When Regulatory Policy Sounds Like an Ad

Ask anyone in my family, and they’ll tell you to hide my cellphone when I’m watching late-night TV.  I absolutely love advertisements for products promising better this or faster that, and with unbelievably low prices in three convenient payments to boot.  As a result of my purchases, I have enjoyed juicier chicken, fresher vegetables, and easier kitchen clean-up.

This week in D.C. federal district court, arguments will be presented on a challenge to the Trump administration’s version of a regulatory infomercial – Executive Order (EO) 13771, telling agencies that they have to repeal or eliminate two existing regulations for every new one that they propose to make final.  Sort of like a “Buy One Get Two Free” deal, but without the steak knives.

The Executive Order goes further, by allowing agencies to promulgate only regulations that have combined incremental costs that do not exceed a certain cost cap, once the cost savings of the rescinded regulations is taken into account.

Of all the legislative and policy initiatives laid out by the new administration, regulatory reform has probably advanced more quickly, and with more consequence, than any other.  As we’ve written here, this aggressive posture delaying or rescinding literally dozens of rules across the federal government has triggered numerous cases brought by public interest groups and states under the Administrative Procedure Act (APA).  While those challenges tend to focus on arcane APA requirements of notice and comment or the justification supporting any agency action, the “two for one” Executive Order case cuts more directly to certain fundamental constitutional principles.

In Public Citizen, Inc., et al., v. Trump, the judge will be confronted with the basic definition of executive authority requiring the President to “take Care that the Laws be faithfully executed.”  Of course, the Constitution grants solely to Congress the authority to make those laws.  The Plaintiffs assert that numerous Supreme Court cases expressly limit executive authority to act only within the strictures set by Congress.  Perhaps the most memorable recent example of a decision reinforcing this conclusion was the 1998 Court decision ruling that the Line Item Veto Act was unconstitutional because it allowed the President to amend acts of Congress (in that instance, the budget) by vetoing parts of them.

The Executive Order runs afoul of this constitutional provision, Plaintiffs argue, because there is no direct congressional authorization allowing the executive to make this regulatory “one time only, order now” offer.  Certain statutes have been passed ordering agencies to issue regulations to address one problem or another.  Withholding or delaying action on those regulations until other (likely unrelated) regulations are repealed would improperly substitute the executive agency’s judgment for that of Congress.

“Nonsense,” says the government in its summary judgment briefing.  The President and his delegates in the federal agencies take the costs and benefits of regulations into account all the time, and that authority has never been challenged.  In addition, both Democratic and Republican administrations have routinely ordered a review of old and outdated regulations that should be repealed.  Beyond the President’s inherent authority to manage the executive branch, the government argues that the EO itself states that it applies only “to the extent permitted by law,” so if a particular statute requires regulatory action to be taken, nothing in the EO would alter that obligation.

From a constitutional perspective, the government probably has the better argument here.  In the abstract, the executive branch is granted broad authority to issue rules that implement the will of Congress.  Repealing or updating regulations would appear to be central to that authority.  If Congress passes a law telling the President to issue a regulation and the pertinent agency refuses, that inaction could be properly challenged.  But simply mandating that the agency consider the costs and benefits of its regulatory actions would not appear to be an abuse of executive power or a violation of the separation of powers.  (All of this assumes that Plaintiffs can show actual harm from issuance of the EO, giving them standing to be in court.)

The strength of Plaintiffs’ arguments lies less with the facial constitutional challenge raised in the pending case than it does with how the EO will be applied in the context of a specific final rule.  For example, the U.S. Department of Transportation wants to issue a final safety rule dealing with autonomous vehicles.  There’s no doubt such a rule will cost millions, if not billions, to implement over time.  What two rules would the DOT choose to repeal, and would the agency also calculate the potential safety risks if those rules were no longer in place?  For a significant rule like one addressing driverless cars, where in the world would the DOT find other rules to repeal that would come anywhere near the incremental cost of that single proposal?

