Todd Gaziano, Executive Director of PLF’s DC Center, co-authored this blogpost.
Last week, Pacific Legal Foundation filed an amicus brief in the Supreme Court of the United States in support of Century Exploration New Orleans LLC (Century) in its dispute with the United States Department of the Interior (Interior). Century is seeking Supreme Court review of a Federal Circuit decision that, among other things, erroneously treated an informal agency email and a Frequently Asked Question (FAQ) document as “regulations.”
We take no position on the policy change that was contained in the FAQ, but the administrative process for promulgating such a significant policy change is, to paraphrase Vice President Biden, “a big [freaking] deal.” The Administrative Procedure Act (APA) requires certain steps in order for agencies to issue binding “rules” and “regulations” (which are a subset of rules). The FAQs at issue and many other informal guidance documents don’t qualify. The trend of agencies to utilize informal guidance documents instead of providing notice of a proposed regulation and an opportunity for public comment is problematic. This case would not reverse that trend by itself, but it would certainly help if the High Court granted review and issued the right opinion.
A brief summary of the facts demonstrates the significance of the policy change that Interior attempted to implement through an email and FAQ. In 2008, Century leased land on the Outer Continental Shelf in order to drill for oil. After the Deepwater Horizon oil accident in the Gulf of Mexico in early 2010, Interior sought to unilaterally amend the lease agreement and impose new demands on Century (and other lessees) that were financially overwhelming. In essence, Interior informed Century that it would have to increase its bonding requirements for a potential spill from $35 million to $150 million. Century could not meet Interior’s demands and thus lost the lease, along with the $23 million down it paid so as to enter the lease.
Interior claimed that the new demands were allowed under the lease because they were issued in new “regulations” that the lease explicitly allowed for. The modifications, however, were not regulations at all; they were simply new demands imposed by a notification, an email, and a FAQ document. Such informal guidelines do not constitute regulations. Thus, imposing these demands on Century amounted to a breach of the lease.
In our amicus brief, PLF emphasizes the executive branch’s efforts to improperly define regulations and rules down to include all agency guidance documents. Our brief explains why that violates the APA and threatens the liberty of all Americans. [Tweet “By Interior’s logic, agency tweets are “regulations,” also.”] The APA and other administrative law decisions were designed to provide some minimum opportunity for public and congressional input, as well as judicial review.
PLF’s brief also points out how executive branch agencies continue to accrete more power by way of the ever-growing regulatory state, and thus, how the exercise of that power is increasingly important. In this case, Interior short-circuited the rulemaking process in order to force oil and gas companies to stop drilling for oil and gas, or at least to raise the regulatory and financial bars so high that they (the oil and gas companies) could not continue in the business as to the contracts at issue. Interior’s conduct breached the lease, but the underlying issue is much more important than that. This is a good opportunity for the Supreme Court to push back against agency efforts to regulate, without public notice or comment, in the form of emails and other informal documents.