Environmental Regulation, Energy, and Market Entry

As my contribution to a symposium, I was asked to identify and to discuss conflicts between environmental regulation and pursuit of the goals of national energy policy. I identify three contexts in which I see clear conflicts between environmental regulation and energy policy - gasoline production, importation of liquefied natural gas, and transmission of electricity. In each case, I conclude that the conflict is attributable to state and local regulations. In the case of the gasoline market, I conclude that the market is beginning to perform poorly because of a combination of state land use regulations that make it impossible to construct new refineries and state gasoline-type mandates that are in the process of transforming the highly competitive and efficient national gasoline market into scores of much smaller inefficient markets that are increasingly susceptible to both unilateral and collusive exercises of market power. In the case of the natural gas market, I conclude that state and local government attempts to assert the power to veto federally approved liquefied natural gas terminals place us in jeopardy of experiencing a devastating shortage of natural gas in the next few years. In the case of electricity transmission, I conclude that our rapidly growing shortage of transmission capacity is already costing us many billions of dollars per year and increasing dramatically our vulnerability to widespread blackouts and price spikes, and that the shortage is attributable primarily to state and local land use regulation. In each case, the conflict can be eliminated only by reducing the power of state and local regulators and/or by transferring some regulatory power from state and local institutions to federal institutions

Which Institution Should Determine Whether an Agency’s Explanation of a Tax Decision is Adequate?: A Response to Steve Johnson

This Essay responds to Professor Steve Johnson’s Article for the 2014 Duke Law Journal Administrative Law Symposium, Reasoned Explanation and IRS Adjudication. I first describe the ways in which courts have added burdensome procedures that are not required by the APA for the notice and comment process. Next, I explain why the Office of Information and Regulatory Affairs (OIRA) is better than courts at reviewing the adequacy of agency reasons for issuing a rule. Finally, I explain how courts can eliminate judicial review for the adequacy of the reasons IRS gives for issuing a rule by applying the traditional broad interpretations of the Anti-Injunction Act and the tax exception to the Declaratory Judgment Act

Democratizing the Administrative State

Scholars have long questioned the political and constitutional legitimacy of the administrative state. By 1980, a majority of Supreme Court Justices seemed poised to hold that large portions of the administrative state are unconstitutional. In 1984, the Court retreated from that abyss and took a major step toward legitimating and democratizing the administrative state. It instructed lower courts to defer to any reasonable agency interpretation of an ambiguous agency-administered statute, basing this doctrine of deference on the superior political accountability of agencies. Henceforth, politically unaccountable judges were prohibited from substituting their policy preferences for those of politically accountable agencies. The Court recognized that agencies are politically accountable to the people because they are subject to the control of the elected President. The Court\u27s 1984 effort to democratize the administrative state has fallen far short of its potential because of temporal problems with the manner in which the Supreme Court defines and implements both the deference doctrine it announced in 1984, and the other two doctrines that require courts to defer to agency interpretations of agency-administered texts. The most important of those deference doctrines is explicitly premised on the Court\u27s understandable belief that policy decisions should be made by the politically accountable President rather than by politically unaccountable judges. Yet, the Court\u27s present method of implementing the deference doctrines has two unfortunate effects. First, in a high proportion of cases, there is a lag of four to eight years between the time that a President takes office and the time when a court is willing to acquiesce in implementation of the policies preferred by the President. In other words, each President is required to implement the policies preferred by his predecessor for at least one term and perhaps even for two terms. Second, in some important situations, regulatees are required to incur large costs in enforcement actions to comply with interpretations of agency rules that have already been rejected by the incumbent President by the time courts impose the costs on the regulatees, and that were disavowed by the agency at the time the regulatees engaged in the conduct that is the basis for the enforcement actions. This Article explains why these results are unacceptable, and proposes four changes in the Court\u27s present methods of implementing the deference doctrines that will eliminate these effects and that will create a more democratic and constitutionally legitimate administrative state in which Presidents actually have the power to make changes in policy within the statutory boundaries set by Congress

