Shutdown Impacts on U.S. Energy and Natural Resource Sectors: Assessing and Mitigating the Escalating Costs of Budget Brinksmanship

While media coverage tends to emphasize the human costs of government shutdowns – from national parks closed to vacationing families, to financial hardships imposed on federal workers – American businesses pay a heavy and often underappreciated toll that grows over time. With President Trump signaling his willingness to extend the current budget impasse for “weeks or even years,” [1] this article examines the scope of permissible legal operations during a lapse in appropriations and considers what potential impacts the U.S. energy and natural resources sectors ought to expect as this funding hiatus drags on.

1. A Lapse in Appropriations of (Soon-To-Be) Unprecedented Duration

Brinksmanship over federal spending is not new. Since our current budget system was enacted in 1976, lapses in appropriated funds have occurred at least 21 times. [2] Historically, however, these shutdowns were mostly fleeting, lasting a few days at most, with the public scarcely aware of the budget drama in Washington, D.C., let alone harmed by it. By contrast, today’s ongoing funding gap – which began on December 22 and to date has shuttered much of the federal government for 18 days – is already the second longest on record. If it stretches past January 11, President Trump and the newly elected Democratic majority in the U.S. House will share the dubious honor of presiding over the longest federal government shutdown in history. As the economic impact expands, it is critical to appreciate the narrow scope of legally permissible operations during a lapse in appropriations.

2. Basic Principles: the Antideficiency Act and Agency Shutdown Decisions

The Constitution prohibits government spending without an appropriation.[3]The Antideficiency Act (ADA) operationalizes that requirement by barring any “officer or employee of the United States Government” from “mak[ing] or authoriz[ing] an expenditure or obligation exceeding an amount available in an appropriation.”[4] Diversion of appropriations to unauthorized purposes is also forbidden,[5] as is acceptance of voluntary services exceeding that authorized by law.[6] Other provisions require appropriated funds to be apportioned over their period of intended use to reduce the need for supplemental or deficiency appropriations.[7] Agencies are required to report violations to the President and Congress, and compliance is enforced by the availability of various administrative, civil, and criminal penalties.[8]

Limited exemptions and exceptions do apply. For example, activities may be exempt if: funded with unexpired appropriations where carryover funds remain unobligated; sustained by fees (or other non-appropriated funds); a statute or other legal requirement expressly authorizes the expenditure; the function is necessary to discharge the President’s constitutional powers; or it is necessarily implied from the authorized continuation of other exempt or excepted activities. Likewise, activities might be excepted if they address emergency circumstances, such that their suspension would imminently threaten the safety of human life or the protection of property.[9]

OMB Circular A-11, Section 124 requires agencies – from the Department of the Interior, to the National Oceanic and Atmospheric Administration (NOAA), to the Department of Energy, to the Department of Justice (DOJ) – to develop and maintain detailed plans for implementation of these rules, should a lapse occur.[10] The Environmental Protection Agency’s (EPA’s) December 31, 2018 Contingency Plan for Shutdown, for example, designates 794 of 13,927 agency employees, or 5.7% of staff, as necessary to protect life and property.[11] Excepted functions that EPA staff may perform include: “[p]roviding for homeland and national security”, “activities essential to ensure continued public health and safety, including safe use of food and drugs and safe use of hazardous materials,” “emergency and disaster assistance”, and activities to support ‘[s]ites/projects predominantly associated with the superfund program, where a failure to maintain operations would pose an imminent threat to human health.”[12] Recipients of EPA’s 5,593 active assistance agreements and other funded grants and cooperative agreements can generally work on their projects and make draw-downs of authorized obligated levels using the Automated Standard Application Payment (ASAP) system, but EPA staff may not assist.[13]

3. Diverse Federal Regulatory Impacts

Post-mortem analyses of extended shutdowns in 1995 and 2013 demonstrate that these sharp curtailments in government action can significantly disrupt environmental, natural resource, and consumer product regulatory activity and related litigation – notwithstanding the fact that much of environmental regulation has been delegated to the states,[14] and environmental litigation often proceeds in state courts.