It makes sense that environmental and other public interest groups would take offense at the EO and the subsequent implementation guidance issued by the Office of Management & Budget.  The administration’s two for one regulatory policy appears to mandate agency decision-making that could be viewed as divorced from case-specific analysis supporting an individual rule.  Once any federal agency repeals rules pursuant to the EO, that action will likely be subject to an “arbitrary and capricious” APA challenge.  From my perspective, the court will likely find that the President has authority to take these costs into account when finalizing specific rules.  But the Plaintiffs may ultimately be able to get their money back (minus shipping and handling, of course) if, when that authority is applied to a specific regulation, the EO fails to live up to its promises.

 

Environmental Regulation and the Return to Regular Order

Senator John McCain made a dramatic return to the floor of the United States Senate this week following his brain cancer diagnosis.  With the scar and stiches from his recent surgery still healing, McCain took to the floor to implore his colleagues to consider using the Senate’s long-standing procedures to find a solution to the legislative body’s quagmire over healthcare.  In parliamentary parlance, he pleaded for “a return to regular order.”

He received genuine and heartfelt applause, but not a return to regular order.

The departure from legislative norms permeates all aspects of our current political landscape; environmental law is no exception.  As we’ve noted, in the midst of its consideration of various agency appropriations bills, the House is considering a rider that would exempt the proposed repeal of the 2015 Waters of the United States (WOTUS) final rule from review under the Administrative Procedure Act.  As of this writing, that rider remains in the current funding package.

When I first noticed reporting on the WOTUS rider, I ruminated that such a measure may be unprecedented in recent memory, especially considering that the draft rule attempting to clarify the definition of Clean Water Act jurisdiction attracted 1 million comments.  Could they really do that?

In short, yes.  Not only has Congress used the precise appropriations rider language previously – there has also been recent litigation over the constitutionality of that sort of measure.

Here’s the language in question.  It permits EPA and the Corps to “withdraw the Waters of the United States rule without regard to any provision of statute or regulation that establishes a requirement for such withdrawal.”  That’s an exemption wide enough to drive a truck through.  One would think Congress would use such language judiciously.  My initial instincts were incorrect.  Thanks to one of our outstanding summer associates, we uncovered at least nine riders addressing administrative agency action, mostly dealing with the listing or delisting of species under the Endangered Species Act.

Perhaps the subject matter of the various ESA riders indicates why they flew mostly under the radar.  The listing and delisting of the gray wolf in Wyoming and neighboring states was (and remains) extremely controversial there, but that action has nowhere near the notoriety of the WOTUS rule.  The similarities between the exemption precedents go beyond just the legislative language.  As with WOTUS, there was active litigation pending over the agency rules dealing with protection of the wolf when the rider was introduced and passed.

Section 1713 of the Department of Defense Appropriations Act of 2011 directed the Interior Secretary to reissue a final rule that removed ESA protections from the gray wolf species outside of Wyoming.  The rule had been challenged in district court and vacated.  While appeals were under way, Congress tucked in the appropriations rider including the “without regard to any provision” language.  Public interest groups promptly challenged the constitutionality of the rider, arguing that it violated separation of powers by directing a court what to do in pending litigation.

The public interest groups lost.  In Alliance for the Wild Rockies v. Salazar, Judge Donald Molloy reluctantly upheld the exemption statute.  In a fairly remarkable opinion, the judge lamented that “if I were not constrained by what I believe is binding precedent…, I would hold Section 1713 is unconstitutional because it violates the Separation of Powers doctrine articulated by the Supreme Court.”  The judge stated that the rider “sacrifices the spirit of the ESA to appease a vocal political faction,” but in a noble act of judicial restraint, went on to say that “the wisdom of that choice is not now before this Court.”  The Ninth Circuit upheld his ruling. Just last year, a similar constitutional challenge repeated itself in the D.C. Circuit over ESA protections that affect African antelopes, with the same result.

Current debate over the WOTUS rider reflects the philosophical struggle evident in Judge Molloy’s opinion.  One representative argued that the provision “allows the executive branch to act unilaterally” and that the House should let the agencies deal with the rule in the courts, rather than in a spending bill.  Others favoring the rider repeated concerns over the breadth of regulation of waters by the EPA.  Despite objections, it seems likely that the WOTUS rider will survive in any final funding bill.

