January 01, 2017

Chevron Deference: Ambiguous Future, or All Clear?

Thomas J. Grever

Federal agency actions must be authorized by statute, but sometimes the statutes lack a certain amount of clarity, as many courts struggling with our federal environmental laws have observed with varying degrees of exasperation, befuddlement, and vitriol. But lack of statutory clarity does not in itself prevent agency action. A fundamental principle of administrative law is that courts generally defer to the judgment of administrative agencies attempting to implement an ambiguous or open-ended statute. This is referred to as “Chevron deference,” from the Supreme Court’s decision in Chevron v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 (1984).

Challenges to federal environmental regulations and other agency actions often rise or fall on the reviewing court’s application of Chevron. Chevron is a two-step analysis: at step one the court asks whether the statute is ambiguous. If the statute is found to be clear and unambiguous, then the court determines whether the agency action comports with statute—and there is no deference to the agency on this question. If the statute is judged to be ambiguous, the court proceeds to step two, determining whether the agency’s interpretation of the ambiguous statute is plausible, and not arbitrary or capricious. The application of Chevron in any case turns on the initial examination of whether a statute is ambiguous. On paper, this would appear to be straightforward evaluation with little room for disagreement.

Chevron has come under sharp criticism from some judges and commentators. Some view that ambiguity is found too frequently, and Chevron deference too frequently allowed, promoting an expansion of executive agency power and diminishing the role of the courts as a check on the executive branch. Court opinions, law review articles, blog entries, and tweets periodically signal the demise of Chevron, but reports of its death are premature; it remains a core principle directing judicial review of federal agency regulations. This debate will continue to rage in the near future, as two of the most significant environmental regulatory challenges in recent memory will likely implicate Chevron: the challenges to the Environmental Protection Agency’s (EPA) Clean Power Plan, which would require significant national reductions in greenhouse gas emissions from power plants, and the challenges to EPA’s Clean Water Rule, which seeks to define the waters subject to regulation under the Clean Water Act.

Recent outcomes in other environmental regulatory challenges have shown that the answer to Chevron’s step one inquiry is hardly predictable or consistent. Three cases, each involving significant national air regulations, highlight the issue. In one, the court of appeals found no ambiguity and struck the agency action, while a divided Supreme Court also found no ambiguity but found an exactly opposite meaning. In a second, the court of appeals found no ambiguity, but a divided Supreme Court found ambiguity (and then found the agency’s interpretation unreasonable). In the third, the court of appeals found the pertinent statutory language both ambiguous and unambiguous at the same time.

In the litigation over the Cross State Air Pollution Rule (CSAPR), the petitioners challenged the imposition of a federal implementation plan (FIP) forcing emission reductions in states upwind of areas designated as in nonattainment with air quality standards. EME Homer City Generation, L.P. v. EPA, 696 F.3d 7 (D.C. Cir. 2012), reversed and remanded, EPA v. EME Homer City Generation, L.P., 134 S. Ct. 1584 (2014). The battle concerned the meaning of the language in 42 U.S.C. § 7410(c)(1) providing that EPA must issue a FIP within two years of disapproval of a state implementation plan. Petitioners argued that the states had not yet submitted a state implementation plan to attempt to address the specific limitations, although EPA had rejected earlier state plans prior to developing the emission targets.

The court of appeals determined, at Chevron step one, that the statute unambiguously required that states first be allowed to submit a plan to meet the specific targets before EPA could issue a FIP. Writing for the panel, Judge Brett Kavanaugh looked beyond the specific text to determine the unambiguous meaning, explaining that “[s]tatutory text ‘cannot be construed in a vacuum. It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.’” 696 F.3d at 33. The Supreme Court reversed, finding that the text of the statute unambiguously supported EPA’s opposite position: the “‘plain text and structure establish a clear chronology of federal and State responsibilities’”, despite the “practical difficulties” this might present. 134 S. Ct. 1584, 1601 (quoting EME Homer City Generation, 696 F.3d at 47 (Rogers, J., dissenting)).

In litigation over whether greenhouse gases are covered in the Clean Air Act’s new source review and major source operating permit provisions, the courts addressed the meaning of “any air pollutant.” The court of appeals found that “any air pollutant” was unambiguous and could not be read any way other than to subject greenhouse gases to regulation under the permitting provisions. Coalition for Responsible Regulation, Inc. v. EPA, 684 F.3d 102 (D.C. Cir. 2012). The Supreme Court disagreed in a 5–4 opinion on this point, finding that “any air pollutant” is ambiguous when viewed in the context of the entire Clean Air Act. On this finding of ambiguity, the Court moved to Chevron step two, but found that the agency’s interpretation was unreasonable because it would result in a massive expansion of the permitting program to small sources that Congress could not have intended to be subject to these programs. Utility Air Regulatory Grp. v. EPA, 134 S. Ct. 2427 (2014) (UARG).

