
appointed by Republicans were incredulous that a case could be
filed like this while it was just a proposed rule. But, maybe
they will change their mind during the deliberative process and
agree with Mr. Grossman. The signals did not sound that way.
Senator Ernst. Well, it is an extreme case, I understand,
but it really goes back to something that I have hit on many
times in this Committee, the fact that we have entities out
there, we have a public that is out there that is responding to
public comment. They are entering what they believe is to be
the proper course of action, of course, anything that might be
detrimental to their businesses, to their individual lives, and
we have many agencies that are not, I believe, taking those
into consideration as they move forward, and this is exactly
one of those examples.
Mr. Levin. Right. So, in the Mortgage Bankers case decided
last month, the Supreme Court reaffirmed what had been common
law and administrative law for many years, which is that an
agency in a rulemaking process has a duty to respond to
comments from the public. So, that will be part of the ultimate
decision of whether they are acting lawfully.
Senator Ernst. Absolutely. Thank you, gentlemen, for your
time today.
Thank you, Mr. Chairman.
Senator Lankford. Senator Peters.
Senator Peters. Thank you, Chairman Lankford and Ranking
Member Heitkamp, for this hearing, and thank you to our
witnesses. We certainly appreciate your testimony here today.
The one issue that I want to raise, and something that I am
particularly concerned about, is the impact of judicial
vacancies on our capacity for the judicial reviews being
discussed today. There are currently 54 vacancies in the
Federal courts and only 14 have nominees pending at this time.
There are another 26 future vacancies that we know are coming
within a year and only three of those have nominees pending. If
the courts are asked to increasingly review agency issued
regulations, this will obviously quite substantially increase
the workload of an already overloaded Federal bench.
Until 2 weeks ago, this Senate had not confirmed a Federal
judge. There are currently 17 judicial nominations that the
Senate needs to act on, and even more vacancies without
nominees. I think an important first step is for the Senate to
address these vacancies on these pending nominations, but even
if all these vacancies were filled, the nonpartisan Judicial
Conference of the United States has recommended that Congress
create 82 new Federal judgeships to properly address the
current caseload.
Earlier this month, the Wall Street Journal reported that
pending cases are up 20 percent since 2004, with over 330,000
cases pending before Federal courts. Of those, over 30,000 have
been pending for 3 or more years.
So, given this backdrop, Mr. Levin, do the courts have the
resources to provide adequate review of all cost-benefit
analyses that are now being produced by agencies, and what is
this going to do to this already pretty extensive backlog?
Mr. Levin. I entirely agree that there is a problem of
undue vacancies on the courts. I would hope that both the
nomination process and confirmation process could be expedited
to allow that to happen.
There is a mismatch many times between what the laws
require judges to do and the resources made available for them
to do it. I think that is a generic problem. Adding to the
obligation to work through cost-benefit analyses to a greater
extent than they do now would aggravate it, but it would
aggravate it in the same way as many other things could
aggravate it.
So, my critique is not so much that they would not have
time, but that it is not the task for which they are best
suited. And, given all the pressures on the courts these days
to make time for the cases they do have, you want to be very
cautious about passing any legislation that would materially
increase it.
Senator Peters. Well, it is clear, given this law, putting
in a number of cost-benefit analysis requirements for the
courts would be a heavy burden for them when already we are
looking at delays of 3 or more years for 30,000 cases and
330,000 cases pending. Certainly, there are other things that
can add to the backlog, but this would add a significant burden
that would continue to slow down the system and allow judges to
deal with important areas of justice that they have to deal
with each and every day----
Mr. Levin. So, I am agreeing with that and then saying, and
it is more than that.
Senator Peters. It is more than that, and let us go to
that. Where they may have the time and the resources and the
necessary expertise, as you have alluded to, it seems that many
times that they are being asked to review some pretty highly
technical regulations, including things that are based on
significant scientific expertise, how can the courts deal with
that? How best can they deal with those kinds of issues?
Mr. Levin. Well, it takes a lot of time to study those
records, to write those opinions, to reach agreement on a
panel. I would suggest that, to some degree, the answer is to
give a reasonable amount of deference to the agency that has
the specialized expertise in the area, so they do owe a hard
look, as it is called, to see if the agency acted reasonably.
But, I think they need to draw the line short of making all
those decisions again on their own.
