Thanks, Chevron?

How a 1984 Supreme Court ruling for Big Oil could help Obama’s new plan to fight climate change.

August 05, 2015

Photo: Roo Reynolds

President Obama released the Clean Power Plan on Monday, aimed at reducing carbon pollution from power plants by 32 percent over the next 15 years. That same day, the National Mining Association requested that the U.S. Environmental Protection Agency stay the rule’s implementation, and legal challenges from utilities, coal interests, and coal-friendly states are expected in the coming days.

In an ironic twist, the EPA will argue through the federal courts that a Supreme Court case the environmental movement lost more than 30 years ago—by a unanimous vote—grants the agency the authority to regulate carbon pollution today.

An Ordinary Case

Chevron’s lawyers must have felt pretty great on June 25, 1984. It was a balmy 86 degrees in Washington, D.C., the sun was shining between wispy clouds, and the Supreme Court had just upheld the EPA’s big favor to fossil-fuel interests—a weak air pollution rule that let polluters avoid installing new scrubbers. Life was good, or so they thought.

On its face, Chevron v. NRDC was an ordinary case of statutory interpretation (disclosure). In 1977, Congress amended the Clean Air Act, requiring states to establish programs to reduce air pollution from power plants. A key part of the statute forced polluters to install state-of-the-art pollution-control technology whenever they made changes to their facilities.

Photo: Larry Miller

The issue in Chevron v. NRDC was what sorts of changes to the plants triggered this upgrade requirement. The simplest reading of the statute would have called for pollution controls whenever any sort of equipment change was made. The EPA, however, adopted what became known as the “bubble rule.” By treating an entire power plant, which typically has multiple smokestacks, as a single unit—as if covered by a bubble with one smokestack—the agency allowed utilities to make whatever changes they liked inside the bubble. As long as the plant’s total emissions didn’t increase, the utility wouldn’t need new pollution controls. The bubble rule seems like a technical detail, but it saved the utilities millions of dollars and significantly dulled the effectiveness of the Clean Air Act amendment.

NRDC sued, arguing that this interpretation of the EPA’s was not allowed under the statute. Both sides’ attorneys arrived at the Supreme Court prepared to discern Congress’ intent in passing the law: What did members of Congress say during the debates? What was added or removed from it? Which interpretation was more consistent with the overarching goals of the legislation?

In the end, the justices decided Chevron was a case about the separation of powers, not the hoary old traditions of statutory interpretation. In a 6-0 decision (three justices recused themselves, possibly because of financial interests in Chevron), Justice John Paul Stevens argued that the Supreme Court should allow administrative agencies to interpret statutes, as long as their interpretations do not obviously contradict the language in the law. Since the text of the Clean Air Act amendments did not obviously oppose the bubble concept, the court stood aside.

The pivotal question, in other words, wasn’t which side had the better interpretation of the statute but rather who gets to decide.

It’s not clear whether the justices had any inkling that Chevron would later become the most cited case in administrative law. “Chevron, at the time it was decided, was not any kind of a watershed opinion,” says Lisa Heinzerling, a processor of administrative and environmental law at Georgetown. “It didn’t come to the court as a big case, and it wasn’t presented as one.”

It became a big case as it filtered down into the lower courts, where judges found that the principle applied to almost all regulatory disputes. Chevron deference, as it is now implemented, is a two-step process. First, the judge determines whether the statute speaks directly to the issue. If it does not, and there is room for interpretation, the court decides whether the agency’s interpretation is reasonable within the framework of the statute.

Chevron was, in some ways, an abdication of judicial authority. Justice Stevens reportedly called the case “confusing” and declared, “When I am confused, I go with the agency.” It also seems to upset the traditional balance of power, in which the judicial branch is tasked with interpreting the law. On the other hand, Chevron limits the influence of unelected judges and empowers more accountable executive agencies. Scholars continue to argue the merits of the decision, but it is now an undeniable part of the constitutional firmament.

A New Space for Environmental Regulation

In the abstract, Chevron deference is neither a liberal nor a conservative tool. It merely strengthens the executive branch at the expense of the judicial branch. In the three years following the decision, the administration’s win rate in constitutional challenges rose by ten percentage points. Whether that power is used to tighten or relax regulations depends, in theory, on who occupies the White House and picks the agency heads.

“If your part is in the executive branch, then Chevron is a good thing—it gives you a lot more power,” says Brian Potts, a partner at the law firm Foley and Lardner, who specializes in energy and environmental law.

But Chevron’s empowering effects have not been neutral or uniform across the administrative landscape. In regard to environmental laws, which are typically strongly worded and absolute in their commitment to conservation, Chevron has become particularly useful.

“Environmental statutes in this country were passed by bipartisan majorities committed to strong environmental regulation and health outcomes,” says John Walke, director of NRDC’s Clean Air program. “They are comprehensive and capacious. Against that historical backdrop, Chevron is a gift.”

Put simply, administrations seeking to tighten environmental regulations can usually find ample space within the statutory language to support the tougher rules. For example, the Clean Air Act has a “good neighbor” provision aimed at limiting how much pollution states can allow to drift across their borders, thereby dirtying the air of adjacent states. In 2014, the Supreme Court turned away a utility industry challenge to the EPA’s strict interpretation of that rule, pointing out that the agency is entitled under Chevron to interpret the Clean Air Act as it likes, as long as it is trying to accomplish the law’s lofty goals of clean air.

Presidents—usually of the “R” variety—seeking to loosen the reins on polluters have had a much more difficult time identifying ambiguities that can be exploited under Chevron. The EPA lost a series of court challenges in the early 2000s, because the judges couldn’t accept that the strict language of the country’s environmental laws allowed for the permissive interpretations of the Bush II–era agency.

