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Supreme Court Limits Deference Owed to Agency Interpretations of Regulations

Last month, a bare majority of the Supreme Court held in Kisor v. Wilkie, No. 18-15, 588 U.S. ___, that federal courts should still defer to an agency’s interpretation of its own regulations, a practice known as Auer deference, but only sometimes. In doing so, the Supreme Court narrowed the circumstances in which Auer deference is warranted by adopting a new five-part test that must be satisfied for it to apply. The decision has important ramifications for environmental practitioners because of the significance of regulations in environmental law.

Consider this common scenario: EPA issues an enforcement order against a regulated entity on the basis that the entity failed to comply with an EPA regulation. The regulated entity, denying liability, argues in response that it complied with the letter of the regulation and seeks judicial review. EPA and the regulated entity disagree on the interpretation of the regulation. 

Under Auer deference, as it has been previously formulated, a federal court was to defer to reasonable agency interpretations of their own regulations. In the scenario above, EPA’s position almost certainly would have prevailed because of Auer deference. 

After Kisor, the concept of Auer deference survives, albeit barely, but with new limitations. Importantly, the Supreme Court did not overrule Auer v. Robbins, 519 U.S. 2521 (1997) and eliminate Auer deference. Rather, a 5-4 majority of the Court agreed that there was inadequate justification for abandoning the Court’s prior precedent that had instituted and upheld Auer deference. But stare decisis did not prevent the Court from narrowing the doctrine’s application. 

Specifically, the Court held that federal courts should not afford an agency interpretation deference unless several conditions were met. First and foremost, the Court emphasized that Auer deference does not apply unless the regulation is “genuinely ambiguous,” meaning that it does not lend itself to a single correct interpretation after a court exhausts traditional tools of construction by considering the text, structure, history, and purpose of the regulation. Then, even if the regulation is deemed “genuinely ambiguous,” federal courts are not to defer to the agency interpretation unless the agency’s interpretation is deemed all of reasonable, authoritative, technical in nature, and reflective of the agency’s considered judgment. 

The upshot is that litigants now have more basis to contend that federal courts should conduct their own independent review of regulations regardless of an agency’s interpretation. In the hypothetical above, before affording EPA’s interpretation deference, the federal court would now have to confirm that the interpretation sufficiently implicated EPA’s expertise, that it was EPA’s “official position,” and that it was not merely adopted for purposes of litigation, among other considerations. In short, in the Supreme Court’s own words, “[w]hen it applies, Auer deference gives an agency significant leeway to say what its own rules mean. . . . But that phrase ‘when it applies’ is important—because it often doesn’t.”