And, so, putting some confidence in the agency and the
political process in which the agency operates can be
desirable, because I share Senator Heitkamp's point that it is
important to remember that the agency answers to Congress and
they answer to the public so that is a source of constraint
that suggests that a court should not try to do everything in
the review process. They should look to see if it is
reasonable, but they should not try to decide themselves all
the scientific questions.
Senator Peters. So, in addition to the delays that occur
because of the already overloaded courts and also the need to
get some very sophisticated information in order to make well-
reasoned decisions, I am also concerned that because of all of
that, which would slow down the process, that would likely mean
significant delays in the rulemaking process because of these
increased procedural requirements that some folks are talking
about.
So, would mandating additional judicial review have a major
chilling effect on the rulemaking process, do you believe?
Mr. Levin. I think so, but in the sense that if you give
the agencies more tasks to do and no more resources to do them,
that will strain their resources. So, your point about adequate
funding for the courts should be paired with adequate funding
for the agencies because their budgets have been cut. The
discretionary spending has been reduced at the same time that
Congress continues to add more expectations for them. And, so,
there is a mismatch there, as well.
Senator Peters. And, as that has slowed down and as
rulemaking has a chilling effect, although companies and
industries are going to be expecting some rulemaking, as you
know, uncertainty has an incredibly detrimental impact on
economic activity on businesses. So, now you have the
uncertainty as to what is going to happen with rules, and those
are going to take much longer with some of these proposals. I
suppose you could also see there could be an increase in
litigation. Would you expect that this might increase
litigation, if we have more proposals and more procedural
requirements for rulemaking?
Mr. Levin. If you add new requirements and make them
judicially reviewable, that is more or less by definition an
invitation to more litigation to test whether the agency
measured up under those standards.
Senator Peters. So, in a sense, we have an overburdened
court without the resources to deal with the issue that is
going to delay rulemaking, which will cause uncertainty, which
will have a negative impact on the economy as well as
increasing litigation in the courts. If I can summarize what
you are saying.
Mr. Levin. Yes.
Senator Peters. Great. Thank you.
Senator Lankford. For the Committee and those of you all
here at the dais and for you, the second round, it is the
tradition of this Committee--what I mean by tradition is we
have done it once, so---- [Laughter.]
So now we are just going to keep doing it. [Laughter.]
The second round of questioning is open, and so every
microphone is open and we are open to have open colloquy here
and with you, and so it is a less formal round of questioning
on that.
The challenge that I see on this is how to continue to give
Congress its legislative powers that are required by the
Constitution, which I think all of us want to see the clear
separation of powers in Congress to the part that says all
legislative powers shall reside in Congress actually has
meaning, as well, and to continue to be able to practice that.
So, my question is, where there is ambiguity in the law
now, deference is given to the Executive Branch rather than
deference to the Legislative Branch, meaning if it is unclear,
if there is ambiguity, the courts would look at it and say, I
am going to trust the people in the agencies because Congress
did not complete this, rather than saying, this has to be on
hold until Congress brings clarity. So, the assumption is
Congress will not clarify, so the agencies must clarify, rather
than this is unclear in the statute, Congress needs to go back
and bring clarity. Until then, it is on hold, or no, you cannot
move this. Why is the deference given to an agency from the
Judicial Branch rather than the deference given to the
Legislative Branch?
Mr. Grossman. If I could, it is a very good question. The
idea, I think, is, to begin with, there is this background
assumption underlying the deference canons that the Congress
has intended to delegate to the agencies interpretative
authority to fill up the details of statutes where Congress has
not specified particular details. That assumption may or may
not prove correct with respect to different statutes, but that
really is the core idea underlying both Chevron as well as Auer
deference, that is what Congress's intent is.
Second, in terms of why the Legislative Branch itself is
not deferred to, I think the way to look at that is, obviously,
the Legislative Branch itself cannot participate in an official
basis in litigation and express its views other than by
enacting laws. And, certainly, enacting laws is, by far, the
best way to clarify and resolve ambiguities in statutes.
But, where that does not happen and where it is not
possible and where you have ambiguities or vagueness, the
question is, to what extent are those questions of statutory
interpretation going to be decided by courts who may be looking
at, trying to wring from a particular statutory scheme every
ounce of meaning they possibly can from it. In other words,
when you have something that appears to be an ambiguity, if you
apply all the traditional tools of statutory interpretation,
the ambiguity might be substantially narrowed so that an agency
has at its disposal several possible choices, but perhaps not a
wide range of choices.
