Lost in space: Backdoor climate regulation of federal contractors violates statutory limits

When there is a regulatory cause de jour, there is a natural tendency for even the most specialized, technical federal agencies to overreach. They see a perceived crisis or public fear as cover under which they think they can and should expand their authority, without respecting their limited statutory mandate.  

Climate change has often been such a catalyst for unmoored regulatory activity. And it is again.

The Department of Defense, NASA and the General Services Administration (GSA) proposed new rules in November that are lost in space beyond the limited universe of authority they’ve received from Congress.  

These proposed rules are not designed to defend our country from foreign enemies, send astronauts to space or manage the ministerial aspects of government contracting as they each were established to do. These rules instead would attach climate-friendly strings to any contracts that private business might wish to enter to supply goods or services to the federal government. 

Any federal contractor covered by the rule would be required to disclose its greenhouse gas (GHG) emissions, disclose its climate financial risks and ultimately require most covered contractors to reduce emissions as a condition for receiving a contract from the federal government. These rules are bad policy and unauthorized by law. 

Disclosure seems harmless, but it is far from it. These rules would place a very costly burden on the more than 5,700 contractors the rule itself identifies as impacted, many of which are small businesses with small enough margins that simply cannot absorb these new costs.

The obligations vary by size of the contractor. Smaller contractors would face costs to track and report their “Scope 1” and “Scope 2” emissions, meaning any emissions they generate at their own factories and office, as well as what footprint they leave by their electrical, heating, natural gas and other energy consumption.  

Larger contractors would need to report those things as well as create a “GHG Inventory” of all of the “Scope 3” emissions to which they contribute. This means that, as a condition of being able to contract with the federal government, they must report not just on their own CO2-related activities but also track and report how everyone upstream and downstream in their supply chain operates and might have CO2 impacts, including their customers, their suppliers, their suppliers’ suppliers and more — even though those individuals and entities in the supply chain may not themselves be federal contractors. And the contractors must do so even if those upstream and downstream contributors do not themselves already track their own CO2-related activities.

Many of the covered contractors will also be required, simply to be permitted to sell their goods or services to the federal government, to set enhanced “science- based targets” for “reducing GHG emissions that [are] in line with reductions that the latest climate science deems necessary to meet the goals of the Paris Agreement to limit global warming.” 

This means that these agencies are indeed proposing to impose behavioral change requirements on these contractors. 

Don’t get confused. The current climate disclosure, inventory and targeted behavior change regulations from DoD, NASA and GSA are not coming from agencies that have the authority to control pollution. The agencies here are imposing substantive environmental mandates even though they are not agencies with substantive environmental rulemaking authority. 

Important too is that the covered federal contractors are already subject to federal and state environmental regulations that can and do control emissions by the agencies that the state legislatures or Congress granted such authority. This is just unauthorized piling on. 

With the DoD, NASA and GSA rulemaking, we have agencies that have no congressional mandate to set environmental law or policy trying to add on environmental controls through a backdoor. To borrow a line from the late Supreme Court Justice Antonin Scalia in Whitman v. American Trucking Associations, Inc., these agencies are trying to shove massive elephant-size substantive requirements that necessarily mandate behavioral changes into their mouseholes of authority to set federal contracting standards.

The comment period for this rule closes on Feb. 13, after which the agencies will need to decide whether to proceed to a final rule. The agencies should check their own transgressions of the boundaries of their authority. 

And these agencies should know that, if they do not abandon this effort, any final rules are highly vulnerable to invalidation under the Administrative Procedure Act as being “arbitrary, capricious” and “in excess of statutory jurisdiction, authority, or limitations.”

Power grabs like this are simply unlawful exercises by the executive branch directly disrespecting the allocation and limits of agency authority provided by and within the constitutional province of Congress.

The Department of Defense, NASA and the GSA should leave the environmental regulating to the environmental agencies.

Donald J. Kochan is a professor of law and the executive director of the Law & Economics Center at George Mason University’s Antonin Scalia Law School.