More and more, we see the legislative branch seeking to impose results on the executive branch, even in the face of pending judicial action.  If a majority of the legislature supports a certain administrative action as a political matter, what better way to ensure certain results than to prevent the judiciary from ever addressing the legality of agency action?  The delineation of the separations of power is more blurry every day.

APA review is frustrating.  Rules take years to promulgate, only to face protracted litigation.  But Congress should contemplate potential damage to “small d” democratic institutions as it weighs APA exemptions.  “Regular order” gives voice to millions of citizens impacted by regulation, not just 535 representatives on Capitol Hill.  It’s a concept worth fighting for.

Now THAT’S Streamlining!

It is a welcome day when headlines focused on infrastructure make the front page.  Of course, they provide inspiration for the blog.  They also take my attention off, well, everything else.

Today’s headline was certainly an eye-catcher:  “Elon Musk says he has ‘verbal’ government approval for hyperloop.”  Anyone spellbound by the possibility of the hyperloop technology would sit up and take notice.  But yours truly, fascinated by both innovative infrastructure projects and methods to permit that innovation more quickly, definitely raised my standing desk to read the article.

“Verbal approval???”  That Mr. Musk had a conversation with someone (unidentified) and that someone from some office (also unidentified) provided some form of government agreement (what kind?) to promote the underground tunneling necessary for the theoretical 29-minute trip between Washington, DC and New York City is intriguing to say the least.

This news came on the heels of the administrations’ latest Executive Order, this one announcing the formation of an infrastructure Advisory Council.  According to the EO, this Council “shall study the scope and effectiveness of, and make findings and recommendations to the President regarding, Federal Government funding, support, and delivery of infrastructure projects in several sectors (long list ensues)… and other such sectors as determined by the Council.”  If the hyperloop team has information concerning how it was able to obtain this verbal approval, I am certain this new Advisory Council would be all ears.

Amazingly, White House officials did not dismiss the idea of verbal assent out of hand.  As a member of a homeowner’s association who has to get approval in writing for the color of any stain I would apply to my aging deck, the notion of a verbal approval for boring a system of tunnels deep under some of our most populous cities (never mind the various entry/exit points necessary to hop off the loop) is liberating.

Such a process would clearly redefine an environmental impact statement – it could simply be someone’s statement!

In all seriousness, this exciting news story highlights the true tension between innovation and regulation.  Advocates of autonomous driving technology are forging ahead at lightning speed, even as safety regulations struggle to catch up or at least stay out of the way.  Drone technology has revolutionized the concept of aerial delivery, even as aviation experts attempt to balance that new form of traffic with existing uses of airspace.  Even now seemingly quaint advances like high-speed rail systems must address fairly typical land use and natural resources concerns.

As much as fans of expedited project approval might applaud the idea of a quick “yeah, go ahead and do that,” the messy part of infrastructure approval – reaching out to affected stakeholders – remains essential.  Inviting the opinions from potential “NIMBYs” may seem counter-productive, but it also informs and, in many instance, improves the underlying project.

The President’s new Advisory Council, the relatively new Federal Permitting Improvement Steering Council, the Council on Environmental Quality, and any other entity now tasked with finding a way to incorporate streamlining into routine project delivery might envy the “verbal approval” model.  It seems more than possible, however, to encourage private sector ingenuity and at the same time employ public disclosure and approval processes to educate even the current and future Thomas Edisons of the world.

 

 

DC Circuit Vacates Stay of Clean Air Act Methane Rule – a Canary in EPA’s Regulatory Reform Coal Mine?

Immediate reaction to the D.C. Circuit’s July 3 ruling in Clean Air Council v. Pruitt spanned the predictable political divide.  The decision was either a major rebuke of the administration’s efforts to rethink a number of environmental regulations, or it merely represented a case-specific blip on the policy radar screen.  A close reading of the majority opinion suggests that EPA’s ongoing reconsideration of a wide range of its own rules might face close scrutiny under otherwise mundane aspects of the Administrative Procedure Act (APA).