For example, hearings before the Subcommittee on Civil Service of the House Committee on Government Reform and Oversight on the impact of the 1995 lapse identified that the four-day shutdown:

• Delayed or interrupted ~$60 million in Superfund settlements, environmental fines, and injunctive relief, from initial assessment, to negotiation, to collection activities;[15]
• Closed hundreds of toxic-waste cleanups, delaying remediation of these Superfund sites and prolonging exposure to an array of dangerous chemicals;[16]
• Caused 5,000 NOAA data requests to go unfilled. As a result, state and local business planners were forced to delay commercial ventures requiring environmental information, and private value-added firms could not obtain climate data to support their agricultural customers;[17]
• Forced emergency measures to prevent contamination of freshwater aquifers by an onshore oil and gas lessee in New Mexico without the necessary Bureau of Land Management (BLM) approval;[18]
• Delayed expansion of existing mining operations on public lands – by at least a month at one site, for example;[19] and
• Idled numerous drilling rigs waiting for permit approvals, costing tens of thousands of dollars per day for each idled rig.[20]

Similarly, a White House Office of Management and Budget report examining the economic impacts of the 16-day shutdown in October 2013 determined that it:

• Halted EPA’s non-emergency hazardous waste inspections at about 1,200 facilities, chemical facilities, and drinking water systems; discontinued evaluations of potential health impacts of new industrial chemicals; and stopped reviews of pesticides for adverse impacts to health and the environment. EPA’s failure to conduct these inspections, evaluations, and reviews likely resulted in uncertainty in the regulated community and delayed the release of new products to market;[21]
• Stopped NOAA from apportioning harvest levels for the Alaskan crab fishing season, delaying the start of the season for three to four days. The fishing industry estimates these delays cost fishermen thousands of dollars of lost revenue per day, since days lost at the beginning of the season cannot be made up later;[22]
• Halted permitting and related environmental reviews, delaying transportation and energy projects. The federal government was unable to issue permits to conduct drilling operations on federal lands, and it stopped or delayed environmental reviews of planned transportation and energy projects, which prevented companies from moving forward on these projects. For example, BLM was unable to process approximately 200 Applications for Permits to Drill, delaying energy development on federal lands in North Dakota, Wyoming, Utah, and other states;[23]
• Curtailed inspections of domestic and international food facilities by the Food and Drug Administration (FDA), delaying nearly 500 food and feed domestic inspections and roughly 355 food safety inspections performed by States under contract. These routine inspections enable FDA to determine compliance with the law and ensure that unsanitary conditions and practices which may result in foodborne illness are addressed. The FDA also cut back on examination, sampling, and laboratory analysis of imported products during the shutdown;[24]
• Stopped Consumer Product Safety Commission (CPSC) work related to recalls of products that could cause injuries. CPSC was only able to continue work related to products that present an imminent threat to consumer safety, and therefore normal work related to recalls was halted. CPSC’s port inspectors were furloughed, preventing the agency from screening thousands of products, including children's merchandise that could contain excessive lead and sleepwear that may violate flammability standards;[25] and
• Delayed efforts to combat invasive species that are endangering Great Lakes fisheries. U.S. Geological Survey scientists were unable complete field-testing of a technology to prevent the spread of Asian carp into the Great Lakes. The window of opportunity to field test this technology was missed, due to cooling water temperatures, and testing was delayed for at least six months. Work was also delayed on other invasive species projects, including research on the spread of dangerous Africanized honeybees in the Southwest, invasive grass species involved in intensifying wildfires, and white-nose bat syndrome impacting bats in national parks. These testing delays have likely had far-reaching, albeit unmeasurable, economic impacts.[26]

While the impacts of the current shutdown may differ given changes to agencies’ contingency plans,[27] similar disruptions have already begun to emerge from the current lapse. For instance, the EPA recently canceled a public hearing scheduled for January 10 on the USS Lead Superfund site in East Chicago;[28] public comment on proposed changes to the New Source Performance Standards for greenhouse gas emissions from new and modified power plants has been delayed;[29] and permit applications are on hold for state-level natural gas and electricity infrastructure projects requiring D.C. involvement.[30]

