The United States Supreme Court issued a trilogy of significant administrative law cases in the last week of its 2023-24 term. The most important of these decisions for brownfield and superfund practitioners was Loper Bright Enterprises v. Raimondo, 2024 U.S. LEXIS 2882 (June 28, 2024) where the Court abandoned its 40-year old “Chevron” doctrine that required judges to defer to agency interpretations of ambiguous statutes.
Background-
Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984) involved a challenge to EPA’s “bubble policy” which was designed to relieve the regulatory burdens of complying with the New Source Review (NSR) program of the Clean Air Act (CAA). The NSR program applies to facilities located in areas that do not comply with national air quality standards (non-attainment or NNSR) or areas that exceed the national air quality standards (Prevention of Significant Deterioration or PSD).
First, a little regulatory history. The 1970 CAA instructed EPA to promulgate national ambient air quality standards (NAAQS) and required states to develop State Implementation Plans (SIP) to achieve the NAAQS. The 1970 law also required EPA to establish uniform national New Source Performance Standards (NSPS) for categories of new or modified sources whose emissions were thought to endanger public health or welfare. The NSPS were to represent the most stringent emissions controls available and were intended to remove incentives for states to adopt weaker SIPS to attract new industry along with preserve clean air to accommodate future growth. Congress envisioned that air quality would improve as the new sources subject to the stringent NSPS gradually replaced the older, dirty plants.
However, EPA struggled with how to balance the statutory imperative to improve the nation’s air quality while also promoting economic activity. One response was EPA’s 1976 Emission Offset Interpretative guidance that allowed construction or modifications of major sources in non-attainment areas so long as they achieved offsets to additional emissions resulting from the alterations and installed stringent emissions controls.
With many areas of the country still not achieving the NAAQS, Congress amended the CAA in 1977 which added new SIP requirements for non-attainment areas as well as creating the PSD and NNSR permit programs. Congress also codified EPA’s Emission Offset guidance for new and modified sources in non-attainment areas until July 1, 1979. After that date, states were prohibited from allowing construction of new sources or modification of new existing sources in non-attainment areas unless they submitted revised SIPs that provided for “reasonable further progress” towards achieving the NAAQS.
In 1980, EPA issued final regulations requiring SIPS to contain NNSR for construction of new major sources or modifications to existing major stationary sources that would result in a significant increase in emissions. States could not issue permits for those projects unless the sources installed stringent pollution controls. The regulation defined “sources” as individual emissions units which meant that a factory would have to undergo the costs and delays associated with NNSR even if the facility could obtain emissions reductions elsewhere in the plant that would offset the increased emissions from the new or modified emission source.
However, in 1981 the Reagan Administration EPA repealed the 1980 SIP NNSR regulation and replaced it with the so-called “bubble” rule which allowed facilities to treat all the individual sources of pollution-emitting equipment as if they were one source encased in a plastic “bubble” for purposes of calculating emissions. By treating an entire industrial plant as a single source for regulatory purposes, the bubble concept allows polluters to lower their cost of compliance with the CAA since an existing facility could construct new pollution-emitting processes or modify existing equipment without having to install expensive pollution controls so long as total emissions from the entire plant did not increase. Moreover, facility owners could expand their plant capacity by modifying existing components and apply less expensive technology. The agency argued the changes were necessary because the prior rule discouraged new investments and modernization of existing plants- arguments that had been rejected by the Carter Administration EPA in its 1980 SIP NNSR regulations.
NRDC sued, claiming the “bubble rule” improperly reduced the number of sources that would have to install stringent air pollution controls The Court of Appeals for the District of Columbia had previously approved the use of a bubble rule for the PSD program but rejected its use for the NSPS. In an opinion written by Judge Ruth Bader Ginsburg, the court found the plantwide definition of source was an impermissible interpretation of the CAA because NNSR was intended to improve air quality.
Even though it was evident that the “bubble” rule was adopted simply to implement a deregulatory agenda by a new administration, the Supreme Court reversed and reinstated the “bubble” rule. Only six justices participated in the decision. Justice John Paul Stevens writing for the Court said the statutory term “source” was ambiguous and that the “bubble” rule reflected a reasonable accommodation of the competing interests of reducing air pollution while maintain economic growth that Congress had either inadvertently failed to address or intentionally left to EPA to resolve. The Court found the statutory ambiguity constituted a limited delegation of interpretive authority to EPA. As a result, the Court said that EPA’s interpretation of the statute was entitled to deference.
In so doing, the Court unveiled a new two-step formula for reviewing agency statutory interpretations. Under “Chevron Step 1”, the Court said a reviewing court must determine if Congress has directly spoken to the precise question at issue. If the answer is yes, the court must give effect to the unambiguously expressed intent of Congress.
However, if the court determines that the statute was silent or ambiguous, the court was required to move to “Chevron step 2” where the court’s task was to determine if the agency’s interpretation was a “permissible” construction of the statute. If so, the agency’s interpretation must be upheld by the court even if it would have chosen an alternative interpretation or if a court thought that the non-agency litigant had the better argument. In other words, the reviewing court was not allowed to substitute its own construction of a statute.
At the time, Chevron was not viewed as a particularly significant case but just a restatement of “long recognized” principle of administrative review. Recently released papers show that the justices were concerned that lower courts had been engaging in judicial activism by substituting their own policy choices for those of federal agencies. Deference was the answer to this perceived judicial activism.
The Reagan Justice Department quickly sensed the sea change and aggressively relied on Chevron to correct what it viewed as activist judges trying to block its deregulatory agenda. Chevron soon became a bedrock principle for reviewing executive agency actions with over 15,000 lower court decisions citing it during the past 40 years. Studies have shown that courts applying Chevron have overwhelmingly upheld agency rulemakings.