In its 2-1 decision, the court grappled with whether Section 307(d)(7)(B) of the Clean Air Act mandated reconsideration of an Obama-era rule establishing standards for fugitive emissions of methane and other pollutants in the oil and gas sector.  Several industry groups petitioned EPA for reconsideration of the rule.  In response, the agency published notice that it would in fact begin the process to review the disputed rule, and in the meantime, would stay enforcement of the rule – just days before the new standards would have taken effect.  At first, the agency announced a 90-day stay; shortly thereafter, it extended that to two years, allowing EPA “to look broadly at the entire 2016 Rule” during its reconsideration.  A broad coalition of environmental groups filed an emergency motion for a stay of the stay (“sit, methane regulation, sit!”) or for “summary vacatur” (“bad agency order, bad!”).

After finding that it had jurisdiction to review the stay – a conclusion drawing a vigorous dissenting opinion – the D.C. Circuit rejected all of EPA’s procedural arguments and vacated the proposed stay.

First, the court held that while federal agencies have “broad discretion” to review a regulation at any time, they all must comply with the APA, including requirements for notice and comment.  Second, the court rejected EPA’s position that it had “inherent authority” to issue a “brief” stay of the final rule.  It found that the agency can act only in accordance with the authority granted to it by Congress, even if only to stay enforcement of a rule.  The court found no such authority in the Clean Air Act.  Moreover, it held that the actual text of the Clean Air Act section in question authorized the agency to issue a stay in those circumstances where EPA is mandated to convene reconsideration proceedings – circumstances found absent in this case.

The court’s first two conclusions are noteworthy.  Many of the current EPA’s actions in the environmental arena have relied generally on the agency’s discretion to revisit rules from the prior administration.  That’s fair game – elections have consequences, as they say.  However, in ways large and small, the APA constrains an agency’s ability to reverse course suddenly.  That’s what notice and comment is all about.  As we noted in this space last week, the proposed repeal of the “Waters of the United States” rule will go through that very process.

Should those rules even apply to an agency’s enforcement of existing rules?  The problem in the methane rule case perhaps lies with EPA’s express announcement of a stay.  Agencies choose not to enforce rules (or at least not to enforce aggressively) all the time.  That policy decision could draw ire from the other branches of government, but in reality, that sort of enforcement discretion goes unchallenged most of the time.  Here, however, EPA expressly stated what it intended while it conducted reconsideration of the rule, and that may have dictated the outcome.

In addition, the agency’s “inherent authority” argument only goes so far.  This proposition swings back and forth like a pendulum depending on who’s running the federal government.  Remember President Obama’s argument that he had “inherent authority” to enforce immigration laws in a particular way that would grant greater leniency to the children of undocumented immigrants?  That position was rejected for many of the same reasons articulated by the D.C. Circuit in the methane rule case.  The line between agency discretion and agency authority can certainly be fuzzy.  If a new administration doesn’t like a certain rule or policy, it can go ahead and change it – so long as it follows the APA playbook.

When the court got to the merits of the Clean Air Act argument, it really wasn’t a close call.  (Arguing that the court didn’t have jurisdiction to consider the case in the first place, the dissent did not address these issues.)  Reconsideration of the rule would have been mandated only had it been “impracticable” for parties to object to certain elements of the rule announced for reconsideration during the initial notice-and-comment period.  In each of the substantive areas identified by the agency, the court found that stakeholders had ample opportunity to comment, therefore making imposition of a stay “arbitrary and capricious.”

At the conclusion of its opinion, the court stressed that EPA has clear authority to reconsider the rule consistent with its Federal Register announcement.  Only the administrative stay was improper given the Clean Air Act section in question and general APA requirements.  As EPA continues to revisit or reconsider a whole panoply of environmental regulations, two things are likely:  The agency will more strictly adhere to notice-and-comment requirements, and it probably won’t announce so boldly its intent to ease enforcement of existing rules.

