[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

MANDATE MADNESS: WHEN SUE AND SETTLE JUST ISN'T ENOUGH

=======================================================================

HEARING

before the

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION
POLICY, INTERGOVERNMENTAL RELATIONS AND
PROCUREMENT REFORM

of the

COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

__________

JUNE 28, 2012

__________

Serial No. 112-185

__________

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

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

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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director

Subcommittee on Technology, Information Policy, Intergovernmental
Relations and Procurement Reform

JAMES LANKFORD, Oklahoma, Chairman
MIKE KELLY, Pennsylvania, Vice GERALD E. CONNOLLY, Virginia,
Chairman Ranking Minority Member
JASON CHAFFETZ, Utah CHRISTOPHER S. MURPHY, Connecticut
TIM WALBERG, Michigan STEPHEN F. LYNCH, Massachusetts
RAUL R. LABRADOR, Idaho JACKIE SPEIER, California
PATRICK MEEHAN, Pennsylvania
BLAKE FARENTHOLD, Texas

C O N T E N T S

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

WITNESSES

Mr. E. Scott Pruitt, Attorney General, State of Oklahoma
Oral Statement............................................... 5
Written Statement............................................ 8
Mr. Roger R. Martella, Jr., Partner, Sidley Austin LLP, Former
General Counsel, U.S. Environmental Protection Agency
Oral Statement............................................... 32
Written Statement............................................ 34
Mr. William L. Kovacs, Senior Vice President, U.S. Chamber of
Commerce
Oral Statement............................................... 43
Written Statement............................................ 45
Mr. Robert Percival, Robert F. Stanton Professor of Law,
Director, Environmental Law Program, University of Maryland
Francis King Carey School of Law
Oral Statement............................................... 65
Written Statement............................................ 67
Mr. William Yeatman, Assistant Director, Center for Energy and
Environment, Competitive Enterprise Institute
Oral Statement............................................... 75
Written Statement............................................ 77

APPENDIX

The Honorable Jackie Speier, a Member of Congress from the State
of California, Opening Statement............................... 99
The Honorable James Lankford, a Member of Congress from the State
of Oklahoma, Draft Remarks..................................... 101
United States Environmental Protection Agency, Letter to the
Honorable James Lankford....................................... 103
Office of the Attorney General, Department Policy Regarding
Consent Decrees and Settlement Agreements...................... 105
Associated Builders and Contractors, Inc., Letter to The
Honorable James Lankford and The Honorable Gerald Connolly..... 110
Letter to The Honorable Lisa Jackson, Administrator,
Environmental Protection Agency from The Honorable James
Lankford....................................................... 111

MANDATE MADNESS: WHEN SUE AND SETTLE JUST ISN'T ENOUGH

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Thursday, June 28, 2012

House of Representatives,
Subcommittee on Technology, Information Policy,
Intergovernmental Relations and Procurement Reform,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 9:02 a.m., in
Room 2203, Rayburn House Office Building, Hon. James Lankford
[chairman of the subcommittee] presiding.
Present: Representatives Lankford, Kelly, Labrador,
Connolly and Speier.
Staff Present: Alexia Ardolina, Assistant Clerk; Joseph A.
Brazauskas, Counsel; Brian Daner, Counsel; Linda Good, Chief
Clerk; Kristina M. Moore, Senior Counsel; Noelle Turbitt,
Assistant Clerk; Jeff Wease, Deputy CIO; Jaron Bourke, Minority
Director of Administration; Adam Koshkin, Minority Staff
Assistant; Suzanne Owen, Minority Health Policy advisor; and
Cecelia Thomas, Minority Counsel.
Mr. Lankford. The committee will come to order.
This is a hearing from the Oversight and Government Reform,
Technology and Procurement Reform and Intergovernmental
Relations Subcommittee. We exist to secure two fundamental
principles: First, that Americans have the right to know the
money Washington takes from them is well spent; and, second,
Americans deserve an efficient and effective government that
works for them.
Our duty on the Oversight and Government Reform Committee
is to protect these rights. Our solemn responsibility is to
hold government accountable to taxpayers because taxpayers do
have a right to know what they get from their government. We
will work tirelessly in partnership with citizen watchdogs to
deliver the facts to the American people and bring genuine
reform to the Federal bureaucracy. This is the mission of the
Oversight and Government Reform Committee.
We have a significant amount of attention that is going to
happen today focused on the red tape, and that has happened
across all of Congress recently from both parties actually
trying to make us more efficient. This is an issue that does
hold us back from our own growth in prosperity.
Today's hearing we are going to focus on examining the
highly questionable practice that's been perfected by the
Environmental Protection Agency known as ``sue and settle.''
This has emboldened the administration to pursue an aggressive
green agenda while escaping political accountability for the
costs and burdens of these regulations and what they impose on
job creators.
The process is rather simple. Environmental groups will sue
the EPA, demanding the agency issue a regulation on an
accelerated timeframe. Rather than fighting the lawsuit, EPA
quickly agrees to the special interest demands. These
settlement agreements are reached after closed-door
negotiations between EPA and environmental groups, where other
interested parties are excluded. Once the settlement agreement
is approved by a Federal Court in a consent decree, the EPA is
legally bound to engage in the rulemaking.
It is important to note that when a court approves the
consent decree, it does not consider the merits. The court is
merely accepting and ratifying what the parties agreed to.
In the past 3 years, the administration has conducted
approximately 60 settlements with special interests. Twenty-
nine of these agreements bound the EPA to make major policy
changes. The plaintiffs in these cases are often the very same
reoccurring players: The Sierra Club, NRDC, Defenders of
Wildlife, Wild Earth Guardians, Center for Biological
Diversity. These special-interest groups not only hold a
special seat at the table with the EPA, EPA is effectively
paying them to sue the agency. In 2011 alone, taxpayers
reimbursed these groups millions of dollars to participate in
these sue-and-settle agreements.
In addition to examining this outrageous practice, we will
hear today about two particular egregious cases where EPA
defied all norms of transparency, sidelined interested parties,
and is now in the process of imposing extraordinary burdensome
regulations. These two cases are EPA's regional haze
regulations and its greenhouse gas standards for power plants.
In the case of regional haze, Congress was crystal clear
that this is purely an aesthetic visibility program and is to
be administered by the States, not by the EPA. Through sue and
settle, EPA is attempting to federalize the program in imposing
costs well beyond what the State had determined was necessary
or justified. Ultimately, EPA's proposal will cost billions of
dollars for visibility improvements that are undetectable to
the human eye.
In the second case study, New Source Performance Standards
for electric utilities, EPA concluded settlement negotiations
on December 23rd, 2010, and agreed to promulgate NSPS for
greenhouse gases for both new and existing electric generating
units under section 111(a) and 111(d) of the Clean Air Act. At
the time this settlement was reached, EPA was not in violation
of any mandatory duty, and as such the litigants didn't have a
legal leg to stand on. And yet the Agency settled, committing
the Agency to make major policy changes without interested
parties at the table, and they rewarded litigants with a cash
prize they were never entitled to.
These two case studies are but two examples of the dozens
of policy changes EPA has committed to in sweetheart sue-and-
settle arrangements with special interests.
Time and again when the EPA is criticized for the excessive
burden imposed by their Agency, whether it be Utility MACT,
Boiler MACT, Florida water quality standards, regional haze,
NSPS, EPA's response is suspiciously similar: The Agency had no
discretion to extend the timeline to hear additional points of
view. It is under a court order to finalize those regulations
by date certain. Of course, that court order was agreed to by
EPA in the first place.
Let's be clear: What EPA claims the law requires them to do
is nothing more than what EPA agreed to do in a collusive
agreement with special-interest allies. The lack of
transparency is designed to circumvent other regulatory checks
Congress has put in place.
Environmental regulations only work when they are made in
an open process that involves all stakeholders. Sue-and-settle
rulemaking is an affront to that process.
Finally, I want to tell you that we very much wanted a
representative from the EPA here today to respond to these
concerns that our panelists will raise and that I am raising.
However, despite adequate notice, EPA has refused to provide a
witness for today's proceedings. I am hopeful we can find a
date in the near future when they can make an appropriate
witness available to respond and add to detail to our questions
today.
With that, I would like to recognize the person filling in
for our ranking member today Ms. Speier for an opening
statement.
Ms. Speier. Mr. Chairman, thank you. And let me say at the
outset, first I would like to offer this into the record and
ask unanimous consent that it be placed in the record. This is
a letter from the United States Environmental Protection Agency
dated June 22.
The chair mentioned that there was ample time offered to
those at EPA to have a participant here. Actually, the first
request came in on June 14th. They checked their travel
schedules and other hearing requirements and found that one of
the--both of the people that would be appropriate to testify at
this hearing could not make it. So rather than finding a date
that could accommodate both our schedules, this hearing went
forward without having EPA represented, which frankly does not
meet my standards as a committee that is supposed to be about
oversight and hearing from the parties. So I would like to
submit this for the record.
Mr. Lankford. Without objection.
Mr. Lankford. And one additional side note. We responded
back to them when they said these three individuals were not
available, asked for other individuals, asked for people by
name. They responded back they had no one available. We asked
for basically what the reasons were there was no one available
on any of the topics on it, and we just received back a
correspondence on that. So we do look forward to having them to
get a chance to discuss this at a further hearing.
Ms. Speier. All right. Thank you, Mr. Chairman.
I must say that I have been a member of this committee for
4 years. I chaired a committee on oversight when I was in the
State legislature in California for 6 years. And oversight
hearings are supposed to be objective evaluations of an issue.
It is in the interests of both the Democrats and the
Republicans in Congress to find where there are problems and to
fix them. But when hearings are entitled, as most hearings in
this committee recently, with a point of view, we are not being
objective, we are not looking at both sides, we are ramming
down a particular principle, and I find that particularly
disconcerting.
The focus of today's subcommittee hearing is on consent
decrees and settlement agreements to commonplace court
procedures that give parties in lawsuits the opportunity to
settle their differences, while avoiding prolonged trials and
mounting legal expenses. These procedures help parties in court
cases reach compromises that bring advantages to both sides.
In lawsuits against the Environmental Protection Agency,
whether brought by State or local governments, private
companies, environmental groups or local citizens, a consent
decree often leads to a timelier and less expensive resolution
for all involved. Consent decrees and settlements provide
resolution and certainty, while allowing EPA to do its job and
protect the public interest. That is the commonsense,
noncontroversial context for today's hearing. Or at least it
should be.
Unfortunately, the majority has chosen to break with this
historic support for these environmental protections, which are
overwhelmingly popular with the public, and which they once
helped create, in order to push a false narrative to fit a
propollution agenda. Terms to describe consent decrees like
``mandate madness'' and ``sue and settle'' are catchy political
slogans, but they are based on a flawed understanding of how
our environmental laws work.
Accusations that environmental groups are somehow dictating
government policy through court settlements rings just as
hollow. In fact, an August 2011 GAO report covering the years
1995 to 2010 found, and I repeat this, no discernible, no
discernible trend in lawsuits against the EPA. Now, this is the
GAO, which is a separate entity that is independent, making
that statement. However, it did note that private companies and
industry trade associations accounted for 48 percent of those
lawsuits, while local and national environmental and citizen
groups collectively accounted for 30 percent.
So what are we saying here? Is black white and white black?
The reality is that EPA gets sued a lot, not just by green
groups, but more often than not by polluting industries, which
are better funded and choose to fight their violations in court
instead of cleaning up their acts. ``Sue and settle'' is a
manufactured term and a distraction from the real sue-and-
pollute strategy that these corporations prefer.
Existing law already provides ample means for parties to
comment on and seek changes to consent decrees that they don't
like. However, partisan attempts to rewrite those rules that
have served the courts and the American people so well for
decades is a solution in search of a problem.
I would like to thank our witnesses here for appearing
before the subcommittee, and I would like to say that I look
forward to your testimony. We will see.
Mr. Lankford. Thank you.
Mr. Lankford. All the Members will have 7 days to submit
opening statements and extraneous material for the record.
I would like to recognize our panel. The Honorable Scott
Pruitt is the attorney general of my State, of the State of
Oklahoma. I know that he also has an appointment across the
street at the Supreme Court. There is something happening today
at 10 o'clock, I understand, over there, I have heard some sort
of rumor on that. And our State was also part of that, so he
will be part of that as well. So we will excuse you around 9:30
today after we hear your testimony.
Mr. Roger Martella is a partner at Sidley Austin LLP and a
former general counsel of the U.S. Environmental Protection
Agency. Thank you for being here as well.
Mr. William Kovacs is senior vice president for environment
and technology and regulatory affairs at the U.S. Chamber of
Commerce.
Mr. Robert Percival is the director of the environmental
law program, professor of law at the University of Maryland
Francis King Carey School of Law. Thank you for being here very
much.
And Mr. William Yeatman--is that correct, Yeatman--is the
assistant director for the Center for Energy and Environment at
the Competitive Enterprise Institute. Thank you for being here.
Pursuant to committee rules, all witnesses are sworn in
before they testify. If you would please rise and raise your
right hands, please.
Do you solemnly swear or affirm that the testimony you're
about to give to this committee will be the truth, the whole
truth, and nothing but the truth so help you God?
Thank you.
Let the record reflect all witnesses answered in the
affirmative.
You may be seated.
In order to allow time for discussion, I would like you to
limit your oral testimony to 5 minutes. You will see there the
time, but we will also be attentive to that as well. We are not
going to try to cut people off in the middle of it, but we
would like you to be attentive to that. Your written statement,
of course, has already been submitted for the record itself.
I would like to recognize Mr. Scott Pruitt to begin our
testimony today.