More recently, in its July 2016 decision upholding most provisions of EPA’s hazardous air pollutant standards for boilers and incinerators (the Boiler MACT), the D.C. Circuit found one provision of the Clean Air Act both ambiguous and unambiguous, depending on the issue. U.S. Sugar Corp. v. EPA, 830 F.3d 579 (D.C. Cir. 2016). Industry and environmental group petitioners challenged various emission limits arguing that they were too stringent or too lenient, and not authorized under the requirement of § 112 (codified in 42 U.S.C. § 7412(d)(3)) that hazardous air pollutant emission standards be set at the level “achieved in practice” by “the best controlled similar source.”

One industry challenge was that EPA should consider emissions during periods of operational malfunction in setting emission limits. They argued that the term “achieved in practice” requires EPA to consider malfunction periods, because malfunctions are inevitable—as even EPA agreed, although EPA did not consider malfunction periods in calculating the limit. Finding the statutory language ambiguous, the court deferred to EPA, finding that “at the very least, the language permits EPA to ignore malfunctions in its standard setting.” Id. at 608.

But in the environmental group’s challenge of another emission limit as being too lenient, the court found that the same statutory language was unambiguous, and allowed EPA no discretion to interpret the provision. EPA had rejected consideration of a particular, lower-emitting existing source as the “best controlled similar source” on the basis that the source was not “similar” because its performance was based on test results unrepresentative of typical operations. The court held, however, that § 112(d)(3) “mandates, without ambiguity” that EPA consider each and every source within the category, leaving EPA no discretion to avoid consideration of any one individual source. Id. at 631.

The divergent views on ambiguity in these cases fuel Chevron critics, who would seek to replace Chevron in most cases with an approach that might lend more certainty and less deference to the agency. In 2016, Judge Kavanaugh of the D.C. Circuit Court of Appeals published an article commenting on the state of judicial statutory interpretation, with particular emphasis on determining ambiguity, and proposing improvements toward a goal of more consistent, objectively neutral, and precedential results. Brett M. Kavanaugh, Fixing Statutory Interpretation, 129 Harv. L. Rev. 2118 (2016). Judge Kavanaugh notes that an overarching goal of the judiciary should be “to make judging a neutral, impartial process in all cases—not just statutory interpretation cases. Like cases should be treated alike by judges of all ideological and philosophical stripes, regardless of the subject matter and regardless of the identity of the parties to the case.” Id. at 2120. However, he argues that this goal is compromised by too many rules and interpretive canons that are not applied evenly or consistently, and “judges often cannot make that initial clarity versus ambiguity decision in a settled, principled, or evenhanded way,” id. at 2118, resulting in “a situation where every relevant actor may agree that the agency’s legal interpretation is not the best, yet that interpretation carries the force of law.” Id. at 2151.

The concern is that the initial finding of ambiguity (or clarity) can be a pretext for reaching (or avoiding) Chevron deference to the agency. Judge Kavanaugh’s suggested approach would be to abandon the clarity versus ambiguity test, and instead have judges determine the “best reading” of the text of the statute by interpreting the words of the statute, taking account of the context of the whole statute, and applying appropriate semantic canons of construction. Once judges have arrived at the best reading of the text, they can then apply more limited canons (such as the absurdity doctrine) that may justify departure from the text. Judicial deference to the agency would be warranted only where the statute clearly invited the agency to exercise technical judgment, such as a mandate to regulate “unreasonable” pollution levels.

Would this approach have made a difference in recent cases? In the CSAPR litigation, Judge Kavanaugh himself appeared to use this approach in finding that the state implementation plan provisions were clear in mandating that EPA could not issue federal implementation plans. Because the Supreme Court focused more on the language at hand and less on the context, a more contextual reading may have resulted in agreement with the court of appeals. In UARG, the court of appeals might have reached the same result as the Supreme Court, which took a more contextual approach in defining “any air pollutant.” And in the Boiler MACT case, the “best reading” of the standard-setting requirements might yield an approach that either allows agency flexibility or not, but not both at the same time depending on the issue.

For the Clean Power Plan and Clean Water Rule, the courts of appeal and Supreme Court will be asked to grapple again with Chevron and determine whether the relevant statutory provisions are clear or ambiguous. To understate the obvious, these rulemakings hang much in the balance for all sides. If the opinions rest on Chevron, the debate over Chevron’s future viability will only get louder.

Thomas J. Grever

Mr. Grever is a partner in the Environmental Practice Group at Shook Hardy & Bacon LLP in Kansas City, Missouri, and is a member of the editorial board of Natural Resources & Environment. He may be reached at tgrever@shb.com.