March 21, 2013 5:05PM

Reining In the Modern Executive State

The Supreme Court issued a ruling yesterday on a consolidated pair of cases that looked initially like a win for property rights. (Decker v. Northwest Environmental Defense Center and Georgia-Pacific West, Inc. v. Northwest Environmental Defense Center.) Interpreting Environmental Protection Agency authority, the Court held 7-1, with Justice Kennedy writing for the Court, Justice Scalia concurring in part and dissenting in part, and Justice Breyer recusing himself, that logging companies and Oregon forestry officials did not have to obtain EPA permits for storm-water runoff from logging roads, contrary to what the NEDC had argued and the Ninth Circuit below had held.

As so often happens, however, the underlying issues were far more complicated and important, involving basic administrative law questions and fundamental separation-of-powers principles. In particular, the question Scalia pressed was this: Should a court give deference—known as Auer deference—to an administrative agency’s interpretation of its own regulations? Bad enough that courts give excessive Chevron deference, as it’s known, to agencies' interpretations of congressional statutes when agencies write and enforce regulations pursuant to the statutes. When agencies, in addition, get not only to write but to interpret their own regulations, it’s a prescription for mischief, as Scalia made clear.

As a general matter, we at Cato have long argued that Congress delegates far too much of its legislative authority to executive branch agencies. After all, the very first sentence of Article I of the Constitution reads: “All legislative Powers herein granted shall be vested in a Congress ….” (emphasis added) As a practical matter, Congress has always had to delegate some rule-making authority to the executive branch. With the vast expansion of Congress’s legislative powers during the New Deal, however, that delegation has grown exponentially, along with the hundreds of agencies Congress has since created. Today, most of the law we live under, except at the broadest level, is written not by Congress but by those agencies. Do we need any better example than Obamacare? Over 2,000 pages long, that Act pales in comparison to the volumes of regulations now being written in the agencies to give it effect. All of which raises the question, what’s the role of the courts in all of this?

The substantive question here was whether stormwater runoff from two logging roads violated regulations the EPA had written pursuant to the Clean Water Act. Thus, although the environmental plaintiffs lost, that does not mean, as might be thought, that the decision was a win for proponents of property rights. This was a question of whether logging enterprises were using their property in a way that protected the public’s property interests in clean water. That’s what the regulations were written to ensure. The Court had before it, therefore, a question of regulatory interpretation and application in light of the facts. Without going into the complex statutory and regulatory parsing that both the Court and Scalia engaged in—see the decision to work your way through that—suffice it to say, again, that Kennedy simply deferred to EPA’s interpretation of its own regulation: Auer deference, which accepts an agency’s reading of its own regulation unless it is “plainly erroneous or inconsistent with the regulation.” By contrast, carefully invoking several interpretive canons, Scalia argued that in so deferring the Court had upheld EPA’s unnatural reading of its regulation. He would have found for the NEDC. (So much for Scalia the result-oriented conservative.)

Although I believe Scalia had indeed the “more natural” reading of the regulation, the larger, constitutional issue is the more interesting one, namely, whether such deference as the Court had given is consistent with the separation of powers, and on this, Scalia is at his best. Addressing the contention that the agency possesses special expertise in administering its complex and highly technical regulatory program, he answers:

That is true enough, and it leads to the conclusion that agencies and not courts should make regulations. But it has nothing to do with who should interpret regulations…. Making regulatory programs effective is the purpose of rulemaking, in which the agency uses its “special expertise” to formulate the best rule. But the purpose of interpretation is to determine the fair meaning of the rule—to “say what the law is,” Marbury v. Madison. Not to make policy, but to determine what the law is.

Again, addressing the claim that, if it is reasonable to defer to agencies regarding the meaning of statutes that Congress enacted, as the Court does per Chevron, it is a fortiori reasonable to defer to them regarding the meaning of regulations that they themselves crafted, Scalia noted that in delegating authority to an agency to administer a statute, Congress implicitly accords the agency a degree of discretion, which the courts must respect, regarding the meaning of the statute. But,

While the implication of an agency power to clarify the statute is reasonable enough, there is surely no congressional implication that the agency can resolve ambiguities in its own regulations. For that would violate a fundamental principle of separation of powers—that the power to write the law and the power to interpret it cannot rest in the same hands. “When the legislative and the executive powers are united in the same person … there can be no liberty; because apprehensions may arise, lest the same monarch or senate should enact tyrannical laws, to execute them in a tyrannical manner.” Montesquieu, Spirit of the Laws.

And speaking to the mischief latent in Auer deference:

When an agency interprets its own rules, … then the power to prescribe is augmented by the power to interpret; and the incentive is to speak vaguely and broadly, so as to retain a “flexibility” that will enable “clarification” with retroactive effect. It is perfectly understandable for an agency to issue vague regulations if doing so will maximize agency power.

Chief Justice Roberts, joined by Justice Alito, concurred in the Courts opinion, but wrote separately to say that Scalia “raises serious questions about the principle” that has come to be called Auer deference, adding that “it may be appropriate to reconsider that principle in an appropriate case.” But because the issue was not properly briefed and argued, “this is not that case.” Stay tuned. Given the vast reach of the modern executive state, this issue will not, and should not, go away.