And, I think that is really where the disagreement is in
this particular debate. There are always going to be
ambiguities, and when there are genuine policy decisions to be
made, it probably makes sense, in general, for those to be made
by the agencies. But, the real question is the scope of their
authority to do so.
Senator Ernst. Can I jump into that, please?
Senator Lankford. Yes.
Senator Ernst. Something that I did not have the time to
address, and I think it fits well here as we talk about
constitutional authority, whether it is the Judicial Branch,
Executive Branch, Legislative Branch, but if both of you could
just take a moment and visit a little bit about sue and settle,
when the agencies maybe decide not to defend themselves, or
someone sues and they decide to settle out of court. It is done
behind closed doors. It really takes away the transparency, I
think. Decisions are made behind closed doors but do not
involve a lot of the different members that we have spoken
about. So, rules and regulations are made behind closed doors
and the public is not aware of what is going on behind those
closed doors.
Mr. Levin. I wanted to respond to Senator Lankford, and
maybe I can also respond to you, Senator Ernst. On Senator
Lankford's point, I really do not think that there is a lack of
deference to the Legislative Branch because the legislature can
intervene and make a decision through legislation when it
chooses. I think the problem is that it too infrequently uses
that authority, I think is the point Senator Heitkamp made
earlier----
Senator Lankford. Let me just jump in there. The standard
to actually interrupt a rule is as high or higher than it is to
making a law in that sense. So, if you have, let us say, a
divided Congress or Congress and the White House, and the White
House through their agencies have put in a policy, have found a
vagueness in a rule, have put out a rule, Congress wants to
respond to that. They now have to get 67 votes in the Senate to
be able to overthrow that, when at the beginning they would
only have to get 60 for cloture or 51 for passage. So, now, you
have this very high standard because you assume the White House
is going to veto any kind of change in their policy that they
put in place. If you have a politically divided House and
Senate, then the agencies can basically move at whatever will
they want, knowing that one area is not going to check them.
So, the unusual standard here, as I understand the
legislature has a responsibility in that and has the ability to
be able to do that, but it is the capacity to be able to get
that done where there is a vagueness and the agencies have more
leeway. Does that make sense?
Mr. Levin. It does, but I think what you are saying is it
is too bad that we have bicameralism and----
Senator Lankford. No, sir, I am not saying that.
[Laughter.]
Most definitely not saying that.
Mr. Levin. I misunderstood.
Senator Lankford. What I am saying is it is too bad that
the executive now makes a rule, enforces the rule, and
interprets the rule. What I am saying is, it is too bad that we
are now creating a system where only one branch runs everything
and the judicial branch gives deference to them and the
legislative, when they have differences in political opinions,
which the American people do, does not get to speak to that.
That is what I am saying is the problem.
Senator Heitkamp. And, if I can just jump in here, but
taken that is kind of the problem, that politically, and let us
at least acknowledge that the President is politically
accountable for decisions that he makes, maybe not in his
second term, but----
Senator Lankford. Right.
Senator Heitkamp [continuing]. He is politically
accountable and has an obligation to listen to what people
believe and we all go there. But, the solution of turfing this
or making the court the ultimate arbitrator of these decisions
has its own limitations.
And, I think it is interesting that the two cases we are
talking about today, direct regulations that we have
referenced, which is Waters of the United States and clean
coal, the EPA CO2 regulation, both of those situations are
presented because of Supreme Court decisions. So, you already
had a review process that may not necessarily have dealt with
deference, especially on CO2, because the question was EPA had
decided not to regulate CO2 and the court reversed that
decision and said, yes, you have jurisdiction to regulate CO2,
and that began this process that we are in.
When you look at the opinions in Waters of the United
States you have four deciding that EPA is wrong, you have four
deciding EPA is right, and you have a decider in the middle who
said, well, I am going to side with the four that said EPA is
wrong, but I think you ought to maybe think about doing it this
way. And, so, there is huge uncertainty that is created, and
ironically in those two cases, created because of Supreme Court
decisions.
And, so, I understand and appreciate the concern. I am as
vehement about Waters of the United States and CO2 regulation
as anyone on this panel. But, I think that we are asking to put
a really heavy burden on the courts when, as Senator Peters was
talking, courts are ill equipped at this point, just in terms
of resources, to play that role, and is that--what role does
the court have in all of this?