4. Disruptive Civil Litigation Delays

United States as Party to Litigation.Environmental litigation commonly involves federal agencies as both plaintiffs and defendants, many of which are represented by the DOJ’s Environment and Natural Resources Division (ENRD).[31] DOJ assumes that: the courts will continue to operate; all criminal litigation will continue as an activity essential to the safety of human life and the protection of property; civil litigation will be curtailed; and its litigators will approach the courts and request that active cases, except for those in which postponement would compromise to a significant degree the safety of human life or the protection of property, be postponed until funding is available.[32] DOJ requires that if a court denies such a request and orders a case to continue, its litigators comply with the court’s order.[33] Following these principles, DOJ estimates that 45 percent (263 out of 578) of ENRD staff will continue working during the shutdown.[34]

In compliance with DOJ’s contingency plan, U.S. Attorneys across the country have moved for stays in civil cases in which the United States is a party, with results varying in each court. For example: the Southern District of New York has issued an order staying all civil cases (other than civil forfeiture cases) in which the United States Attorney’s Office for the Southern District of New York has appeared as counsel of record for the United States, its agencies, and/or its employees until the business day after the President signs into law a budge appropriation that restores DOJ funding.[35] Other courts that have entered similar orders include the Northern District of Illinois,[36] the District of New Mexico,[37] the Second Circuit,[38] and the Third Circuit.[39]

Similarly, the Southern District of West Virginia has ordered that all civil litigation involving the United States, its agencies, its officers or employees, and/or any party represented by DOJ be stayed for 14 days.[40] However, notably, a judge in the Southern District of West Virginia issued his own order contradicting the court’s general order, ordering that all cases in which the United States is a party assigned to him were not stayed, stating that “the government should not be given special influence or accommodation in cases where such special considerations are unavailable to other litigants.”[41]

Many courts have not issued a blanket stay, including the Central District of California, the Northern District of California, the District of Colorado, the District of Columbia, the Eastern District of Michigan, the Eastern District of Pennsylvania, the Southern District of Texas, the Western District of Washington, as well as the Federal and Ninth Circuit Courts of Appeal.

Operation of Federal Courts.The Administrative Office of the U.S. Courts has stated that the federal judiciary will continue to operate as normal until January 11, 2019 using court fee balances and other funds not dependent on a new appropriation.[42] However, if the shutdown persists beyond January 11, the federal judiciary’s resources would be exhausted, and federal courts would begin to operate under ADA requirements.[43] The ADA allows work to continue during a lapse in appropriations if it is necessary to support the exercise of Article III judicial powers, but the Administrative Office of the U.S. Courts advises that each court and federal defender’s office would determine the staffing resources necessary to support such work.[44]

Generally, courts have not yet issued public guidance on how they would proceed in the event funds lapse. The Ninth Circuit advises that once funding is exhausted, “the federal courts face serious disruptions,” and “should it become necessary for the Ninth Circuit to limit essential activities, an announcement will be posted on [its] website.”[45] Similarly, the First Circuit advises that “[i]n the event of a prolonged shutdown, the Court will provide further guidance.”[46]

5. Engagement and Advocacy

The Council of Economic Advisers has estimated that budget brinkmanship in 2013 resulted in 120,000 fewer jobs created in the private sector, with as much $6,000,000,000 of gross economic output lost.[47] Should the current lapse persist, these costs are likely to rise even higher, and businesses have few tools to mitigate the impact. Legal challenges to agency shutdown decisions are difficult to mount. Even in protracted shutdowns, the issues are likely to be moot before they are resolved in court, and courts traditionally have not prescribed how agencies navigate funding gaps. Ultimately, congressional engagement and executive branch advocacy may prove the best way to drive political compromise and reignite business-critical government action. Until then, businesses can learn what the ADA requires, carefully study agencies’ contingency plans to understand how they apply those appropriations rules to their operations on the ground, and plan accordingly.

