National Environmental Policy Act and Chevron Deference Aren’t the Problem

Benjamin Zycher is absolutely correct that government efforts to maintain environmental quality often fall short, and that the political economy of environmental protection is often to blame. Whatever the theoretical basis for various regulatory interventions to address environmental problems, the actual policy implementation is often ineffective, at times even undermining the very environmental concerns at issue, as he says in his Liberty Forum essay.

There are many reasons why so many regulatory interventions do not achieve their environmental goals, and Zycher is also correct that policymakers lack sufficient incentive to make things better, particularly at the federal level. The economic stakes of environmental policy decisions can be quite substantial, creating ample incentive for rent-seeking. Powerful economic interests have much to gain from ensuring that environmental measures suppress competition and increase profits.

Improving these efforts requires dramatic reform. It should begin with the wholesale rejection of the dominant “market failure” paradigm upon which most regulatory interventions are founded.

Resource scarcity and pollution problems tend to arise where the underlying institutional framework upon which markets rely is lacking. Where ecological resources are fully incorporated into the system of private property and voluntary exchange, protected by the rule of law, waste is minimized and resources are used efficiently. Where, however, this underlying institutional framework is lacking—or where transaction costs are high—environmental problems are more likely to accumulate.

Much of the environmental progress of the past several decades can be credited to market-driven technological innovation and the embrace of property-based resource management. As the experience with marine fisheries amply demonstrates, the shift from centralized regulation to property-based resource management generates substantial economic and ecological gains. The catch is that not all environmental problems are so readily amenable to such property-based solutions and, as Zycher notes, the underlying political incentives do not always encourage the adoption of such policies.

Given the broad and deep failings of contemporary environmental law, Zycher has made a curious choice of reform targets: the National Environmental Policy Act and Chevron deference. Reforms in these areas might produce some economic savings, but neither will do much to reorient environmental protection efforts.

National Environmental Policy Act

NEPA is arguably one of the nation’s foundational environmental laws. Enacted in 1969, it was the first in a wave of environmental legislation signed into law by President Richard Nixon. Yet NEPA is largely aspirational. While it declares a federal policy “to use all practicable means and measures” to safeguard environmental quality, it imposes no substantive obligations, and does not reach purely private activity.

Stripped of the soaring rhetoric in the statutory findings, NEPA is a quite limited statute. It imposes only one real requirement: Federal agencies must prepare an environmental impact statement (EIS) before undertaking “major federal actions significantly affecting the quality of the human environment.” Such statements must often be quite extensive, and activist groups routinely challenge their adequacy in court, but there is nothing in NEPA that requires agencies to prioritize (let alone select) policies or actions that minimize environmental impacts. NEPA only requires that agencies consider such impacts, and disclose them in a comprehensive statement.

In practice, NEPA can impose a significant procedural burden on federal agencies undertaking major projects. The onus falls primarily on infrastructure projects, government-financed construction, and those projects that require federal permits or approvals, including development activities on federal land. (Permits required under the Clean Air Act and Clean Water Act are exempt, as are most regulations promulgated by the Environmental Protection Agency.) Federal agencies must consider whether specific projects are covered by NEPA, and make initial assessments of non-exempt projects, but estimates cited by the Government Accountability Office suggest a full EIS is only required in a tiny fraction of cases.

If an EIS is required, the burden may be substantial. A full EIS may take years to complete. Courts and the Council on Environmental Quality (the federal agency charged with implementing NEPA) have interpreted the relevant requirements expansively. Compounding the burden, environmentalist and NIMBY groups often file lawsuits challenging the adequacy of environmental assessments and impact statements. This adds to the time and cost of federal projects, but the federal government ultimately prevails in most NEPA suits, and (as already noted) only a small fraction of federal actions—albeit often large and significant ones—are subject to the EIS requirement in the first place.

The prospect of having to prepare and disclose an EIS detailing the potential adverse environmental impacts of a given project may well discourage agencies from taking certain actions, but is that a problem? If the federal government is undertaking or funding an activity that will cause environmental harms (harms that it will then use as the basis for imposing additional regulatory burdens on private economic activity), shouldn’t we want this to be disclosed ahead of time? If it is a good idea for agencies to engage in some form of cost-benefit analysis of their actions before proceeding, is there any reason the environmental consequences of agency actions should be excluded?

To be sure, NEPA reform is warranted, largely to standardize and streamline the process and prevent opportunistic use of this law to obstruct federal projects. Some reforms could be made administratively by the Council on Environmental Quality to reinterpret some of NEPA’s requirements; others might need to be enacted by Congress. Yet curing NEPAs ills will not do much of anything to alleviate the burdens or cure the irrationalities of contemporary environmental regulation let alone to rationalize environmental policy more broadly.

Chevron Should Be Applied Better, Not Shelved

It has become fashionable in some circles to disparage and decry the Supreme Court’s decision in the 1984 case of Chevron v. Natural Resources Defense Council, and Zycher repeats what has become the standard critique of the Chevron doctrine. I confess I am skeptical of this line of thinking, and have called for confining Chevron to its proper domain instead of overruling it. Whether or not Chevron deference to federal agencies’ interpretations of statute is a good idea, however, is somewhat irrelevant to the issue at hand, for there is little reason to believe that getting rid of Chevron will do much to improve environmental policy, and many reasons to suspect it could actually do more harm than good.