And, we are really talking about a standard, because,
should it be Chevron deference or Auer deference or whatever it
is, at the end of the day, what capacity does the court have, I
think is the question, either in terms of resources or ability,
especially given the two examples we are having here where the
Court did not provide additional clarity, in fact, may have
made it even more difficult to find clarity.
Senator Ernst. And, again, I would like to jump back in.
And what happens when it is not the court, but behind closed
doors when settlements are made----
Senator Heitkamp. Yes.
Senator Ernst [continuing]. Where does that fit into this?
Senator Heitkamp. And that is a problem, Senator,
regardless of who is--it could be corporate America could be
behind the closed door----
Senator Ernst. Exactly.
Senator Heitkamp [continuing]. It could be the
environmentalist behind the closed door. I am always concerned
about friendly lawsuits that make a policy decision and say,
now we are enforcing a consent decree and not interpreting a
statute. And, I guess, Mr. Levin, it would be interesting to
hear your perspective on the friendly lawsuit possibility.
Mr. Levin. The question has been kicking around for a long
time, and one of the problems is a lack of clear factual
information about the extent of any abuse, and it is often the
subject of heated charges in both directions. But, I would say
that Congress should be careful in this area and develop clear
factual basis for any action it might take.
Senator Heitkamp. But, do you share our concern that this,
in fact, could happen and maybe has happened in the past?
Mr. Levin. It could. But, I think the number of accusations
exceeds the number of ones that can be substantiated.
Senator Heitkamp. Verified.
Mr. Levin. So, I do not want to dismiss it----
Senator Lankford. But, are affected parties brought to the
table? So, if a consent decree is made within a group and then
suddenly that new regulation was imposed, was appropriate
comment given to the affected parties or do they suddenly have
the imposition of a new regulation?
Mr. Levin. Oh, I think that is a fair question to ask and
parties should have the opportunity----
Senator Lankford. That is the prime concern. It is not just
the transparency. It is that affected parties are not given the
opportunity for comment.
Mr. Levin. In concept, I do agree.
Senator Heitkamp. Correct.
Mr. Grossman. Senator, if I may, I actually testified on
this particular issue before the Senate Judiciary Committee in
the last Congress, and my testimony recounts in substantial
detail a number of instances of abuse of the settlement process
with regulatory agencies. I agree that it does not happen all
the time, but there are instances where it has happened.
In response to that testimony as well as other policy
interests, there was introduced, I think it is called the
Sunshine and Settlements Act, which does not alter any
substantive rulemaking standards or anything of that sort but
simply provides a procedure so that parties who are interested
can become aware of these circumstances and can participate in
ways such that their views are taken into consideration.
Senator Lankford. Going back to consent decrees and Senator
Ernst, is it inappropriate to ask any agency not to be able to
make a consent decree if you are changing a discretionary
authority to a mandatory authority? Is there a problem with
that, to just limit--you cannot make a consent decree that
changes substantively something that was discretionary to
mandatory?
Mr. Grossman. Well, I think there are two ways to look at
it. On the one hand, when an agency has the discretionary duty,
it could just say, fine, we are going to go ahead and carry out
that particular duty, whether it is to regulate a particular
pollutant or undertake some other regulatory action.
The one issue that really arises in terms of transferring
these things from discretionary duties to mandatory duties is
the power to basically bind future administrations----
Senator Lankford. Right.
Mr. Grossman [continuing]. In other words, to remove their
policy discretion. This is something that we saw quite a bit of
during the transition from the Carter Administration to the
Reagan Administration, where the Carter Administration in its
final days had agreed to regulate a laundry list of particular
substances and the Reagan Administration spent pretty much
their entire first term trying to get out from under that and
ultimately was unable to do that in a very contentious series
of cases in the D.C. Circuit.
And, that led at the time Attorney General Ed Meese to put
forward a Meese memorandum that actually limited agencies'
authority to bind their successors. He realized that this would
reduce the power of the Reagan Administration to bind whatever
administration came thereafter, but his view was that it was
the right thing to do.
Senator Lankford. OK. So, short answer. Do you agree that
changing a discretionary to a mandatory is a good limitation? I
know that was part of the Meese memo, as well.
Mr. Grossman. Mm-hmm.