WITNESS STATEMENTS

STATEMENT OF E. SCOTT PRUITT

Mr. Pruitt. Chairman Lankford, Ranking Member Connolly and
members of the subcommittee, good morning, and thank you for
inviting me to appear before you today to present my concerns
on the legal and policy implications of recent actions that the
chairman identified taken by the U.S. Environmental Protection
Agency. This is a critical issue for Oklahoma, and I appreciate
the attention that the chairman and this subcommittee is
devoting to this matter.
First I would like to be clear about my intentions today
regarding environmental policy. My comments will in no way
disregard the law or the provisions we as a Nation or States
have put into place to protect our natural resources. We take
seriously our responsibility to preserve and protect these
valuable natural assets so that they may be enjoyed by our
children and grandchildren.
This responsibility requires a delicate balance between
environmental and economic interests, which is why Congress,
when drafting the Clean Air Act and the Regional Haze Program,
gave deference and authority to the States, not a Federal
agency, to take economic factors into consideration when
deciding what actions needed to be taken and over how many
years for implementation. With these considerations in mind,
the State of Oklahoma submits that Oklahoma stakeholders, not
the EPA, should make decisions on regional haze where outcomes
directly affect Oklahomans.
Congress was clear when they drafted the Clean Air Act and
other environmental laws they intended for States and EPA to
work together. They intended for cooperative federalism to take
place to reach outcomes that protect our environment and at the
same time take into consideration the economic costs.
Unfortunately, this has not been the case over the past 3
years.
In Oklahoma's case, the regional haze matter, the EPA
ignored its own provisions and denied our carefully crafted
State plan in place of an unwarranted Federal plan. The State
plan was not devised on a whim, but created after careful
consideration and input from all the stakeholders in the State,
including the Oklahoma Department of Environmental Quality. We
followed the rules. The EPA did not.
If the EPA's unlawful Federal plan is allowed to move
forward, utility rates in the State of Oklahoma will rise as
much as 20 percent over a 3-year period, and the economic harm
to the State will be irreparable. To stop the Federal plan, I,
on behalf of the State, filed an appeal to the EPA's final rule
and asked the tenth circuit for a stay. In a rare decision, as
this committee will recognize, the court granted a stay this
month, which we believe recognizes the potential merits of our
case.
Once we became aware of actions by the EPA in Oklahoma, we
began to dig deeper into the current EPA practices across the
country. What we found was a complete abrogation of notice and
public comment requirements when instituting Federal plans, as
well as a setting of an environmental agenda through consent
decrees. In several instances the EPA filed consent decrees on
the same day that environmental groups filed lawsuits. This was
in spite of the fact that these cases involved, as you know,
Mr. Chairman, involved complex legal issues that typically
would take weeks to review and respond. Such actions raised
questions and concerns about the motives and transparency
behind EPA's activities.
Attorneys general are in the process of evaluating the
EPA's alarming practice of relying on consent decrees to deny
States their important role as a partner under cooperative
federalism. We are also concerned with the use of these consent
decrees to implement Federal law. These decisions have put
States in the position of dealing with burdensome regulations
and harmful outcomes through processes in which they have no
say.
In conclusion, the EPA's refusal to follow its own rules
and create its agenda through consent decrees has denied States
due process and ignored the foundation of cooperative
Federalism set forth by Congress under the Clean Air Act. With
the backing of the administration, the EPA is conducting, we
believe, superlegislative activity that Congress has not
authorized.
Members must take seriously their role in passing
legislation and not delegate their authority to agencies
through unchecked rulemaking and questionable settlements.
These issues are of great importance to the State of Oklahoma
because Oklahomans value our State's natural resources which
provide sustenance to Oklahoma's citizens and fuel our economic
development.
I look forward to answering any questions the chairman and
the committee may have. Thank you.
Mr. Lankford. Thank you.
[Prepared statement of Mr. Pruitt follows:]

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Mr. Lankford. Mr. Martella.