 

Waters of the United States: The Struggle to “Repeal and Replace” Isn’t Limited to Healthcare

The USEPA and Army Corps of Engineers finally announced what has been expected since Inauguration Day – the repeal of the 2015 “Waters of the United States” (WOTUS) rule.  Not unlike the more prominent political battle raging over the Affordable Care Act, the administration now faces the stern challenge of replacing the controversial rule.  Many of the themes of the healthcare debate are echoed in the struggle over how the government should regulate WOTUS.

For example, will any revised rule work to expand or limit the resources that qualify for protection under the Clean Water Act?

Objections to the 2015 rule focused on the apparent expansion of federal authority over particular water bodies that may not have been covered under the prior interpretation of the Act following the Supreme Court’s fractured Rapanos ruling.  Taking Justice Kennedy’s “significant nexus to navigable waters” test to its logical extremes, certain industry groups claimed, would amount to an unauthorized “land grab” by the federal government.  Indeed, many court rulings since Rapanos have concluded that determination of the status of certain water features is jurisdictional, resulting from fairly tenuous connections between the feature in question and a small stream or a larger river miles from the property.

Defining WOTUS jurisdiction to “relatively permanent” waterbodies that share “a continuous connection” to navigable waters—Justice Scalia’s and the current administration’s preferred articulation—attracts equally vociferous objections from various conservation groups.  They claim that the Scalia test would overly restrict the Act’s jurisdiction, perhaps to the exclusion of important water features they assert are crucial to the health of navigable waters or wetlands that act as natural buffers against severe storms or continued coastal erosion.

In addition, as in the healthcare discussion, any new rule will confront the role of the states versus that of the federal government.

At the heart of the administration’s repeal notice is a return of authority over regulation of waterbodies to the states.  The repeal announcement cites with equal importance the Clean Water Act’s objective to “restore and maintain” the integrity of the nation’s water and the policy to “recognize, preserve, and protect the primary responsibilities and rights of the States to prevent, reduce, and eliminate pollution.”  This leads us to ask, What if a state fails to take action to prevent or reduce pollution?  Who decides what’s enough?  Again, this feels eerily like the debate over giving states authority to decide what health benefits are “essential” for covered patients.  Given Administrator Pruitt’s repeated reliance on the role of state authority over the entire panoply of environmental regulation, this will clearly be a significant aspect of any revised WOTUS rule.

Finally, the WOTUS rule and healthcare policy share the common theme of balancing stakeholders’ need for regulatory certainty with permitting the exercise of commonsense flexibility.

Preserving the rights of states to make or influence jurisdictional determinations under the Act recognizes plain geographical and ecosystem differences across the country.  Yet, promoting a regulatory approach that “one size does not fit all” could leave many regulated industries, like residential and commercial builders, subject to the unpredictable differences between states and between Army Corps districts.  The 2015 rule attempted to answer decades-old pleas for regulatory certainty, but quickly led to certain buyer’s remorse.  Knowing with greater certainty what waterbodies would be covered by the rule across the country didn’t satisfy stakeholders who felt that the clarity offered by the rule went too far.

EPA and the Corps have set a goal of publishing a new rule by the beginning of next year.  While it’s possible they will meet that goal, in order to do so the agencies will have to consider what is sure to be another avalanche of public comment whenever they release a revised draft rule.  They will also have to defend the “repeal” step of the proposed two-step regulatory process against an inevitable legal challenge.  (Congress is said to be considering legislation to curtail any such Administrative Procedure Act challenges – a remarkable action without much precedent.)

I’ll offer some not-so-bold predictions:  Even if EPA and the Corps publish a revised WOTUS rule in final form sometime in 2018, litigation over the rule will continue past the end of President Trump’s first term.  In the interim, uncertainty over the jurisdictional scope of WOTUS will continue.  And the search for the perfect balance of certainty and flexibility in the Section 404 program, like Don Quixote’s quest, will continue, “no matter how hopeless, no matter how far.”  Despite my exercise of poetic license (and my tendency to quote musical theater lyrics), participation in the revised rulemaking is still essential, and should not be equated with tilting at windmills.

