Regulatory Reform and the Chevron Doctrine

Adam Babich

Adam Babich is editor-in-chief of ELR—The Environmental Law Reporter. The views expressed in the Comment are not necessarily shared by the Environmental Law Institute.

[26 ELR 10597]

Over the last year or so, Congress has considered several proposals to reform the regulatory system.¹ This short Comment suggests an alternative approach to reform, based on the theory that the regulatory system should work in the following manner: (1) Congress should set clear goals; (2) agencies should implement those goals; and (3) courts should provide quality control, ensuring that regulations embody well-thought out policy decisions that are driven by Congress' goals.² The system does not work this way now, and probably will not until Congress changes the statutory provisions that govern judicial review of agency decisions. The change suggested by this Comment is a relatively minor statutory adjustment to the U.S. Supreme Court's holding in Chevron U.S.A., Inc. v. Natural Resources Defense Council³ —the 1984 case that created the Chevron doctrine.

Background: The Theory of Chevron

The Supreme Court created the Chevron doctrine to ensure that the judiciary plays an appropriate role, vis-a-vis the role of administrative agencies, in interpreting regulatory statutes. It is not the judiciary's function, the Court ruled, to assess the wisdom of policy choices or decide between competing views of the public interest.⁴ Instead, the executive agencies that Congress has charged with administering its statutes should resolve questions that Congress inadvertently or intentionally left open.⁵ Thus, under Chevron, federal courts treat any statutory ambiguity as an implicit delegation of authority to the agency.⁶

To discourage judges from substituting their own interpretations for those of the agencies charged with the laws' implementation, the Court set up a two-step process. When reviewing an agency's interpretation of statutory language, courts must first ask "whether Congress has directly spoken to the precise question at issue." If so, "that is the end of the matter."⁷ If not, however, courts move to step two and ask whether the agency's interpretation is "reasonable."⁸ In this context, the term "reasonable" has come to mean "tenable."⁹ Once a court determines that an agency's tenable interpretation is not foreclosed by "crystalline"¹⁰ statutory language, the inquiry is over. The Court must defer to the agency's interpretation.¹¹

As a reminder to judges that Congress and the executive, not the courts, make regulatory policy, Chevron is hard to argue with.¹² Taken literally, however, to preclude any [26 ELR 10598] evaluation of the wisdom of agency decisions, the doctrine becomes extreme. Although it is true, from an academician's viewpoint, that a purely objective analysis can only answer the question of whether an agency interpretation is within the ballpark of possibilities left open by a statute, the application of judgment—not purely objective formula—is the essence of the judicial function. By imposing an ideal of pure objectivity, the Court has over-corrected for the risk of judicial activism. There is ample middle ground between substituting the personal opinions of judges for agency decisions and treating every tenable agency interpretation—no matter how marginal—as equal under the law.

By denying the possiblility that a firm minded judge can find some "reasonable" interpretations a good deal more reasonable than others, Chevron can be read as an abdication from the judiciary's quality control function.¹³

Chevron in the Courts

Under Chevron, courts focus less on whether regulations are credible efforts to achieve statutory goals than on legalistic analyses. For example, in Hazardous Waste Treatment Council v. U.S. Environmental Protection Agency,¹⁴ the court considered an industry argument that a new Resource Conservation and Recovery Act (RCRA) regulation would sometimes require companies to treat hazardous waste to levels beyond drinking water standards before placing that waste in a hazardous-waste landfill. The court noted that the U.S. Environmental Protection Agency (EPA) sets drinking water standards under the Safe Drinking Water Act, which requires the Agency to consider compliance costs. The RCRA provision at issue contained no similar limitation and EPA could reasonably assume that any public exposure to the chemicals at issue would pose some risk of harm. Following Chevron's instructions to the letter, the D.C. Circuit declined to trouble itself about the wisdom of the Agency policy, and found that EPA was "reasonable" in deciding that a waste concentration can be fit to drink, yet unfit for disposal in a double-lined, hazardous waste landfill.¹⁵

It is not clear exactly how far the Supreme Court means the courts to push deference under Chevron. More than 10 years after deciding Chevron, the Court noted that it has left open the question of whether it will defer to agency memoranda and other interpretations that have not been subject to notice and comment or adjudication.¹⁶ Chevron itself concerned a situation in which the Court was in a position to find that "the agency considered the matter in a detailed and reasoned fashion."¹⁷ Since Chevron, however, the rest of the federal judiciary has been deferring to practically anything government employees commit to paper, regardless of whether these documents reflect carefully considered agency decisions or hastily drafted—and sometimes half forgotten—responses to questions.¹⁸ The D.C. Circuit does not withhold deference when an agency declines to test its interpretation through notice-and-comment rulemaking.¹⁹