Chevron may have reached its highwater mark in the 2004 National Cable & Telecommunications Association v. Brand X Internet Services case where the Court held that an agency was not bound by a prior judicial interpretation of a statute unless the interpretation had been based on a specific and clear congressional intent. While lower courts had continued to use Chevron, the Supreme Court has not relied on Chevron since 2016.
The Loper Bright Decision–
Writing for a 6-3 majority, Chief Justice John Roberts wrote that Chevron was incompatible with section 706 of the Administrative Procedures Act (APA) which commands courts to exercise independent judgement to decide all relevant questions of law and to set aside agency action not in accordance with law. In contrast, the Chief Justice wrote, Chevron required a court to ignore a reading it would have reached had it exercised its independent judgment.
Chevron had been rooted in a presumption of legislative intent. Some legal scholars have argued that statutory ambiguities and gaps are implied delegations by Congress to the agency tasked with administering the law especially where the interpretive issues involve scientific or technical subject matter. These proponents argue that agencies are staffed with “experts in the field” who can apply their training and knowledge to plug statutory gaps. They have also argued that implied delegation also promotes uniform construction of federal law and that because resolving statutory ambiguities often involves policymaking, this work was best done by politically-accountable representatives of the president.
The Chief Justice also rejected the notion that statutory ambiguities represent implied Congressional delegations. He characterized implied delegation as a legal fiction that is often not tethered to reality because most statutory ambiguities are either unintentional or because Congress could not resolve a conflict, and do not reflect a congressional intent that an agency resolve the resulting interpretive question. Instead of declaring a particular party’s reading “permissible” in such a case, the Chief Justice said that courts must use every tool at their disposal to determine the “best reading” of the statute to resolve the ambiguity.
Finally, the Chief Justice said stare decisis did not compel the Court to retain Chevron. However, he said prior cases that relied on the doctrine to uphold specific agency actions remained lawful, including the ruling affirming the bubble rule.
Congress May Still Delegate Authority to EPA
While Loper Bright instructs courts that they should no longer “pretend” that statutory silence or ambiguity constitutes a lawful delegation, it also made clear that Congress retains the ability to expressly delegate authority to federal agencies by using broad language that authorizes agencies to act provided the delegation withstands constitutional scrutiny such as under the Major Questions Doctrine.
Many environmental statutes use broad language that authorize EPA to establish rules it finds are “necessary to protect public health and public welfare,” that are “reasonably necessary” or “appropriate” to carry out its statutory duties.” These statutory references should pass muster as express delegations of decision-making authority.
Deference Is not Dead
There are three forms of deference that survive the demise of Chevron.
Skidmore Deference– Chief Justice Roberts approvingly referred to Skidmore v. Swift & Co., 323 U. S. 134, 140 (1944) several times. In exercising their independent judgment, Skidmore allows courts to give “respectful consideration” to agency interpretations of the statutes that they administer. Changes in agency interpretations that are supported by good reasoning based on science and facts should survive muster.
APA Deference– Agencies may still be afforded deference under the APA’s arbitrary-and-capricious standard. This is a highly deferential standard where a court will not substitute its judgment for that of the agency. The standard is most applicable for reviewing agency factual findings. An agency’s determination will be upheld so long as there is a rational connection between the facts found and the conclusions made.
Auer Deference– Loper Bright did not overrule Auer v. Robbins, 519 U.S. 452 (1997) which provides that courts should generally defer to an agency’s interpretation of ambiguous regulatory language- as opposed to agency’s interpretation of an ambiguous statute- unless it is plainly erroneous or inconsistent. Auer deference survived by the barest majority in Kisor v. Wilkie, 588 U.S. 558 (2018). The 5-4 opinion narrowed the scope of Auer deference and in the wake of Chevron’s demise, might prove vulnerable to being overruled.
Conclusion–
To dispense with the parade of horribles, Loper Bright does not incapacitate the federal administrative state. To borrow from George Keenan, Chevron has fallen to the “Treacherous Curtain of Deference” where agencies increasingly re-interpret statutes not necessarily based on statutory mandates or subject matter expertise but simply to carry out White House directives.In our highly partisan political climate, Chevron promoted an extremely unstable legal regime by accommodating new statutory interpretations and reversing major policy with the change of a presidential administration. Chevron undermined the separation of powers by allowing Congress to abdicate its legislative role and enabling the Executive to determine the meaning of the law instead of the Judiciary.
Staff work for EPA or a state environmental agency because they believe in its mission. All too often, though, they act more like embedded environmental advocates pursuing personal or administrative policy preferences rather than civil servants operating within the statutory authority conferred on them by the legislative branch. However, under our Constitutional form of government, agencies are bound by the law that was passed and not the law the agency employees wish the legislature had passed. If a statute does not authorize the agency to address a particular issue, the response should not be to adopt an exceedingly broad interpretation of the authorizing statute that arrogates the legislature’s core lawmaking power to the executive branch.
What the demise of Chevron will do is to allow the regulated community to pull back the curtain on an agency’s claims that its interpretation of a statute is based on its expertise when it may be nothing more than advancing the political goals of a new administration. It may now be easier for superfund and brownfield practitioners to question a variety of decisions such as if a response action is a removal or remedial action which has statute of limitations consequences, the validity of NPL listings, issuance of unilateral administrative orders, whether costs were incurred consistent with NCP, remedy selection, identification of ARARs and challenges to consent orders by non-settling parties.
As George Washington said in his farewell address, a branch of government arrogating for itself the power of another branch based on the perception of it would be an instrument of good “is the customary weapon by which free governments are destroyed”.
Hopefully, Loper Bright will operate to apply the brakes to such regulatory overreach.
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