STATEMENT OF ROGER R. MARTELLA, JR.

Mr. Martella. Thank you.
Chairman Lankford, Ranking Member Connolly and members of
the committee, thank you for providing me the opportunity and
the honor to appear before you today.
I would like to start with the uncontroversial proposition
that rulemaking activities should be built upon three bedrock
principles of transparency, public participation and judicial
review. The Administrative Procedure Act guarantees these
principles and protections for all citizens when the government
engages in rulemaking, and these procedural protections that
are inherent to our democratic system are just as critical to
protecting the environment as the substantive laws and rules
themselves.
However, the APA and our process for enacting effective
Federal regulations is confronting new challenges that in some
cases are bypassing these protections. Today I want to share
with you my concern about recent efforts to circumvent the
protections of transparency, public participation and judicial
review in an emerging phenomenon that provides an off ramp to
these principles.
The concern arises out of a growing trend where certain
groups increasingly are employing a so-called sue-and-settle
approach to the government on regulatory issues. Such an
approach effectively provides an off ramp that ignores these
bedrock protections, such as, first, a lack of transparency. In
such settlements, discussions and agreements typically are
reached with a subset of interested parties without full
stakeholder input, and frequently take place outside the
boundaries of the public process.
Second, a lack of public participation. In such settlements
public participation is foreclosed three times. First, the
agreement on how to regulate is reached without full input of
stakeholders; second, the negotiated deadlines for final rules
are frequently so quick that the public's comments might
receive little weight in the actual subsequent rulemaking;
third, because the final rule must be the logical outgrowth of
the proposal, settlement agreements that influence even the
proposed rule effectively preordain the final outcome without
full public participation.
Third, a lack of judicial review. In such settlements
parties frequently reach an agreement before a lawsuit is even
filed or defended, thus depriving interested parties from
intervening in the litigation to defend their interests where
intervention has been granted.
Fourth, a conflation of government and nongovernmental
roles. In such settlements the NGO plaintiffs effectively set
the priorities and timelines for how the government enacts
certain rulemakings over other competing concerns and
resources, in turn influencing policies and priority settings
far beyond the reach of a particular settlement. These concerns
are not theoretical or abstract, but have been rising with
increasing frequency in the last several years.
One recent example alluded to by the chairman includes the
greenhouse gas New Source Performance Standards for utilities.
In December of 2008, an NGO group predicted publicly it would
be successful in convincing the EPA to phase out new coal-fired
power plants by setting a New Source Performance Standard at a
level that no coal-fired power plant could meet. Exactly 2
years later, on December 23, 2010, EPA announced a consent
decree with the very same NGO committing the Agency to propose
and finalize this very rule even though it was not required to
do so.
Importantly, EPA agreed to promulgate such standards
without any prior input from a single stakeholder in those
affected impacted industries. When the ultimate proposal came
out on March 27th of this year, it was virtually identical to
what the NGO had predicted in 2008 and barred the construction
of new coal-fired facilities in the United States. Because of
the unique nature of NSPS proposals, the rule is already in
effect, even though EPA has yet to respond to a single
stakeholder comment from industry on the issue. Thus, as a
result of this settlement, we now have an effective rule that
is barring new facilities without first offering transparency
to the industry impacted, allowing for public participation
before the rule took effect, and providing no real means of
judicial review at this time.
Finally, Mr. Chairman, just to emphasize a point, I do
strongly support and encourage efforts to pursue settlement
agreements and consent decrees whenever feasible. I don't
intend my comments to suggest it's always inappropriate for a
settlement agreement to provide some definition of scope to a
proposed rule. However, my overarching recommendation to this
subcommittee is to address and improve the process by which
these agreements are reached in the first instance.
By promoting fairness, transparency and public
participation of interested stakeholders in the first instance,
settlement agreements will better reflect a wide range of
interests that must be balanced, result in stronger and more
defensible outcomes, and improve the success of the subsequent
rulemaking process.
Thank you very much for this opportunity today to share my
views.
Mr. Lankford. Thank you.
[Prepared statement of Mr. Martella follows:]

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Mr. Lankford. Mr. Kovacs.

STATEMENT OF WILLIAM L. KOVACS

Mr. Kovacs. Thank you, Mr. Chairman and members of the
committee. I am not going to try to go over old ground that
others have discussed, so I am going to briefly hit sue and
settle, but I also would like to talk about how it impacts
jobs, and I think that's where the business committee really
comes in.
But in essence, sue and settle is really a good-government
concern. It's transparency, public participation and the impact
on jobs. And really what we are talking about is when you look
at sue and settle, this is a subset of the interested community
that is actually entering into contract negotiations. They are
contracts.
When the contract is decided, it is decided without the
rest of the public involved. And I think from the business
community point of view, being involved in those contract
negotiations should be a fundamental right that we have under
the Administrative Procedure Act, which the Congress passed
decades ago to literally open up the process to the citizens
and for participation between the citizens.
So when this contract is executed and is filed with the
court, the court doesn't review the substance. What the court
does is the court reviews the representations of the parties.
And when it enters a judgment, that judgment cannot be
disturbed unless it's shown that there is an abuse of
discretion by the court, which is an almost impossible
standard. And then when the final rule comes out, even if it's
identical to what the agency and the environmental groups
sought, our chances of overturning that based on an arbitrary
and capricious standard are very, very low. So once the
contract is made, the decision is made as to how to go forward.
But let me talk about the more practical aspects of it.
Environmental litigation is costing this country tens of
thousands and hundreds of thousands and millions of jobs. In
2010, the U.S. Chamber did a study called Project No Project
and we looked at environmental litigation across the country
from the point of view of what was the private sector trying to
finance in 2010. And we looked at just electric generation. We
could have looked at cell towers, big box stores, cement
companies. We could have looked at anything. We looked simply
at electric generation.
There were 351 projects where developers were trying to get
permits. They could not get the permits. And the impact of not
getting the permits meant that they could not invest $576
billion, which would have created 1.9 million jobs a year
during the 7 years of construction.
That is the impact of environmental litigation. There are
ways to address it, and the Judiciary Committee is doing some
of that. That is not my point here.
The second point in sue and settle--and this is very, very
specific because there is great data from the Department of
Labor--when sue and settle occurs, it is a specific regulation
on a specific industry. Take Utility MACT, take NSPS, take
whatever you want, but that regulation is targeted at an
industry. Jobs will be lost in that industry.
And let's assume that everything that the other side says
is true, that jobs are created somewhere, and there is full
employment everywhere, and, in fact, more jobs are created. But
what your own statistics from your Department of Labor show is
that the jobs that are created aren't created in the same
communities, they are created in different communities. So what
happens is you have a real person with a real job that is lost
in a real community that is impacted; and then on the other
side of the equation, you have jobs created somewhere that they
can't get.
Let me give you the statistics, because this is really what
the key is. The Bureau of Labor Statistics every 3 years does a
study of displaced workers, and the sampling is of about, just
so we've got the numbers, 15 million workers. And of the 7
million workers that were what we would call long-term
displaced, they didn't have a job for 3 years--or they had
worked for 17 years, but were out of a job during the survey--
out of that, out of those 7 million workers, a majority of
those workers were not able to get a job during the entire
survey period, meaning that if the survey was 2007 to 2009, in
2010 51 percent of those workers did not have jobs. Now, that
is displaced from all, and we've got to keep that in mind. But
once you lose a job in an impacted area, you're not going to
get another one. And of the 49 percent who actually ended up
getting jobs, we have 55 percent getting lower wages.
So when you look at the impact of regulations, you look
at--and litigation, you look at it twofold. One is you don't
create the jobs, and that, I think, the Project No Project
study clearly determines. And the second part of it is when you
lose a job due to a regulation, even if jobs are created in
other industries, that community is really impacted and that
worker is impacted, and that's something we have to keep in
mind.
And the most frustrating part is that since 1977, this
Congress mandated that EPA do a continuing analysis of job loss
and shifts in employment due to regulations, and in 35 years
the Agency has never conducted that study. And this is what is
so frustrating about it. On one hand, we want to turn
everything into a mandate and let the Agency do what it wants,
but Congress can give the Agency a mandate to worry about jobs,
and the Agency won't do it.
Thank you very much.
Mr. Lankford. Thank you, Mr. Kovacs.
[Prepared statement of Mr. Kovacs follows:]

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Mr. Lankford. Mr. Pruitt, I know you have got to be able to
scoot out of here as well. You are excused from the panel.
Thank you for being here.
Mr. Pruitt. Thank you, Mr. Chairman.
Mr. Lankford. Mr. Percival.

