Biden vetoes CRA resolution seeking to nullify ESG 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 the landscape of judicial and legislative challenges to the Environmental Protection Agency’s (EPA) regulatory authority under the Clean Water Act (CWA); oral argument before the United States Supreme Court on the Biden administration’s proposed student loan cancellation plan; and President Biden’s veto of a Congressional Review Act (CRA) resolution aiming to nullify the U.S. Department of Labor’s rule allowing retirement plans to consider certain environmental, social, and corporate governance (ESG) factors in investment-related decisions.

At the state level, we take a look at a proposal in the Idaho State Legislature aiming to modify the legislative approval process for state administrative rules as well as activity in Alabama and Ohio seeking to reduce state administrative regulations.

We also highlight new scholarship from law professor Allison M. Whelan on what Whelan refers to as executive interference in scientific agency decisionmaking. We wrap up with our Regulatory Tally, which features information about the 167 proposed rules and 227 final rules added to the Federal Register in February and OIRA’s regulatory review activity.

In Washington

Judicial, legislative challenges seek to limit federal water regulation

What’s the story?

The Biden administration earlier this year finalized an updated version of the Waters of the United States (WOTUS) rule, effective March 30, 2023, which spurred new legal and legislative challenges to the scope of the Environmental Protection Agency’s (EPA) regulatory authority under the Clean Water Act (CWA). The challenges argue in part that the inclusion of certain wetlands and streams in the definition of navigable waters—an interpretation of the CWA promulgated by the Obama administration, narrowed by the Trump administration, and largely reinstated by the Biden administration—exceeds the scope of the EPA’s regulatory authority.

A coalition of 24 Republican-led states on February 16 filed suit in the United States District Court for the District of North Dakota Eastern Division challenging the lawfulness of the Biden administration’s final WOTUS rule. The suit argues, among other claims, that the rule exceeds the EPA’s statutory authority under the CWA “by encompassing waters with no reasonable connection to ‘navigable waters.’”

Meanwhile, a ruling from the United States Supreme Court is forthcoming in Sackett v. EPA, a 14-year legal challenge that questions the EPA’s regulatory scope under the CWA. In Sackett, the court will decide whether to articulate a standard for recognizing the extent of the EPA’s regulatory jurisdiction over the nation’s navigable waters.

At the same time, a Congressional Review Act (CRA) resolution seeking to nullify the Biden-era WOTUS rule was pending in the United States Senate as of March 17 with support from Democratic Senator Joe Manchin (W. Va.) and 49 Republican senators. The CRA resolution, sponsored by Rep. Sam Graves (R-Mo.) and 170 Republican cosponsors, passed the House on March 9 by a 227-198 vote in which nine Democrats voted with Republican colleagues.

President Biden released a statement on March 6 indicating that he would veto the CRA resolution if it reaches his desk. Biden argued that the resolution would result in an “uncertain, fragmented, and watered-down regulatory system.”

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SCOTUS hears oral argument in case challenging Biden administration’s student loan cancellation plan

What’s the story?

The United States Supreme Court on February 28, 2023, heard oral argument in Biden v. Nebraska—a case challenging the U.S. Department of Education’s authority to cancel up to $20,000 of federal student loan debt per borrower under the national emergency provisions of the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act).

Six states (Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina) on September 29, 2022, filed a lawsuit arguing in part that the debt-cancellation program overstepped the department’s emergency authority under the HEROES Act and that the department could not lawfully stop collecting student loan payments without congressional approval. A district court in October ruled that the states, which further argued that the plan would harm their investments and reduce their tax revenues, did not have standing to sue because they had not demonstrated sufficient harm from the program. The United States Court of Appeals for the Eighth Circuit later blocked the plan from taking effect while the case progressed through the courts.

While “the court’s liberal justices were dubious about the states’ right to sue,” according to SCOTUSblog analyst Amy Howe, “the court’s conservative justices appeared just as skeptical about whether the Biden administration could rely on the HEROES Act to adopt the loan-forgiveness program.” Howe further observed that “a majority of the justices appeared unconvinced that Congress intended to give the secretary of education the power to adopt the program,” adding that “[s]ome of the conservative justices also suggested that the loan-forgiveness program might fail under the ‘major questions doctrine.’”

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Biden vetoes CRA resolution seeking to nullify ESG rule

What’s the story?

President Joe Biden (D) on March 20, 2023, vetoed a Congressional Review Act (CRA) resolution passed by Congress that aimed to nullify a rule from the U.S. Department of Labor (DOL) allowing retirement plans to consider certain environmental, social, and corporate governance (ESG) factors in investment-related decisions.

The U.S. House of Representatives voted 216-204 on February 28 to pass the resolution, with Democratic Representative Jared Golden (Maine) joining Republican colleagues. The U.S. Senate passed the resolution on March 1 by a 50-46 vote. Democratic Senators Joe Manchin (W. Va.) and Jon Tester (Mont.) joined Republican senators in supporting the measure.