Chevron's impact, of course, can be overstated. Lawyers are trained to find flexibility in seemingly rigid doctrines, and judges tend to be skillful lawyers. The doctrine, not surprisingly, has developed escape valves.²⁰ Commentators have noted a tendency for some judges to employ statutory construction to resolve cases under Chevron's first step, reaching results that arguably substitute the court's policy preferences for agency decisions that they deem unwise.²¹ Courts sometimes also continue to accept Agency policies that depart from clear—but unwise—statutory mandates.²² [26 ELR 10599] And, although Chevron is binding precedent across the nation, courts outside of the D.C. Circuitoften seem inclined to treat deference to agency interpretations as one factor among many that may affect their rulings.²³

Nonetheless, the doctrine is hardly irrelevant. Under the best of circumstances, judicial review of regulatory decisions is difficult and prone to error. If Chevron did nothing more than prevent judges from explaining their opinions in straightforward terms, it would damage the legal process.²⁴ The doctrine, however, has ramifications that go beyond the way cases are decided. Chevron affects rulemaking and, possibly, the legislative process.

Chevron's Effect on Rulemaking

The Chevron doctrine not only limits courts' ability to overturn poorly though out regulations, but it also creates incentives for poor agency decisionmaking. Modern administrative agencies act with the knowledge that virtually every regulation they issue could be met with a lawsuit and that any admission of uncertainty will be exploited. Thus, agency employees craft regulations and explanatory preambles with one eye toward surviving judicial review. A good standard of judicial review would focus agencies' attention on developing practical policies that advance congressional goals, and on frank communications about difficult policy choices. Instead, by providing a "king's x" for tenable interpretations of ambiguous language, Chevron encourages agencies to focus their resources on a legalistic search for ambiguity and to bury policy decisions in their interpretations.²⁵ These interpretations can take on a life of their own, limiting agencies' ability to base subsequent decisions on common-sense plans to achieve congressional goals.²⁶

As a result, agencies often seem to treat statutes like connect-the-dots puzzles, as if a coherent whole will emerge from a series of legally tenable, rather than goal-driven, interpretations. Modern regulatory statutes, however, are so complex that they make sense only when implementing agencies keep congressional goals firmly in mind. Moreover, when agencies focus their Federal Register preambles on Chevron-inspired legalistic analyses, these agencies pass up an important opportunity to communicate with anybody besides lawyers. Ironically, federal agencies tout the importance of public participation, while couching their public communications in obscure, legalistic terms.²⁷

Chevron and the Legislative Process

An unfortunate trend in modern legislation is for Congress to put too little stock in the ability of courts and agencies to use judgment and discretion. Instead, Congress often seems to want its laws to work like clockwork and automatically spit out correct answers. As a result, the laws can become so complex that regulators and members of the regulated community can easily lose sight of congressional goals and begin to treat the laws like a series of "hoops" to jump through. And of course, it is hard to expect agencies and courts to focus on implementing statutory goals when Congress itself fails to articulate reasonably clear goals.

Trying to determine whether Chevron is responsible for the muddled state of many regulatory programs presents a "chicken and egg" problem. Perhaps Chevron resulted from the Court's conclusion that courts cannot be expected to distill coherent goals from statutes that go on for hundreds of pages. On the other hand, when courts decline to assess whether agency action (or inaction) is reasonably calculated to achieve congressional goals, the courts leave Congress little choice but to draft the detailed mandates and statutory deadlines that fill many of today's statutes.²⁸

Proposal for Reform

To break out of this vicious cycle, each branch of government must begin to change its approach: Congress must establish reasonable goals and give agencies enough latitude to achieve them. Agencies must explain their decisions and priorities in terms of these goals. And finally, courts must provide a check on the process, ensuring that agency action not only comports with statutory mandates, but stays on a course that can reasonably be expected to achieve congressional goals. As courts and agencies express their decisions in terms of goals, Congress will have an incentive to articulate its purposes more clearly.

Of course, none of this means that courts should simply substitute their own judgments for those of regulators. [26 ELR 10600] Moreover, it would be unwise for Congress to try to tell courts exactly how much to defer to agency decisions. The necessary statutory change would be straightforward. For example, the following language could be added to the Administrative Procedure Act,²⁹ Clean Air Act § 307,³⁰ and similar provisions:

The reviewing court shall defer to interpretations of ambiguous statutory language promulgated by the agency charged with administration of the applicable statutory provision, provided that those interpretations are reasonably calculated to advance the statute's purposes in a manner consistent with the statutory scheme.

Congress could indicate in legislative history its intent to inspire a somewhat harder and more goal-oriented look at agency interpretations. This should be enough to cause the courts, and ultimately the Supreme Court, to reassess Chevron.