We’ll Always Have Paris

32111053371_3660e14ee1_bCertainly nothing in President Trump’s Rose Garden announcement that the United States will withdraw from the Paris climate agreement resembled that bittersweet moment between Rick and Ilsa in Casablanca.  Despite the momentous decision, however, it remains likely that the citizens of this country and around the world “will always have Paris.”

This is not some myopic conclusion or reflection on whether the Paris accord was a good or bad deal for this country.  (By the way, the odds of 190 countries agreeing to renegotiate on Mr. Trump’s terms are about as good as those of the New York Jets again winning the Super Bowl in my lifetime.)  Rather, this view takes into account that the marketplace has long ago embraced the issues associated with climate change and efforts to reduce carbon emissions.

Don’t take my word for it – just two days before the President’s announcement, 62 percent of ExxonMobil’s shareholders voted to require the company to report on the impacts of climate change to its business.  In other words, investors want the company to assess the risk to its bottom line as countries around the world reduce fossil fuel use to live up to goals established in the Paris Agreement.  Similar shareholder resolutions obtained near-majority support in other major industry sectors.

More proof: Renewable energy continues to become more economical, even as government-supported subsidies are phased out around the globe.  A report from the World Economic Forum at the end of last year indicated that renewables, especially wind and solar, have achieved economic competitiveness and reached what it termed “grid parity.”  According to one of the report’s co-authors, renewable energy “is not only a commercially viable option, but an outright compelling investment opportunity with long-term, stable, inflation-protected returns.”  If those trends continue, Wall Street, not Pennsylvania Avenue, will likely dictate the future of the international energy mix.  If he were alive today, John D. Rockefeller might not like that prognosis, but he might very well admire how the market continues to have the power to influence basic human behavior.

Market influence goes beyond the valuation of various companies’ financial risk or individual or institutional investment decisions.  It also impacts consumer choice, ranging from electric/hybrid or zero-emission vehicles over traditional gas-combustion engines to housing preferences that tend to reduce reliance on automobile travel.  Even the rapidly evolving autonomous vehicle industry has the potential side benefit of reduced greenhouse gas emissions.  Drivers may not appreciate how greater use of currently available technology such as GPS guidance or sensors that detect available parking spots can dramatically reduce emissions.  But there is no doubt that progress to more advanced vehicle automation is unstoppable.  Once again, the market has spoken, and Fortune 100 companies in the technology and automobile sectors have listened.

Perhaps as influential as financial markets is the marketplace of ideas.  These take years to shift, but in the context of concern over climate change, attitudes have rapidly changed.  The movement in public opinion can be witnessed on a global scale.  Australians express fear over the future health of their cherished Great Barrier Reef.  Pacific islanders who exercised influence far out of proportion to their populations or economies spurred the international movement toward the Paris Agreement out of a genuine concern over losing their homeland.  African nations, having long suffered from the political and social upheaval arising from drought on that continent, rightly worry over even greater conflicts as a result of potentially more severe droughts.  The United States’ withdrawal will not and cannot change any of that.  If anything, it might have the opposite effect of further bolstering other nations’ commitment to the goals established in the Paris Agreement.

When Rick urged Ilsa to hold on to the memory of their brief but enduring love affair, he knew that their relationship was not to be.  For the 194 other signatory countries left to ponder the repercussions of President Trump’s decision, however, they may look to another famous line from Casablanca:  “I think this is the beginning of a beautiful friendship.”

 

The Litigation Flight of the Bumblebee

This post follows up on our previous analysis of the Illinois highway project that had been enjoined as a result of allegations that the project proponent may not have adequately assessed potential impacts on the recently listed rusty patched bumblebee, which has habitat in the project area.

At the time of our first post, we predicted that the temporary restraining order that halted project construction could be short-lived. The government had proffered several serious procedural defenses against the plaintiffs’ ESA claims surrounding impact to the bumblebee. The court scheduled an expedited hearing on a preliminary injunction to allow the parties to present arguments on those defenses, as well as any additional substantive evidence regarding alleged harm to the species.