Manchin described the rule as “another example of how our administration prioritizes a liberal policy agenda over protecting and growing the retirement accounts of 150 million Americans,” according to The Hill.

Nullification of the ESG rule would have resulted in the DOL reverting to a Trump-era regulation requiring that retirement plans only consider pecuniary factors with a material effect on investment risk or return. Biden argued in his veto statement, “There is extensive evidence showing that environmental, social, and governance factors can have a material impact on markets, industries, and businesses. But the Republican-led resolution would force retirement managers to ignore these relevant risk factors” and “would prevent retirement plan fiduciaries from taking into account factors, such as the physical risks of climate change and poor corporate governance, that could affect investment returns.”

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In the states

Idaho lawmakers consider changes to legislative approval of agency rules

What’s the story? 

Idaho state lawmakers are considering legislation that would require both chambers of the Idaho State Legislature to approve pending administrative rules before they can take effect.

Idaho law requires the state legislature to reauthorize all of the state’s administrative rules each year. A vote by one chamber of the state legislature is required to either approve or reject a pending administrative rule (except for rules carrying fees, which must be rejected by both chambers). If one chamber approves while the other chamber rejects a rule, the rule nonetheless becomes effective—a framework that has contributed to tension in the past between the state House and state Senate, according to the Idaho Capital Sun. House Bill 206 instead proposes requiring both chambers of the state legislature to approve pending administrative rules.

“This is a fundamental change,” said state Rep. Vito Barbieri (R), the bill’s floor sponsor, during a meeting of the House State Affairs Committee. “As you may know, one house approving a rule and another house rejecting a rule—unless it’s a fee rule—that rule has become effective.”

The House passed the bill by a 59-11 vote on March 1, 2023. The bill was pending in the state Senate as of March 17.

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Alabama, Ohio governors propose regulatory reductions

What’s the story? 

Alabama Governor Kay Ivey (R) on March 8, 2023, signed Executive Order 735, which puts a two-year freeze on state agency rulemaking, with certain exceptions. The order also requires each state agency during the two-year period to create an inventory of all rules and rescind any regulatory restrictions on citizens and businesses deemed discretionary. During her State of the State address on March 7, Ivey put forth a goal of reducing the number of regulatory restrictions in the state by 25%.

“In many cases, government regulations that were necessary a decade ago have outlived their usefulness, and it’s time for that to change,” said Ivey in a statement.

Ohio Governor Mike DeWine (R) included a similar proposal earlier this year as part of his proposed budget plan. Under DeWine’s proposal, state agencies would eliminate one-third of the Ohio Administrative Code by rescinding “duplicative provisions, outdated sections, and unnecessary requirements,” according to The Statehouse News Bureau. The proposal also seeks to remove federal regulatory language from the state code in an effort to help small businesses better identify the differences between state and federal requirements. 

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Examining scientific agency decisionmaking and the executive branch

New scholarship from law professor Allison M. Whelan in the Vanderbilt Law Review proposes a conceptual framework to address what Whelan refers to as executive branch interference in the scientific decisionmaking of administrative agencies:

“The scientific credibility of the administrative state is under siege in the United States, risking distressful public health harms and even deaths. This Article addresses one component of this attack—executive interference in agency scientific decisionmaking. It offers a new conceptual framework, ‘internal agency capture,’ and policy prescription for addressing excessive overreach and interference by the executive branch in the scientific decisionmaking of federal agencies. The Article’s critiques and analysis toggle a timeline that reflects recent history and that urges forward-thinking approaches to respond to executive overreach in agency scientific decisionmaking. Taking the Trump Administration and other presidencies as test cases, it scrutinizes who should control, or alternatively advance or limit, an agency’s scientific decisions, which are distinct from its policymaking decisions. With its ‘internal agency capture’ framework and the COVID-19 pandemic as its backdrop, the Article illustrates the phenomenon of excessive executive overreach at work in the scientific decisionmaking of the U.S. Food and Drug Administration (‘FDA’), glaringly reflected in the Agency’s decisions on reproductive medicines and protocols to respond to the pandemic. This Article demonstrates that covert internal capture can mislead the public, pose serious risks to individual and public health, undermine the arm’s-length neutrality and objectivity of agencies, and result in lasting consequences for agency legitimacy and reputation.”

Want to go deeper

  • Click here to read the full text of “Executive Capture of Agency Decisionmaking” by Allison M. Whelan

Regulatory tally

Federal Register

Office of Information and Regulatory Affairs (OIRA)

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

  • Review of 38 significant regulatory actions. 
  • Two rules approved without changes; recommended changes to 35 proposed rules; one rule withdrawn from the review process.
  • As of March 1, 2023, OIRA’s website listed 114 regulatory actions under review.
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