Monday, July 11, 2022
In late June, the U.S. Supreme Court issued an opinion in a case involving the Environmental Protection Agency’s (EPA’s) regulatory authority under the Clean Air Act (CAA). The Court, as it has in several recent cases, invoked the “major question” doctrine to pair back unelected bureaucratic agency authority and return policy-making power to citizens through their elected representatives.
The Court’s decision is important to agriculture. Many government agencies regulate agricultural activities. When federal regulations amount to setting nationwide policy and when state regulations do the same at the state level, the regulatory bodies may be successfully challenged in court.
The scope of government agency regulatory authority – it’s the topic of today’s post.
Government regulation. A significant amount of governmental regulation of economic activity is conducted by and through administrative agencies that promulgate regulations and make decisions. This is particularly true concerning the regulation of agricultural activities. This form of regulation occurs outside both the legislatures and the courts, where most of conventional lawmaking occurs. Consequently, with much of administrative law, the administrative agency that writes the regulation at issue serves as judge and jury over disputed matters involving those same regulations via the administrative review process – a process that must reach a final determination before judicial review is available. This raises fundamental questions of fairness. In exercising their rule-making power, agencies of government cannot go beyond the authority provided by the legislative body. This is the precise point that the U.S. Supreme Court recently dealt with.
At the federal level, the Congress enacts basic enabling legislation, but leaves the particular administrative agency (such as the USDA, EPA or FDA, for example) to implement and administer congressionally created programs. As a result, the enabling legislation tends to be vague with the administrative agencies (such as the USDA) needing to fill in the specific provisions by promulgating regulations. The procedures that administrative agencies must follow in promulgating rules and regulations, and the rights of individuals affected by administrative agency decisions are specified in the Administrative Procedures Act (APA). 5 U.S.C. §§ 500 et seq. (2008). The APA constitutes the operative law for many of the relationships between farmers and ranchers and the government.
Standard of review and deference. Courts generally consider only whether the administrative agency acted rationally and within its statutory authority. Consequently, a particular farmer or rancher bears the burden of insuring that the record is adequate for the appeal of the issues involved before the matter leaves the administrative process. Otherwise, an appeal of an administrative agency's decision must be based solely on arguments that the agency acted arbitrarily, capriciously, beyond legal authority or that it abused its discretion. Prevailing in court on this type of a claim can be quite difficult. However, in Christensen v. Harris County, 529 U.S. 576 (2000), the U.S. Supreme Court ruled that statutory interpretations made by governmental agencies in pronouncements that do not have the force of law, such as opinion letters, policy statements, agency manuals, and enforcement guidelines, are not entitled to such great deference. This is a significant case for the agricultural sector because the USDA often interpretates the laws they administer in formats that do not have the force of law.
Similarly, in another case the court noted than an agency is not entitled to deference simply because it is a governmental agency. Meister v. United States Department of Agriculture, 623 F.3d 363 (6th Cir. 2010). involved a claim that the U.S. Forest Service had failed to comply with its own regulations and a federal statute in developing its 2006 management plan for national forests in northern Michigan. The court specifically noted that agency deference was not automatic. Instead, the agency must apply the relevant statutory and regulatory authority.
The “major questions” doctrine. In several decisions, the U.S. Supreme Court has held that if a government agency is, in essence, setting national policy via regulation, the “arbitrary and capricious” level of deference normally accorded to the agency under the rule of Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), will not apply. Instead, the agency’s action must be supported by clear statutory authorization from the Congress. See Utility Air Regulatory Group v. Environmental Protection Agency, 573 U.S. 302 (2014). This is known as the “major questions” doctrine. It’s a doctrine that has been around for about 30 years and has been utilized in numerous cases involving the Federal Communication Commission, the Food and Drug Administration, the IRS, the Centers for Disease Control, the Occupational Safety and Health Administration, the conduct of the U.S. Attorney General as well as the EPA. Each case involves the Court determining that agency action involves a matter significant enough on a national scale for the Court to invoke the doctrine, either on the basis that the Congress had not given the agency the authority to regulate the particular matter at issue, or because the agency’s interpretation was unreasonable due to lack of clear authority from the Congress.
