The U.S. Supreme Court’s October 2023 term has seen a quartet of very significant decisions concerning the administrative enforcement of agency regulations, the time available for challenging federal regulations, and whether judicial deference to agency interpretations of statutory ambiguity and silence is even permissible, among other things. These and five current cases pending for the 2024 Term make for a very busy year for the Court and for environmental, energy, and natural resource practitioners.
These cases concern challenges to the authority of the National Marine Fisheries Service (NMFS) under the Magnuson-Stevens Act (MSA) to require operators of domestic fishing vessels to pay the salaries of federal observers carried on board their vessels to observe compliance with NMFS regulations. While the MSA expressly requires vessels to pay the salaries of federal monitors in three narrow circumstances, the statute caps those salaries at 2-3% of the value of the vessel’s catch. Petitioners unsuccessfully appealed the NMFS’ requirement in fisheries management plans for vessels to pay federal observers' salaries in circumstances not expressly authorized by the MSA and without the protections of the statutory cap on those salaries. The District Court granted summary judgment to the NMFS based on Chevron deference, and a divided panel of the U.S. Circuit Court of Appeals for the District of Columbia Circuit affirmed.
On certiorari granted in Loper Bright and a consolidated case, Relentless, the Court held that the Administrative Procedure Act (APA) mandates courts to exercise independent judgment when deciding whether an agency acted within its statutory authority and explained that courts should not defer to agency interpretations of a statute simply because the statute is ambiguous. In doing so, the Court overturned the so-called Chevron deference test. Under that two-part test, courts would first determine whether a statute is clear or ambiguous. If the statute is ambiguous, the court must defer to an agency’s reasonable interpretation of the ambiguous language.
Writing for the majority, Chief Justice Roberts began by noting that the Framers of the Constitution intended the judiciary to be the final interpreters of the law. But after rapid expansion of the administrative state during the New Deal, the courts established a body of law under which courts are generally bound by agency findings of fact. He noted, however, that the courts never extended that same deference to agency determinations of law, observing that the Court in Skidmore v. Swift & Co. stated that the weight a court gives to an agency interpretation of statutory text depended on “[f]actors which give it power to persuade, if lacking power to control.”
The Court then differentiated two clauses of section 706 of the APA that guide how courts must review final agency actions being contested. The APA mandates that courts apply deferential standards when reviewing agency policymaking and factfinding; however, the Court did not read such deference into section 706 guidelines for judicial review of agency legal interpretations. In relevant part, section 706 states that “the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.”. Further, the APA mandates that courts set aside agency conclusions that are “not in accordance with law.” The Court then concluded that the APA codified its traditional understanding of the judicial function.
Turning to the Chevron test itself, the Court held that the test “cannot be squared with the APA.” Chevron step two demands that courts mechanically afford binding deference to agency interpretations when a statute is ambiguous or silent on an issue. In effect, the test forces a court to ignore the APA mandate that courts exercise independent judgment when interpreting the law.
The Court rejected NMFS’s and the dissent’s contention that statutory ambiguities are implicit delegations to the agencies charged by Congress with implementing the statute. The Court took note of the Chevron Court’s observation that ambiguous language “may result from an inability on the part of Congress to squarely answer the question at hand, or from a failure to even ‘consider the question’ with the requisite precision.” The Court also noted that the Framers recognized ambiguities in the written law would inevitably flow from human imperfection and the complexity of words and phrases. The Court then observed that statutory ambiguities are not deemed congressional delegations of legislative authority in any other legal context, and that courts, not agencies, have special expertise in resolving statutory ambiguities.
Justice Kagan authored a dissenting opinion joined in by Justices Sotomayor and Jackson that asserted expert agencies are best suited to resolve ambiguities falling within their statutory purview and criticized the majority for overturning forty years of precedent and forcing courts to make technical judgments on esoteric subject matters. The Court reversed this case and a number of other pending cases and remanded for further proceedings.
The Court reviewed a Fifth Circuit decision that held the Securities and Exchange Commission’s (SEC’s) 2013 administrative prosecution of securities fraud claims against hedge fund manager George Jarkesy was unconstitutional on several grounds. The Fifth Circuit majority found that (1) Congress had not authorized SEC to adjudicate administrative enforcement proceedings that impose monetary penalties; (2) allowing SEC to decide between prosecution for securities fraud in an Article III court and before an Administrative Law Judge (ALJ) employed by SEC is an impermissible delegation of legislative authority, and (3) SEC cannot provide ALJs with multiple layers of removal protection without impermissibly limiting the President’s executive power, consistent with the Supreme Court’s 2010 decision in Free Enterprise Fund v. Public Co. Accounting Oversight Board.
