Administrative Law Blog Essay

The Deregulatory Moment and the Clean Power Plan Repeal

We are currently in the midst of the most important deregulatory moment in the United States since the beginning of Ronald Reagan’s presidency in 1981 — perhaps since the dawn of the administrative state.  President Donald Trump has issued a series of Executive Orders directing agencies to explore opportunities to reduce regulatory burdens, including Executive Order 13783.  This particular Order, inter alia, directs the United States Environmental Protection Agency to review Clean Power Plan (CPP) rules issued by the EPA during the Obama Administration “and, if appropriate . . . as soon as practicable . . . publish for notice and comment proposed rules suspending, revising, or rescinding those rules.”  The EPA complied, and on October 16, 2017, it published a notice of proposed rulemaking that would repeal the CPP rules.

As we learned during the Reagan Administration’s deregulatory push, the Administrative Procedure Act’s judicial review provisions can pose a significant impediment to deregulation.  In the landmark Airbags case Motor Vehicles Manufacturers Association v. State Farm, the Supreme Court rejected the Reagan Administration’s argument that, because deregulatory rules resemble decisions not to regulate, they should be reviewed pursuant to a lenient version of the APA’s “arbitrary, capricious” standard.  Instead, the Court applied “hard look” judicial review and rejected the Department of Transportation’s decision to rescind its requirement that new cars be equipped with passive restraints, finding that the decision to rescind the rules (promulgated under the previous President) was not sufficiently justified.

The Trump Administration’s proposal to repeal the Obama Administration’s CPP rules presents a similar situation—a new administration that campaigned on a deregulatory platform is seeking to rescind one of its predecessor’s major regulatory initiatives.  The two initiatives may also be similar in a less obvious way — just as the Reagan Administration lacked a sufficient policy basis for rescinding the Carter Administration’s passive restraint requirement, the Trump Administration may lack a sufficient policy basis to rescind the Obama Administration’s CPP rules.  This presents the Trump Administration with a challenge: how to rescind the CPP rules without running into the hard-look buzz saw on judicial review?  Further, even if it could develop a sufficient policy basis for rescission, it would take the EPA years of research and analysis to do it, during which time the Obama-era CPP rules might still be upheld on judicial review and the political benefits of rescission would be blunted by the delay alone.

To avoid these potential pitfalls, the EPA’s rescission proposal relies exclusively on a reinterpretation of a key provision of the Clean Air Act, codified at 42 U.S.C. § 7411(b).  According to the current EPA, the Obama Administration’s CPP rules are unlawful because they rely upon an incorrect construction of the Act’s requirement that the EPA promulgate guidelines that reflect the “best system of emission reduction” (BSER).  The Trump EPA argues that the BSER requirement refers only to emissions technology at the emissions source, instead of other changes like altering the fuel used (for example, substituting natural gas for coal) or the development of clean energy sources (like wind or solar power) at another location to replace the dirtier output of coal-fired power plants.  The EPA’s notice of proposed rulemaking contends that its understanding “is the best construction” of the relevant provision of the Clean Air Act and that, under this construction, the Obama-era CPP rules are unlawful.

The success of the EPA’s proposal thus appears to depend on a single issue: whether the EPA’s prior reading of the Clean Air Act is unlawful.  The Chenery rule confines agency arguments on judicial review to the basis or bases the agency relied upon in promulgation. Thus, if the EPA’s rescission of the CPP rules is challenged on judicial review, the EPA will be precluded from raising the policy implications of the Obama-era rules or the economic or pollution-control superiority of a new EPA proposal.  Rather, the EPA’s arguments will be confined to their single, original proposition, that the Obama Administration’s rules were based upon an improper interpretation of the Clean Air Act.

This would be a relatively straightforward inquiry but for complications injected by the Chevron doctrine, under which reviewing courts defer to agency interpretations of ambiguous statutes they administer (Chevron step two).  Without Chevron, if a reviewing court were persuaded that the new construction of the Clean Air Act offered by the Trump-era EPA was the best understanding of the statute, the Court would uphold the rescission and leave it to the Trump Administration to determine, as a matter of policy, how to best effectuate the Clean Air Act’s requirements.  However, under Chevron, as elaborated in the Brand X decision, the validity of a new statutory construction does not necessarily imply the invalidity of the prior construction, and under Chenery, as discussed above, the rescission should be upheld if and only if the prior construction was invalid.

In a new administration, agencies are free to substitute their own reasonable or permissible constructions of their statutes for those of a prior administration.  Under Brand X, it would be perfectly appropriate for a reviewing court to view both constructions as valid, i.e. permissible or reasonable under Chevron step two.  In fact, the flexibility inherent in the possibility of multiple permissible constructions of the same statute is considered a virtue of Chevron.  It facilitates adaptation to new circumstances and effectuation of changing policy views, which is especially important in a democracy after a presidential transition.

Assuming that the EPA finalizes its proposal to rescind the CPP rules, what happens if the rescission is challenged on judicial review and the court determines that both constructions of the Clean Air Act are lawful?  In my view, the EPA’s rescission would be doomed under Chenery.  There is, however, a further complication.  Although the CPP rules were challenged on judicial review, that litigation has been held in abeyance at the request of the Trump EPA, presumably to allow it to act on its rescission proposal.  This gives rise to an unanswered question under Chevron: should a court defer to an agency interpretation that has been disavowed by the agency before judicial review is completed?

Given the unique circumstances of the Clean Power Plan repeal proposal, it is not surprising that no court has ever been called upon to answer the question of whether an agency’s unreviewed and now disavowed construction of an ambiguous statute should receive Chevron deference.  Under Chevron’s logic, however, the answer ought to be “yes.”  Unless the Clean Air Act unambiguously precludes the Obama Administration’s construction of the BSER provision, EPA’s 2015 determination that the Clean Air Act allows it to require more than technological changes applied at the emitting source satisfies all of the requirements for Chevron deference:  It was the construction of the agency charged with administering the Act; it was arrived at through a rulemaking process conducted under the Clean Air Act’s rulemaking procedures, which easily meet the procedural requirements for Chevron deference; and the CPP rule contains a thorough, well-reasoned discussion of the agency’s construction of the BSER provision.  Completed judicial review is not a prerequisite to Chevron deference.

I can imagine a reviewing court taking the contrary view, that because the EPA changed its mind during the course of judicial review, the Obama Administration’s construction of the BSER provision is no longer eligible for Chevron deference.  In fact, perhaps the Trump Administration should insist that judicial review of the Obama CPP rules goes forward, with the government arguing against its own construction.  A court might refuse to accord Chevron deference to the prior administration’s construction if the agency urges it not to in the course of the litigation.  But what this really shows, at bottom, is the incoherence of Chevron deference itself.  In my view, the result of judicial review should turn on the reviewing court’s best estimation of the meaning of a statute.  That’s what the rule of law is concerned with, not an imaginary set of possible meanings that an agency might employ to meet current political exigencies.  And when an agency decides to change course, whether to increase or decrease the level of regulation, it should be based upon a thorough and reasoned re-evaluation of the policies embodied in the relevant statutory scheme, not a legalistic reinterpretation of the underlying statute.  Deregulation should be evaluated on its policy merits, not on the legalistic musings of agency and Justice Department lawyers.