A Primer on Demand Response and a Critique of FERC Order 745

This essay is a contribution to the Second Annual Demand Response Conference sponsored by George Washington University and the law firm of Husch Blackwell. Demand response is a term that is used in debates about potential ways of reforming regulation of electricity to provide consumers with the proper incentives to conserve electricity. In this essay, Professor Pierce attempts to describe the basic economic and legal principles that are implicated in the debate in terms that make the debate more accessible to participants, policy makers, and the general public

Agency Adjudication: It Is Time to Hit the Reset Button

In this contribution to a symposium in honor of the 75 th Anniversary of the Administrative Procedure Act (APA) Professor Pierce describes the history of agency adjudication from the 1930s until the present. He concludes that the passage of the APA in 1946 responded well to the widespread criticisms of the agency adjudication process during the 1930s. The APA required agencies to use procedures that confer on participants in agency adjudications procedural rights analogous to those available in federal courts and conferred on Administrative Law Judges (ALJs) a degree of decisional independence analogous to the assurances of independence that federal judges enjoy. The agency adjudication process has evolved since 1946 in ways that have undermined all of the beneficial characteristics of the process that Congress created in 1946. The future of the agency adjudication process is grim unless we make major changes. Professor Pierce describes three ways in which we might be able to rescue the agency adjudication process

Chevron and its Aftermath: Judicial Review of Agency Interpretations of Statutory Provisions

In its 1984 opinion in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,\u27 the Supreme Court attempted to resolve the long standing conflict concerning the proper scope of judicial review of agency interpretations of statutory provisions. Chevron concerned the Environmental Protection Agency\u27s (EPA) interpretation of the Clean Air Act, which requires the EPA to limit emissions from all stationary sources. The EPA interpreted the statutory term stationary source to mean an entire plant, rather than an individual piece of combustion equipment. That statutory interpretation was adopted as part of the EPA\u27s bubble concept, which is based on the EPA\u27s belief that it can simultaneously further the inherently conflicting goals of the Clean Air Act-improved air quality and continued economic growth-most effectively by imposing emission limitations on an entire plant, and by conferring upon the owner of the plant both the obligation and discretion to determine the means by which to reduce plant emissions. In defining the proper scope of judicial review of agency interpretations of statutory provisions, the Chevron Court established what one judge calls the Chevron two-step. \u27 The first step requires the court to determine whether Congress has directly spoken to the precise question at issue, in which case the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If the court concludes, however, that Congress has not directly addressed the precise question at issue, the court must refrain from any statutory interpretation of its own and must simply determine whether the agency\u27s answer is based on a permissible construction of the statute.\u27 The Chevron test established a simple approach to a traditionally complicated issue in administrative law. The court first decides whether the statute resolves the specific issue or is silent or ambiguous with respect to the issue. If it determines that the statute is silent or ambiguous, the court then affirms the agency\u27s interpretation of the statute if that interpretation is reasonable. In the three years since the Court decided Chevron, the case has transformed dramatically the approach taken by courts in reviewing agency interpretations of statutory provisions. The Supreme Court has continued to interpret and apply Chevron in the manner previously described,\u27 or, in Professor Cass Sunstein\u27s terminology, the strong reading of Chevron. While appellate courts use Chevron as the starting point in reviewing agency interpretations of statutory provisions, appellate judges seem to have interpreted Chevron differently. Some judges have adopted the strong reading of Chevron, while others have adopted a weak reading that requires a court to resolve many of the ambiguities in regulatory statutes

A Primer on Demand Response and a Critique of FERC Order 745

This essay is a contribution to the Second Annual Demand Response Conference sponsored by George Washington University and the law firm of Husch Blackwell. Demand response is a term that is used in debates about potential ways of reforming regulation of electricity to provide consumers with the proper incentives to conserve electricity. In this essay, Professor Pierce attempts to describe the basic economic and legal principles that are implicated in the debate in terms that make the debate more accessible to participants, policy makers, and the general public