Chief Justice Roberts, writing for a 6-3 majority, held that when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial. Under the Seventh Amendment, most defendants in civil cases seeking monetary damages have the right to a jury trial, and the exceptions to this right generally require establishing that the types of actions at issue could have been brought in the 18th century in an equity court without a jury. The exception to the Seventh Amendment’s guarantee of a right to jury trial at issue in Jarkesy concerns the Supreme Court’s doctrine of “public rights.” When this exception applies it is because the right in question is a “public right” that would not have required the kind of suit at common law to which the Seventh Amendment applies. Calling the resolution of this issue “straightforward,” the majority explained that it was following the analysis set forth in Court precedents Granfinanciera, S. A. v. Nordberg, and Tull v. United States.
The Court observed that this action implicated the Seventh Amendment because the SEC’s antifraud provisions replicate common law fraud and because the Seventh Amendment embraces all suits which are not of equity or admiralty jurisdiction, whatever may be the peculiar form which they may assume, including statutory claims that are “legal in nature.” To determine whether a statutory suit is legal in nature, courts must consider whether the cause of action resembles common law causes of action and whether the remedy is the sort that was traditionally obtained in a court of law. Of these factors, the Court observed that the remedy is the more important, and in this case the remedy was all but dispositive for the majority. For respondents’ alleged fraud, the SEC sought civil penalties, a form of monetary relief. The Court observed that such relief is legal in nature when it is designed to punish or deter the wrongdoer rather than solely to “restore the status quo.” The Court also noted that the close relationship between federal securities fraud and common law fraud confirms that conclusion.
Because the fraud claims at issue implicate the Seventh Amendment, a jury trial is required unless the “public rights” exception applies. Certain categories that have been recognized as falling within the public rights exception include the collection of revenue, aspects of customs and immigration law, relations with Indian tribes, the administration of public lands, and the granting of public benefits.
Justice Sotomayor authored a dissenting opinion in which Justices Kagan and Jackson joined, observing that Congress has enacted more than 200 statutes authorizing dozens of agencies to impose civil penalties for violations of statutory obligations with “[n]o reason to anticipate the chaos today’s majority would unleash after all these years.”
The Court did not address the remaining issues in the case, which was affirmed and remanded.
In 2021, two trade associations and a convenience store/truck stop filed a complaint challenging a Federal Reserve Board of Governors (Fed) rule promulgated in 2011 that caps debit card processing fees for large banks. Corner Post, Inc., which owns a small truck stop in North Dakota, was added as a plaintiff in an amended complaint when the Fed moved to dismiss the original complaint on statute of limitations grounds. Although the Fed had issued the rule ten years earlier, Corner Post, Inc. first opened for business in 2018 and, therefore, argued that its APA claim did not accrue until it was “first injured” by the rule in 2018. The U.S. Court of Appeals for the Eight Circuit affirmed the dismissal of this action by the U.S. District Court for the District of North Dakota as being time-barred.
The Court granted certiorari and then agreed with Petitioners, rejecting the arguments of the Fed based primarily on the express language of 28 U.S.C. § 2401(a), the default six-year statute of limitations applicable to suits against the United States, and holding that an APA claim does not “accrue” under section 2401(a) until the plaintiff is injured by final agency action.
The Court began its analysis by interpreting the text of section 2401(a), which provides that civil actions against the United States “shall be barred unless the complaint is filed within six years after the right of action first accrues.” The Fed asserted that an APA claim accrues under section 2401(a) when agency action is final, i.e., when the challenged credit card fee rule became final, but the Court disagreed. Looking at section 2401(a) and its predecessor statutory language prior to the adoption of the Judicial Code in 1948, the Court observed that Congress retained the language starting a limitation of actions period when the right “accrues” or “when the plaintiff has a complete and present cause of action.” Moreover, a review of the Court’s precedent revealed that this definition of accrual is the “standard rule for limitations periods,” and noting that the Court has previously rejected the possibility that a “limitations period commences at a time when the [plaintiff] could not yet file suit” when considering this same standard language. The Fed’s position that the claim accrues when agency action becomes final was then categorically dismissed by the Court as misinterpreting section 2401(a) as a defendant-protective statute of repose, contrary to the plaintiff-focused language that makes it a statute of limitations. The Fed’s reliance on Court precedent was similarly distinguished by the majority.