At the appointed date, the parties and their counsel appeared for argument – with one major exception. The plaintiffs’ expert, who had submitted a declaration in support of the proposition that the highway would have an adverse impact on the bumblebee, failed to show up. That’s right. Didn’t show up. In light of the government’s inability to cross-examine plaintiffs’ key witness at the PI hearing, and rejecting the testimony of another citizen lacking bee expertise, the court dissolved the injunction.

While the project is back on track and the Illinois injunction motions practice over the bumblebee has been resolved, this incident proves the old saying attributed to Woody Allen: “80 percent of success is showing up.”

When Does $1,000,000,000,000 ≠ $1,000,000,000,000?

White_House_DC

The long-anticipated Trump infrastructure plan is almost ready, but the preview of that plan as reflected in the administration’s proposed FY 2018 budget has already prompted strong reactions.  Two things are clear: the promised $1 trillion dollar investment in infrastructure may be illusory, at best, and the plan’s outline represents a fundamental shift in the federal government’s role in planning and developing infrastructure.

The President’s closest infrastructure advisors have deep background and expertise with public-private partnerships (P3), the most traditional vehicle for inserting private assets into public facilities.  These same advisors also likely harbor the frustration felt by many in the infrastructure sector that the U.S. has lagged behind other developed nations in the use of P3s to finance infrastructure development.

It is no surprise then that the proposed budget contains a line item of $200 billion over the next decade to incentivize private and state spending.  At the same time, it cuts $96 billion from the Highway Trust Fund over 10 years, almost $1 billion from the FTA’s capital transit program in the next year alone, and (as predicted) slashes $500 million for the locally based TIGER grant program.

The administration argues that the $200 billion in federal spending will encourage additional private and state-level investments, which would add up over time to the overall goal of $1 trillion.  While there is little disagreement that P3 activity in the U.S. is a fraction of what it could be, history suggests that the investment seed proposed by the administration may not grow the magical infrastructure beanstalk.

According to the Harvard Kennedy School of Government, from 2005 to 2014, a total of 40 P3 transactions were completed (covering roads, airports, ports, parking, water utilities, and others), with a value of $39 billion.  Not bad, but this represents a fraction of the total federal investment in public facilities, and is less than one full year of just the average annual highway spending during that time frame.  As my former USDOT colleagues have said repeatedly, P3 can be an effective tool in our country’s infrastructure spending toolbox, but it is only one tool.

Could the proposed bolstering of already successful federal loan programs like TIFIA and financing instruments like Private Activity Bonds create greater private investment activity?  Absolutely.  Will it create a level of investment equivalent to the $1 trillion talking point?  Highly doubtful.

Even with the welcome additional line item for federal loan programs, the proposed budget’s greater significance perhaps lies in the how the spending plan reflects a seismic shift in the federal government’s role in building infrastructure.  The administration asserts that federal rules, mostly in the environmental arena, bog down important projects in red tape and permitting delays.  Readers of this blog know that I have advocated consistently for reforms in how agencies assess and permit major projects.  Yet, blaming the country’s woeful recent record in infrastructure investment on environmental requirements is somewhat misleading.

The administration famously rolled out a complex flowchart of how a typical highway project gets permitted, and the chart quickly went viral.  For those of us who have spent a career in the infrastructure arena, it was worth a good chuckle.  But even those involved with this effort would likely admit that the graphic bears little resemblance to the permitting of a typical highway project.

John Porcari, the former U.S. DOT Deputy Secretary, recently testified before the Senate Environment and Public Works Committee.  He explained what has been understood for a long time: that only 4 percent of all transportation projects require a full environmental impact statement.  Almost 90 percent of all projects are approved with the simplest and quickest NEPA approval, a categorical exclusion.  Mr. Porcari also detailed the many reforms already in place through recent authorization bills that have successfully streamlined environmental reviews, and other best practices that have led to tremendous successes on projects of regional and national significance.  More could be done, he said, but let’s not shift focus away from the more common causes of delay, growing out of local project-specific factors (political and otherwise) which understandably arise during complex project development.