Senator Lankford. Is that an appropriate limitation on a
consent decree, to say, yes, we can do consent decrees, but
they are not unlimited in their ability. You cannot change the
discretionary to a mandatory and control, basically, the
actions of the next administration based on a consent decree
that did not have outside input from affected parties?
Mr. Grossman. I think, in general, that is correct. Look,
the question is a very nuanced question----
Senator Lankford. Sure.
Mr. Grossman [continuing]. Because of the scope of
agencies' authority to carry out certain actions. But, I
certainly agree with you that the power to bind a subsequent
administration is----
Senator Lankford. What about changing line items of
spending, that you could do a consent decree to change line
items of spending? Obviously, that is congressional intent just
got altered. Should a consent decree allow an agency to alter
spending line items?
Mr. Grossman. No, of course not. I think the distinction,
and the only reason I am hesitant, is because many duties that
agencies take as being discretionary are things that, frankly,
in statutes are specified as non-discretionary. Congress may
say ``shall'' and the agencies decide, well, we have too much
on our plates, and so we are going to take the ``shall'' and
read it as a ``may.'' And, so, in those circumstances when an
agency acknowledges that they, in fact, do have a non-
discretionary duty, it is difficult to say whether their
decision to recognize what is in the statutory text is
necessarily a mistake. So, it varies from case to case.
That said, there are plenty of cases where that is not
actually what has happened, and so for those cases, I think the
thrust of your questioning is exactly right.
Senator Lankford. OK.
Senator Heitkamp. When you look at this, I think we all
know that things are controversial. I mean, we could talk about
the fiduciary rule now coming out of the Department of Labor
(DOL). I mean, I could probably give you the top 10 most
controversial regulations making their way through the
regulatory body.
But, underneath all of that is a tremendous amount of
regulation that goes on that is--you can argue whether it is
necessary or not, but it is critical that we have agencies that
are able to do that work in a timely fashion to give the
certainty to the constituency stakeholders that they need in
order to function.
And, one of the problems that we have is we react to things
like the Waters of the United States, we react to CO2
regulation in a way that then gives broad brush strokes that
may, in fact, have stopped us from moving forward and giving
predictability that we would otherwise have. Do you see what I
am saying? We take the controversy and we redesign the system
to deal with what is controversial and that may, in fact, put
way--too much onerous burden on the everyday regulation that
has no controversy, and I guess I would like to hear your
response to that, Mr. Levin.
Mr. Levin. Oh, I agree. I think that was implicit in some
of what I was saying to Senator Portman, that one can look at
particular areas and say there is a special need, but if you
extrapolate it governmentwide, you will be affecting functions
that were not really that controversial but that Congress has
said should go on, and adding procedures on such a broad basis
can weigh down the process in that way.
Senator Heitkamp. Mr. Grossman.
Mr. Grossman. I agree with you. I would also add that, a
lot of uncertainty comes in areas that can be resolved by
agencies. You noted, for example, the Waters of the United
States rule. If EPA and the Army Corps of Engineers wanted to,
they could write a rule tomorrow that would win nine votes on
the Supreme Court and it would be, relatively speaking, a
pretty easy thing to do.
What happens is that they have policy interests that are
not necessarily compatible with the different views that have
been expressed on the Supreme Court and that is why you have
the uncertainty and the complexity in that area. I think in
some cases where agencies are really trying to test the very
limits of their statutory authority, and in some cases while
disregarding traditionally understood limits on that authority,
that is when you wind up with a lot of uncertainty in major
areas.
Senator Heitkamp. Right. And, it goes to my argument, which
is Congress needs to take responsibility for clarifying
ambiguity in things that are as controversial, I think, as CO2,
as controversial as Waters of the United States, maybe the
fiduciary rule that is coming out of the Department of Labor
right now. And, when we do not do that, that just becomes an
invitation for further expansion of agency authority. When we
do not act effectively, we are basically writing a blank check.
And, so, the only entity, in my opinion, that can fix a
legislative problem from the agency is Congress. And, by
putting too much responsibility on the courts because maybe we
think the political solution is too tough, we are abrogating
our legislative responsibility not just to the agencies, but
also to the judiciary.
And, you made a great point, I think, Mr. Grossman, when
you started out, because you talked about judicial activism,
which for years was a buzzword, saying they have too much
authority, they are being too interpretive. Now, we are talking
about executive agency activism and the real problem is
legislative inactivism in helping resolve a lot of these
controversies, it seems to me.
