The Nickel Report

As previous Nickel Report posts have discussed, congressional efforts to rein in freewheeling agency interpretation and reinterpretation of ambiguous statutes have begun to intensify, and calls to reconsider Chevron deference have increased from both within the judiciary and without. One of the most vocal and eloquent critics of Chevron and its progeny, notably Mead and Brand X, is Judge Neil Gorsuch, President Trump’s nominee to fill the current Supreme Court vacancy. In Gutierrez-Brizuela v. Lynch, 834 F.3d 1142 (10th Cir. 2016), Judge Gorsuch penned an exhaustive and erudite analysis of the tension between the separation of powers that the US Constitution demands and the deference that Chevron and Brand X require courts to afford to reasonable agency interpretations of ambiguous statutes, even if those interpretations differ from those previously announced by the courts.

Judge Gorsuch’s analysis in Gutierrez-Brizuela describes a host of ills and infirmities attending the application of Chevron deference, most notably the usurpation of authority that the Constitution assigns the courts to interpret the law and to apply that law to cases and controversies that come before them. His concurrence emphasizes that congressional silence does not necessarily amount to a clear intent to authorize an agency to fill the gap, and that congressional delegation of authority to make law would, absent clear guiding principles, violate the separate of powers. The aspect of his concurrence most likely to interest the average Joe is his analysis of the ways in which Chevron and Brand X may interfere with due process, fair notice and equal protection, and otherwise affect the liberty and livelihood of the citizenry.

But not every agency interpretation of an ambiguous statute upends settled expectations or increases regulatory burdens and costs. Sometimes, the effect is quite the opposite. One such interpretation is EPA’s “Water Transfer Rule,” 40 C.F.R. § 112.3(i), which excludes certain water transfers from the rigors of the Clean Water Act’s (CWA) National Pollutant Discharge Elimination System permitting program — rigors that, inevitably, would limit the ability of state and local authorities to manage water resources to meet the demands of thirsty consumers. The 2008 rule embodies the EPA’s longstanding and much-litigated position that activities conveying or connecting “waters of the United States” without subjecting the transferred water to any intervening industrial, municipal or commercial use are not “point source discharges” because they do not add pollutants to waters of the United States from the outside world. EPA promulgated the Water Transfer Rule in response to a string of citizen suits wherein both district and circuit courts (including the Second Circuit) refused to defer to EPA’s interpretation in part because the agency had not adopted it by rule.

In its January 18, 2017, decision in Catskill Mountains Chapter of Trout Unlimited, Inc. v. EPA, No. 14-1823 (2d Cir. Jan. 18, 2017), the Second Circuit split two-to-one in favor of the rule. The decision reverses the Southern District of New York’s decision, which examined every nook and cranny of EPA’s rationale for the rule and found it wanting when compared to the district court’s preferred interpretation. The two judges in the majority (Judges Sack and Carney), applying Chevron Step 1, concluded that the CWA term “addition of pollutants … to navigable waters” was ambiguous. Having found room for interpretation, the court applied Chevron Step 2 in reviewing EPA’s “holistic” interpretation of the CWA, including the statutory language (which EPA read as referring to navigable waters collectively, rather than to individual navigable waters); the broader statutory scheme (including the existence of other statutory authorities for addressing impacts from water transfers); the legislative history; the history and consistency of EPA’s interpretation; and the adverse impacts of a contrary interpretation on state water rights and water management. Ninety-one pages later, the majority found EPA’s interpretation reasonable.

Judge Chin most emphatically did not agree with her colleagues, either as to the statute’s ambiguity or the reasonableness of EPA’s interpretation. Her 35-page dissent parses the same statutory language, structure and history that EPA and the majority mined, yet reaches a very different result.

Can renewed litigation be far behind? We doubt it. Perhaps the fates will align, and the case will reach the US Supreme Court. Perhaps Judge Gorsuch will by then be Justice Gorsuch and in a position to put some of his ideas about the perils of Chevron deference to the test. But he might keep in mind that, when it comes to upending settled expectations and imposing new burdens and liabilities, it is the judiciary that set that ball rolling when, almost 30 years after passage of the CWA, courts began opining that the transfer of water among waters of the United States requires an NPDES permit.