Checks and Balances: SEC publishes proposed climate disclosures rule

The Checks and Balances Letter delivers news and information from Ballotpedia’s Administrative State Project, including pivotal actions at the federal and state levels related to the separation of powers, due process, and the rule of law.

This edition: 

In this month’s edition of Checks and Balances, we review new proposed climate disclosure requirements from the Securities and Exchange Commission; a decision from the Merit Systems Protection Board allowing civil service members to concurrently hold elected office; and new proposed packaging symbols from the Food and Drug Administration aiming to denote healthy foods. 

At the state level, we take a look at an effort by an Oregon business coalition to block the state environmental agency’s new greenhouse gas emissions rules; the West Virginia governor’s veto of legislation that would have split the state’s health agency in two; and a proposal before a Rhode Island special commission that suggests stripping a state agency’s political appointees of their decision-making authority in favor of the agency’s career staff.

We also highlight recent scholarship from administrative law scholar Emily Bremer that examines the democratic—or undemocratic—roots of agency rulemaking. As always, we wrap up with our Regulatory Tally, which features information about the 208 proposed rules and 286 final rules added to the Federal Register in February and OIRA’s regulatory review activity.

In Washington

SEC issues climate-related disclosures rule

What’s the story?

The Securities and Exchange Commission (SEC) on March 21, 2022, voted 3-1 to release its proposed plan requiring climate-related sustainability disclosures from publicly traded companies. 

The 510-page proposal would require publicly traded companies “to report greenhouse-gas emissions from their own operations as well as from the energy they consume, and to obtain independent certification of their estimates. In some cases, firms also would be required to report greenhouse-gas output of both their supply chains and consumers, known as Scope 3 emissions,” according to The Wall Street Journal.

SEC Chairman Gary Gensler issued a statement arguing that the proposed rule “would provide investors with consistent, comparable, and decision-useful information for making their investment decisions and would provide consistent and clear reporting obligations for issuers.”

In a statement titled “We are not the Securities and Environment Commission—At Least Not Yet,” the SEC’s sole Republican commissioner, Hester Peirce, argued that the proposal “will undermine the existing regulatory framework that for many decades has undergirded consistent, comparable, and reliable company disclosures. We cannot make such fundamental changes to our disclosure regime without harming investors, the economy, and this agency.”

U.S. Senator Bill Hagerty (R-Tenn.) on March 22 sent a letter to Chairman Gensler stating that the Congressional Review Act requires the SEC to submit the rule to Congress for review. The proposed rule is open to public comment through May 20, 2022. 

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Federal employees can now also hold public office

What’s the story? 

In a break from precedent, the Merit Systems Protection Board (MSPB) on March 29, 2022, found that civil service members can concurrently hold both elected public office and their civil service positions without violating the Hatch Act. 

An MSPB administrative law judge had previously found that the board’s historical interpretation of the Hatch Act prohibited Rodney Cowan, an employee of the U.S. Postal Service (USPS), from also serving as an elected county commissioner in Tennessee. The board disagreed, arguing that changes to the Hatch Act in 2012 prohibited federal employees from running for partisan office but not from holding such office. The board, made up of Biden appointees Tristan Leavitt and Raymond Limon, found that a six-month suspension from USPS was adequate disciplinary action for running for office and that Cowan’s resignation from either position was not required.

“We find nothing in the statute that requires an employee to relinquish the elected position before the board may impose an authorized penalty less than removal,” wrote the board members in their decision.

The new precedent creates an environment where civil service members could intentionally choose to violate the Hatch Act and run for elected office “knowing they could keep both positions in exchange for a suspension,” according to Government Executive.

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FDA seeks public comment on healthy symbols

What’s the story?

The Food and Drug Administration (FDA) on March 28, 2022, announced in the Federal Register that it is conducting research on packaging symbols aimed at denoting food and beverage items that the agency considers to be healthy.

The FDA “seeks to improve dietary patterns in the United States to help reduce the burden of diet-related chronic diseases and advance health equity,” according to the Federal Register. “To help advance these goals, we are exploring the development of a graphic symbol to help companies communicate and consumers identify packaged food products that meet FDA’s definition of ‘healthy.’”

Use of the symbols would be voluntary on behalf of food companies. The agency’s development of the symbols is independent of its ongoing work to update its 1994 definition of the term healthy.

Members of the public have until April 27 to submit public comment on the symbols, including the following examples:

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In the states

Oregon businesses seek to block state agency’s greenhouse gas rules

What’s the story? 

A coalition of Oregon businesses on March 18, 2022, filed suit in the Oregon Court of Appeals aiming to halt implementation of the state Department of Environmental Quality’s (DEQ) Climate Protection Program, arguing that the program exceeds the agency’s statutory authority.

Governor Kate Brown (D) last year directed DEQ to develop a plan to reduce greenhouse gas emissions in the state after lawmakers failed to pass legislation on the issue. DEQ’s resulting Climate Protection Program, which took effect on January 1, aims to achieve a 90 percent reduction in greenhouse gas emissions from fuel and natural gas by 2050.