Congress and the administration will soon engage in a heated political philosophical debate in the context of the upcoming budget battle, as well as negotiations over expected infrastructure legislation.  Questions on the table include the following:

  • What is the most appropriate role of the federal government in infrastructure development?
  • Is public financing democratic (little d) when it is implemented through a gas tax or a vehicle mile charge, or does a reliance on federal financing promote unacceptable inefficiencies?
  • How much incentivizing is necessary to unlock greater private or state investment, or is it too uncertain to rely on state governments to choose to spend more on infrastructure?
  • Can government make environmental streamlining “business as usual,” or are more drastic measures required to reduce the project approval process?

Transportation Secretary Chao is 100 percent correct when she says, “This is a democracy; they’re not easy questions.”  How our current political leaders choose to answer these questions will have ripple effects across America, perhaps for generations to come.

What’s the Buzz? Tell Me What’s A-Happening

When the U.S. Fish & Wildlife Service placed the rusty patched bumblebee on the endangered species list back on March 21, many observers wondered how this action could impact a wide variety of infrastructure development proposals.  Unlike some of the recent controversial species management actions that implicated areas of the American west more accustomed to Endangered Species Act (ESA) issues, the bumblebee’s habitat stretches across over a dozen heavily populated eastern and midwestern states.  Based on litigation challenging a highway project in Illinois, we may have our first answer.

A District Court judge in Illinois granted a temporary restraining order delaying construction of a proposed new 5.6-mile stretch of highway called the Longmeadow Parkway Fox River Bridge Corridor.  The ruling was based, in large part, on a local environmental group’s allegation that the project’s NEPA review did not adequately take into account the presence of the bumblebee on property in the project area.  Emergency relief was warranted to prevent harm to the species, the court ruled, finding that the traditional balance of harms weighed in favor of short-term relief over the planned beginning of construction.

Plaintiffs still face a number of substantial procedural hurdles (did they give the government adequate notice of their claims under the ESA, for example).  As a result, the injunction may not persist long after an April 28 deadline for the plaintiffs to provide additional information to the court and argument on preliminary injunctive relief.  But the very fact that a federal judge was persuaded that the protections afforded the bumblebee as a result of the ESA listing should delay project construction is noteworthy.  Moreover, it is possible that the project proponent could be compelled to make additional engineering modifications and/or to take further mitigation measures to protect the bee.  Any such concessions of course mean additional time and money.

Some of the project opponents’ comments as reported by local media demonstrate precisely the potential for confusion and uncertainty for development interests.  One person suggested:  “There are bumblebees pretty much all over the state of Illinois.  I don’t know if it’s significant to this area.  No one really does, because it has not been studied.”  Another advocate added:  “It’s a little keystone in the ecosystem, that if they go who knows what else is going?”

These fundamental questions, combined with an observed 95 percent decline in the species’ presence across the U.S. and Canada, led to the listing, despite a brief delay by the new administration in taking that final action.  Native pollinators contribute to the growth of many important and popular crops, but have been adversely impacted by modern farming trends, urban sprawl, and possibly by the use of certain insecticides.

Whether construction of this one particular highway is further delayed or if the project is modified in some way to address potential impacts to the bumblebee, there is little doubt that developers working in states with remaining bumblebee populations and habitat must take these concerns into account.  The practical effect of the bumblebee listing may also finally free up the potential for mitigation banks specializing in habitat in the species’ current range.  While this market has been fairly robust in the wetlands/stream context, it has been slow to advance in the ESA context.  Now that ESA obligations for the bumblebee may complicate infrastructure development in states like Pennsylvania, Maryland, Illinois, and Ohio, perhaps habitat conservation banking will be more readily accepted by the Fish & Wildlife Service.

Cases like those attacking the Longmeadow project are sure to provide more fuel to those seeking reform of the ESA, something gathering momentum on Capitol Hill. In the interim, however, the real “buzz” should be focused on research, compliance, and mitigation, so that other development projects can avoid the same litigation fate.

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