Environmental commission sues over rules four months after Cooper drops case

More than four months after Gov. Roy Cooper dropped his lawsuit against a group that oversees N.C. government rules, a state commission has filed its own complaint against the same group.

The N.C. Environmental Management Commission filed suit Tuesday in Wake County Superior Court against the Rules Review Commission.

State legislators appoint all 10 RRC members. Cooper launched a legal attack against the group in August 2020. The governor’s office argued then that the rules commission gives “the legislative branch an unconstitutional veto authority over rules and regulations issued by the executive branch.”

Cooper filed a notice of voluntary dismissal in the case last October, days before a three-judge panel was scheduled to hold a hearing in the case on Nov. 9. Neither the governor nor his legal team offered an explanation for dropping the case.

Attorneys with the Environmental Section of N.C. Attorney General Josh Stein’s state Justice Department represent the Environmental Management Commission in the new legal action.

It’s the first suit filed against the RRC since Cooper dropped his complaint.

The EMC’s new suit challenges the rules commission’s response to proposed new state standards for the “carcinogenic toxin 1,4-dioxane.” It’s described as a “synthetic industrial chemical whose primary historical use was as a stabilizer in industrial solvents,” according to the lawsuit. “It is also a byproduct in some plastics manufacturing processes. It is considered a likely carcinogen by the EPA.”

The environmental commission argues that the rules group should have accepted information submitted about the proposed rule’s fiscal impact. Staff at Cooper’s Office of State Budget and Management had signed off on that information, in a document called a “fiscal note.”

The RRC instead rejected the rule in May 2022.

“The RRC strayed far beyond its legislatively prescribed role and based its objection on its own disagreement with the conclusions of the agency’s fiscal note, which had been approved by the Office of State Budget and Management,” according to the complaint. “Further, the RRC lacks both the statutory authority and economic expertise to substantively review a fiscal note. The law is clear that, as relevant here, the RRC can only reject a rule if the agency fails to obtain a fiscal note or if OSBM does not approve the agency’s fiscal note. This rejection of the rule by the RRC has caused uncertainty among regulated entities and threatens to impede the EMC’s efforts to protect the public from toxic chemicals like 1,4-dioxane.”

A letter from RRC lawyer Lawrence Duke in May 2022 explained the rules group’s concerns about EMC’s proposal. Objections focused on compliance with the state Administrative Procedures Act.

“The APA requires that, prior to publishing notice of the proposed text of a rule, the State agency must prepare a fiscal note that assesses the costs imposed by the rule to the greatest extent possible and state the amount of funds that would be expended pursuant to the rule,” Duke wrote. “This allows both the public and regulated entities the opportunity to give informed comment, either to the agency during the rule adoption process, this Commission during the rule review process, or the legislature once the rule has been approved.”

The rules group objected to the process for setting “in-stream target values” for the chemical. “EMC achieved this by setting baseline target values for 1,4-dioxane through regulatory policy and permitting agreements instead of through the rule-making process required by law, then using these values as the baseline when submitting the addition of 1,4-dioxane target values to these rules for OSBM fiscal impact analysis,” Duke wrote.

“This resulted in the fiscal note concluding there would be no additional fiscal impact because there would be no change in in-stream target values,” he added. “The fiscal note stated this even though adding 1,4-dioxane into EMC’s regulatory rules would require treatment processes that are, in EMC’s own words, ‘prohibitively expensive for local governments and the citizens served by public utilities,’ and yet EMC’s fiscal note ‘did not attempt to monetize costs’ because the baseline target values were already in place.”

“This is not sufficient to satisfy the APA as costs must be quantified to the greatest
extent possible and published with or before the publication of the notice of text of the proposed rule,” Duke wrote.

The rules commission did not object to EMC adding “target values” for the chemical to its rules. “That is a policy decision [EMC] alone may make. However, it must do so in the manner prescribed by law,” Duke explained. “The Rules Review Commission is simply requiring of EMC, as it would require of any other rule-making body within the State, that it follow the good-governance requirements of the APA rule-making process and transparently assess and make known to regulated entities and the citizens of this State the fiscal impact of proposed rules and proposed rule amendments.”

The lawsuit argues that RRC refused to address EMC’s answers to the objections in August 2022. Based on a request from the environmental commission, the rules group returned the proposed rule amendments on Feb. 13.

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