For more information or assistance in developing strategies to deal with the impacts of the federal government shutdown on your business or other regulatory compliance and risk management issues, please contact Jonathan Rackoff.

** Jonathan E. Rackoff is a partner and head of Marten Law’s Regulatory and Government Investigations practice. Mr. Rackoff brings over 15 years of experience, including serving in the Obama White House, where he helped to coordinate government-wide shutdown contingency planning at the Office of Management and Budget during the budget battles of 2011-13.

[1] Kevin Liptak, Trump says he could keep shutdown going for months or years, CNN (Jan. 4, 2019), https://www.cnn.com/2019/01/04/politics/shutdown-donald-trump-nancy-pelosi/index.html.

[2] Dareh Gregorian, Winners & losers: Past government shutdowns and how they ended, NBC News, [3] Like" class="redactor-autoparser-object">https://www.nbcnews.com/politi... all legislation, this requires bicameral enactment and approval by the President. See U.S. CONST. art. I, § 7.

[4] 31 U.S.C. § 1341(a)(1).

[5] 31 U.S.C. § 1347(a).

[6] 31 U.S.C. § 1342.

[7] See 31 U.S.C. §§ 1511–1516; see also United States Government Accountability Office, Office of the General Council, Principles of Federal Appropriations Law (2016), available athttps://www.gao.gov/legal/appropriations-law-decisions/red-book.

[8] See, e.g., 31 U.S.C. §§ 1349, 1350.

[9] 31 U.S.C. § 1342.

[10] Executive Office of the President of the United States, Office of Management and Budget, Circular No. A-11, Preparation, Submission, and Execution of the Budget Sec. 124 (Jun. 2018), available athttps://www.whitehouse.gov/wp-content/uploads/2018/06/a11.pdf.

[11] U.S. Environmental Protection Agency, Contingency Plan for Shutdown 3 (Dec. 31, 2018), available at https://www.epa.gov/sites/production/files/2018-12/documents/epa_contingency_plan_december_18_2018_508.pdf.

[12] Id. at 5-6.

[13] Id. at 10.

[14] See Environmental Council of the States, Status of State Environmental Agency Budgets (EAB), 2013-2015 3 (Mar. 15, 2017), available athttps://www.ecos.org/wp-content/uploads/2017/03/Budget-Report-FINAL-3_15_17-Final-4.pdf.

[15] Government Shutdown I: What’s Essential? Hearings Before the Subcommittee on Civil Service of the Committee on Government Reform and Oversight, House of Representatives, 104th Cong. 269 (1995), available at https://www.govinfo.gov/content/pkg/CHRG-104hhrg23275/pdf/CHRG-104hhrg23275.pdf.

[16] Id.

[17] Id. at 270.

[18] Id. at 521.

[19] Id.

[20] Id. at 614.

[21] Executive Office of the President of the United States, Office of Management and Budget, Impacts and Costs of the October 2013 Federal Government Shutdown 19 (Nov. 2013), available at https://perma.cc/NH6P-LMHA.

[22] Id. at 11.

[23] Id. at 9.

[24] Id. at 18.

[25] Id. at 19.

[26] Id. at 12.

[27] See Kelsey Brugger, BLM continues to process drilling applications, EnergyWire (Jan. 7, 2019), https://www.eenews.net/energywire/2019/01/07/stories/1060111029(finding that BLM is continuing to process drilling permits despite the current lapse in funding).

[28] See Niina Heikkinen, Plans for public hearings succumb to shutdown woes, GreenWire (Jan. 3, 2019), https://www.eenews.net/greenwire/stories/1060110881/search?keyword=New+Source+Performance+Standards.

[29] Id.

[30] See Niina Heikkinen, Shutdown may affect Trump’s rule-busting agenda, GreenWire (Jan. 4, 2019), https://www.eenews.net/greenwire/stories/1060110995/search?keyword=shutdown.

[31] See e.g. Ellen E. Gilmer and Michael Doyle, Justice delayed becomes commonplace in shutdown, GreenWire (Jan. 8, 2019), https://www.eenews.net/greenwire/2019/01/08/stories/1060111253.