These cases make for amusing reading, as the Bush administration’s EPA tied itself in knots trying to find some—any—policy space in which to loosen environmental regulations. In 2006, the D.C. Circuit rejected the EPA’s interpretation of a provision on water pollution, beginning with the following sentence: “This case poses the question whether the word 'daily', as used in the Clean Water Act, is sufficiently pliant to mean a measure of time other than daily.” Ouch. In New York v. EPA, the D.C. Circuit accused Bush’s EPA of living in a “Humpty Dumpty world.” With a second (!) Lewis Carroll reference, the court in New Jersey v. EPA said the agency’s interpretation “deploys the logic of the Queen of Hearts, substituting EPA's desires for the plain text.”

There are exceptions to this rule. Occasionally, the EPA oversteps the Chevron boundaries while trying to tighten environmental regulations, and deregulatory administrations sometimes find the wiggle room they need (the Chevron case itself is such an example). Overall, though, Chevron deference has been kind to the environment.

Chevron and the Clean Power Plan

The Supreme Court already rejected one legal challenge to President Obama’s signature environmental initiative in June when it sensibly decided that the utilities industry can’t challenge a rule that doesn’t yet exist. But the utilities will be back. Now that Clean Power Plan is final, the case will likely wend its way to the Supreme Court, where Chevron will loom very large once again.

Utilities will make two primary arguments against the Clean Power Plan. First, they’ll say that the EPA based some of its Clean Air Act targets on renewable energy expansion. By considering these factors, opponents will say that the agency impermissibly reached “beyond the fence line” of the power plants it’s seeking to regulate.

Second, the challengers will point to an alleged conflict between two provisions in the Clean Air Act. When amending the statute in 1990, the House and Senate each passed their own fixes to an administrative problem in the law—and both versions were erroneously included in the final statute. The differences between the two, although slight at first glance, have big implications. According to the interpretation of the Clean Power Plan’s challengers, one version says the EPA cannot regulate source categories already regulated under a separate section, as power plants are. The other version says the EPA cannot regulate pollutants already regulated under a separate section, which carbon dioxide is not. The EPA, for its part, has determined that the provisions are not in conflict, and both allow for regulation of carbon emissions from power plants.

Smart lawyers will make cases on either side of these arguments. The issue, however, isn’t which argument is best, but rather who gets to decide. That’s where Chevron comes in.

If the Clean Power Plan challenge is a Chevron case, the EPA can expect to win. The statute says very little about inside or outside the fence line, and the bizarrely conflicting provisions concerning source categories and pollutants are also indisputably ambiguous. These are exactly the circumstances under which Chevron would direct the court to defer to the agency’s judgment.

But will Chevron apply, or will the justices take the interpretation of the Clean Air Act out of the EPA’s hands? Court watchers are already deeply engaged in this question, which could settle the case.

In recent terms, the court appears to be taking a slight step back from Chevron. Nowhere has this been more obvious than in King v. Burwell, the case that upheld Obamacare earlier this year. In his majority opinion, Chief Justice John Roberts, wrote that, on questions of “deep economic and political significance,” the court should only defer to agencies if Congress expressly delegated decision-making power to the agency. In other words, as one legal scholar told me, Chevron doesn’t apply if something’s a big deal.

In a somewhat ironic twist, utilities will argue that climate change is a big deal, and carbon pollution is a big deal. They’ll say if Congress had wanted the EPA to issue major, economy-changing rules to prevent climate change, it would have done so expressly.

Not so fast, argue defenders of the Clean Power Plan. The Chevron case itself establishes the principle that the court should defer to the EPA on Clean Air Act interpretation. They will also argue that King v. Burwell is nothing like the Clean Power Plan. Since the interpretation at issue in the Obamacare case was one of tax law, Chevron deference would have required the Court to defer to the IRS.

“There was this impressionistic argument that it wouldn’t make sense to let the IRS make healthcare decisions,” says Heinzerling. “That rhetorical force is absent in the Clean Power Plan. The EPA has to make this decision.”

Even if King is relevant to the Clean Power Plan, supporters will argue that Chevron should still apply. In a case released only days after King v. Burwell, the Supreme Court applied Chevron deference to mercury emissions rules, which are likely to cost the economy more than the Clean Power Plan ($9.6 billion for mercury compared to $8.8 billion, at most, for carbon.)

“[T]he estimated cost of the proposed [carbon] plan is less than the cost of the [mercury] rule, and its adoption poses no economic risk even close to the demise of health insurance markets threatened in Burwell,” writes David Doniger, director of NRDC’s Climate and Clean Air program (and the attorney who argued for NRDC in the Chevron case in 1984). “That makes it very likely that courts reviewing the Clean Power Plan will accord EPA Chevron deference just as the Supreme Court did in [the mercury case], and will not take over the interpretive lead as Chief Justice Roberts did in Burwell.”

Which argument will prevail? Everyone’s basically reading tea leaves at this point.

“For me, it becomes really easy,” says Heinzerling. “The Clean Air Act requires the agency to attack new pollution problems when there is evidence they are dangerous. That seems completely sensible. Agencies have to make these decisions.”

Brian Potts recently surveyed 130 environmental lawyers and law professors to take the temperature of the field. He found something very interesting: The vast majority of professors think the Clean Power Plan is legal, while the vast majority of private environmental attorneys think it’s illegal.

It just goes to show: It’s not who has the better argument, it’s who gets to decide.


onEarth provides reporting and analysis about environmental science, policy, and culture. All opinions expressed are those of the authors and do not necessarily reflect the policies or positions of NRDC. Learn more or follow us on Facebook and Twitter.

Join Us

When you sign up you'll become a member of NRDC's Activist Network. We will keep you informed with the latest alerts and progress reports.