Music’s Off on the Chevron Two-Step: A Change of Tune for Natural Resources Law
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Music’s Off on the Chevron Two-Step: A Change of Tune for Natural Resources Law

Brownstein Client Alert, July 8, 2024

On June 28, in Loper Bright Enterprises v. Raimondo, the Supreme Court overruled its landmark decision in Chevron v. Natural Resources Defense Council, which gave rise to the Chevron doctrine. The Chevron case, decided in 1984, required judicial deference to a federal administrative agency’s challenged actions if a two-step test was satisfied. The Chevron two-step test has since become foundational precedent for challenges to environmental and natural resources rulemaking and other agency actions.

Chevron specifically directed federal courts, in reviewing an agency’s interpretation of a statute, to determine first whether Congress directly spoke to the precise statutory question at issue. If so, the intent of Congress is clear and courts should give effect to that intent. Second, if the statute is instead silent or ambiguous, Chevron directed courts to defer to the agency’s reading of the statutory provision as long as that interpretation was a permissible construction of the language.

The court’s decision to overturn Chevron, which has been cited thousands of times by courts over a 40-year period, will sharply curtail federal agencies’ ability to interpret the statutory laws they administer and will empower courts to make final interpretations of ambiguous laws. And Loper Bright is one of three major decisions this term, including Securities and Exchange Commission (SEC) v. Jarkesy and Corner Post, Inc. v. Board of Governors of the Federal Reserve System, which will fundamentally change administrative law and have far-reaching effects on both federal regulatory agencies and the entities they regulate. This alert covers the current deference landscape, general impacts and impacts specific to environmental and natural resources regulations and regulatory actions.

Current State of Judicial Deference to Agencies

1. Chevron Deference, Narrowed Over 40 Years, Is No More

The Chevron doctrine has been a linchpin of administrative law for decades; it is cited thousands of times. Overruling this landmark administrative law decision no longer affords agencies judicial deference for permissible construction of ambiguous statutes.

The Chevron doctrine has been criticized and narrowed over the years. Critics argued the Chevron doctrine granted federal administrative agencies an outsized role in resolving statutory ambiguities, allowing agencies to interpret the bounds of the law. In response to such criticisms, the courts created a number of limitations to the doctrine, including the threshold requirement of Chevron “step zero” and that Chevron does not apply if the question is one of “deep economic and political significance” or if the “major questions doctrine” is implicated. West Virginia v. U.S. Environmental Protection Agency, 597 U.S. 697 (2022) (holding the U.S. Environmental Protection Agency (“EPA”) asserted “extravagant statutory power over the national economy,” overstepping its authority under the Clean Air Act in promulgating the 2015 Clean Power Plan).

Some agencies, in recent years, proactively relied less on Chevron in rulemaking and legal arguments. For example, the EPA made a tactical shift to deemphasize the role of Chevron arguments, arguing that its statutory interpretation is the best interpretation regardless of Chevron. See alsoWeyerhaeuser Co. v. U.S. Fish and Wildlife Service, 586 U.S. 9 (2018) (parties silent on Chevron arguments raised on appeal when before Supreme Court on agency’s critical habitat designation under the Endangered Species Act).

Given the trend in recent years to rely less on Chevron, much of the effect of the court’s decision may be avoided. We previously discussed the Supreme Court’s likely decision in Loper Bright given this backdrop here.

2. Agencies Still Have Deference Interpreting Own Regulations

The Loper Bright decision is not a wholesale disposal of judicial deference to agencies. Chevron deference did not apply to an administrative agency’s interpretation of its own regulations. In such cases, a principle known as “Auer deference” (or “Seminole Rock deference”) applies. See Auer v. Robbins, 519 U.S. 452 (1997); Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945) (explaining that an agency’s interpretation of its regulation should be given “controlling weight unless it is plainly erroneous or inconsistent with the regulation”).

Notably, the Supreme Court had an opportunity to overrule Auer deference when it decided Kisor v. Wilkie, 139 S. Ct. 2400 (2019), but imposed limitations on this form of deference instead. After Kisor, an agency interpretation of its own regulation is entitled to deference only if: (1) the regulation is “genuinely ambiguous,” (2) the agency interpretation is reasonable, and (3) the agency interpretation is entitled to controlling weight. Id. at pp. 2415–2418. Controlling weight requires, for example, a showing the interpretation is an official position of the agency made in some formal context, is consistent with the agency’s prior formal interpretations, implicates the agency’s expertise, is not merely a litigation position or post hoc rationalization, and was issued with fair notice to regulated parties. Ibid.

The Loper Bright decision does not directly impact Auer deference, narrowed by Kisor, though courts may continue to limit Auer deference in the future.

3. Agencies Still Have Deference Over Informal Decisions—Where Persuasive

Similarly, Chevron deference never applied to interpretations of policy statements, agency manuals and enforcement guidelines. Agency interpretations in these “informal” contexts, which lack the force of law, are entitled to Skidmore deference, by which the weight afforded to an agency’s interpretation “will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).

The Loper Bright majority opinion cites approvingly to Skidmore. This form of persuasive agency authority persists.