Mr. Grossman. I do not disagree, really, with any of that.
Congress really should be the first mover in pretty much every
instance, particularly when you are dealing with major
questions.
That said, one point that may get overlooked in this
discussion is something that economists refer to as the
endowment effect. It matters who has a right to begin with. So,
when we are starting now where we are, where we have a large
body of laws, many of which contain very capacious language of
delegation and authorization, under our current systems of
deference, the agencies view themselves as being the ones with
that first mover ability because they operate under this very
broad, unbounded language that is only limited by sort of
traditional and settled understandings rather than necessarily
clear statutory barriers. And when those understandings fall
away, the agencies view themselves as having a great deal of
authority that Congress may well never have intended. So, that
is the endowment they have.
And, yes, you are right. Congress certainly can, in some
instances--technically speaking, constitutionally in every
instance--reverse those decisions. But, the problem is, there
are enormous hurdles and veto gates that make it very difficult
to do that when agencies start with that endowment. I mean, it
matters who has what at step zero.
Senator Lankford. May I ask you, what happens if Congress
passes some sort of mandate, which I know you have affirmed
before you do not think is a good idea, say we are not going to
do Skidmore--or, I am sorry, we are not going to do Chevron
deference. We are going to do something more like Skidmore
deference. That is going to be the policy and we will try to
push it back there. Obviously, Congress has the authority to do
that. What happens if that occurs?
Mr. Grossman. Well, as I discussed in my testimony, my
general answer is I do not know. There is some reason to
believe, based on empirical research, that the difference in
judicial outcomes would not be very large. My hope would be,
and it is my hope and it may be an idle hope, would be that it
would change the mood that currently affects agency rulemaking
and that agencies would recognize that they may well be subject
to greater checks and that deference is not necessarily
something they can count on at every instance.
Do I know that would be the case? No, I do not. As I
discuss in my testimony, it seems to me the best answer is
really rigorous application of Chevron step one, but that is
something, I think, that it would be very difficult for
Congress to legislate.
Senator Lankford. So, where is the check, as I have
mentioned before, for an agency or an independent agency that
they both create the rule, they interpret the rule, they
enforce the rule, and if you want to appeal the rule, you are
appealing the rule to the person sitting next door to the
previous person that gave you the previous decision. There is
no place to go outside.
Banking is a good example of that. There is really no place
to go to be able to get another opinion outside of this
particular group of regulators, and so you may disagree with
this opinion of this regulator, you may appeal it, but that
same regulator is now going to come back and is going to bring
more things on you in the days ahead. Where do we build in a
structure where there is not a due process outside of that
entity?
Mr. Grossman. Two responses. First of all, talking about an
agency's interpretation of their own rules, that is something
that, I agree with the thrust of the questioning. That is
something, I think, is worth considering, and I think could
have some effect, and probably a positive effect.
With respect to areas where judicial review is sometimes
difficult to obtain and certain types of decisions are left
within the agencies, it is a difficult question. There are some
areas where, due to the statutory schemes that Congress has
enacted, you effectively have procedural dead ends where it is
difficult to get a final definitive judicial interpretation of
the extent of an agency's authority.
It seems to me that where those exist, and there are fewer
than they were in the past, those are ripe areas for Congress
to consider what the proper procedure is.
Senator Lankford. OK. Mr. Levin, do you have any comments
on that?
Mr. Levin. Well, I think that if you were to change the
Administrative Procedure Act to provide that all agencies'
interpretations of law will be decided under Skidmore, I think
you could be confident that it would cause enormous confusion,
not just because Congress had enacted something new, and not
just because the phrasing may be difficult to work out, as, I
believe, has actually been the case with the recent bills, but
also because the Skidmore test itself is considered to be one
of the most indeterminate in all of American law.
Senator Lankford. Is Chevron applied consistently?
Mr. Levin. I would say in relative terms, Chevron is widely
viewed as the more determinant and predictable standard.
Senator Lankford. But, is it consistent?
Mr. Levin. I do not think any standard is applied
completely consistently I also think that there are judgment
calls to be made and judges will bring other considerations to
bear no matter what standard you provide. But, I would still
say Chevron is considered a relatively determinate, Skidmore a
relatively vague and indeterminate one.