The Chevron doctrine does not embody an “implicit assumption that the executive agencies are disinterested enforcers of the relevant statutes,” as Zycher claimed. To the contrary, the doctrine explicitly relies upon the fact that agencies are part of the executive branch and are therefore subject to presidential control. The explicit premise of Chevron, reaffirmed in subsequent cases such as United States v. Mead Corp. (2001), is that Congress has delegated to the implementing agency the authority to resolve ambiguities and fill statutory gaps (even if only implicitly), and that such power necessarily involves the policy judgments—judgments better made by politically accountable agencies than unaccountable courts. Chevron itself is explicit on this point, and there is ample evidence that congressional staff consider Chevron in the legislative drafting process.

Consideration of Chevron’s history is instructive. The Chevron doctrine was born, somewhat accidentally, in the 1980s, when the Reagan administration, and the EPA in particular, was attempting to reduce regulatory burdens. The case arose from that agency’s attempt to allow for a mild form of emissions-credit trading—the use of “bubbles”—to relieve some industrial facilities of onerous permitting and retrofitting requirements. The U.S. Court of Appeals for the D.C. Circuit rejected the Reagan policy because, in the lower court’s view, such a move was inconsistent with the underlying purpose and intent of the Clean Air Act, even if it was not prohibited by the statutory text.

The Supreme Court unanimously rejected the D.C. Circuit’s read, declaring that it was not the place of federal courts to second-guess agency policy decisions based upon reasonable interpretations of ambiguous statutory text. As Justice John Paul Stevens explained in his opinion for the Court, where the relevant statutory language does not answer the precise question at issue—in this case, whether to focus on emissions from a discrete smokestack or consider them facility-wide—there is often reason to presume that Congress has delegated the resolution of this question to the agency charged with implementing the statutory scheme.

The message of Chevron was clear: Courts have no warrant to force agencies to regulate more expansively or aggressively than Congress has expressly required. If Congress has not required an agency to be more stringent, that is a choice left for the agency to make. Although Justice Stevens did not see his opinion as much of a change from then-current law, the Reagan administration and first Bush administration seized upon the Court’s language to defend their deregulatory moves against challenges from environmentalist groups.

Chevron not only disciplined lower courts that had been prone to embracing broad purposive arguments for ever-more-stringent environmental regulations. It also appears to constrain partisan tendencies among judges on federal appellate courts, enhancing legal stability and predictability. If there is a problem with Chevron, it is more due to the lack of rigor or consistency with which the doctrine has been applied than with the doctrine itself, a point made by Justice Anthony Kennedy in one of his last opinions on the Court.

While pro-regulatory administrations have utilized Chevron to justify regulatory expansions, Chevron has been indispensable for those administrations seeking to defend deregulatory measures in federal court. Indeed, if the Trump administration is going to have any success in repealing or revising the Obama administration’s regulatory initiatives, it will need the breathing room Chevron provides in order to do it, as a careful examination of recent proposals to revise regulations under the Clean Air Act and Clean Water Act make clear. Indeed, Zycher’s own cause of NEPA reform will be much more difficult if courts are not required to defer to the Council on Economic Quality’s reasonable interpretations of that statute’s broad and somewhat ambiguous terms.

The Way Forward

While I share Zycher’s concerns about contemporary policy, I am not at all sure that he has trained his fire on the proper targets. Reforming NEPA may reduce the time and expense involved in government projects and ease some permitting delays, but it will not address the substantive burdens of environmental regulation. Abandoning Chevron may limit the regulatory ambition of progressive administrations, but it will also hamper deregulatory initiatives and risk a return to the days when federal judges felt more free to dictate regulatory priorities to recalcitrant agencies—a risk that is only magnified by the current and immediately foreseeable composition of the D.C. Circuit.

Are there other, more productive, ways to reform environmental policy—ones that will help address the misaligned incentives Zycher identifies? Yes. Here are few possibilities.

One problem in the federal oversight of land use, such as regulation under the Endangered Species Act and Clean Water Act, is that agencies are inattentive to the economic costs of their actions, and often ignore how imposing costs on private landowners can undermine environmental conservation efforts. Forcing agencies to account more directly for these costs would be a step toward remedying this problem.

Ideally this would come in the form of protecting landowners from uncompensated regulatory takings, so that agencies would consider the full range of non-punitive and non-regulatory measures before constraining private land use. Alternatively, this could be achieved by forcing agencies to undergo more holistic and comprehensive examination of their options, such as when developing species-recovery and habitat-conservation plans under the Endangered Species Act. Ironically, this process would look quite a bit like that which is required under NEPA, and from which environmental regulatory agencies are (at present) largely exempt.

Another problem is that the current regulatory regime is relatively inflexible, unable to account for regional differences, and hostile to experimentation. One way to address this is to open up federal environmental law to more state-level experimentation, such as through a waiver process much like that which helped facilitate the welfare reforms of the 1990s. Offering the opportunity to be freed from federal requirements would provide an incentive for states to come forward with alternative ways of advancing environmental goals without sacrificing economic dynamism and growth. While it might also enable some states, such as California, to regulate more aggressively, it would enable voters and policymakers to see which policy approaches generate the greatest returns and at what cost.

A third possibility is to look for more ways to replace regulatory controls with property-based management regimes. This has been tremendously successful with marine fisheries, and there are good reasons to believe such reforms would help address water scarcity issues as well.

Finally, where property-based management is not possible, I would encourage replacing prescriptive regulations and permitting requirements with simple taxes on emissions or the consumption of resources. Emission taxes impose burdens of their own, but they do less to inhibit economic dynamism and innovation than their regulatory alternatives. So, for example, I would jump at nearly any opportunity to replace Clean Air Act regulation of greenhouse gases with a revenue-neutral carbon tax.

None of these ideas represents a silver bullet. Indeed, in environmental policy silver bullets do not exist. The failings of contemporary environmental policy run deep, and there are no simple solutions that can or will be imposed overnight. But the right reform measures can begin to lead us in a more positive direction.

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