STATEMENT OF ROBERT PERCIVAL

Mr. Percival. Thank you, Mr. Chairman. Thank you for
inviting me. I am Robert Percival, the director of the
environmental law program at the University of Maryland Law
School.
I'm afraid I'm going to be a bit of a skunk at the party.
I've been practicing environmental law for 31 years. When I
first started practicing environmental law, it was during the
early days of the Reagan administration. And what I've heard
here today is complaints about how environmental regulation,
which had long been a bipartisan issue, is killing jobs and
killing the economy.
Every time a new major program was being implemented, the
feature of environmental law in the United States that has so
distinguished us is the fact that we have citizen
participation. We allow for citizen suits, and virtually every
major program had to be implemented only because the agencies
were forced by citizen suits to implement it.
As Congresswoman Speier indicated, most lawsuits brought
against the EPA are actually brought by industry groups. That's
part of the system. We allow ordinary citizens to go into court
to make sure that EPA abides by the law.
When the Reagan administration proposed to phase lead out
of gasoline, there were cries of doom, we were going to have
gasoline shortages. It has been one of the most successful
environmental regulations in the world, adopted by virtually
every country in the world.
We had a very healthy economy until the global economic
problems in 2008. At the same time we had environmental law
that made us the envy of the world. All you have to do is go to
China, as I do fairly regularly, and you see these young
public-interest lawyers in China who would love to have a
system like we have where they can hold their government
accountable.
And what I have heard today is that illegal regulations are
being adopted, that the public is being cut out of the process
because of these settlements. Similar charges were investigated
way back in the Reagan administration in 1986, when Attorney
General Edwin Meese came up with the Meese Memorandum to
provide guidelines for what agencies could agree to when they
reached settlements. And as I indicated in my testimony,
settlements are a prominent feature of the U.S. legal system,
and they're expressly favored by public policy because they
have so many benefits.
The characterization of collusive litigation and sue and
settle, I believe, is simply a fantasy. To be sure, agency
policies are going to change when there is a change in
Presidential administration. Administrations have the ability
to change course, and if we have a new Republican
administration coming into office in January, you may see a
situation where EPA is more frequently reaching settlements
with industry groups.
But there has not been any change in EPA that has in any
way cut out the public from the process. There are already very
important safeguards that prevent that; standing requirements
that require concrete adverseness among litigants, the need to
obtain judicial approval of settlements, and, most importantly,
the requirements of the Administrative Procedure Act that
preclude agencies from making commitments concerning the
substance of rules.
The D.C. circuit and other U.S. courts of appeal have not
been shy about striking down EPA regulations, as Mr. Martella
well knows, if they are, in fact, illegal, or if the
Administrative Procedure Act has been violated. But the charge
that EPA is out of control and as a result acting illegally I
think was quite well refuted on Tuesday when the D.C. circuit
came down with its Coalition for Responsible Regulation v. EPA
decision upholding EPA's greenhouse gas regulations, saying
that everything EPA did essentially was correct.
So I simply am not on board with the notion that we need to
do more to discourage settlements. I think that will only make
it more difficult for agencies to benefit the public, whether
it's in a Democrat administration or a future Republican
administration.
Thank you.
Mr. Lankford. Thank you, Mr. Percival.
[Prepared statement of Mr. Percival follows:]

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Mr. Lankford. Mr. Yeatman.

STATEMENT OF WILLIAM YEATMAN

Mr. Yeatman. Chairman Lankford, distinguished members of
the subcommittee, thank you very much for inviting me to
testify this morning. My name is William Yeatman. I work at the
Competitive Enterprise Institute. We are a free-market think
tank here in Washington, D.C.
Wonderful. I am getting a visual aid.
I am here this morning to speak to you about how EPA is
using the sue-and-settle--so-called sue-and-settle consent
decrees to usurp the States' rightful authority on regional
haze.
First a short primer on the regional haze regulation. It's
a Clean Air Act regulation, and its purpose is to improve the
view at national parks and wilderness areas. This point bears
repeating. It's an aesthetic regulation, not a public health
regulation. Due to this fact, the Congress intended for the
States to be the lead decisionmakers on regional haze policy,
on visibility improvement policy.
Despite State primacy, the Environmental Protection Agency
has already imposed three Federal implementation plans for
regional haze on Oklahoma, New Mexico and North Dakota over the
staunch objection of State officials. EPA's plans would cost
almost $400 million per year more than the States' plans, which
were crafted with all due process over the course of years. Sue
and settle featured prominently in EPA's actions in these
Federal implementation plans, and I'll briefly sketch out how
it worked for each of these States.
In a northern California court, EPA agreed to deadlines on
regional haze as part of a settlement agreement with Wild Earth
Guardians. The States were not notified and were not part of
this agreement. They were notified after the fact, but were not
part of the agreement.
On the eve of the consent decree deadline, EPA objected to
the process used by States for their regional haze
determinations. They didn't take on the determinations directly
due to State primacy accorded by the Clean Air Act on regional
haze policy. Instead, they objected to the process. Usually it
was the State's cost-effectiveness analysis. That's what they
went after. This didn't reject the State's plan outright;
rather, it held it in abeyance, sort of holding pattern. Then
EPA claimed that, pursuant to the consent decree, it had no
choice but to run roughshod over the State and impose its own
preferred plan, Federal implementation plan.
So that is how it has worked in each of these three States,
this three-part strategy, already, and as I mentioned,
Oklahoma, New Mexico and North Dakota, $400 million per year of
cost over what the States had determined was necessary to
comply with the regional haze rule. EPA's proposed fix for
Wyoming and Nebraska, these would cost $120 million per year
more than the States' plans. Utah and Arkansas are likely next.
And for what? What is the ultimate benefit of these Federal
implementation plans? Thanks to Colorado State University
professors, they have actually created software that allows us
to visualize visibility impairment. It is known as WinHaze. It
is available on the Internet for free. I downloaded that
software. I input the EPA's own data, its own baseline data,
and its own visibility improvement data. What I found was
rather striking. I have two images to convey what I did find.
On the left here, this is Oklahoma, Wichita Mountains
National Park. This is the most affected Class 1 area of the
EPA's Federal implementation plan for Oklahoma. This is the
result. This is the putative benefits of the regulation right
here.
On the left we've got the State's controls. On the right
we've got EPA's controls. Notably, this is the largest
disparity between State and EPA controls. This is the biggest
improvement engendered by any of EPA's actions on regional haze
today. This improvement, quote/unquote, was worth $282 million
per year in control costs, in compliance costs. So this is a
side-by-side photo.
Up on the monitor--aww jeepers, we had it there right
before, but perhaps it's the not there anymore. We'll get it
back.
Up on the monitor, in addition to side-by-side images,
WinHaze, the aforementioned software, allows us to do split
images, so it's, in essence, a melding of two. On the left
half, those are the State controls. On the right half, right 50
percent, those are EPA's controls. The split image is meant to
accentuate any difference between the two visibility results.
As you can tell, or at least certainly to my eyes, there is
no difference. Even the split image, which is supposed to
accentuate the difference, is invisible. I cannot tell the
difference. Last night at the Competitive Enterprise Institute,
I lined up my colleagues and had them each look at this
placard. None of them could distinguish a difference. So in
essence, it appears to be all pain and no gain with respect to
this regional haze regulation.
That concludes my testimony. I look forward to taking your
questions. Thank you very much.
Mr. Lankford. Thank you.
[Prepared statement of Mr. Yeatman follows:]

