Appeals Court Lifts Injunction, Allowing Interim Social Cost of Carbon Standard to Be Used in Rules, EIS

Appeals Court Lifts Injunction, Allowing Interim Social Cost of Carbon Standard to Be Used in Rules, EIS

March 18, 2022  | Jeff Davis

On March 16, a federal appeals court removed an injunction that was blocking the ability of federal agencies, including the Department of Transportation, to issue new rules and process environmental impact statements.

As earlier reported in ETW, on February 11, the U.S. District Court for the Western District of Louisiana struck down an interim standard for monetizing the “social cost of greenhouse gas emissions” that had been issued in February 2021 pursuant to President Biden’s January 20, 2021 Executive Order 13990. A coalition of oil-and-gas-producing states had sued the federal government, claiming that the interim standards were tainted because they hadn’t been issued via the Administrative Procedure Act or any other notice-and-comment process and that the eventual use of the tainted standard would cause irreparable harm to their state economies.

While the case itself has not yet been decided, the District Court agreed with all of the oil state arguments enough to issue a nationwide injunction prohibiting the use of the interim standard while the case is being heard. This injunction also had the effect of suspending all ongoing rulemakings or draft rulemakings that relied on the standard, and also held up notices of funding opportunity for grant programs that were going to use the interim standard as one of the evaluation criteria. In addition, ongoing environmental impact statements that were going to use the interim standard as part of their benefit-cost analysis were left in limbo. (Ironically, the injunction also had the effect of suspending all applications for permits to drill for oil and gas on federal lands, which allowed the Biden Administration to point its finger at the Louisiana court when people complained about the skyrocketing price of gas.)

In a motion asking for the injunction to be lifted, the Justice Department listed many specific transportation-related problems with the injunction:

  • Regulations. “The Office of Information and Regulatory Affairs (OIRA) reports that agencies as varied as the Department of Energy, the Department of Transportation, the Department of the Interior, and the EPA have seen a range of ongoing activities delayed or halted because they in some way referenced the Interim Estimates—even if they had not relied upon those estimates as a basis for the agency action at issue. See Mancini Decl. ¶¶ 17-23. In particular, unless the injunction is stayed, agencies would be required to redirect resources to revise already-drafted proposed rules and regulatory impact analyses, including in instances where a draft rule that incorporates the Working Group’s Interim Estimates has already been submitted to OMB. See id. ¶ 17. The Department of Energy noted approximately twenty-one initially-identified rulemakings that will be so affected; the EPA has noted approximately five; the Department of Transportation has noted approximately nine; and the Department of the Interior has noted approximately three.”
  • Capital Investment Grants. DOJ said that the Federal Transit Administration uses the interim SCC standard “to capture the monetary value of changes in GHG emissions, as a sub-factor for FTA’s project rating for one of the several statutory criteria. See Final Interim Policy Guidance, at 20. Because the injunction prohibits FTA from applying the Policy Guidance to conduct the statutorily required rating of projects, it has effectively frozen the advancement of multi-million dollar transit projects (there currently are more than 50 projects in the CIG pipeline) through the CIG process while the agency figures out a plausible, and perhaps lengthy, alternative path forward. The Policy Guidance was published after notice and comment as required by 49 U.S.C. § 5334(k), and therefore, immediate changes are most likely not feasible.”
  • EIS’s. “The Department of Transportation has also identified approximately sixty records of decision or environmental impact analyses required by the National Environmental Policy Act (NEPA) that discuss the Working Group’s work product in some measure, and therefore now would require revision under the preliminary injunction.”

In their March 16 ruling, a three-judge panel of the Fifth Circuit Court of Appeals (two Obama appointees and a George W. Bush appointee) unanimously agreed to lift the District Court’s injunction. In its order, the appeals court confined itself to the threshold issue of “standing.” As ETW wrote the first time, “Just because you or I don’t like something the government did doesn’t allow us to go down to a federal courthouse and challenge it in court. In order for the court to decide your case, you have to have “standing,” loosely meaning that you have to be able to prove that the government action (or inaction) in question has caused you demonstrable harm, and that the harm is something that a court can fix. Federal appeals courts love to hide behind standing as an excuse not to decide a case.”

The Fifth Circuit ruled that “The Government Defendants are likely to succeed on the merits because the Plaintiff States lack standing. The Plaintiff States’ claimed injury is ‘increased regulatory burdens’ that may result from the consideration of SC-GHG, and the Interim Estimates specifically. This injury, however, hardly meets the standards for Article III standing because it is, at this point, merely hypothetical.” (Translation: go away, and come back once the government has actually finished using the standards to harm you in some way.)

On the other side, the court ruled that “The Government Defendants have shown they will be irreparably harmed absent a stay. The preliminary injunction halts the President’s directive to agencies in how to make agency decisions, before they even make those decisions. It also orders agencies to comply with a prior administration’s internal guidance document that embodies a certain approach to regulatory analysis, even though that document was not mandated by any regulation or statute in the first place.”

Louisiana and its co-plaintiff states will continue to have the underlying case against the interim standards heard in the Western District, but it faces that same standing issue. However, some of the interesting legal issues raised by the case could be heard in specific lawsuits challenging specific federal regulations or actions taken using the interim standards later on down the road.

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