Chevron might be good in practice but results in inconsistent regulation. Only a risk court rulings are better

Chevron deference and high political polarity are incompatible. For present purposes, I am referring to the original version of the Chevron test. Over the decades in which the Court has applied the Chevron test, it has qualified the test in many ways. 23 That highly qualified version of the Chevron test might produce acceptable results if lower courts correctly applied it. My concerns about the adverse effects of continued application of the Chevron test are based on my belief that circuit courts are continuing to apply the test in roughly the same manner and with about the same results as they did when the Court first issued the Chevron opinion. I have two types of evidence to support that belief.

The first type of evidence is the work of Professors Kent Barnett and Chris Walker, who have conducted by far the most comprehensive study of circuit court applications of Chevron. In their study, Barnett and Walker found that circuit courts uphold agency statutory interpretations twenty percent more often when they apply Chevron 24 than when they apply the traditional Skidmore test. Second, that finding is illustrated by some of the most important recent appellate cases. The D.C. Circuit's 2019 opinion in Mozilla Corp. v. FCC, is one of many opinions that illustrate the unfortunate results of the combination of Chevron and political polarity.

In Mozilla, the D.C. Circuit had to decide whether to uphold or reject the FCC's interpretation of the Communications Act of 1934. The FCC had interpreted the statute to exempt the internet from regulation." The over 100 pages the court devoted to discussion of that question demonstrates the challenging nature of the issue. The interpretative question was particularly difficult to resolve for two reasons. First, the court was required to decide whether internet service providers are "common carriers," as that term is used in the Communications Act of 1934,26 when Congress could not possibly have contemplated the existence of the internet when it enacted the statute eighty-five years ago. Second, the FCC had been remarkably inconsistent with respect to this interpretative issue. It had resolved the issue four times over the prior fifteen years. On each occasion, it reversed its prior interpretation."

The D.C. Circuit finally concluded that it had no choice but to uphold the FCC's most recent interpretation notwithstanding the agency's remarkable record of inconsistency with respect to both the interpretation and the agency's reasoning in support of the 28 interpretation. The court concluded that it was bound to uphold the agency's interpretation through application of the Chevron test, 29 particularly because of the Supreme Court's decision in Brand X. In that case, the Ninth Circuit held that a prior FCC interpretation of the same statute in the same context was arbitrary and capricious because the agency had previously adopted an inconsistent interpretation and a circuit court had upheld the prior inconsistent interpretation.30 The Supreme Court reversed the Ninth Circuit and instructed it to apply 3 Chevron on remand. 1 Not surprisingly, the Ninth Circuit upheld the FCC's new interpretation on remand notwithstanding its inconsistency 32 with the prior interpretation. required to follow the lead of the Ninth Circuit and to uphold the FCC interpretation even though the result was to allow the FCC to adopt a new interpretation every time a president of one party replaces a president of the other party.

The FCC's history of vacillation in this context and the decisions of the courts to uphold each of the FCC's inconsistent interpretations illustrate the effects of retaining the Chevron test in today's conditions of extreme and growing political polarity. The formal legal issue before the court in each of the cases in which it upheld the FCC's inconsistent interpretations of the Communications Act of 1934 was whether an internet service provider is a "common carrier" under the act. In political parlance, the issue in each of those cases was whether the FCC should apply the principles of "net neutrality" to the internet. That is one of the hundreds of policy issues on which the two political parties are hopelessly divided. Democrats strongly support net neutrality, while Republicans oppose it with equal vigor. Not surprisingly, every time the White House changes hands, the newly elected president appoints FCC commissioners who dutifully reverse the interpretation adopted by their predecessors of the opposing party and adopt a new interpretation that reflects the policy preference of the party that elected the new president.

Whether net neutrality is a good or bad policy, we have chosen the worst possible policy in this context. Net neutrality discourages investment by internet service providers by subjecting them to strict regulation, but it encourages investment by content providers by assuring them of equal access to the internet. Conversely, deregulation of the internet discourages investment by content providers because they cannot be confident that they will have access to the internet on fair and impartial terms, but it encourages investment by internet service providers by assuring them that they will have the freedom to use the assets in which they invest in ways that maximize the return on their investments. By combining Chevron with political polarity, we have adopted a policy that discourages investment by both content providers and internet service providers.

Our policy of flip-flopping between net neutrality and deregulation of internet service providers every time the White House changes hands discourages all investments in the internet. Policy uncertainty discourages investment.33 Prospective investors hate uncertainty. They discount any potential return on investment significantly if they foresee a substantial risk that they will not be able to earn an adequate return on their investment because of the risk that the government will change its policies in ways that reduce or eliminate 34 their return on that investment. In the context of the internet, prospective investors must decide whether to make an investment in conditions in which they know that the government policies that have a material effect on their investment returns will change with each change in administration. That is a policy environment that is far worse than either consistent application of the principles of net neutrality or consistent rejection of those principles.

The powerful beneficial effects of stable policy on investment were illustrated well by the changing position of electric utilities in the context of the Environmental Protection Agency's ("EPA") decision to adopt a limit on mercury emissions that cost utilities billions of 35 dollars. The utilities joined coal producers and coal-producing states in opposing the limits at the EPA and initially in litigation in both the 36 37 D.C. Circuit and the Supreme Court. When the Supreme Court reversed the rule and remanded the case to the D.C. Circuit to decide whether to vacate the rule, however, the court refused to vacate the 38 rule for a good reason. and urged the court to allow EPA to keep the emissions limit in effect to protect the investments the utilities had made in the pollution control technology that they had purchased and installed to comply with the emissions limit.