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Mr. Lankford. Thanks to all of you.
I now recognize myself for 5 minutes, and we will begin
some rounds of questions here.
Mr. Martella, you've dealt with this in the past. Tell me
what is typical in the EPA for a consent decree and working
through the process, because you had mentioned it's not
inappropriate, and I would agree with you that not all
settlements are inappropriate. But you also outlined a couple
key statements. You said that we have to deal with the actual
public policy and make sure the public is engaged in that.
What would you set as a policy for this? Mr. Percival
mentioned the Meese memo on it in the past. Is there a certain
process that you would look at for that?
Mr. Martella. Sure, and thank you for the question. I would
like to clarify that. I fully support settlements and consent
decrees in every opportunity. In an ideal world, all litigation
would be settled. I was a Justice Department attorney before
EPA, and my incentive was always to settle over going to trial,
as it is today.
I think, though, you have to look at a number of factors,
the first being the merits of the case that's coming in. It's
not in the government's interests to be settling frivolous
cases. And so for the group, whether it's an industry group or
an NGO group, I am not trying to, you know, preference one over
another, any group that comes to the EPA and says, we are going
to assert this frivolous claim to get you to do something, will
you settle it with us, the agency should be comfortable
standing up in court and telling the court, this is frivolous;
we are not going to be giving up our discretionary obligations
just because somebody wants us to.
I think, unfortunately, that is my gripe is that I'm seeing
a lack of willingness to defend cases I think are frivolous, or
at least where legitimate arguments could be made to defend
them, and the result is it's shifting resources. All of a
sudden EPA is now adopting the folks who are coming in, their
policies and their priorities as opposed so what the Agency's
priorities are.
Mr. Lankford. Let me ask you about that then. The citizen
suits that are set up there are really designed to force EPA to
do its mandatory responsibilities. Am I correct on that?
Mr. Martella. That's exactly what the intent should be,
yes.
Mr. Lankford. Correct. So if a citizen suit pushes them to
do a discretionary responsibility, has that extended their--the
NGO's ability to be able to then take something as uniquely
EPA's responsibility?
Mr. Martella. I think that's, you know, fundamentally kind
of transforming the purpose of the citizen suits. A citizen
suit, as you point out, is the government was required to do
something, it didn't do it. When you now enter the realm of
we're going to make you do something you're not required to do
because we think it is important even if you don't think it is
important, the government has limited resources, and that
becomes a fundamental reallocation of resources.
Mr. Lankford. Can a citizen suit also create a new policy;
change previous policy and create a new policy off a citizen
suit?
Mr. Martella. Right, and we saw that in the New Source
Performance----
Mr. Lankford. Is that appropriate? Is that an appropriate
use of a consent decree?
Mr. Martella. I don't believe that's what Congress
intended.
Mr. Lankford. So we've got some basics here. If it is a
mandatory responsibility, and it doesn't extend to new policy,
then you would suggest that is a better policy; that if a
consent decree creates new policy or expands an existing
policy, or if it mandates something for future administrations
of something that's clearly discretionary, then it's also
expanded beyond its bounds.
Mr. Martella. I would agree with that.
Mr. Lankford. Are you familiar with the Meese memorandum
Mr. Percival mentioned before?
Mr. Martella. Yes, sir.
Mr. Lankford. I would ask unanimous consent to submit the
Meese memorandum for the record. Without objection.
This highlights three areas. It says the department or
agency should not enter into a consent decree that converts
into a mandatory duty otherwise discretionary authority.
The second aspect of this is departments or agencies should
not enter into a consent decree that either commits the
department or agency to expend funds that Congress has not
appropriated and that have not been budgeted for the action in
question.
And the third thing, the department or agency should not
enter into a consent decree that divests the Secretary or
agency, Administrator or his successors of discretion committed
to him by Congress or the Constitution where such discretionary
power was granted with the changing circumstances.
Any issues with those three?
Mr. Martella. I think those are principles that I would
hope would be vigorously applied to today. They are sound
principles both intended to preserve the government's own
ability to set its own policies, but also avoid an infinite
loop where people are constantly forcing the government to new
obligations that it can't meet, and people go back to court,
and it ends up being less efficient for the courts.
Mr. Lankford. Right. This is currently not what we're doing
now, right?
Mr. Martella. I would argue we've given examples today of
things that are inconsistent with those principles.
Mr. Lankford. This is really about process. This is not
about trying to throw out all citizen suit possibilities. This
is about trying to see if process is being followed through
correctly, and if we are achieving the end result or if we are
creating new legislation in a way that is outside of this
Congress.
Mr. Martella. It's about public participation, it's about
transparency, it's about affirming the principles of the
Administrative Procedure Act that Professor Percival referred
to.
Mr. Lankford. I was very interested in the fact that when
the consent decree was formed dealing with Oklahoma, when that
decree was formed, there were some timelines that were set on
those, and for those timelines to change or to get an extension
of those timelines, the State of Oklahoma would have to return
to the environmental groups to request permission for an
extension of the timeline.
Do you see that being appropriate, that a State would go to
an environmental group to request permission to have an
extension with the EPA? Does that seem like an appropriate
extension to you?
Mr. Martella. I don't want to speak for the Attorney
General, but I would imagine that States would be very
concerned about their sovereignty being intruded upon.
Mr. Lankford. That seems just a little odd to me that in a
consent decree that's been signed off on, that we don't come
back to the EPA for an extension permission, we go back to
environmental groups to acquire permission for that.
With that, I would like to recognize Ms. Speier for 5
minutes.
Ms. Speier. Mr. Chairman, thank you.
And let me say at the outset, I have a great deal of
respect for the chairman. I think there are some issues here
that could really be looked at, and I'm willing to do them. But
I must say that doing it in this manner doesn't get us to a
constructive resolution.
To Mr. Martella, you suggest that maybe sometimes we should
be defending cases. I think one of the questions we need to ask
is is there enough staff to defend these cases? If you don't
have enough staff to defend the cases, then sue and settle is
exactly where we're going to go.
To Mr. Kovacs, your comments about regulation and how it's
a job killer is something that is articulated over and over
again. But I look to the deregulation of the financial services
industry with the Gramm-Leach-Bliley Act and with the number of
laws that were passed by this Congress after that act, and we
now have 50 million people out of work in this country because
the financial service industry came to a shutdown, and this
government had to bail out that industry to the tune of over $1
trillion. So in terms of jobs lost, I think you can make the
case that when you deregulate, sometimes there is greater job
loss.
Now, to you, Dr. Percival, I'm going to turn over the rest
of my time to you, because I believe this hearing is, frankly,
not as constructive as it could be. I would like to do a whole
hearing on the haze in Oklahoma, because if, in fact, that is
what is presented by Mr. Yeatman, then we should look at it,
and we shouldn't have third parties dictating to States whether
or not there's an extension. Those are legitimate issues we
should be talking about. But I'm not interested in kangaroo
hearings, and that's what I think this is.
So, Professor, please make any comments you would like to
make about what everyone else has said.
Mr. Percival. Thank you.
I still, you know, come back to the point that this is not
a situation where third parties are dictating what regulations
are adopted. That still has to be done through the
Administrative Procedure Act. Now, it is true that EPA, when it
fails to perform a mandatory duty, then can be hauled into
court, and a schedule is negotiated for how you're going to
cure this violation of law.
The Meese memorandum, which I wrote the Law Review article
that I submitted with my testimony about, I thought was unwise
policy because it was designed essentially to say that the only
remedy for the government not carrying out the commitments we
make in a settlement should be reviving the litigation rather
than having an enforceable consent decree that actually
increased the value of the government's work.
Now, you say if it's true that the haze rules are
outrageous and illegal, the tenth circuit steps in, you get
them overturned in court. We have that open process, and EPA
will have wasted a whole lot of time doing something illegal.
People said that's what they were doing with respect to
greenhouse gas emissions, but the D.C. circuit has confirmed
that that certainly wasn't the case.
The argument that somehow this private group is going to be
able to dictate whether or not there could be an extension of
time, if EPA feels it needs an extension of time, it can ask
the court for an extension of time, and its word is probably
going to be given some deference. But what we have seen in case
after case is a situation where rules that Congress mandated be
adopted a decade ago still have not been promulgated, and
deadline after deadline passes, and sometimes courts say,
enough is enough, and the rule ends up getting promulgated,
but, as I mentioned in my testimony, even then the agency is
free to reconsider them if they think that the rules are not
adequately supported.
Ms. Speier. You have more time.
Mr. Percival. Oh, okay.