Recent U.S. Supreme Court Opinion
In West Virginia, et al. v. Environmental Protection Agency, et al., No. 20-1530, 2022 U.S. LEXIS 3268 (U.S. Jun. 30, 2022), the U.S. Supreme Court was asked to review the EPA’s authority to regulate greenhouse gas emissions from existing power plants under the CAA. The case arose from the EPA’s regulatory development of the Clean Power Plan (CPP) in 2015 which, in turn, stemmed from then-President Obama’s 2008 promise to establish policy that would bankrupt the coal industry. The EPA claimed it had authority to regulate CO2 emissions from coal and natural-gas-fired power plants under Section 111 of the CAA. Under that provision, the EPA determines emission limits. But EPA took the position that Section 111 empowered it to shift energy generation at the plants to “renewable” energy sources such as wind and solar. Under the CPP, existing power plants could meet the emission limits by either reducing electricity production or by shifting to “cleaner” sources of electricity generation. The EPA admitted that no existing coal plant could satisfy the new emission standards without a wholesale movement away from coal, and that the CPP would impose billions in compliance costs, raise retail electricity prices, require the retirement of dozens of coal plants and eliminate tens of thousands of jobs. In other words, the CPP would keep President Obama’s 2008 promise by bypassing the Congress through the utilization of regulatory rules set by unelected, unaccountable bureaucrats.
The U.S. Supreme Court stayed the CPP in 2016 preventing it from taking effect. The EPA under the Trump Administration repealed the CPP on the basis that the Congress had not clearly delegated regulatory authority “of this breadth to regulate a fundamental sector of the economy.” The EPA then replaced the CPP with the Affordable Clean Energy (ACE) rule. Under the ACE rule, the focus was on regulating power plant equipment to require upgrades when necessary to improve operating practices. Numerous states and private parties challenged the EPA’s replacement of the CPP with the ACE. The D.C. Circuit Court vacated the EPA’s repeal of the CPP, finding that the CPP was within the EPA’s purview under Section 7411 of the CAA – the part of the CAA that sets standards of performance for new sources of air pollution. American Lung Association v. Environmental Protection Agency, 985 F.3d 914 (D.C. Cir. 2021). The Circuit Court also vacated the ACE and purported to resurrect the CPP. In the fall of 2021, the U.S. Supreme Court agreed to hear the case.
The Supreme Court reversed, framing the issue as whether the EPA had the regulatory authority under Section 111 of the CAA to restructure the mix of electricity generation in the U.S. to transition from 38 percent coal to 27 percent coal by 2030. The Supreme Court said EPA did not, noting that the case presented one of those “major questions” because under the CPP the EPA would tremendously expand its regulatory authority by enacting a regulatory program that the Congress had declined to enact. While the EPA could establish emission limits, the Supreme Court held that the EPA could not force a shift in the power grid from one type of energy source to another. The Supreme Court noted that the EPA admitted that did not have technical expertise in electricity transmission, distribution or storage. Simply put, the Supreme Court said that devising the “best system of emission reduction” was not within EPA’s regulatory power.
Clearly, the Congress did not delegate administrative agencies the authority to establish energy policy for the entire country. While the Supreme Court has never precisely defined the boundaries and scope of the major question doctrine, when the regulation is more in line with what should be legislative policymaking, it will be struck down. The Supreme Court’s decision is also broad enough to have long-lasting consequences for rulemaking by all federal agencies including the USDA/FSA. The decision could also impact the Treasury Department’s promulgation of tax regulations.
The Supreme Court’s decision returns power to the Congress that it has ceded over the years to administrative agencies and the Executive branch concerning matters of “vast economic and political significance.” But, it’s also likely that the Executive branch and the unelected bureaucrats of the administrative state will likely attempt to push the envelope and force the courts to push back. It’s rare that the Executive branch and administrative agencies voluntarily return power to elected representatives as was done in numerous instances from 2017 through 2020.