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Pallone, Whitehouse, Carper Raise New Questions about Wehrum’s Involvement in Reversing EPA Position to Benefit Former Firm’s Client

Mar 20, 2019
Press Release

Energy and Commerce Chairman Frank Pallone, Jr. (D-NJ), Senator Sheldon Whitehouse (D-RI) and Senate Environment and Public Works Committee Ranking Member Tom Carper (D-DE) are raising new questions about whether Environmental Protection Agency (EPA) officials William Wehrum and David Harlow helped to reverse the agency’s position in a major enforcement action to favor a client of their former law firm.  In a letter sent to the EPA Office of Inspector General today, the members point to a novel argument included in an agency memo explaining the EPA’s change in position.  The argument is a unique interpretation of a decades-old EPA preamble to a Clean Air Act rule, which Wehrum and Harlow’s law firm previously deployed in litigation against the EPA. 

As the three members pointed out in a previous letter to the Inspector General’s office, Wehrum and Harlow, Assistant Administrator and General Counsel respectively for the EPA’s Office of Air and Radiation, were lawyers at the law firm Hunton & Williams before arriving at the EPA.  The firm, and Harlow specifically, represented DTE Energy Company as DTE has been fighting the EPA for nearly a decade over air pollution from the company’s coal-fired power plant in Monroe, MI.  Ethics rules bar EPA officials from participating in matters involving former clients and clients of their firm, but it appears Wehrum and Harlow may have helped persuade the agency to abandon its position and change EPA policy in the manner sought by DTE through litigation.  The EPA memorandum at issue, regarding DTE energy, came on the eve of consideration of the lawsuit involving DTE by the Supreme Court.

Having already raised the issue of the DTE memo with the EPA Inspector General’s office, Whitehouse, Carper, and Pallone recently unearthed the additional evidence of Wehrum and Harlow’s potential involvement in the memo’s drafting.  “It appears unlikely that an arcane application of a single sentence from a 1992 preamble notice (a) suddenly became known to EPA authors of the DTE memo, and (b) was adopted as formal EPA policy in that memo without further explanation, absent the direct involvement of lawyers knowledgeable of DTE Energy’s position in the DTE litigation—Mr. Wehrum and Mr. Harlow,” Whitehouse, Carper, and Pallone write in their letter today.  

The members continue, “Mr. Wehrum and Mr. Harlow were barred by ethics rules from participating in the development of the DTE Memo because it concerned ongoing EPA litigation against DTE Energy, in which DTE Energy is represented by their former law firm.  DTE Energy had been a client of Mr. Harlow himself at Hunton.  This information, taken together with information and documents presented in our February 21 letter, further suggests that Mr. Wehrum and Mr. Harlow may have violated federal ethics rules by participating in the development of the DTE Memo.”

The EPA Inspector General would have access to documentation and the ability to obtain testimony from current EPA employees, all of which could shed light on Wehrum and Harlow’s conduct.

Full text of the members’ letter is below.  A PDF copy is available here.

 

March 20, 2019

Charles J. Sheehan

Acting Inspector General

U.S. Environmental Protection Agency

1200 Pennsylvania Avenue, N.W.

Washington, DC 20460

 

Dear Acting Inspector General Sheehan,

We write to bring additional information to your attention regarding our February 21, 2019, request that you open an investigation into improper involvement of William Wehrum and David Harlow in the Environmental Protection Agency’s (EPA) December 7, 2017 memo regarding EPA’s New Source Review (NSR) program (“DTE Memo”).[1] 

It has been brought to our attention that EPA’s DTE Memo adopts, without discussion, a novel interpretation of an EPA NSR regulation known as the “demand growth exclusion,” based on a single sentence from a 1992 EPA preamble.  This interpretation, it appears, was previously enunciated only by lawyers from Hunton, Andrews, Kurth [Hunton]—Mr. Wehrum’s and Mr. Harlow’s former law firm—in two briefs submitted to the Sixth Circuit on behalf of DTE Energy on February 27, 2015, and May 1, 2012.  If this is accurate, an argument advanced only by Hunton lawyers in specific litigation was recently adopted by EPA in a memo whose issuance appears to have been timed to affect the outcome of litigation involving Hunton’s current client

It appears unlikely that an arcane application of a single sentence from a 1992 preamble notice (a) suddenly became known to EPA authors of the DTE memo, and (b) was adopted as formal EPA policy in that memo without further explanation, absent the direct involvement of lawyers knowledgeable of DTE Energy’s position in the DTE litigation—Mr. Wehrum and Mr. Harlow. 