So what I would like to emphasize is that this is well-trod
territory. Since 1986, when there was the big kerfluffle over
the Meese memorandum, this charge was made that somehow
environmental groups were dictating the priorities of EPA. When
everyone looked into it, it turned out it wasn't true then.
There is absolutely nothing that has fundamentally changed
about EPA during the Obama administration. It's not a situation
where the Agency is being dictated to by a group of
environmental groups.
If, in fact, it's true that the agency is being sued in a
situation where it does not have a mandatory duty, then the
plaintiffs don't have a leg up in court. They don't have any
possibility of winning that lawsuit. And that can be challenged
when the court is trying to approve a consent decree if, in
fact, they're trying to say this is a mandatory duty and it's
not.
So I'm saying the system works pretty well for both
industry and environmental groups. EPA unfortunately gets beat
up on by all sides, has its budget cut and the like, and the
result is that you see a situation where the Agency is always
the bogeyman, and occasionally, because our judiciary functions
so well, you see a decision like the decision on Tuesday
upholding the greenhouse gas regulations that tells the Agency,
you are doing something that, in fact, complies completely with
the law.
Ms. Speier. Thank you.
Mr. Lankford. I would like to recognize Mr. Kelly for 5
minutes.
Mr. Kelly. I thank the chairman.
I do believe this is--I would not use the term ``kangaroo
court.'' I really am interested, Mr. Martella, I've watched
this. Coming from Pennsylvania, I am watching now what's going
on. If we could go to just a little bit of background.
We're having coal plants shut down, all right? I know that
there's 11 plants in Pennsylvania just shutting down. Slide
number 3, if you could just go to that, please, for a minute.
This is the President before he became President: ``So if
somebody wants to build a coal-powered plant, they can; it is
just that it will bankrupt them because they're going to be
charged a huge sum for all that greenhouse gas that's being
emitted.''
Now, I watched another clip this morning of the President
explaining how cap and trade would work because some people
just don't get it, so you have to force feed them into this,
which I think is kind of an unusual take on things. I think
there's a much better way to do it.
With New Source Performance Standards, let me ask you, what
was the Sierra Club--what was their involvement in the New
Source Performance Standards?
Mr. Martella. Well, what we know is December of 2008, the
Sierra Club wrote an article that was public saying that their
goal for the administration was to set a New Source Performance
Standard that would make sure that no new coal-powered power
plant could be built. Two years after that, the administration
entered into a settlement with them setting a deadline for
proposing such a standard. That agreement was entered into. It
affected both the utilities and refineries, but no one ever
consulted with the utilities and refineries in setting the
schedule.
Just a couple months ago in March, the EPA enacted the very
proposal that looked identical to what the Sierra Club had
written in 2008, and, again, without any prior consultation
with the industries actually impacted by the substance of the
proposal.
Mr. Kelly. Without objection, Mr. Chairman, I wanted to
enter into the record the newsletter from the Sierra Club.
Mr. Lankford. Without objection.
Mr. Kelly. I am interested, because this process that takes
place, you call it an off-ramp decision, and so for those of us
that come from the normal world, the regular world, the
commonsense--and I don't mean to in any way diminish people
that come from the legal world where they use--things don't
have to make sense to you, commonsense, you have to have a law
decree to understand some of it.
I believe that if you're not at the table, you're on the
menu. So when we have these decisions being made by groups, and
it comes forward like that, would you have--in your former
position at EPA, would you have litigated the New Source
Performance Standards?
Mr. Martella. I believe, you know, I would have liked to
have seen the government stand up in court and explain why it
should not be forced to do this. And, in fact, Congress has
given EPA a process that would have solved this for everybody
without having invoked this impact. EPA could have done an
Advanced Notice of Proposed Rulemaking. That would have allowed
it to study the issue. Everyone could have been at the table. I
share your point, everyone should be at the table. But it
wouldn't have had the immediate impact of shutting down coal-
fired power plants.
So there was clearly was an option before EPA that I would
have advocated for to go with an Advanced Notice of Proposed
Rulemaking that would not have had the immediate impact while
shutting folks out.
Mr. Kelly. Okay. So was there a mandatory duty?
Mr. Martella. I would have been--if I was back at the
Justice Department, I would have been very happy to stand up in
the court and argue to the court there was no mandatory duty
here. I would have felt very comfortable with that argument.
Mr. Kelly. And I think--listen, I don't think there's
anybody in this country that doesn't want clean air and clean
water. I think we are all serious in that. But there is also a
factor of our economic freedom. And as we continue to take a
look at this--I'm just trying, coming out of the private
sector, understanding as we continue to turn on our back on
things that are very abundant, accessible and affordable, which
I believe in the fossils, we are turning our back on those and
going in another direction that really costs the American
consumer, which is who we represent, the American people, not
just Republicans or Democrats, but everybody. Their costs of
living under some of these new regulations are going to
skyrocket because energy costs are going off the board.
As I said, in Pennsylvania we see power plants shutting
down all the time. The trend is, okay, well, fine, we're going
to go to natural gas. And now we are finding out, you know
what? Well, you know what, that's a little bit better than
coal, but we're finding problems with that, too. So sometimes
you can mandate yourself into a situation where it's so
untenable.
Mr. Kovacs, because I do believe it's about jobs, I really
do, and if we're going to turn this thing around that we're in
right now, this decline that we're in, it's going to be about
getting people back to work and having more people being able
to obtain the standard of living that makes sense and they can
support a family on.
There's a slide. If we can go to slide number 4. I think
this is really something that we need to take a look at.
This is a statement that was made by Curtis Spalding. He
says, ``Lisa Jackson has put forth a very powerful message to
the country. Just 2 days ago, the decision on greenhouse gas
performance standards and saying basically gas plants are the
performance standard, which means if you want to build a coal
plant, you got a big problem. This was a huge decision. You
can't imagine how tough that was, because you got to remember
if you go to West Virginia, Pennsylvania, and all those places,
you have coal communities who depend on coal. And to say that
we just think those communities should just go away, we can't
do that. But she has to do what the law and the policy
suggested, and it's painful. It's painful every step of the
way.''
Now, this is about jobs, and you mentioned some metrics
about the numbers of jobs that were being walked away from.
Mr. Kovacs. Sure. The Bureau of Labor Statistics does this
displaced worker survey, and it's 7 million. So this isn't a
random survey. It's 7 million for long-term unemployed. If you
take long-term/short-term, it's 15 million. So we're talking
about whoever is unemployed and displaced. And what it finds is
that the workers who lose a job, the long-term workers, the
coal miners, the person who works in the utility plants, does
not get a job within the survey period, which is a 3-year
period. And after the survey period, 51 percent of those long-
term workers who were unemployed--and this is going to a
regulation that takes an industry out--51 percent of those
still did not have jobs afterwards. And of the 49 percent who
got jobs, 55 percent were below what they made before.
So that's the impact. And of the jobs that are created, if
you take a job out of Pennsylvania or West Virginia, and you
build a battery plant in Michigan or California, they're
different workers. So you have a real-life impact on the
workers where the displacement occurs, and you have a
theoretical or modeled worker somewhere else.
But the second point, which is, I think, more important, is
that since 1977, Congress imposed a very--mandated a duty on
EPA--the language is ``shall''--mandated that when they do a
major regulation, that they do a jobs analysis and a shift in
employment analysis. And that was specifically to find out what
is the impact of these major economic regulations. And EPA has
never done that, and that is mandatory.
And what I think, and this is my last point, as I listen to
this, we're talking about mandatory duties and discretionary
duties and how you convert them, but here is a clear example of
a mandatory duty that EPA has never attempted even to do, and
that's really where I think the disgrace is, because they had
the opportunity to link up what they were doing, what the
Bureau of Labor Statistics were doing, and to find out what the
impact of the regulations are. And if there was true public
participation, and they truly cared about jobs, then they would
be doing that analysis.
Mr. Kelly. Thank you.
Mr. Lankford. I'd like to recognize the ranking member Mr.
Connolly.
Mr. Connolly. Mr. Chairman, I know at the full committee we
have descended into the bad habit of prejudging the outcome of
a hearing in the selection of the title. I had hoped we would
not do that in this subcommittee. To have a hearing entitled
``Mandate Madness: When Sue and Settle Just Isn't Enough'' kind
of gives away the game. I don't think it's an intellectually
honest pursuit. I don't think this hearing is an intellectually
honest pursuit.
I'm glad, I guess, you have provided a forum for folks who
don't like the Environmental Protection Agency or don't like
environmental regulation to have a forum. And I can't express
enough my disappointment in the structure of this hearing and
in the title itself.
I'm all for an honest intellectual pursuit of the issue of
