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SCOTUS Reverses 9th Circuit on Logging Road Culverts – New Rule Irrelevant

Posted in Judicial Review & Remedies, Regulatory Process

The Supreme Court of the United States (SCOTUS) today vacated the United States Court of Appeals for the Ninth Circuit decision in Decker v. Northwest Environmental Defense Center, holding that the Environmental Protection Agency (EPA)’s original interpretation of its original regulations warranted Auer deference, that a new EPA rule on the subject did not moot the case, and that the new rule was not really relevant to the case.  The Court noted the new rule was promulgated during litigation (and even surprised the Court), but only Justice Scalia took exception in a dissent the effectively aligned him with the environmental interests in the case.

Background:  The Northwest Environmental Defense Center (NEDC) sued the Oregon State Forester and timber companies contending they were violating the Clean Water Act (CWA) and its implementing regulations by not obtaining permits from the EPA for logging road culverts that channel stormwater, ultimately discharged into forest streams and rivers.  NEDC brought suit under the CWA citizen suit provisions contending that culverts were “point sources” within the meaning of the CWA and therefore require permits.  EPA was not a party.

Decision Below:  EPA, through the Department of Justice (DOJ) Solicitor General, argued as amici that the Ninth Circuit owed deference to EPA’s long settled position that logging ditches and culverts were not point sources subject to the CWA.  The Ninth Circuit disagreed, holding that logging road ditches, culverts, and channels are point sources that require a permit.  The Supreme Court granted certiorari to review this recurring question of massive implications.

Notice of Changing Rules:  EPA had long interpreted its own regulations to not require a permit for thousands (perhaps millions) of logging road culverts, and proposed a rule after and because of the 9th Circuit decision to help settle this issue.  The Court was noticeably displeased with the Solicitor General’s Office about the tardy advice on changing the rule during oral argument on December 3, 2012.  EPA published its final rule on December 7, effective January 7, 2013.

Holding:  SCOTUS (by Justice Kennedy, 7-1; Justice Breyer not participating) held that the intervening regulation did not render the case moot because prior liability could be based in the prior rule.  SCOTUS continued that the EPA interprets its regulation to exclude the type of stormwater discharges from logging roads at issue in this case, citing the brief for United States as amicus curiae.  SCOTUS concluded the EPA’s interpretation is a reasonable interpretation of its own regulation; and, inconsequence, deference is accorded to the interpretation under Auer v. Robbins.  Auer and other cases hold that an agency is due substantial if not controlling deference in the interpretation of its own regulations.

Mootness:  Decker and the United States argued that the new rule rendered the case moot, but SCOTUS disagreed, noting,  “A case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.”  Here, past violations are still controlled by the previous rule; the new rule does not reach back:  “despite the recent amendment, a live controversy continues to exist regarding whether petitioners may be held liable for unlawful discharges under the earlier version of the Industrial Stormwater Rule.” and “The instant cases provide no occasion to interpret the amended regulation.”

Applying AuerAuer and its progeny

well establish[] that an agency’s interpretation need not be the only possible reading of a regulation — or even the best one — to prevail.  When an agency interprets its own regulation, the Court, as a general rule, defers to it “unless that interpretation is ‘plainly erroneous or inconsistent with the regulation.”

Here, SCOTUS found that EPA’s interpretation is a permissible one.  Moreover, SCOTUS noted:

There is another reason to accord Auer deference to the EPA’s interpretation: there is no indication that its current view is a change from prior practice or a post hoc justification adopted in response to litigation.  See Christopher v. SmithKline Beecham Corp., ….  The opposite is the case.  The agency has been consistent in its view that the types of discharges at issue here do not require NPDES permits.

Scalia’s Concurrence & Dissent:  Ever vigilant for tight language, Justice Scalia concurred in part, and dissented on the treatment of the regulations:

The Court there gives effect to a reading of EPA’s regulations that is not the most natural one, simply because EPA says that it believes the unnatural reading is right.  It does this, moreover, even though the agency has vividly illustrated that it can write a rule saying precisely what it means — by doing just that while these cases were being briefed.

