By Garrett Delk, Pickering Energy Partners
The views expressed by the author are their own and do not represent the views of Energy Workforce & Technology Council.
The Supreme Court’s decision to overrule Chevron deference in Loper Bright Enterprises v. Raimondo marks a significant shift in administrative law and holds implications for public and private U.S. energy. For 40 years, Chevron deference required courts to uphold reasonable agency interpretations of ambiguous statutory provisions. This precedent allowed federal agencies, drawing on their expertise, to fill gaps in legislation with interpretive rules and regulations. With the end of Chevron deference, courts must now exercise their independent judgment in interpreting laws. This change substantially alters the balance of power between the judiciary and federal agencies such as the Environmental Protection Agency (EPA) and the Securities and Exchange Commission (SEC).
The immediate impact on the EPA and SEC involves a fundamental increase in judicial scrutiny over their rulemaking processes. Historically, both agencies relied on Chevron deference to validate their interpretations of complex statutes, thus enabling them to implement extensive regulatory frameworks. For the EPA, think the methane tax and other greenhouse gas regulations under the Clean Air Act. For the SEC, Chevron deference facilitated the development of recent climate disclosure rules for public companies. Without Chevron, courts will no longer defer to the EPA’s or SEC’s expertise in interpreting ambiguous statutory language, leading to potentially more stringent judicial/court reviews and increased legal challenges.
The EPA’s methane tax, a key part of its climate strategy, exemplifies how agency regulations might face new vulnerabilities. Legal challenges could question whether the EPA has the statutory authority to impose such taxes, and courts, now interpreting the law without deferring to the agency’s expertise, might not uphold the regulation. Similarly, the SEC’s climate disclosure rule could be scrutinized more rigorously. Opponents may argue that the SEC lacks clear statutory authority for such requirements, leading to possible invalidation of the rule if courts find the statutory language ambiguous and not explicitly supportive of the SEC’s actions.
To maintain the rules they have already implemented, both the EPA and SEC will need to, and likely will, adopt new strategies. First, they will likely provide robust justifications for their rules, demonstrating that their interpretations of statutory mandates represent the best reading of congressional intent. This involves detailed statutory analysis, comprehensive documentation of their policy rationales, and extensive public engagement during the rulemaking process to show broad support and necessity.
Second, the agencies will also likely seek more precise legislative mandates from Congress. By advocating for amendments that explicitly grant them the authority needed for their regulatory actions, the EPA and SEC can secure a more robust legal foundation for their rules. Additionally, they could enhance collaboration with other federal agencies to present a unified regulatory approach, aligning their rules with broader governmental policies to mitigate challenges based on statutory interpretation. However, lobbying Congress for an explicit mandate for the EPA and SEC is a politically fraught and dubious path to securing already implemented rules.
So, what does this all mean for clients and energy companies? Initially, the answer is an unexciting, not much. This change represents stopping new rulemaking and the potential for slow degradation of agency power most relevant to US energy. However, the most recent and contentious rules implemented by the EPA and SEC are here to stay for now. The degree to which companies don’t need to worry about these rules will depend on the level of successful legal challenges, but waiting for these outcomes will take time. Additionally, however likely/unlikely, there remains the chance these agencies could receive explicit mandates from Congress, which is functionally equivalent to deference.
Additionally, this decision is likely to galvanize support from already well funded Non-Governmental Organizations (NGOs). The Natural Resources Defense Council, Sierra Club, and Environmental Defense Fund wield significant influence through substantial funding, outpacing industry groups with hundreds of millions in fundraising annually – these NGOs are well-resourced to advocate against fossil fuels over the long term. Further, NGOs will continue to leverage advanced technology and data capabilities to monitor emissions and influence regulatory frameworks. Partnerships and initiatives like the Super Emitter Program allow these groups to detect and report large emission events, thereby pushing for stricter environmental compliance and maintaining pressure on the fossil fuel industry, particularly at the state level.
Importantly capital markets and allocators also maintain a need material non-financial data, disclosure, risk assessment, and messaging on sustainability topics. We recommend that public and private U.S. energy companies maintain progress and accretion toward implementing sustainability disclosure, particularly climate disclosure, via the SEC.
Energy Workforce partner Pickering Energy Partners provides insights on ESG due diligence, disclosures and reporting. Garrett Delk is Associate, Consulting & Advocacy.
