Caught in the Net

How A New Jersey Fishery Took Down the Chevron Deference

Friday Fish Fry

Catch of the Day

News broke early this morning that the Supreme Court issued a 6-3 landmark ruling overturning the “Chevron deference” doctrine. The Chevron deference had been a mainstay of administrative law adjudication for 40 years, granting broad powers of regulatory authority to federal agencies.

The case in question, Loper Bright Enterprises vs. Raimondo, centered around a New Jersey commercial fishery contesting a rule issued by the Commerce Department’s National Marine Fisheries Service (NMFS). This rule required fishing boats to host expert observers to oversee the vessel’s activities, at the expense of the owner. Citing an undue financial burden, Loper Bright sued the Commerce Department, asking the court to grant relief in the form of overruling or relaxing the Chevron deference, which had been used by the agency to pass regulations seen by industry as increasingly draconian.

The Chevron doctrine originated from the 1984 Supreme Court case Chevron USA vs. National Resources Defense Council, which ruled that, in instances where federal statutes are ambiguous and disputes over interpretation arise, ultimate authority should be deferred to the relevant administrative agency as domain experts, rather than addressed through the court system. At the time, the Supreme Court was frustrated with appellate courts lacking in expertise in technical areas of policy, who consistently misapplied the law in cases involving administrative agencies, and simply ruled in favor of their preferred political agendas. However, in the intervening decades, Chevron has been expanded to encompass competencies not initially envisioned in the 1984 decision.

In Friday’s ruling, Chief Justice John Roberts writing the majority opinion explicated that the Chevron doctrine had usurped the rights of the courts to interpret law, violating Articles I and III of the Constitution. He wrote “that the reviewing court--not the agency whose action it reviews--is to decide all relevant questions of law and interpret ... statutory provisions." He further elaborated that “perhaps most fundamentally, Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.”

In her dissent, Justice Elena Kagan underscored the role of Chevron as mediating issues of complex technical policy, explaining that the doctrine “has formed the backdrop against which Congress, courts, and agencies — as well as regulated parties and the public — all have operated for decades. It has been applied in thousands of judicial decisions. It has become part of the warp and woof of modern government, supporting regulatory efforts of all kinds — to name a few, keeping air and water clean, food and drugs safe, and financial markets honest.”

A Fishy Legacy

The overturning of Chevron has significant implications for the U.S. energy policy landscape. Earlier this year, the Environmental Protection Agency (EPA) passed sweeping reforms to power plant emissions rules, requiring coal plants that intend to remain in operation through 2039 to reduce CO2 output by 90% using carbon capture and other technologies. These measures must be implemented by 2032. Analysts largely agree that this task would be too onerous for most plants to remain economic, and the majority of coal operations would be forced into premature retirement. The rule also requires any newly constructed natural gas plants to similarly reduce emissions by 90% through capture and sequestration, compared to a baseline of currently operating plants.

The EPA has recently issued rules that tighten tailpipe emissions requirements for internal combustion engine (ICE) vehicles, as a market intervention strategy to encourage manufacturers to phase out conventional cars in favor of electric and plug-in hybrid models. EPA efficiency standards for a slew of home and commercial appliances and electronic devices are also currently in the works.

Similarly, this year the Securities Exchange Commission finalized disclosure rules requiring large accelerated filers (public float of at least $700 million) to report their Scope 1 and 2 emissions on official filings. These disclosures are nominally intended to provide information on corporate environmental stewardship to potential investors.

Now, in light of the Supreme Court’s Chevron ruling, the implementation of such agency rules is in jeopardy. While the Court’s opinion clarified that past precedents where the Chevron doctrine was successfully applied will not be readjudicated, any case brought before the courts going forward will be obliged to disregard these precedents. The reversal of four decades of administrative law policy thus provides fertile ground for industry and lobbyists to attack the (questionable) merits of rules issued by the EPA, SEC and others.

Long-time critics of Chevron have articulated that it is against constitutional norms for agency administrators, who are unelected and serve at the pleasure of the executive, to be granted unilateral and, increasingly broad, authority to decide how and when congressional statute applies to agency actions. These critics, mainly conservatives, suggest that agencies beholden to the political agenda of the President are incentivized to act in unscrupulous and politicized manners, unfairly applying strict interpretation on issues that conflict with the mandates they receive to enact presidential platform promises. Furthermore, opponents to the Chevron doctrine opine that the proper procedure in cases of legislative ambiguity is for courts to direct Congress to further clarify and enumerate statutory provisions. This ensures a fair debate on the substance of the law by duly elected representatives.

On the other hand, those who supported Chevron claimed that such deference was necessary in a world where policy — especially related to energy/environment, technology, and health — is increasingly complex and must be administrated deftly by field experts. They suggest that courts, as generalists, are not trained to understand the highly technical details and nuance of specialized policy to make informed and accurate adjudicative decisions. Proponents also argue that the rapid acceleration of technology in fields such as energy policy requires rapid response and policy pivots that are more conducive to a flexible administrative law framework rather than the slow and sometimes cumbersome congressional legislative procedure.

Plenty More Fish in the Sea

Whether one is for or against the now-defunct Chevron deference, most can agree that the uncertainty the decision leaves in its wake will likely cause chaos and confusion in the immediate future. For the first time in 40 years, courts will have to develop their own rubrics and build up a body of precedents to help them interpret issues that were historically the purview of domain experts. On the flip side, federal agencies will come under some much-needed restraint, preventing a run-away train effect of administrative excess.

One thing’s for sure: the removal of Chevron has opened the floodgates to challenging administrative agency authority. They’ll soon be swimming in lawsuits.

Electrically yours,

K.T.