Conclusion

There are, of course, no panaceas. Agencies and courts will always make some bad decisions. Congress, however, can significantly improve the regulatory system by asking courts to insist that agencies focus on achieving goals. The Supreme Court should help keep courts in the middle of the road—providing real quality control without arbitrarily substituting judicial preferences for administrative ones. This may be difficult, but the process for choosing judges was designed to result in appointment of capable and self-disciplined people. We cannot afford to have an entire branch of government throw up its hands and declare itself incompetent to assess policy decisions. Clear congressional legislation, creative adminstrative implementation, and wise judicial review are all needed for the regulatory system to live up to our expectations.

1. See John Pendergrass et al., The Environment and the Contract, 25 ELR 10350 (July 1995); Beth S. Ginsberg & Cynthia Cummis, EPA's Project XL: A Paradigm for Promising Regulatory Reform, 26 ELR 10059, 10060-61 (Feb. 1996); James M. McElfish Jr., Fee Simple? The 1996 Equal Access to Justice Act Amendments, 26 ELR 10569 n.5 (Nov. 1996).

2. See NATIONAL ACADEMY OF PUBLIC ADMINISTRATION, SETTING PRIORITIES, GETTING RESULTS: A NEW DIRECTION FOR EPA (Summary Report to Congress) 48 (Apr. 1995) (recommending that Congress "refrain from micro-managing EPA"); James V.DeLong, New Wine for a New Bottle: Judicial Review in the Regulatory State, 72, VA. L. REV. 399, 417-18 (1986) (suggesting that courts should "ensure that somebody somewhere in the system performed adequate quality control and to recognize that the somebody need not necessarily be a court"); BRUCE A. ACKERMAN & WILLIAM T. HASSLER, CLEAN COAL/DIRTY AIR 122-23 (1981) (suggesting that Congress should enact "ends-oriented" statutes).

3. 467 U.S. 837, 14 ELR 20507 (1984).

4. Id. at 866, 14 ELR at 20514.

5. Id.

6. Id. at 844, 14 ELR at 20509.

7. Id. at 842, 14 ELR at 20508.

8. Id. at 843, 14 ELR at 20509.

9. Judge Silberman has noted that the question of whether an agency's interpretation is reasonable "is not all that different analytically from the APA's arbitrary and capricious review." Laurence H. Silberman, Chevron—the Intersection of Law and Policy, 58 GEO. WASH. L. REV. 821, 827 (1990). Often, however, Chevron's "reasonableness" standard is significantly more lax than the arbitrary and capricious standard because, in many cases, the Court will have no administrative record to review when applying Chevron. See, e.g., Lutz v. Chromatex, Inc., 725 F. Supp. 258, 261, 20 ELR 20345, 20346 (M.D. Pa. 1989) (deferring in a citizen enforcement action to a U.S. Environmental Protection Agency (EPA) interpretation set forth in an unrelated rulemaking).

10. New Mexico v. Watkins, 969 F.2d 1122, 1130, 22 ELR 21262, 21266 (D.C. Cir. 1992).

11. "When a challenge to an agency construction of a statutory provision, fairly conceptualized, really centers on the wisdom of the agency's policy…the challenge must fail." Chevron, 467 U.S. at 866, 14 ELR at 20514.

13. Moreover, the Court has rejected Congress' attempt to set up an alternative quality control mechanism—the legislative veto. I.N.S. v. Chadha, 462 U.S. 919, 13 ELR 20663 (1983). One might view Executive Order 12291, ELR ADMIN. MAT. II 40525 (1981), which provides for Office of Management and Budget (OMB) review, as an attempt to fill this gap. But OMB has no broad mandate to ensure that agencies fully and fairly implement congressional mandates.

14. See, e.g., Hazardous Waste Treatment Council v. U.S. Environmental Protection Agency, 886 F.2d 355, 362-63, 19 ELR 21398, 21402-03 (D.C. Cir. 1989), cert. denied, 498 U.S. 849 (1990).

15. Requiring waste to exceed drinking water standards before disposal in a landfill seems unwise. See E. Donald Elliott, Environmental TQM: Anatomy of a Pollution Control Program That Works!, 92 MICH. L. REV. 1840, 1847 (1994) (book review) (arguing that the price for disproportionate regulation "is paid not only in dollars but also in other environmental problems left unaddressed" and that the regulatory effort tends to focus "on relatively few substances that we regulate very heavily"); Adam Babich, What Next?, ENVTL. F., Nov./Dec. 1994, at 54 ("Regardless of whether disparate treatment of similar risks is the result of political influence or simple inertia, it is wasteful, destructive, and—ultimately—threatens the credibility of the environmental regulatory system").