Justice Jackson wrote a dissenting opinion in which Justices Sotomayor and Kagan joined that asserts the meaning of “accrues” is context-specific in the Court’s precedents, and accuses the majority of misguided, one-size-fits-all reasoning that ignores the “hazards inherent in attempting to define for all purposes when a ‘cause of action’ first ‘accrues.’”
The Court used an application for a stay, converted it into a full-blown argument and then a detailed opinion granting the stay on the grounds that EPA was likely to lose on the merits. In Ohio v. EPA, the Court was initially confronted with an application for stay of an EPA rule. The applicants, a series of states including Ohio, Indiana, West Virginia and related requests by other states and industrial associations and parties, sought to stay implementation of the Federal ‘Good Neighbor Plan’ for the 2015 Ozone National Ambient Air Quality Standards. EPA issued its rule to limit emissions from fossil fuel-fired power plants in 23 states and certain other industrial sources in 20 states. This rule was premised upon EPA’s findings that certain “ozone precursor” emissions from upwind states adversely impacted the ability of downwind states to comply with air quality standards, thereby addressing a provision of the Clean Air Act known as the “good neighbor provision.”
The details of the statutory authorization for such a rule, its technical background, and potential impacts on air quality are discussed in the separate chapter by the Air Committee in Chapter A. This section discusses the increased use of the Court’s “emergency docket” (previously known as the “shadow docket”) and increased concerns over the use of that procedure to dispose of complicated cases with massive records.
In Ohio v. EPA applicants argued that because the plan effectively exempted 12 of the 23 states from the regulation it was fatally flawed. This was so, in part, applicants argued because the EPA failed to reach a decision in a “considered matter” to avoid an arbitrary and capricious action. The Supreme Court consider the various applications and issued an order in December setting oral argument for February 2024 and specifically addressing “whether the emissions controls imposed by the Rule are reasonable regardless of the number of States subject to the Rule.” Oral argument was held in February and by June the Court issued a decision of some 46 pages, including the dissent.
Although marked by the indicia of a normal decision—a briefing schedule (albeit an accelerated one), oral argument, and then a decision with majority and dissenting opinions---the Court’s mandate in this case was a “non-merits” decision. That is, all that the Court’s decision effectuated was a further stay of the EPA regulation pending further proceedings. The Court’s precise mandate was to grant a stay “pending the disposition of applicants’ petitions for review in the United States Court of Appeals for the D.C. Circuit and any [subsequent] petition for certiorari.”
The dissenters challenged the Court’s ruling, noting in particular that “the Court grants emergency relief in a fact-intensive and highly technical case without fully engaging with both the relevant law and the voluminous record.” As Justice Barrett for the dissenting justices concludes: “[o]ur emergency docket requires us to evaluate quickly the merits of applications without the benefit of full briefing and reasoned lower court opinions. [citation omitted]. Given those limitations, we should proceed all the more cautiously in cases like this one with voluminous, technical records and thorny legal questions.”
City and County of San Francisco v. EPA concerns the specificity required in National Pollution Discharge Elimination System (NPDES) permits under the Clean Water Act (CWA). The CWA was designed to ensure that any holder of a discharge permit has notice of how much they must control their discharges to comply with the act. The CWA requires that the EPA and authorized states provide notice by detailing specific pollutant limitations in the NPDES permits they issue. Based on the act’s text, the Supreme Court and Second Circuit have previously read the act to require the EPA and states to create specific limits for water quality standards. However, in this case the Ninth Circuit held that the EPA may issue permits containing “generic prohibitions” against violating water quality standards. The question presented to the Court is “whether the Clean Water Act allows EPA (or an authorized state) to impose generic prohibitions in NPDES permits that subject permitholders to enforcement for exceedances of water quality standards without identifying specific limits to which their discharges must conform”.
At the core of the suit is whether the CWA in section 301(b)(I)(C) requires specific quantifiable effluent limitations or if it allows for any other type of limitation the EPA believes is necessary to protect water quality. Petitioners, the City and County of San Francisco, argue that the Generic Prohibitions impermissibly measure the City’s compliance based on whether the receiving waters meet water quality standards instead of whether the Petitioner’s discharges meet effluent limitations. According to the Petitioners, the generic prohibitions make compliance with the CWA elusive because a waterbody’s ability to meet water quality standards at any time depends on pollutants from all sources rather than San Francisco’s discharges alone. In this case, the waterbody receiving the discharge is the Pacific Ocean, a body of water marked by many other potential pollutants caused by other sources beyond the Petitioners’ control. The government argues that the generic prohibitions are acceptable when the agency “lacks assurance that the permit’s effluent limitations alone are insufficient to protect water quality.” Moreover, EPA argued the limitations are needed because San Francisco failed to supply information necessary to create tailored limitations.
