Chevron Overturned: Impacts on Environmental, Energy, and Natural Resources Regulation

On June 28, 2024, the United States Supreme Court in Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Dept. of Commerce overruled Chevron deference — a 40-year-old precedent that required courts to afford deference to agencies’ reasonable interpretations of ambiguous statutory provisions. Under the new Loper Bright doctrine, courts “must exercise their independent judgment” and “may not defer to an agency interpretation of the law simply because the statute is ambiguous.” While the decision curtails deference to certain agency interpretations of statutes, the practical impacts in the areas of environmental, energy, and natural resources regulation will take time to evolve and may be less than many anticipate.

Chevron Background

In Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the Court set out a two-step framework for reviewing an agency’s interpretation of a statute it administers. Under the so-called Chevron doctrine announced in that case, the reviewing court would first use all traditional tools of statutory construction to determine whether Congress has directly spoken to the question at issue such that the statute is clear. If clear, the inquiry would be complete and Congress’ direction would control. If not, and the court determined that the statute was ambiguous, the court would proceed to the second step, deferring to the agency’s interpretation as long as the court concluded that the agency interpretation was reasonable, even if not the “best” reading the court might adopt. The Court subsequently limited Chevron’s application in various circumstances, including limiting it to notice-and-comment rulemaking and formal adjudications.

Chevron Overturned

Loper Bright and Relentless considered two separate challenges to a National Marine Fisheries Service (NMFS) rule under the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act). The NMFS rule allowed the New England Fishery Management Council to require certain fishermen to bear the cost of observers monitoring the fishery under the council’s fishery management plan. In two separate cases, fishing businesses challenged the rule on the grounds that the Magnuson-Stevens Act does not authorize NMFS to mandate that the industry pay for observers. Applying Chevron deference, the U.S. Court of Appeals for the D.C. Circuit and the U.S. Court of Appeals for the First Circuit rejected the fishermen’s challenges. The Supreme Court granted certiorari in both cases limited to the question of whether Chevron should be overruled or clarified.

In overruling Chevron and remanding the cases, the Loper Bright Court held that Chevron deference “defies the command” of the Administrative Procedure Act (APA) and is incompatible with the “province and duty” of courts to interpret the law. Relying on the understanding of the Framers, pre-Chevron case law, and the language of the APA, the Court recognized that agencies’ interpretations of the statutes they administer may be entitled to respect and weight, but held that courts must have the final say.

The Court rejected the presumption underlying Chevron that ambiguities and gaps in statutory text represent implicit delegations of power to agencies. The Court reasoned that ambiguities and gaps may exist for any number of reasons — including inadvertence — and should not be presumed to reflect an intended delegation of policymaking authority. Further, the Court held that the “presumption is misguided because agencies have no special competence in resolving statutory ambiguities.” The Court was largely dismissive of the role of agency subject-matter expertise as warranting dispositive control in statutory construction. It reasoned that, to the extent such expertise might be necessary or helpful, courts will have the benefit of agencies’ advocacy, which courts may consider.

The Court held that principles of stare decisis did not demand continued adherence to Chevron. In so doing, the Court explained that all relevant stare decisis considerations weighed in favor of letting Chevron go: the quality of the precedent’s reasoning, the workability of the rule it established, and reliance on the decision. In addition to characterizing Chevron’s reasoning as misguided, the Court held that it was unworkable in practice, in part, because it invited varying determinations of what constitutes an ambiguity. Further, anticipating a muted impact of the decision, the Court reasoned that the Chevron doctrine did not create significant reliance interests as an obstacle to overruling it, because Chevron had been repeatedly circumscribed and modified, was inconsistently applied, and the Supreme Court itself had not relied on it since 2016. The Court briefly addressed prior cases that relied on Chevron to uphold agency interpretations, explaining that they remain subject to statutory stare decisis and that reliance on Chevron itself is not a “special justification” for overruling such a prior holding.

Justices Thomas and Gorsuch each wrote concurring opinions. Justice Thomas wrote separately to assert that Chevron violates the Constitution’s separation of powers in addition to the APA. In a lengthy concurrence, Justice Gorsuch focused primarily on the limits of stare decisis, possibly signaling his willingness to reconsider other precedents. Justice Gorsuch expounded upon the majority’s criticisms of Chevron and added that Chevron “runs against mainstream currents in our law regarding the separation of powers [and] due process.”

Justice Kagan wrote a forceful dissent, joined by Justices Sotomayor and Jackson. The dissent took issue with the majority’s interpretation of judicial history and the APA, asserting that both leave room for deference to agencies’ statutory interpretations. Such deference is necessary, the dissent asserted, because agency subject-matter experts are better suited than courts to understand and interpret technical language in statutes. The dissent further defended the presumption underlying Chevron — that ambiguities and gaps in statutes are delegations of authority. Congress knows that its statutes will have gaps and ambiguities and can expressly delegate interpretive authority to agencies or the courts if it so desires. Justice Kagan pointed out that Chevron had been the law of the land for 40 years. Congress knew that it was operating within that framework and declined to abolish Chevron despite the ability to do so. The dissent characterized Chevron as “entrenched precedent” entitled to the highest level of stare decisis protection, which the majority’s reasoning failed to overcome. Justice Kagan asserted that overruling Chevron will be “a massive shock to the legal system.”