unfunded mandates or burdensome mandates that may, in fact, be
unproductive. I come from local government, where we had a
struggle with that ourselves. I'm not unsympathetic. But to
basically simply provide a forum for ranting about the EPA and
its mission with very little empirical evidence to back it up
is very troubling to this Member of Congress.
Mr. Connolly. I had hoped we would continue, or try to
continue, a tradition in this subcommittee where we actually
pursue issues in as neutral and objective a way as possible. I
don't think that's going to happen here, and I register my
disappointment.
I yield back.
Mr. Lankford. I would--I would say that it might be good to
go through some of the notes in the testimony and such that is
here to be able to examine the process and how things have
significantly changed in the process of this, because there has
been a significant change. This issue is a process issue, and
that has shifted, and it needs to be an appropriate process so
the citizens have the opportunity to hear and be heard.
Mr. Connolly. Mr. Chairman, may I ask, is it your
contention that the title of a hearing called ``Mandate
Madness'' is an objective title? That's just an objective,
honest pursuit of public policy?
Mr. Lankford. You know, the hearing itself deals with the
policy issues. This is not a hearing about a title. This is a
hearing about the facts in the case.
Mr. Connolly. Titles--titles matter, Mr. Chairman.
Mr. Lankford. Yes, they do, but the facts matter even more.
Mr. Connolly. Well, I think the facts get skewed when the
title clearly channels those facts in a certain direction.
Mr. Lankford. Well, fortunately, this is not a court. This
is a case where we have to bring things to light, and it has
been done by----
Mr. Connolly. It most certainly is not a court; otherwise a
fair hearing on both sides would, in fact, be provided.
Mr. Lankford. We would be glad to have a fair hearing for
all people involved since we have consent decrees that don't
give a fair hearing to all involved. That would be wonderful.
Mr. Connolly. That's your opinion, sir. That's not my
opinion.
Mr. Lankford. I recognize Mr. Labrador.
Mr. Labrador. Mr. Chairman, that's actually the purpose of
a hearing is to share both opinions, but apparently one side
only wants their opinion heard and not the other. And we've
actually been holding a hearing so we can give the other side
the opportunity for them to actually state their opinions, but
instead they want to just make statements about the fairness or
unfairness of this hearing, which is rather shameful.
Mr. Kovacs, I just have two questions for you, and then
take as much time as you want, and then I'll yield the rest of
my time to the chairman. But I just heard Professor Percival
state that there has been no change between the Bush
administration and the Obama administration with respect to the
EPA. Can you recall who in the Bush administration said that
there was a plan to crucify regulated industries? Do you know
what I am referring to?
Mr. Kovacs. Yes, sir.
Mr. Labrador. Can you explain what the change has been
between the Bush administration and the Obama administration?
Mr. Kovacs. Well, certainly the--let's take a step back as
I answer this. And to make it very clear, we're not here to
argue that we want to eliminate citizen suits or what is
mandatory and what is discretionary. We're here to say that as
the EPA begins to exercise its discretion as to whether to sue
or not, that the impacted parties need a seat at the table. And
by a seat, we don't mean sitting there and negotiating, but
when the environmental group and the EPA come to that
understanding, before it is filed with the court and has a
court order attached to it, did it go out for comment. And if
there is an impact on the--on the regulated community, that
they have a right to use intervention within that court.
Right now the regulated community is locked out of that
process. And so what happens, as I explained in my opening
statement, is once the decision is made, the chances--and there
is a court order, the chances of reversing that are virtually
nil through the process. That decision has been made.
So when you get into asking the question, how have things
been different, the issue of sue and settle has been around for
decades, and that's why you have the Meese memo. The Reagan
administration looked at it and said, this is not a process
that the government should be actively involved in because
it's--it's ceding the discretion of the agency to private
groups, who then, because of the consent decree, literally have
an involvement in that issue forever. And just the comment was
made before where you have to go back to the environmental
group to change the deadlines.
The private party actually by contract gets a right. Let me
repeat this. The private party by contract gets a right to be
part of the supervision, not the regulator community, and,
frankly, EPA cedes its authority.
So what has changed is although you had sue-and-settle
agreements going on for decades, right now you have, as the
chairman mentioned in his opening, somewhere around 60 of them.
And they're filed--like in regional haze that William Yeatman
was talking about, the States of Oklahoma, North Dakota, and
New Mexico were involved, but the lawsuit was brought in
Oakland, California.
And so the first notice that they--that the States and the
attorney generals and the Governor had was when the settlement
agreement was actually entered and approved by the courts, and
then they got notice. So what's changed is it's gone from a few
a year to being the policy of the administration. That's the
change. And that's the 60 of them that you have.
And in some of these instances, to give you an idea of how
broad they are, there was one in Oakland, California--seems to
be a popular court--where there are actually 28 rules that were
subject to 1 consent decree regulating two-thirds of the
industries in the United States.
Mr. Labrador. Excellent. And I liked some of your comments.
You said that the decision has already been made, that there
has been no opportunity to be heard, but yet this hearing has
been called a kangaroo court. I find that really fascinating.
As you know, the Endangered Species Act is often the
premise to these sue-and-settle rulemakings. Last week I was in
a different hearing, Natural Resources hearing, and we heard
testimony that the EP--that the ESA actually creates jobs. And
in your experience, how does the ESA actually create jobs?
Mr. Kovacs. Well, I always go back to Milton Friedman's
comment when he was--he was in China one time, and he was
asking why they were building a dam with shovels, and the
Chinese replied, well, that's what the regulations call for,
because we are trying to create jobs through--in essence
through regulation. And Friedman's remark was, well, if that's
the case, why don't you just use spoons? You'll create more.
So the purpose of a regulation should be to undertake and
to achieve what Congress intends of the--the public interest.
And in, for example, the Endangered Species, I think, you know,
you do have a situation where you are going to have more boots
on the ground, you're going to have more inspectors, you're
going to have more government paperwork, you're going to have
more petitions for protection. You're going to create jobs
there, but the key is you lose; you lose jobs because the land
that's impacted, and if you go into some of the energy issues,
in many instances is so vast that you've taken large areas of
the United States out of development.
And that's why I keep on going back to the Bureau of Labor
Statistics displaced workers. When a regulation comes in, it
impacts a specific industry. Whether it be coal, cement,
logging, we've got a lot of instances of that. And maybe jobs
are created in Washington, D.C., but the jobs that are lost in
Pennsylvania or New Mexico are not the same, are not--are not--
these people do not get the jobs in Washington, D.C. And it's
the community that's displaced. And I keep on coming back.
These are real workers who are really displaced, whose families
are displaced, whose communities are harmed. And that doesn't
mean that jobs aren't created somewhere else. They might be.
But that community has been harmed by that regulation.
Mr. Labrador. Thank you.
Mr. Chairman, I--it has been my experience as a practicing
attorney for 15 years, and just watching and observing, you
know, debates, that when you can't debate the facts, you resort
to ad hominem attacks.
You're one of the people I respect the most here in
Congress. You've been one of the most fair individuals. And to
come here this morning and listen to two different members of
the minority attack you personally has been pretty distasteful.
I thought I was just coming to a regular hearing, actually a
pretty boring hearing, I thought that it was going to be. But
maybe what we should do is see if the opinions of the chairman
or the opinions of the ranking member prevail after having a
full and fair hearing this morning.
I yield back.
Mr. Connolly. Mr. Chairman.
Mr. Lankford. This is--just a moment. I will definitely
yield to you.
This is what makes America a great country is that we do
have divergent opinions, and all opinions are open here. Of all
places, in the House of Representatives, every opinion should
be heard on that one. And with that, I'd be honored to yield to
the ranking member.
Mr. Connolly. Mr. Chairman, I want to directly respond to
my colleague.
No ad hominem attack was made against Mr. Lankford. My
remarks were strictly limited to the nature of this hearing.
Mr. Labrador. He is the chairman.
Mr. Connolly. He may be. I am the ranking member of the
committee. I still don't like the hearing, and I am entitled to
not like the hearing.
I have never cast a negative word about Mr. Lankford. In
fact, we have worked well together. I consider him a friend.
And I would ask you to withdraw those words, because no ad
hominem attack was ever made against Mr. Lankford in this
hearing.
Mr. Labrador. Before you got here, Mr. Connolly, this was
called a kangaroo court by a member of your party. You came in,
and you had some pretty distasteful statements about this. So
I--I came this morning to hear both sides and----
Mr. Connolly. Mr. Labrador, I can't, any more than you
can--you can't take responsibility for other members of your
party. I can take responsibility for my remarks. I think you
would agree, since you pointed out you practiced law for 15
years, so pretend you're in a courtroom.
What you heard from the ranking member of this subcommittee
