Evaluating EPA’s Arguments for RFS Waiver Authority

A previous post reviewed the leaked draft of EPA’s proposed rule setting the Renewable Fuel Standard mandates for 2014 and concluded that EPA was making novel use of the authority provided by Congress.  In November, EPA released the proposed regulation for public review and comment (the proposed rule can be found here).  In the proposed rule, EPA proposes setting the RFS mandates lower than the statutory levels and makes an argument in support of its interpretation that the general waiver authority allows it to do so.  This post evaluates EPA’s argument in support of this use of the general waiver authority.

Discussion

Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (a copy of the decision can be found here).   EPA defines supply as an “amount of a resource or product that is available for use by the person or place at issue.” For support, EPA refers to this definition in the online version of the Oxford Dictionaries:  “a stock of a resource from which a person or place can be provided with the necessary amount of that resource.”

Whether the word “supply” can be read to mean something other than an amount or stock, but instead depends on what is available or can be provided, seems like a proverbial splitting of hairs.  And it is not likely, on its own, to allow EPA to use its waiver authority in this manner.  Ambiguity is not a free pass; giving deference to an agency’s interpretation does not require a court to agree with that interpretation.  EPA still must demonstrate that its interpretation is a reasonable and permissible reading of the statute in light of Congressional intent.  Fundamentally, this goes to the separation of powers among the branches of the federal government in the Constitution, where Article I, Section 1 states that “[a]ll legislative Powers herein granted shall be vested in a Congress of the United States.”

Does EPA’s proposed rule and its use of the general waiver authority in the statute go beyond implementing the RFS, crossing the Constitutional line into a form of legislating?  Congressional intent is very important.  As discussed in the previous post, a federal judge has already emphasized that Congress clearly intended for the RFS to expand the production and use of ever higher levels of renewable fuel, and that the volumes provided in the statute were not to be reduced easily.  EPA does not dispute this intent. To understand how EPA’s arguments would hold up if challenged in court in light of this clear intent, there are three Supreme Court cases that appear to be very instructive.

In the 1994 case MCI Telecommunications Corp. v. American Telephone and Telegraph Co. (a copy of the decision can be found here), the Supreme Court considered an agency’s authority to “modify” requirements of a law it administered, especially when those requirements were considered the “centerpiece of the Act’s regulatory scheme.”  The Court did not give the agency deference because the agency’s interpretation of its authority to make modifications to the statutory scheme designed by Congress went too far.  Even if the agency’s idea is a good one, the Court said that it is not entitled to make a fundamental revision to the statute.  The Court emphasized that it was “highly unlikely” that Congress would leave such an important determination to agency discretion and “even more unlikely” that it would do so “through such a subtle device” as the authority to make modifications.

In 2000, the Supreme Court disagreed with an agency’s claim that it had the authority to regulate tobacco in Food and Drug Administration v. Brown & Williamson Tobacco Corp. (a copy of the decision can be found here).  The Court sympathized with the seriousness of the problem the agency was trying to address, but was not persuaded by its argument for authority because an agency “may not exercise its authority in a manner that is inconsistent with the administrative structure that Congress enacted into law.”   Deference is proper only when Congressional ambiguity implies that Congress meant for the agency to “fill in the statutory gaps” but not for important matters and major questions.  Congress is not likely to delegate decisions of “economic and political significance to an agency” and certainly not in “so cryptic a fashion” that requires an “extremely strained understanding” of terms used in the statute.  The limits for delegating legislative powers is rooted in the need for political accountability to the voting public, which is primarily Congress:  “no matter how important, conspicuous, and controversial the issue, and regardless of how likely the public is to hold the Executive Branch politically accountable” the power of an agency “must always be grounded in a valid grant of authority from Congress.”

Finally, in 2001 the Supreme Court reviewed an EPA argument for authority under the Clean Air Act in the case Whitman v. American Trucking Assn., Inc. (a copy of the decision can be found hereWhitman v. American Trucking Assn., Inc. would appear to be particularly instructive here because the Clean Air Act also contains other waiver provisions for transportation fuel requirements, most notably those for oxygenated fuels.  These provisions can be found in the same part of the Act that houses the RFS.  They provide authority to waive oxygenate requirements if EPA determines that there is an “inadequate domestic supply of, or distribution capacity for, oxygenated gasoline meeting the requirements.” (emphasis added)  Simply put, if Congress wanted EPA to consider distribution capacity (i.e. the blend wall) it would have said so.  Congress clearly knew how to provide such authority because it did so for oxygenated fuels in the same part of the statute.  Congress did not, however, include the same phrase (“or distribution capacity for”) in the RFS waiver provision, and that would seem to be a strong indication that the blend wall is outside EPA’s waiver authority.

Conclusion