Implications for Environment, Energy, and Natural Resource Issues

Chevron deference arose from a challenge to an Environmental Protection Agency (EPA) interpretation of the Clean Air Act and has been a fixture of litigation challenging EPA regulation ever since. Following Loper Bright, certain things will not change. First, EPA already has every reason to support its statutory interpretations in rulemaking as the “best” interpretation of Congress’ intent using the text, structure, and purpose of the statute, together with all other traditional tools of statutory construction and its own expertise and policy rationales. That won’t change. In defending EPA rules, the Department of Justice (DOJ) already argues that EPA’s interpretations are “right.” Taking a cue from courts’ more recent diminished reliance on Chevron deference to uphold EPA interpretations, DOJ has reduced its emphasis on such deference in its arguments. And litigants with contrary interests don’t hesitate to challenge significant EPA interpretations as inconsistent with Congress’ intent, likewise invoking all available arguments. That won’t change, either. For these reasons, Loper Bright’s practical impact for regulated industries may not be as significant as widely anticipated.

Second, among the recent limitations the Supreme Court has placed on Chevron is the rise of the Major Questions Doctrine, a “clear statement rule” of statutory construction that presumes Congress does not delegate to federal agencies authority to address issues of major political or economic significance without clear language. In recent years the Court has expanded the scope of the Major Questions Doctrine. That expansion is especially relevant to EPA’s reliance on interpretations of aging environmental statutes such as the Clean Air Act (last overhauled in 1990) to meet newer problems such as regulation of greenhouse gases to address climate change. So, in the landmark 2022 decision West Virginia v. EPA, the Court limited EPA’s authority to regulate carbon dioxide emissions under the Clean Air Act. The doctrine is also at the center of pending challenges to EPA regulation of greenhouse gas emissions that are based on electrification of motor vehicles. The Court’s broad formulation of the Major Questions Doctrine would have cabined agency authority to address new major issues of great public significance regardless of the result in Loper Bright.

Third, Loper Bright does not eliminate all judicial deference to and respect for agency decision-making. Loper Bright leaves undisturbed judicial deference to agency rulemaking based on factual determinations and technical judgments, where there is a clear delegation from Congress. For example, many environmental laws delegate to EPA the discretion to set human health or environmental standards (e.g., National Ambient Air Quality Standards) based on the best available science and/or the agency’s expert judgment. The Court reiterated that judicial deference would continue to apply in such cases. Moreover, with respect to statutory interpretation, the Court emphasized that, although agency legal interpretations are not binding, they may have significant persuasive force, particularly where they rest on factual premises within the agency’s expertise or were issued contemporaneously with the statute and remained consistent over time. (The latter aspect of the Court’s decision is likely to raise the stakes whenever stakeholders seek to influence an agency’s initial set of implementing regulations).

Fourth, Loper Bright may enhance stability and certainty in the mid- to long-term. Previously, agencies could rely on Chevron deference whether they were expanding or contracting their regulatory authority. Chevron deference, therefore, facilitated major swings in agency policy whenever presidential administrations changed every four or eight years. This was particularly true in the environmental field, with each new administration ushering in major revisions of regulations under the Clean Air Act and Clean Water Act. The Loper majority criticized this phenomenon and emphasized that agency interpretations are entitled to the greatest weight when contemporaneous and consistently held. As a result, Loper Bright may lead to fewer and less dramatic swings in agency policy, providing greater stability for regulated industries.

Notwithstanding these mitigating considerations, Loper Bright’s impact is not certain and will play out over time. Open questions that we will continue to monitor include the following:

1. Does Loper Bright’s reasoning jeopardize Kisor deference? Under Kisor v. Wilkie and its predecessors, courts have long deferred to agencies’ reasonable interpretations of ambiguous regulations, much like courts’ prior deference to agencies interpretations of statutes under Chevron. The reasoning in Loper Bright — especially the Court’s insistence that the APA “codifies for agency cases the unremarkable, yet elemental proposition … that courts decide legal questions by applying their own judgment” — could be read to cast doubt on deference to agencies’ interpretation of their own regulations as controlling. The Court’s emphasis that “courts, not agencies, will decide ‘all relevant questions of law’ on review of agency action” arguably applies equally to agencies’ interpretations of regulations as statutes. After all, both are legal (rather than factual) questions.
2. To what extent will Loper Bright give rise to attempts to challenge older decisions that relied on Chevron? The majority stated that reliance on Chevron alone would not be a basis for overruling cases upholding regulations at Chevron step 2. But if other stare decisis considerations support overruling — such as the rule has proven unworkable or has been undercut by subsequent events — the decision could nevertheless be vulnerable. And Justice Gorsuch’s concurrence provides a roadmap for litigants seeking to overcome stare decisis. Moreover, the Supreme Court’s decision today in Corner Post v. Board of Governors of the Federal Reserve System narrowed the applicability of the default six-year statute of limitations to challenge federal regulations, potentially opening the door for challenges that might have previously been barred.
3. Will Congress revive Chevron? Congress could endeavor to revive Chevron whole-cloth by amending the APA or on a case-by-case basis by expressly delegating interpretive authority to agencies in particular statutory provisions. This is a political question in the first instance and may be subject to lobbying by federal agencies and others. But it may also become a legal question, as the concurring opinions in Loper Bright suggest that broad delegations of statutory authority would be constitutionally impermissible.

We will continue to follow and report on these questions and other developments in this area. Please contact any author of this Advisory or your regular Arnold & Porter contact if you have questions concerning how Loper Bright could affect your organization.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.