Justice Scalia goes on to dispute the validity of the premises of Auer deference:

For decades, and for no good reason, we have been giving agencies the authority to say what their rules mean, under the harmless-sounding banner of “defer[ring] to an agency’s interpretation of its own regulations.”

Justice Scalia makes clear that he believes it is time to reconsider deferring to agency interpretations of their own regulations in Auer.

The canonical formulation of Auer deference is that we will enforce an agency’s interpretation of its own rules unless that interpretation is “plainly erroneous or inconsistent with the regulation.”  In practice, Auer deference is Chevron deference applied to regulations rather than statutes.

Two justifications historically have supported Auer deference:  (1) Some cases say that the agency, as the drafter of the rule, will have some special insight into its intent when enacting it.  (2) The agency possesses special expertise in administering its “complex and highly technical regulatory program.”

Justice Scalia points out that permitting agencies deference to interpret their own regulations reinforces the priority for drafting vague regulations.  He then distinguishes Auer deference from Chevron deference to an agency’s interpretation of ambiguous statutes where Congress has delegated authority to the agency:

Auer is not a logical corollary to Chevron but a dangerous permission slip for the arrogation of power.”

The duration of uncertainty produced by a vague regulation need not be as long as the uncertainty produced by a vague statute, Justice Scalia points out,

For as soon as an interpretation uncongenial to the agency is pronounced by a district court, the agency can begin the process of amending the regulation to make its meaning entirely clear.  The circumstances of this case demonstrate the point.

In any case, however great may be the efficiency gains derived from Auer deference, beneficial effect cannot justify a rule that not only has no principled basis but contravenes one of the great rules of separation of powers:  He who writes a law must not adjudge its violation.

Applying strictly the canons of interpretation to the rules, Justice Scalia would come out on the side of the environmentalists:

I would therefore resolve these cases by using the familiar tools of textual interpretation to decide:  Is what the petitioners did here proscribed by the fairest reading of the regulations?  What they did was to channel stormwater runoff from logging roads without a permit.  To decide whether that was permissible we must answer one, and possibly two, questions:  First, was the stormwater discharged from a “point source”?  If not, no permit was required.  But if so, we face the second question:  Were the stormwater discharges exempt from the permit requirement because they were not “associated with industrial activity”?  The fairest reading of the statute and regulations is that these discharges were from point sources, and were associated with industrial activity.”

Concurring, but not Dissenting:  Chief Justice Roberts, joined by Justice Alito, responded to Justice Scalia’s dissent, so taking their concurring opinion out of order points out the potential future strength of that dissent.  Scalia’s opinion, the Roberts and Alito agree, raises serious questions about the principle of deferring to agency interpretation of their own regulations, and that “it may be appropriate to reconsider that principle in an appropriate case.  But this is not that case.”  The Chief’s concurrence poses a warning to the agencies and an invitation (so to speak) to the bar:

The issue is a basic one going to the heart of administrative law.  Questions of Seminole Rock and Auer deference arise as a matter of course on a regular basis.  The bar is now aware that there is some interest in reconsidering those cases, and has available to it a concise statement of the arguments on one side of the issue.

The Dilemma:  DOJ faces a dilemma whenever a court is considering a rule that might be in flux:  How does DOJ honestly advise the court that its consideration of the issue may not warrant its time and effort while preserving the confidentiality of pre-decisional rulemaking discussions?  In this case, it simply failed to timely inform SCOTUS of potentially intervening legal actions under the Administration’s control.  The answer is that it must be honest and forthright – and perhaps forego a bit of confidentiality to be honest with the courts.  Just as in the preventive care / contraception cases, a court should be informed – and may demand to be informed – of the progress of a rulemaking that will affect its decision.