The coalition, made up of farmers, ranchers, and fuel suppliers, among other business and industry groups, argues that existing Oregon law governing the regulation of greenhouse gasses (which calls for the state to reduce greenhouse gas emissions to 75 percent below 1990 levels by the year 2050) prohibits DEQ and other executive branch agencies from creating “any additional regulatory authority.” 

“Oregon law is clear that DEQ does not have authority to implement the policies they implemented in December,” Angela Wilhelms, president of the trade group Oregon Business and Industry, told Willamette Week. “We felt it was important to challenge that action because of the dangerous precedent it sets. The Oregon Legislature has not given the DEQ authority to write rules in this space.”

The governor’s office had not responded to the lawsuit as of April 15.

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W. Va. governor vetoes legislation aiming to split state health agency

What’s the story? 

West Virginia Governor Jim Justice (R) on March 20, 2022, vetoed legislation that aimed to improve efficiency and accountability within the state Department of Health and Human Resources (DHHR) by dividing it into the Department of Health and the Department of Human Resources. Justice instead proposed that the agency work with an outside consultant to identify specific DHHR problems and propose solutions.

The West Virginia State Legislature in March passed a bill that would have divided DHHR into two separate agencies with co-equal cabinet secretaries in order to address what lawmakers considered to be persistent problems with the agency’s handling of a variety of issues related to health and social services. Lawmakers have attributed many of DHHR’s problems to its size, according to Metro News. DHHR manages more than $7 billion in state and federal funds and employs thousands of West Virginians.

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Rhode Island commission considers removing political appointees’ decision-making authority

What’s the story? 

A special commission of the Rhode Island House of Representatives is considering transferring authority from the political appointees of the Coastal Resources Management Council (CRMC), a state agency tasked with managing coastal development, to CRMC career staff. Members of the bipartisan commission, including lawmakers, town officials, and interested parties, have proposed changing the appointed council to an advisory body and shifting its final decision-making authority to CRMC staff.

CRMC is led by a 10-member council whose members are nominated by the governor and confirmed by the state Senate. The agency is staffed by a team of engineers, biologists, environmental scientists, and marine resources specialists. Lawmakers and members of the public have raised concerns about the level of expertise among the appointed council members compared to agency staff, frequent absences among council members, and delays associated with council member resignations and appointments, among other issues. 

Several commission members in an April 5, 2022, meeting supported a proposal to change the appointed commission to an advisory board, according to The Providence Journal. Agency staff would assume the council’s final decision-making authority under the proposed plan. “Everyone applauds the staff and the executive director at CRMC,” said Kendra Beaver, a staff attorney with the environmental group Save The Bay. “They do a great job with limited resources and I think they’re fully equipped and capable and should be allowed to make final agency decisions.”

Former CRMC director Grover Fugate in a December 9, 2021, commission meeting referred to the suggestion that agency staff would improve CRMC’s final decision-making as loaded, adding that the current agency structure requires appointed council members to explain their decision-making process if it differs from staff recommendations.

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Is agency rulemaking democratic?

New scholarship from Professor Emily Bremer of University of Notre Dame Law School argues that the common perception of the Administrative Procedure Act’s notice-and-comment rulemaking procedures as an effort to incorporate democratic principles into agency decision-making is incorrect. Bremer argues instead that the roots of notice-and-comment rulemaking were much less democratic:

“This Article is the first to examine the pre-APA administrative practices that inspired the APA’s informal rulemaking provisions and show that those practices were not about democratic accountability or legitimacy. Instead, they were concerned with the targeted solicitation of views from the representatives of organized interest groups to inform the agency’s expert judgment. Congress, however, built a more democratic framework atop the foundation established by these pre-APA administrative practices. Congress also expected that agencies and courts would each contribute, in their own way, to the future elaboration and evolution of the APA’s minimal procedural requirements. The analysis reveals that what modern administrative law identifies as pathologies in informal rulemaking are natural—perhaps even intended—consequences of the APA’s statutory design. It also offers a more nuanced account of the purposes of the APA’s notice-and-comment provisions and further legitimates both agency procedural discretion and judicial common law. The Article concludes that the vision of informal rulemaking that agencies and courts have constructed based on Section 553’s skeletal provisions vindicates Congress’s intentions and is preferable to a vision bound by rulemaking’s undemocratic roots. 

Want to go deeper

  • Click here to read “The Undemocratic Roots of Agency Rulemaking” 

Regulatory tally

Federal Register

Office of Information and Regulatory Affairs (OIRA)

OIRA’s March regulatory review activity included the following actions:

  • Review of 46 significant regulatory actions. 
  • No rules approved without changes; recommended changes to 45 proposed rules; one rule withdrawn from the review process.
  • As of April 1, 2022, OIRA’s website listed 110 regulatory actions under review.
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