The Court heard oral argument on October 16, 2024. The Justices appeared divided on ideological lines. The three liberal Justices seemed to lean towards the EPA, pressing San Francisco to explain exactly how the generic prohibitions do not provide clarity on how to comply with the permit. The conservative majority seemed sympathetic to the City’s argument; primarily concerned with the City and other permit holders potentially liable for fines and prison time due to failure to adhere to the EPA’s vague limitations.
The Court will hear two cases involving challenges to the provision in the Clean Air Act (CAA) typically assigning jurisdiction over EPA regulations that are “nationally applicable” to the D.C. Circuit.
The first case is one EPA filed, seeking to overturn a Fifth Circuit ruling denying the agency’s motion to transfer an action filed by six small refineries to the DC Circuit. In October, the Court agreed to consider EPA’s request that the jurisdiction over this dispute involving an EPA regulation denying “hardship” exemptions to some 105 refineries under the CAA’s Renewable Fuel Standards program. Six of the affected refineries filed a petition for review with the Fifth Circuit, which subsequently denied EPA’s motion to transfer venue to the DC Circuit. While this jurisdictional dispute might strike some as arcane and abstruse, it is anything but. There is good reason to suspect that the refineries in question were “circuit judge” shopping and thought (with some real possibility) that the Fifth Circuit’s largely conservative bench would be more favorable than that of the DC Circuit. Thus the question of who gets to decide and where has a real impact, particularly for environmental and energy cases that might be screened through a political lens.
The Court will consider a separate jurisdictional challenge, this time brought by states seeking to challenge EPA’s determination as to State Implementation Plans (SIPs) within their respective “regional” Courts of Appeal. The Court of Appeal for the Tenth Circuit held that exclusive jurisdiction to address the challenges of Oklahoma and Utah rested with the DC Circuit on the grounds that EPA’s decision was grounded on the same common methodology. Various industry petitioners led by PacifiCorp filed a related petition. The Court granted certiorari on both cases, which it then consolidated for merits briefing and argument.
What is the legal scope of an agency’s review under NEPA for potential environmental impacts? The Court will evaluate this issue in the context of an approval of a rail trunk line tying into a national system for a problematic product—waxy crude oil. Environmental groups challenged a decision by the Surface Transportation Board approving the rail line connection not on the grounds that the rail line was insufficient, but rather that the product being conveyed was an environmental issue needing further review. The Surface Transportation Board demurred, claiming that this issue was beyond its regulatory scope. The DC Circuit, however, disagreed, holding in part that the Surface Transportation Board “cannot avoid its responsibility under NEPA to identify and describe the environmental effects of increased oil drilling and refining on the ground that it lacks authority to prevent, control, or mitigate those developments.” As the DC Circuit reasoned:
The undisputed purpose of the railway is to expand oil production in the Uinta Basin, by enabling it to be brought to market via the proposed rail line connecting the Basin to existing lines that run to Gulf Coast refineries. The Board concededly has exclusive jurisdiction over the construction and operation of the railway, including authority to deny the exemption petition if the environmental harm caused by the railway outweighs its transportation benefits.
The Court heard oral argument on this case on December 10, 2024, during which the Solicitor General’s office argued in support of the Petitioner Utah counties. A principal discussion during oral argument was one of line-drawing, specifically how ‘remote’ an environmental issue had to be to justify the lead agency’s decision not to consider it.
California, plagued with historically poor air quality, was given special solicitude in part of the CAA. Section 209(b) of the Act allows EPA, after issuing certain findings, to grant California an exemption from otherwise preemptive nation-wide standards in order to impose the state’s own (presumably tougher) automobile emission standards. Under the Biden Administration, EPA issued a waiver to California to allow for the state to implement emissions standards designed to increase “Zero Emission Vehicles” and greenhouse gas related emission standards.