Senator Lankford. OK, so the challenge I still come back to
is when there is the difficulty that sits before a judge, and
there are moments, clearly, there are many moments where
something is big, significant, and however you are going to
determine significant, it is sitting before a judge to
determine whether this agency is going to get deference to be
able to make this rulemaking and to be able to finish this out
with whatever the rule was, when it is vague, why is the
assumption not given to Congress to say, the agency cannot act
on this. Congress has to provide clarity.
Why is the decision, yes, the agency is smart, they have
done the research, they have done this, they are creating new
ground. They are moving out into a new area that Congress may
or may not have intended in the past. But instead of waiting on
Congress to act, the agency is given forward motion and
Congress has basically said, if you want to change the forward
motion of this agency, Congress can then go back, pass a law,
override a veto of the President, but until they can get a
Presidential override, this agency gets deference to keep
moving as far as they want.
Mr. Levin. I could be mistaken, but it sounds as though you
are proposing a judicial revival of the so-called non-
delegation doctrine, which is a theory that an agency cannot
act until Congress provides specificity. That is a theory that
has gotten some support in 1935 and never since because the
courts simply find themselves unable to deal with that.
Senator Lankford. There are a lot of small areas of that.
Senator Heitkamp. Yes.
Senator Lankford. I am talking about major areas. There are
major issues that have significant changes that now it is the
battle to go take something back rather than to try to pass it.
Senator Heitkamp. But, let us stick with the Waters of the
United States example. So, now you have this controversy. The
regulation is moving forward. It is at OIRA, I believe, and so
we are waiting. I do not think Congress should wait. I think
Congress should play a role in making this determination.
But, when you say, so, now let us say the court, instead of
issuing the opinion that they issued, said, OK, hold off. We
are not going to--you cannot do anything. You cannot interpret
this until Congress interprets it. In the meantime, I have a
farmer who wants to title their land and they have applied for
a permit, or they need to know if they have to apply for a
permit. And, so, in the real world--I am saying, in a
theoretical world, that is fine, but these regulations have
practical effect every day. And to say, we are simply going to
stop--and, I think, the court would say that. We cannot just
stop and say, put everything on pause, because we have real
practical applications.
Let us take King v. Burwell. So, what happens if the court
says, we are going to stop until Congress acts. That creates a
tremendous amount of uncertainty to the folks who have gone to
the exchange, that is the Federal exchange, and have relied on
the tax incentives on that exchange.
And, so, I guess, my point in this is that, theoretically,
where I have been arguing Congress needs to act, it also is
probably not a path forward for what I would call a stay of any
executive action pending the Congress doing its due diligence
and fulfilling its responsibilities has huge impact in the real
world.
Mr. Levin. And, I do not want this comment to sound overly
critical, but it is a fact that Congress has been much less
productive over the past several years----
Senator Heitkamp. That is OK, if you are overly critical.
We are, too.
Mr. Levin. Very well. But, it does not need to be, because
I could just make the descriptive point that when you have the
last two Congresses at historic levels of non-activity, the
most--passing fewer laws than any other Congress in recorded
history--it puts a great deal of pressure, in effect, on both
the Executive Branch and the Judicial Branch to see if they can
find ways for the government to go on and do what it needs to
do and fill gaps.
Senator Lankford. So, the question really is does it put
pressure on the Executive Branch or does it give the Executive
Branch opportunity?
Mr. Levin. Both. That is another way of putting it.
Senator Lankford. But, that is the issue and that is the
challenge, is that when we have--and there will be moments
again, multiple moments, but under the trend that we are
heading in the judicial deference, when we have divided
government, which will happen a lot in America in the days
ahead, does that create opportunities from here on out for the
Executive Branch and all agencies to move through the vagaries
of every rule that they can find, create as many policies as
they can to have that deference, because they are smarter and
they have done comments, whether they have acted on those
comments or not, and to be able to move unchecked.
