July 1999 Vol. 220 No. 7  Washington

Charles D. Matthews,  Contributing Editor

Appeals court rattled federal bureaucrats

Recently, the sweeping rules that the Environmental Protection Agency (EPA) initiated in mid-1997, covering ozone and particulate matter (known as soot), have been thrown in a trash heap — at least temporarily. The U.S. Court of Appeals for the District of Columbia took the action when a panel of judges found that the controversial regulations were so ill-defined and unprincipled that EPA must have exceeded its powers in setting them.

The action was a bombshell that transfixed a multitude of federal bureaucrats. The implication was that Congress would have acted unconstitutionally years ago if it had given such unlimited authority to an executive regulatory agency under the Clean Air Act.

Citing the legal doctrine of "nondelegation," the judges took the position that EPA was exercising too much power, effectively making the law rather than enforcing it. This questionable kind of regulatory activity has been developed into an art by the present Clinton / Gore executive branch. More federal courts should vigorously rein in such uncontrolled delegation of legislative responsibilities to executive branch agencies, or the separation of powers set forth in the Constitution of the United States will suffer. This decision could have far-reaching implications for all governmental rulemaking.

The decision of the appeals court does not affect EPA’s implementation of the 1990 amendments of the Clean Air Act, as passed by Congress. The serious questions now are whether future policy will be set by Congress or by the non-elected managers of EPA and other executive branch regulatory agencies.

EPA says it will fight back. Responding to the U.S. Court of Appeals’ ruling, EPA Administrator Carol Browner insisted the agency acted legally about two years ago when it revised the primary and secondary air quality standards for ozone and particulate matter.

Six days after the decision was handed down, Browner talked with the Senate Environmental and Public Works Committee’s clean air subcommittee about her frustrations with the ruling and her opinion that the outcome was "illogical, bizarre and extreme." She said the ruling denies regulatory agencies the ability to reduce pollution to meet public safety standards. Browner still doesn’t get it — Congress makes the laws and executive regulatory agencies only enforce them.

It is interesting that, just six more days after Browner spoke with the Senate subcommittee, the same appeals court suspended another EPA rule requiring 22 states to draw up different plans to cut nitrogen oxide emissions. Nevertheless, EPA still plans to file a petition with the court for a rehearing. Many people believe the petition will likely be headed to the Supreme Court.

Domestic producers finally won one. Before Congress left for its Memorial Day recess, it approved the controversial emergency spending bill that included nearly $15 billion for the Yugoslavia war effort and other programs; and Clinton signed it. The domestic oil industry had been working hard to get some economic relief as riders on the bill.

They won a small but important victory to extend the moratorium on a proposed federal oil royalty valuation rulemaking to October 1 from June 1. There was also $1 million to speed up the processing of coal bed methane lease permits in Montana and Wyoming.

Not so fortunate in the last-minute scrambling between House and Senate conferees were two other riders that would have been good for oil and gas producers in more limited areas of the country; they were: 1) a measure supported by Kansas Republican Sens. Pat Roberts and Sam Brownback to allow producers to obtain reimbursement for payments of Kansas ad valorem taxes on natural gas; and 2) an amendment by Sen. Jeff Bingaman, D-New Mexico, for $125 million in royalty relief on oil and gas production on federal lands.

$500-million loan guarantee proposal still alive. Sen. Pete Domenici, R-New Mexico, had an important amendment for the $500-million loan guarantee for small oil and gas producers in the oil patch. It was removed from the appropriation bill at the last minute with the understanding that it would be considered again when Congress returned from its recess. Domenici’s bill would allow independent oil producers and oil and gas service companies to borrow up to $10 million under more lenient terms than they could get through the commercial market.

The $500 million would be allocated under a new federal Emergency Oil and Gas Guaranteed Loan program that would have an oversight board to operate it. The oil and gas producer part of the program is estimated to cost $125 million and would be totally offset by H. R. 1664, an emergency supplemental spending bill that also includes West Virginia Democrat Sen. Robert Byrd’s $1-billion loan guarantee program for steel plants.

Tax credits bill for small producers introduced. Rep. Wes Watkins, R-Oklahoma, introduced his new bill (H. R. 1971) to assist marginal-well producers in hard times, such as they have been going through during this cycle. During such periods of low oil prices, a countercyclical alternative minimum tax phase out, adjusted as prices drop, would be provided from a 10-year carry-back of carried-over percentage depletion for oil and gas properties. The bill would also permit geological and geophysical costs to be expensed and would clarify that delayed rental payments, at the election of the taxpayer, are deductible.

Reps. Chris John, D-Louisiana, and J. C. Watts, R-Oklahoma, were cosigners of H. R. 1971. This bill is a companion to S. 1042, introduced at about the same time by Sens. Kay Bailey Hutchison, R-Texas, and John Breaux, D-Louisiana. The Senate bill would amend the Internal Revenue Code of 1985 to encourage domestic oil and gas production. It has been referred to the Committee on Finance.

Charles D. Matthews is president of Charles Matthews & Co., consultants and advocates on government relations, Arlington, Virginia.

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