[32] U.S. Department of Justice, FY 2019 Contingency Plan 3 (Sept. 11, 2018), available at https://www.justice.gov/jmd/page/file/1015676/download.

[33] Id.

[34] Id. at 12.

[35] Standing Order M10-468, In re: Stay of Certain Civil Cases Pending the Restoration of Department of Justice Funding (S.D.N.Y. Dec. 27, 2018), available at http://www.nysd.uscourts.gov/cases/show.php?db=notice_bar&id=503.

[36] General Order Holding in Abeyance Civil Matters Involving the United States as a Party, No. 18-0028 (N.D. Ill. Dec. 26, 2018), available at https://www.ilnd.uscourts.gov/_assets/_documents/_forms/_clerksoffice/rules/admin/pdf-orders/General%20Order%2018-0028.pdf.

[37] Temporary Administrative Order Relating to Civil Cases Involving the United States No. 18-MC-00004-55, 18-MC-00035-02, In the Matter of: Civil Proceedings Involving the United States During Federal Lapse in Appropriations (D.N.M. Dec. 27, 2018), available at https://www.nmd.uscourts.gov/sites/nmd/files/general-ordes/18-MC-04-55_Temporary%20Administrative%20Order%20Relating%20to%20Civil%20Cases%20involving%20the%20United%20States.pdf.

[38] Order (2nd Cir. Dec. 22, 2018), available athttp://www.ca2.uscourts.gov/docs/Order%20-%20RAK%20-%20Case%20Mgmt%20in%20Shutdown%20ss%20122118.pdf.

[39] United States Court of Appeals for the Third Circuit, US Court of Appeals for the Third Circuit Open During Government Shutdown, https://www.ca3.uscourts.gov/.

[40] General Order Holding Civil Matters in Abeyance, Misc. No. 2:18-mc-00196, In re Petition for a General Order Holding Civil Matters in Abeyance in which the United States is a Party due to Lapse of Congressional Appropriations Funding the Department of Justice and the United States Attorney’s Office (S.D.W.V. Dec. 26, 2018), available at https://www.wvsd.uscourts.gov/pdfs/generalorders/18-mc-196%20Order.pdf.

[41] Civil Cases, Assigned to Judge Joseph R Goodwin, in which the United States is a Party are Exempt from the General Order, Entered on December 26, 2018, Holding Such Cases in Abeyance, Misc. No. 2:18-mc-00196, In re Petition for a General Order Holding Civil Matters in Abeyance in which the United States is a Party due to Lapse of Congressional Appropriations Funding the Department of Justice and the United States Attorney’s Office (S.D.W.V. Jan. 2, 2019), available at https://www.wvsd.uscourts.gov/pdfs/generalorders/Exemption-Order.pdf.

[42] Administrative Office of the U.S. Courts, Judiciary Operating During Shutdown (Dec. 22, 2018), https://www.uscourts.gov/news/2018/12/22/judiciary-operating-during-shutdown.

[43] Id.

[44] Id.

[45] United States Courts for the Ninth Circuit, December 28, 2018 Announcements, https://www.ca9.uscourts.gov/content/view.php?pk_id=0000000969.

[46] United States Court of Appeals for the First Circuit, Government Shutdown: First Circuit Court of Appeals to Continue Regular Operations, https://www.ca1.uscourts.gov/.

[47] Executive Office of the President of the United States, Office of Management and Budget, Impacts and Costs of the October 2013 Federal Government Shutdown 8-9 (Nov. 2013), available at https://perma.cc/NH6P-LMHA.

+ The Administrative Office of the U.S. Courts now estimates that it can continue operating without new appropriations through January 18, 2019, potentially delaying the majority of impacts to federal courts for one more week. Administrative Office of the U.S. Courts, Judiciary Operating on Limited Funds During Shutdown (Jan. 7, 2019), https://www.uscourts.gov/news/2019/01/07/judiciary-operating-limited-funds-during-shutdown. To continue operations, “courts have been asked to delay or defer non-mission critical expenses, such as new hires, non-case related travel, and certain contracts.” Id.

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