Mr. Levin. Well, they have the authority that they have,
and so there will be arguments about whether they have exceeded
that authority. Courts will review those questions. The point I
was making was that in the absence of legislative input, for
better or worse, there will be impetus on both of those
branches to make it possible for functions to be performed,
and----
Mr. Grossman. Oh, sorry. If I could, I mean, I agree with
Professor Levin regarding the incentives, but I would note that
the incentives actually work both ways. To the extent that the
Executive Branch can take actions that reduce pressure on
Congress to act, the result, understandably, will be inaction,
and I think a paramount example of that is the numerous
executive fixes that have been made to the Obamacare, the
Patient Protection and Affordable Care Act. And, I am not
talking about controversial things like the exchange credits. I
am talking about deadlines, mandatory deadlines that were set
in law, and taxes that were set at certain rates and things of
that nature, where--numbers and ``shall'' and things like that
were altered.
Senator Heitkamp. Where the first analysis probably was,
who is going to sue us if we do it, right?
Mr. Grossman. Well, I think in many cases, the analysis
that the executive agencies undertook was that nobody would
have standing to sue them. And, so, you might have had an
opportunity for Congress to come together, potentially, to make
some number of fixes to this type of statute. But as it was,
since the Executive Branch was making those fixes, there was
absolutely no pressure at all on Congress to do that.
Mr. Levin. I would not say there was no pressure on
Congress to do it. I would say that it was not heeded. But, the
upshot was that the agency had and has a program that it has
been told to implement.
Senator Heitkamp. Well, I mean, if you take my example of
King v. Burwell, if the judiciary decides we are tired of
patching this together, what happens?
Mr. Grossman. Well, I think King v. Burwell is really a
very troubling case. I mean, it is troubling, first of all, in
its implications, and I think everyone should acknowledge that,
that if people who do depend on exchange subsidies lose them,
that is, if that happened suddenly, that can have real
consequences.
But, it is also troubling because the way we got into this
area was that the agency, by interpreting the law in a very
implausible manner, changed the facts on the ground. In other
words, it acted aggressively and the result was to put us in
this bind, where if the court decides in a certain way that is
probably the most natural reading of the text, there will be
dislocation and consequences. And, I think that is really an
example of where we wind up when you have excessive deference--
--
Senator Heitkamp. Right----
Mr. Grossman [continuing]. That agencies feel that they are
able to do that.
Senator Heitkamp. And the court does not live in a vacuum.
I mean, the court understands real world implications of their
decisionmaking. They are not going to not consider the actual
consequences. But, I think it is going to be a very interesting
decision.
Mr. Levin. Well, I think it is, but could I also add that I
do not agree with the proposition that the position the
government took was implausible. I think they took the position
that they believed with great conviction was intended by
Congress all along. If it is the case that for the Supreme
Court to adopt Mr. Grossman's reading would cause great
disruption, that seems like a good reason to believe that the
IRS got it right because it would be disruptive to have the
world the way the challengers are urging.
Senator Heitkamp. And, we should acknowledge that there is
a split in the circuit on the actual interpretation of that
statute, not just agency interpretation of it.
Mr. Levin. Right.
Senator Lankford. Versus the plain text reading, which is--
--
Senator Heitkamp. Yes.
Senator Lankford. The discussion now is over, was that the
intent and was the intent actually put into the statute. When
you read the statute in its plain reading, and we can have a
great discussion about this, but when you read the plain text,
it reads one way, and when you hear speeches, you hear
something different. To say the speed of how the law was
written and done, did that line up with it, that is a whole
different issue for a different day and for a different
hearing, but we will---- [Laughter.]
Mr. Levin. We could go on in that vein indefinitely if we
wanted to.
Senator Lankford. We could. This will be settled somewhere
around June 25, there will be a decision up here one morning on
the website and try to find some sort of resolution of what
happens next from there.
I appreciate your testimony and your preparation for this.
As promised, we did not resolve all of this. What I hope we did
is be able to gather some ideas. We do need to find some
resolution.
I am very concerned about the direction this continues to
go in the back-and-forth nature of regulations unchecked on it
without some consistency to business and individuals and
families and cities and States trying to figure out where we
are really going. So, literally, policies and regulations
change at the whim of the executive rather than have some
ongoing consistency. It is the nature of our great republic,
that you have predictability in law. And, if we no longer have
predictability in law and regulations, where things are going,
it is a problem to us long term.
So, I appreciate very much. I do believe that other
individuals that were not on the dias will have 15 days to be
able to submit any kind of questions or opening statement they
might want to put on the record.
I appreciate you being here and being part of this
conversation.
With that, this hearing is adjourned.
[Whereupon, at 11:31 a.m., the Subcommittee was adjourned.]
A P P E N D I X
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