16. City of Chicago v. Environmental Defense Fund, 114 S. Ct. 1588, 1904 n.5, 24 ELR 20810, 20813 n.5 (1994).

17. Chevron, 467 U.S. at 865, 14 ELR at 20514.

18. Agency letters and memoranda have become a kind of grey law. Much of this material is available only as barely legible and sometimes incomplete copies of copies; some of it has long been forgotten by the issuing agency. Lawyers have developed an effective litigation strategy by attaching agency letters and memoranda to their briefs as binding legal authority. Because lawyers collect these agency documents as part of their legal research, the documents presumably qualify for the attorney work-product immunity and need not be disclosed to opponents in advance. ELR collects these documents and makes them available through its Document Service. See Documents Available, ELR ADMIN. MAT. I 129000:1.

19. New Mexico v. Watkins, 969 F.2d 1122, 1132-33, 22 ELR 21262, 21267 (D.C. Cir. 1992).

20. The Chevron doctrine does not require deference to provisions of a statute that Congress did not empower the agency to interpret. See Kelley v. U.S. Environmental Protection Agency, 15 F.3d 1100, 24 ELR 20511 (D.C. Cir. 1994). Also, in an apparent throwback to the days when deference was based on agency expertise, courts decline to defer to policies that an agency has changed its mind about too often. Environmental Defense Fund v. City of Chicago, 985 F.2d 303, 23 ELR 20690, aff'd on other grounds, 114 S. Ct. 1588, 24 ELR 20810 (1994).

21. Hon. Patricia M. Wald, Environmental Postcards From the Edge: The Year That Was and the Year That Might Be, 26 ELR 10182, 10184-85 (Apr. 1996); Donald W. Stever et al., The Supreme Court, EPA, and Chevron: The Uncertain Status of Deference to Agency Interpretations of Statutes, 25 ELR 10127 (Mar. 1995).

22. See Ohio v. U.S. Environmental Protection Agency, 997 F.2d 1520, 23 ELR 21157 (D.C. Cir. 1993) (upholding EPA's decision to treat permanence as a factor to be balanced against other factors in selecting hazardous waste cleanup plans under CERCLA, despite CERCLA's requirement that remedies use "permanent solutions…to the maximum extent practicable," 42 U.S.C. § 9621(b), ELR STAT. CERCLA § 121(b)).

23. See, e.g., Lutz v. Chromatex, Inc. 725 F. Supp. 258, 261, 20 ELR 20345, 20346 (M.D. Pa. 1989) (citing pre-Chevron precedent for the proposition that "such deference is not absolute, however, and is given only when the interpretation by the agency is reasonable and consistent with the statute and regulations").

24. Judge Silberman has stated:

As a part-time law professor, over the last three years, I have given a good deal of thought as to why it takes so long to teach law students how to identify the holdings of cases. The answer, I am afraid, is that judges too often do not truthfully explain their reasoning….

Silberman, supra note 9, at 828.

25. For example, EPA has asserted that an "exclusion established by Congress in [RCRA] Section 1004(27)"required the Agency to conclude that the very same waste, disposed of at the very same public treatment plant, will meet the definition of hazardous waste or not, depending on whether it travels by truck, in a sewer that also carries domestic sewage, or in a sewer that does not also carry domestic sewage. EPA Administered Permit Programs, 54 Fed. Reg. 30082-83 (July 24, 1990). EPA buried its nonsensical policy choice in an interpretation of RCRA, rather than acknowledging that it chose to broaden RCRA's statutory domestic sewage exclusion. See Comite Por Rescate de la Salud v. Puerto Rico Aqueduct & Sewer Auth., 888 F.2d 180, 187-88, 20 ELR 20211, 20215 (1st Cir. 1989), cert. denied, 494 U.S. 1029 (1990) (noting that the statutory exclusion allows considerable room for interpretation). Judge Silberman has noted:

Of course, it is simply good lawyering for an agency to argue that a particular position is squarely directed by Congress or, alternatively, was authorized by the agency's reasonable construction. But sometimes the agency wishes to disavow any discretion—because it does not want to face the political heat—and instead tries to hide behind an exaggerated congressional directive.

Silberman, supra note 9, at 828. Judge Silberman states that in such cases the agency's decision should be remanded. Id.

26. By changing its mind, an agency can lose deference. See supra note 20.

27. One example is EPA's assertion that a 3 x 10<-4> risk (one excess cancer per 3,333 population) is "essentially equivalent" to a "presumptively safe" level of 1 x 10<-4> (one in 10,000). National Emission Standards for Hazardous Air Pollutants; Radionuclides (preamble), 54 Fed. Reg. 51654, 51682 (Dec. 15, 1989).

28. See Richard C. Fortuna, The Birth of the Hammer, ENVTL. F., Sept./Oct., 1990, at 18, 22.

29. 5 U.S.C. § 706, available in ELR STAT. ADMIN. PROC.

30. 42 U.S.C. § 7607(d)(9), ELR STAT. CAA § 307(d)(9).