was a critique of the intellectual foundation of this hearing
and a critique of the nature of the title of this hearing that
I consider to be intellectually dishonest. None of that had
anything to do with Mr. Lankford as a person or as the chairman
of the committee other than I don't--I don't like the judgment
exercised. But it's not about him personally. Would you not
agree?
Mr. Labrador. We can agree to disagree. Thank you.
Mr. Connolly. Mr. Chairman, I would have hoped my colleague
would have given me the courtesy of acknowledging no ad hominem
attack was made against you by this Member.
Mr. Labrador. I have no further comments. I just made my
comments because I--I was surprised by the nature of the
attacks from your side. But we don't need to debate this.
Mr. Connolly. Well, Mr. Chairman, a charge was made that an
ad hominem attack was made. I would point out to Mr. Labrador
there are actually rules in the House of Representatives about
ad hominem attacks.
Mr. Kelly. Mr. Chairman, could I ask for regular order,
please?
Mr. Lankford. We do need to move on, Mr. Connolly. I am
going to do a quick round here and would be honored to be able
to yield you time in that time just to be able to allow all
voices to be heard, all opinions to be heard.
Mr. Connolly. I would have thought a point of personal
privilege would have been respected, Mr. Chairman.
Mr. Lankford. Well, it has been.
I would like just to do a 3-minute round here of questions
so we can do some follow-up on it and get a chance to pull some
things together.
I would also like to submit for the record, ask unanimous
consent, a letter from the Association of Builders and
Contractors. They make a statement in this letter. With that,
so ordered.
It says, when settlements are agreed to, they're often--
they often mandate that rulemakings go forward and frequently
establish arbitrary timeframes for completion without
stakeholder review or public comment. And they continue on from
there.
Where this originated from was over the past year and a
half, and multiple hearings and multiple settings that I have
been in, I have heard members in leadership and individuals who
work with the EPA say to me, we have to do that because the
court ordered us to do that. They couldn't point to a specific
piece. It was a court order that mandated us to do that.
So it started me on a journey to go back and start to pull
some of these court orders and to say, where did that court
order come from, and exactly what did they order? What I found
is many of these consent decrees did not order them directly to
take a specific action; it ordered them to review policy, as is
appropriate, if it had not been reviewed, and it was a
mandatory responsibility. But then they took that statement of
it has to be reviewed and greatly expanded where it would go
and then hid behind the statement, ``We were ordered by a court
to do that.''
We were also--new policies were created. The NSPS, as Mr.
Kelly mentioned before, where it went from new construction to
now existing construction, that's entirely new policy that's
been created by--without public comment, without input in the
stakeholders. That's something uniquely different than we're
just creating some sort of regulation, running it through the
Administrative Procedures Act; now we're creating new policy
based on the consent decree. That's a giant shift in what has
occurred.
There are also moments where outside litigants are placed
in authority over States, or States are not given primacy to
make a decision. Now they have to request permission of a
litigant, and the States were not given the opportunity to be
at the table. What we have is a situation where the people that
are affected by it do not have the opportunity to actually
address their grievance. They don't have an opportunity to be
able to express that unless they have a court case, unless they
go through a process and try to reverse something, which is
difficult to do. As Attorney General Pruitt mentioned before we
are currently in the tenth circuit in Oklahoma and just had a
stay because it was extended too far. It was a case gone too
far.
Now, that is very difficult when you're planning for a
power plant construction that is incredibly expensive and very
capital intensive, now you don't know what the rules are. And
at any moment they could shift, and you have to sue and
countersue and try to work through the process, all the time
planning on a billion-dollar construction project. This creates
instability.
We have a stable process for this, and the concern is that
we're shifting away from that stable process, and we're now
creating regulations based on preferences and based on a
consent decree without the appropriate people at the table. And
I'm simply asking the question, who sets the timelines, who
comes up with this, who has the opportunity to actually speak
and comment into these issues, and shouldn't it be the people
that are affected.
With that, I would like to recognize Mr. Connolly for 3
minutes.
Mr. Connolly. Mr. Chairman, I have no questions for this
panel.
Mr. Lankford. Mr. Kelly.
Mr. Kelly. I thank the chairman.
And, Mr. Martella, I want to go back to this, because I
think what the chairman is hitting on is something that's very
critical here. Of course, it looks--the court's only accepting
the parties' agreement to settle and not adjudicating whether
the EPA's legal position is correct, and I think that goes to
the crux of the problem.
Now, we can tap dance around all of the other issues, but
the truth of the matter is when we change, and there's a new
administration that comes in, they also have the ability to
appoint to these different agencies the structure of it and how
it's going to go forward. So if I have an agenda in place, what
I do is I place into effect people who are going to go along
with my agenda, and then I tell them, you know what, we got a
problem, we can't legislate it, could you possibly take us to
court, sue us, and then we'll settle out of court, and then it
will become law without the judiciary system? So please explain
that to people, because I think that's where we're missing the
point today.
Mr. Martella. And I think, you know, that' the contrast
between what our democratic system, you know, wants and then
what is happening in some cases. Our system is all about
transparency, that--the notion that government leaders are not
going into back rooms with a subset of folks who are interested
by things. It's all about public participation, that everyone
has an equal role to play in a process, and it's about having
an opportunity to challenge things in court.
I think some of the examples you've heard today, again,
we're not here to say settlements are bad things. What we're
worried about is when we don't have that level playing field of
transparency and public participation.
And just to give you one more example, back to NSPS, when
EPA entered the consent decree with NGOs, there were other
parties in the litigation. Trade associations had intervened,
and in order to intervene in a case, it's not automatic. You
have to prove to a court that you're adversely impacted, you
could be adversely impacted by this case. And then the court
says, okay, you could be harmed here, so I'm going to give you
a right to participate.
The concern with the NSPS is despite the fact the court had
already found those parties could be adversely impacted, they
were at no point part of the settlement discussions. They were
never brought into the room. And that's what, to me, I think,
is kind of the fundamental flaw I have with our notion of
transparency and public participation.
Mr. Kelly. And I've got to tell you, when I'm back home in
western Pennsylvania--the thing about the American people, they
trust us so much with the process, and they have great faith in
the process until they find out they've been gamed.
Mr. Martella. Right.
Mr. Kelly. And so if I can effectively structure a
situation to come out with the answer that I need or that I
want and somehow do an end run, it's not what made America
great. And I think that's the thing that frustrates us all. And
when we look at why people are losing faith in the way the
Federal Government works, it is because we have been able to
take what was there and available to us, and tools that were
supposed to be there for all people, and we have gamed them by
people who know how to maneuver.
And I got to tell you, it is deeply disappointing to me to
sit and watch this and have it come down to something that it
was never supposed to. It has morphed into something entirely
different than what the American people believe, what they have
faith in, and what the Founders started off with to begin. And
that's where it comes to--the wheels come off of it.
And I appreciate what you have done. And I know that this
agreement came about because it was legislation that was
defeated. So when the legislation went down, we found a way to
game it and do a settlement that becomes law without everybody
being at the table. As I said earlier, if you're not at the
table, you're on the menu. And I'm telling you right now that
we are being gamed to a point where no wonder the American
people are losing faith in the people they have sent to
represent them. So I thank you.
I yield back, Mr. Chairman, and I thank you for your
patience. And thank you for calling this hearing. It is
essential that the people of the United States--not the people
who are in the Beltway understand how to game it, but the
people of the United States understand that they do have their
day in court, and they should have been heard. And when they
find out there was an out-of-court settlement made, that just
rubs them the wrong way. And you know what? It doesn't pass the
smell test.
Mr. Lankford. I would like to thank the witnesses for being
here today. This is a very important issue, and this is
something that has to be resolved.
One of the things this committee has responsibility for is
process, make sure process is followed. We also have a
responsibility of dealing with the relationship between the
States and cities, counties and the Federal Government. And it
is essential that the States, cities, counties do their
responsibility and the Federal Government does theirs. And you
do bring things to light, and I appreciate all opinions coming
out and being able to be shared today. And we will continue on
a process of this Congress checking into these issues to make
sure that we continue to follow through. So, thank you.
With that, the committee stands adjourned.
[Whereupon, at 10:20 a.m., the subcommittee was adjourned.]

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