Mr. Wehrum and Mr. Harlow were barred by ethics rules from participating in the development of the DTE Memo because it concerned ongoing EPA litigation against DTE Energy, in which DTE Energy is represented by their former law firm.  DTE Energy had been a client of Mr. Harlow himself at Hunton.  This information, taken together with information and documents presented in our February 21 letter, further suggests that Mr. Wehrum and Mr. Harlow may have violated federal ethics rules by participating in the development of the DTE Memo. 

Attached as an appendix is an analysis of the provisions in question.  As you consider our February 21 request, we urge you to consider this additional information.  EPA OIG is in the best position to analyze this collection of information and interview key staff to evaluate whether violations of federal ethics rules occurred. 

           

Appendix

In 1992, EPA issued a final rule adopting several changes to the New Source Review (NSR) regulations, including establishing what EPA calls the “demand growth exclusion” for utility projects.  The 1992 rule provides that, in projecting future emissions after a physical change or method of operation, the regulatory authority shall

[e]xclude . . . that portion of the unit’s emissions following the change that could have been accommodated during the representative baseline period and is attributable to an increase in projected capacity utilization at the unit that is unrelated to the particular change, including any increased utilization due to the rate of electricity demand growth for the utility system as a whole. 

(40 CFR 51.165(a)(1)(xxi)(B) (emphases added)).  In responding to comments, EPA rejected an argument from an environmental commenter that EPA should always assume that increased operations result from a physical change, rather than independent factors.  Instead, EPA chose to retain its requirement for a case-by-case determination reflected in the regulatory text.  In rejecting the commenter’s argument, EPA cites an example: “[i]f efficiency improvements are the predominant cause of the change in emissions and demand growth is not, the exclusion does not apply.  But this is a question of fact which must be resolved on a case-by-case basis….”  (57 Fed. Reg. 32327 (July 21, 1992)).

In the DTE Memo, EPA references this language to conclude: “Because increased emissions may be caused by multiple factors, the EPA has recognized that the source must exercise judgement to exclude increases for which the project is not the ‘predominant cause.’  45 Fed. Reg. 32,327 (1992).”  (DTE Memo at 7)[2]   This reading misapplies language in the 1992 preamble by transforming the “unrelated” prong into a “predominant cause” test, reflecting neither the language itself nor the underlying regulatory text.  Put differently, the preamble text merely identifies one situation in which the demand growth exclusion does not apply to support EPA’s rejection of an across-the-board rule – it does not state that if the project is not the “predominant cause” of the increased emissions the exemption applies, as the DTE Memo suggests. 

This same seemingly erroneous interpretation of the 1992 language was used by Hunton lawyers in their briefs for DTE Energy before the Sixth Circuit.  The briefs both refer to the “‘causation’ test” allegedly established by the 1992 NSR rules and reference the “predominant cause” language, stating: “For the second prong (i.e., ‘unrelated to the change’), the causation standard is whether the ‘change’ was the ‘predominant cause’ of the increase. Id. at 32,327.” (Feb. 27, 2015 Brief at 20) and (May 1, 2012 Brief at 15 & fn.8.)  The 2015 brief also references a “‘predominant cause’ test” in a footnote.  (Feb. 27, 2015 Brief at 58, fn. 18.)

This is not a reading that EPA enunciated or recognized prior to the DTE memo, to the best of our knowledge.  This conclusion is shared by John Walke and Bruce Buckheit, two NSR experts we consulted in the preparation of this letter.  At various times, Mr. Walke and Mr. Buckheit previously worked on NSR at EPA (Mr. Walke at the Office of General Counsel, and Mr. Buckheit at the Office of Enforcement and Compliance Assurance), and Mr. Buckheit also worked on these issues at the Department of Justice.  They do not believe EPA intended this position in 1992, and have never seen it advanced other than by Hunton lawyers in the DTE litigation. 

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[1] U.S. Environmental Protection Agency, Memorandum from Administrator Scott Pruitt to Regional Administrators, (Dec. 7, 2017).

[2] Note that the citation in the DTE Memo to “45 Fed. Reg.” is incorrect.