I was not surprised by that change of position. I have attended many conferences in which utility executives said that, while they oppose the issuance of a strict limit on mercury emissions, they would much prefer issuance of such a limit to continued uncertainty. They explained that they did not know which of two alternative sets of major investments in generating technology they should make until they knew what EPA was going to do with respect to mercury emissions. As a result, they were deferring many important investment decisions. The decision to defer important investments created a high risk that the utilities would be unable to meet the needs of their customers at a reasonable cost under either an EPA decision to adopt a strict limit on mercury emissions or an EPA decision not to adopt such a limit.

The same analysis applies in each of the hundreds of contexts in which Democrats and Republicans have opposing and uncompromising preferences with respect to policy issues on which investment decisions depend. Three other contexts-healthcare, immigration, and climate change-illustrate the scope and severity of the problems created by the combination of extreme political polarity and Chevron. In each, it is clear to me that a Skidmore-type test, which focuses more on continuity than political deference, would produce results that are preferable to the results of application of the Chevron test.

First, most Democrats support Obamacare, while most Republicans disapprove of Obamacare. The Supreme Court is about to decide the fourth case in which an issue of statutory interpretation 39 will determine the fate of Obamacare. I was delighted when the five- All but one of the utilities had changed sides justice majority that originally upheld the validity of Obamacare 40 applied the major question exception to the Chevron doctrine. I hope that the Court continues to take that approach.

The nation can survive either a decision that upholds Obamacare or a decision that forces Congress to adopt an alternative to Obamacare. I am not at all sure that the nation can survive a decision that places Obamacare in the same situation as net neutrality-it is legal and in effect when a Democrat is president but it is illegal and void when a Republican is president. It is easy to predict that such a policy environment would minimize total investment in healthcare at great cost to the nation-in dollars and lives. It also would make it impossible for individuals to make wise decisions about the actions that they should take to be confident that they will have access to adequate healthcare.

Similarly, most Democrats strongly support Deferred Action for Childhood Arrivals ("DACA") and Deferred Action for Parents of Americans and Lawful Permanent Residents ("DAPA"), two immigration programs that President Barack Obama adopted to 4 protect "dreamers" and their families from the risk of deportation. The Trump administration attempted to rescind DACA and DAPA, but states led by Democratic governors challenged that decision.42 The Trump administration argued that the challenge to the validity of that rescission decision is barred by a provision of the Immigration and Naturalization Act.43 I was pleased when the Supreme Court strongly suggested that either interpretation might be valid if but only if the agency provides an adequate explanation for the interpretation it 44 adopts. test-it instructs a court to consider the quality of an agency's reasoning when it reviews an agency's interpretation of an ambiguous provision in an agency-administered statute.

If the Court had merely relied on Chevron as the basis for a decision in which it held that both the Trump administration's interpretation and the Democrats' interpretation are permissible readings of the statute, it would have created an unstable legal environment. Dreamers and their families would be protected from deportation during a Democratic administration but could be deported at any time during a Republican administration. That kind of radical policy vacillation would make it impossible for dreamers, their families, and their employers to make decisions that are likely to further their interests in the future. Thus, for instance, the many hospitals that rely heavily on dreamers to provide healthcare services during the pandemic would have no way of knowing whether they will continue to have access to that valuable pool of talent.

Climate change is another important context in which the policy preferences of Republicans and Democrats differ completely. The Obama administration issued an aggressive plan to mitigate 46 The CPP has never been the subject of any court opinion. The Supreme 47 Court divided in the process of staying it without opinion, and the Trump administration withdrew it before any court had an opportunity 48 to review it on the merits. The legality of the CPP is certain to come before the courts again, now that a Democrat has been elected president.

Dean Emily Hammond and I wrote an article at a time when we thought that a court decision with respect to the legality of the CPP was 49 anthropogenic climate change called the Clean Power Plan ("CPP"). imminent. We identified a difficult issue of statutory interpretation that a reviewing court must address in the process of reviewing the 50 CPP. We expressed our support for a decision upholding the CPP, but we also urged a reviewing court not to apply the Chevron test in the 5 process of reviewing the agency's interpretation of the statute. ' We expressed our belief that a decision that upheld the legality of the CPP, but did so in a way that invited any Republican president to reject its validity, would be even worse than a decision in which a court held that the CPP and the statutory interpretation on which it is based are invalid. 52

A decision upholding the CPP through application of the Chevron test would have had the effect of discouraging electric utilities from making any of the hundreds of billions of dollars of investments in generating units that are required to provide adequate electricity at a reasonable cost. The expectation that the CPP will be in effect in the future would channel investment in one direction while the expectation that it will not be in effect in the future would channel investment in a different direction. Uncertainty about whether the CPP will be in effect in the future discourages investment of all types.

I have reached the conclusion that we can no longer afford Chevron with regret. The Chevron test continues to have two important beneficial effects. It increases political accountability for policy decisions, and it increases the number of federal statutes that 53 have the same meaning throughout the country. However, when Chevron is combined with extreme political polarity, it has effects that are even worse than adoption of bad policies or uncertainty with respect to the geographic scope of some national policies. The combination of Chevron and political polarity makes it certain that government policies in many important contexts will change dramatically every four to eight years. That effect is intolerable. It makes it impossible for individuals, corporations, and prospective investors to make wise decisions.