At this point, economic reality intrudes; California is the largest state ranked by gross domestic product and is certainly one of the leading states for automobile purchases and leasing. Although the waiver of preemption is technically granted to California other states may, at their option, adopt the more rigorous California emissions standards. Many automobile manufacturers may be reluctant to market two types of cars for the same year and model—one suitable for California emissions standards and the other suitable for all states that do not adopt California standards. This is the economic reality, argued those challenging EPA’s decision to grant California’s waiver, that impacts other states and alternative fuel providers, such as agriculturally sourced fuels. The challengers maintain that if California increases emissions standards, automobile manufacturers will surely follow by only offering vehicles suitable for California’s standards in all states, resulting in states losing fossil-fuel based taxes (i.e., gasoline sales tax) due to lower fuel consumption. Additionally, alternative fuel manufacturers will be negatively impacted because their fuels cannot meet the projected lower California standards.
The DC Circuit disagreed, holding that the State petitioners and certain alternative fuel petitioners lacked Article III standing under the “redressability” element—i.e., that even if a judicial decision went their way, they could not establish that such a determination would redress the alleged harm, which was dependent entirely on the actions of third parties (specifically automobile manufacturers). As the Circuit Court put it, “[b]oth groups of Petitioners' injuries would be redressed only if automobile manufacturers responded to vacatur of the waiver by producing and selling fewer non-conventional vehicles or by altering the prices of their vehicles such that fewer non-conventional vehicles—and more conventional vehicles—were sold.”
The alternative fuel group filed a petition for certiorari, the Court granted the petition, but limited it to the standing issue only. It is noteworthy that the Court denied the petition filed by the State parties several days later, with only Justice Thomas dissenting from the denial of certiorari.
The new Trump administration will reconsider the prior EPA waiver issued in California’s favor. The Administration sought to stay the briefing in this case given the new administration’s reconsideration of the waiver. However, it is unclear whether the pending reconsideration will impact this case. As the certiorari grant indicates, the current case centers on Article III standing and not the substantive merits of the Biden Administration’s waiver.
The Court granted certiorari in two cases considering the U.S. Nuclear Regulatory Commission’s (NRC) authority to license temporary spent fuel storage at offsite facilities. The Petitioners, the NRC and a private nuclear waste storage company, Interim Storage Partners, LLC, challenged a decision of the United States Court of Appeals for the Fifth Circuit, which held that the NRC had no authority to issue a license for a temporary away-from-reactor spent fuel storage facility. The Fifth Circuit’s decision conflicts with the District of Columbia and Tenth Circuit’s decisions holding that the NRC does have the authority to license facilities under the Atomic Energy Act.
Additionally, the Fifth Circuit held that the parties challenging the license had standing to do so under an ultra vires exception to the Hobbs Act previously recognized by the Fifth Circuit. However, in its decision, the Fifth Circuit acknowledged that four other court of appeals have refused to adopt the ultra vires exception. According to an amicus in support of the NRC, “the Fifth Circuit got two exceptionally important questions exceptionally wrong, and its decision will have far-reaching and destabilizing consequences for the nuclear industry.”
The questions presented to the Court are:
(1) Whether the Hobbs Act, 28 U.S.C. 2341 et seq., which authorizes a “party aggrieved” by an agency’s “final order” to petition for review in a court of appeals, 28 U.S.C. 2344, allows nonparties to obtain review of claims asserting that an agency order exceeds the agency’s statutory authority; (2) Whether the Atomic Energy Act of 1954, 42 U.S.C. 2011 et seq., and the Nuclear Waste Policy Act of 1982, 42 U.S.C. 1010 et seq., permit the Nuclear Regulatory Commission to license private entities to temporarily store spent nuclear fuel away from the nuclear-reactor sites where the spent fuel was generated.
The NRC argues that Texas did not become a party under the Act by submitting comments on the draft EIS and sending a letter to the Commission, nor did Fasken Land and Minerals become a party by unsuccessfully seeking to intervene. However, Texas argues that text of the statute shows that Congress specifically chose the broad term “party aggrieved” when it drafted the statute and that a party is defined as any person concerned or having taking part in any affair, matter, transaction or proceeding. The NRC further argues that the Atomic Energy Act authorizes the Commission to license temporary storage of spent nuclear fuel away from nuclear reactors based on a plain text reading of the statute. Moreover, the NRC argues that the Act’s structure and purpose, as well as the Commission’s ongoing interpretation of the Act supports its claim that it has authority to license offsite storage of spent fuel. The Court has scheduled oral argument are set for March 5, 2025.