Note, the consequences of the Loper Bright decision, and loss of judicial Chevron deference, may result in administrative agencies relying on Skidmore-like persuasion arguments to defend formal, regulatory action. The majority in Loper Bright seem to use language similar to this approach. Because Congress is unable to draft legislation that can account for every possible circumstantial scenario or future development, agencies will continue to need to defend interpretations of ambiguous provisions. Developing a framework for power or persuasion arguments on judicial review in this context would allow courts to leverage an agency’s technical and scientific expertise and experience without conceding to that agency’s interpretation of an ambiguous statute.

State jurisdictions, such as California, already consider the persuasive power of an agency’s statutory interpretation when reviewing challenged state agency action, and do not afford outright judicial deference as understood under the Chevron doctrine. Yamaha Corp. of America v. State Bd. of Equalization, 19 Cal. 4th 1, 7 (1998); New Cingular Wireless PCS, LLC v. Public Utilities Com., 246 Cal.App. 4th 784 (2016) (giving “considerable deference” to the agency’s legal result but not the agency’s reasoning.”).

The judicial deference landscape, in sum, has not been obliterated but significantly altered: Agencies will need to defend statutory interpretations through the power of persuasion.

Broad Implications of Loper Bright

In addition to repudiating the deference legal standard applied in statutory interpretation cases, Loper Bright will generally impact all three branches of the federal government and regulated community. This includes potential changes to:

  • Interpretation of Ambiguous Statutory Provisions: Courts, not administrative agencies, are now charged with interpreting ambiguous statutory provisions, even when technical or scientific expertise is involved, and even, moving forward, where courts have previously upheld agency action.
  • Increased Challenges to Agency Decisions: The ruling increases the likelihood of challenges to, and possibility of success for those challenging, federal rulemaking and regulatory actions. Statutes are frequently silent or unclear on issues critical to implementation and enforcement. In those cases, absent interpretive authority clearly and lawfully delegated to the agency, challengers will no longer have to overcome judicial deference to an agency’s interpretation.
  • Effects on Agency Interpretations of Statutes: Executive agencies’ ability to fill gaps in laws or address unforeseen situations has been restricted. Agencies may proceed more cautiously and narrowly when adopting regulations or addressing novel issues.
  • Congressional Legislative Approaches: The ruling puts pressure on Congress to legislate with greater specificity. If Congress does not provide clear guidance, courts will step in to interpret Congress’s intent.
  • Decisions by Regulated Entities: Reduced judicial deference to agency interpretations may create regulatory uncertainty. Businesses may hesitate to act based on new agency pronouncements until courts weigh in and the legal landscape stabilizes.

Specific Implications to Natural Resources and Environmental Regulations

The magnitude of the total effect of the decision remains to be seen.

The Loper Bright decision is most likely to impact areas where statutory ambiguity exists, such as where agencies are interpreting older statutes to respond to contemporary or novel issues not within Congress’s original contemplation. This is often the case in environmental and natural resources regulations, where agencies often implement decades-old statutes to address evolved issues and scenarios. For example, Chevron itself dealt with the EPA’s interpretation of a “stationary source” subject to new source review under the Clean Air Act (“CAA”). Effectively, technology had developed to allow for EPA to consider a bubble-approach to treat all pollution-emitting devices at a whole industrial plant as a single “bubble” source when deciding whether new source review is required for a change to one component of the grouping.

The following are additional examples where federal regulations may feel the impact of Loper Bright:

  • Climate Change and Renewable Energy Regulations—Public Utility Regulatory Policies Act, CAA, and more: On July 2, the Supreme Court remanded Edison Electric Institute, et al. v. Fed. Energy Reg. Commission, No. 22-1246, concerning the Federal Energy Regulatory Commission’s decision that a solar project qualifies as a small production facility pursuant to the Public Utility Regulatory Policies Act, for further consideration without Chevron Similarly, climate-and energy-related rules and national goals issued throughout the Biden administration may be challenged post-Loper Bright. For example, pulling from West Virginia v. EPA, opponents may use the major question doctrine to disrupt the EPA’s ability to regulate the power grid. See more on that case here. And when it comes to climate change, Congress has never enacted climate legislation directly. The EPA has largely relied on the CAA to address contemporary concerns with climate policy. The CAA was enacted in 1963 and has been periodically amended but never directly to address greenhouse gas emissions. The EPA has interpreted and applied various provisions of the statute to address modern climate issues across sectors. For example, on April 24, 2024, the EPA issued a final rule based on the CAA, mandating aggressive carbon dioxide emissions reductions from existing coal-fired power plants and new natural gas-fired turbines. We previously discussed this final rule here. With the Chevron doctrine overturned, individual courts will need to make decisions about the meaning of the CAA and how it applies to contemporary climate issues, if at all.
  • Scope of Federal Inspections and Violations—Mine Safety and Health Amendments Act: On July 2, 2024, the Supreme Court remanded KC Transport v. Secretary of Labor, No. 23-876, a case involving challenges to the Mine Safety and Health Administration inspector’s interpretation of “mine” and “operator” under the 1977 statute to include trucks and repair shops, for further consideration without Chevron Regulated entities may see Loper Bright as easing the burden for future challenges to the scope of federal inspections and violations.
  • Wetland DesignationsClean Water Act, Food Security Act Wetland Conservation provisions (Swampbuster Act), and more: On July 2, 2024, the Supreme Court remanded Foster v. Dept. of Agriculture, No. 23-133, a case involving challenges to the Natural Resources Conservation Service’s certification of wetlands on a farm property and denial of review of the decision, for further consideration without Chevron And given recent rulemaking and judicial decisions concerning other federal agency interpretations of designated waters under the Clean Water Act, including Sackett v. EPA, 598 U.S. 651 (2023) and the 2023 conforming rule, we are likely to see continued challenges to administrative rulemaking and formal decisions in this area.
  • Emerging Contaminant Regulation—Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), Safe Drinking Water Act, Resources Conservation and Recovery Act, Federal Insecticide, Fungicide, and Rodenticide Act, Toxic Substances Control Act, and more: Recently, for example, the EPA has promulgated rules concerning per- and polyfluoroalkyl substances (“PFAS”) compounds, including setting maximum contamination levels for certain PFAS compounds in drinking water and designating for the first time certain PFAS compounds as “hazardous substances” under CERCLA. We previously discussed these designations here. These rules are subject to challenge with any ambiguity of the authorizing statutes (e., Safe Drinking Water Act or CERCLA) being subject to court interpretation rather than EPA’s interpretations. Indeed, two petitions have already been filed challenging EPA’s PFAS drinking water limits, in part for exceeding authority under the Safe Drinking Water Act and for utilizing “novel approaches as the basis for certain portions of the rule.” American Water Works Assoc., Assoc. of Metropolitan Water Agencies v. EPA, Petition, No. 24-1188, U.S. Court of Appeals for Dist. Of Columbia Circuit (June 7, 2024); Nat’l Assoc. of Manufacturers and American Chemistry Council v. EPA, Petition, No. 24-1191, U.S. Court of Appeals for Dist. Of Columbia Circuit (June 10, 2024). And industry groups have challenged the CERCLA designation in Chamber of Commerce of the United States of America, et al. v. EPA, et al., Petition No. 24-1193, U.S. Court of Appeals for Dist. Of Columbia Circuit (June 10, 2024). EPA’s ability to interpret its authority to require new applications of technology under governing statutes to limit and remediate PFAS in the environment may be limited and/or delayed.
  • Environmental, Social, and Governance Disclosures—SEC Reporting Standards: In March 2022, the U.S. Securities and Exchange Commission (“SEC”) proposed the development of climate-related reporting standards. The final rule, adopted on March 6, 2024, required large publicly traded companies to disclose climate action, GHG emissions and the financial impacts of severe weather events. The rule has been embroiled in controversy regarding whether the SEC overstepped its authority. Opponents will almost certainly invoke the court’s recent decision as authority to defeat the rule.
  • Public Lands Rulemaking—Federal Land Policy and Management Act of 1976: The Bureau of Land Management (“BLM”) administers public land according to the Federal Land Policy and Management Act (“FLPMA”), which was passed by Congress in 1976. FLPMA directs the BLM to manage public land according to the principles of multiple use and sustained yield, which requires public lands to be managed in order to sustain a variety of uses over time. 43 U.S.C. § 1701(a)(7). On April 18, 2024, BLM adopted a new Conservation and Landscape Health rule, which identifies “conservation” as a use of public lands on par with other extractive and non-extractive uses under FLPMA. We previously discussed this rule when it was initially proposed by BLM here. The states of Utah and Wyoming have filed suit against BLM and the Department of the Interior arguing the newly adopted rule unfairly prioritizes conservation or nonuse over other public land uses. With Chevron overturned, Utah and Wyoming will not have to overcome deference to BLM’s interpretation of any ambiguous aspects of FLPMA. We expect to see more challenges, particularly by states, to agency rulemaking that expands the definitions of permitted and protected uses of finite resources to include conservation or nonuse for environmental or in-situ benefits.

Moving Forward

The majority’s decision in Loper Bright makes clear the power and responsibility for determining the best interpretation of ambiguous statutes is the province of the courts, which should use “all relevant interpretive tools” at their disposal (presumably referring to interpretive canons and other tools of statutory construction). Justice Elena Kagan, in her dissent, writes “[a]s if it did not have enough on its plate, the majority turns itself into the country’s administrative czar,” emphasizing the minority’s opinion that the Loper Bright decision amounts to a judicial power-grab.

Impacts may be minimal in certain areas, given recent drift away from reliance on the Chevron doctrine, but areas of environmental and natural resources law that require statutory interpretation will be affected by this shift in balance between the judiciary and executive branches of government. Regulated entities should be mindful of the developing ramifications of this decision and Brownstein will continue to monitor the impacts on the environmental and natural resources spheres.

This document is intended to provide you with general information regarding the implications of Loper Bright Enterprises v. Raimondo on environmental and natural resources law. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.

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