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Regulation

Farewell to the Chevron doctrine

And hello to the judiciary’s newfound climate and energy regulatory power.

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Photo credit: J. David Ake / Getty Images

Photo credit: J. David Ake / Getty Images

So ends one of the 21st century’s main vehicles for climate action.

Earlier today, the Supreme Court overturned Chevron v. Natural Resources Defense Council, which was a 1984 ruling that gave federal regulators latitude to interpret vague laws — and which was crucial to much of the climate policy rendered over the last 40 years.

The decision strips power from federal agencies by giving the courts the final say on how laws are interpreted. And as a result, it puts more responsibility on Congress to take on policy issues directly, rather than relying on regulators. 

The 6-3 decision — conservatives in favor, liberals dissenting — has the potential to have sweeping impacts across the federal government, including for emerging fields like artificial intelligence. But according to Deborah Sivas, an environmental litigator and professor at Stanford University’s law school, perhaps nowhere will the impact be felt more strongly than in climate. 

The decision is highly likely to “impede climate and energy policy” going forward, she said.

That’s because the U.S. has virtually no modern statutes governing climate, which means that regulators have been relying on applying old laws like the Clean Air Act to regulate emissions. For instance, the Biden administration’s proposed “good neighbor” plan — which the Supreme Court also struck down just yesterday — would have restricted factories and power plants in the Western part of the country to cut ozone pollution that would drift eastward, which the Environmental Protection Agency described as “essential to ensure that states satisfy their responsibility under the Clean Air Act.”

The 1970 version of the Clean Air Act that we rely upon today didn’t address greenhouse gas emissions, but the 2007 case Massachusetts v. EPA determined that they are covered under the law. And as a result, the agency has used the Clean Air Act to get at climate issues, relying upon Chevron to defend their interpretation. 

“That is all going to go away now — very explicitly go away,” Sivas said. “So it’ll be harder for these agencies to say, ‘We have a plausible reading of the statute and you should defer to us.’ They can have a plausible reading, but…the courts could now be saying ‘Well we think there’s an equally plausible one, and we’re going to use that interpretation.’”

Sivas said this decision was a long time coming, so much so that the Supreme Court has essentially stopped relying on Chevron entirely in recent years (though the lower courts continued to use it until today).

“It had been on the wane at the high courts, and some of the more conservative courts,” she said, adding that in her practice as an environmental litigator, there was an “unwritten notion” during the Trump administration that attorneys should not be relying upon Chevron “because the conservative legal scholars didn’t like it.” 

While this is undeniably a blow to the Biden administration’s climate and energy policies — and to anyone invested in a particular interpretation of the Inflation Reduction Act’s guidelines on energy tax credits, among other things — the decision will not overturn past decisions that relied on the Chevron framework.

What happens now

In effect, the Supreme Court just passed decision-making power on often highly technical questions of regulatory policy from the people trained to make those decisions — those who work in the agencies in question — to the judiciary. 

"If opinions had titles, a good candidate for today's would be Hubris Squared,” wrote Justice Elena Kagan in the dissenting decision. 

Especially in an era of vicious partisan division, that judiciary is increasingly packed with judges chosen for a particular political bent. (This was a key part of the GOP’s strategy during former President Donald Trump’s term, when he nominated nearly as many appeals court judges in four years as his predecessor President Barack Obama did in eight.)

“The reason the conservative legal movement has been so interested in overturning Chevron is that branch of scholarship is really interested in cutting back on the ability of agencies to do broad stroke policies,” Sivas said. “They see Chevron as giving too much power to agencies.”

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If opinions had titles, a good candidate for today's would be Hubris Squared.
Justice Elena Kagan, as written in the Court's dissenting decision

In Chevron’s wake, Sivas said, the “major questions doctrine” will essentially take its place, which has courts presume that Congress will not delegate questions of major economic significance to regulatory agencies.

“If a court doesn’t have to defer, it can impose its own independent judgment,” she added. “That’s where we’re headed.”

Sivas said that for litigators, the primary question about the consequences of today’s decision is what and who the courts will now rely upon to render decisions, especially those that require scientific or technical expertise, as is so common in climate and energy regulation. 

“How are these judges, trained as lawyers, going to bring any kind of expert judgment to bear on how to implement the Clean Air Act to develop climate policies?” she asked. 

In an ironic twist, the Supreme Court itself has been the first to demonstrate the potential problems that could result. The majority opinion, penned by Justice Neil Gorsuch, confused nitrogen oxide, the pollutant that the EPA policy under discussion was designed to curtail, for nitrous oxide, which is used as laughing gas for dental procedures and as a party drug. (That error has now been corrected in the court’s docket.)

The 45V hypothetical

Take the Treasury Department’s proposed guidance for the clean hydrogen production tax credit, released last December. 

The highly technical 45V guidelines will effectively define what hydrogen can be considered “clean” or “green” and accordingly have resulted in controversy across the industry about whether they’re too strict or will prevent deals from penciling out. Treasury is expected to release a final rule in August.

But as the department weighs the thousands of comments it has received in the meantime, the Congressional Research Services pointed that the overturning of Chevron could throw a wrench. In an April brief preempting the decision, three researchers said that if the proposed rulemaking is finalized in its current form, taxpayers could challenge it as inconsistent with the Inflation Reduction Act, which leaves the definition of clean hydrogen vague. 

Without Chevron in place, they found, “Treasury might have to demonstrate not only that its interpretation was reasonable, but that it had adopted the best interpretation of the IRA, increasing the potential that a court would require a different interpretation.”

Essentially, expect “more litigation,” Sivas said, especially if there’s a change of administration.

“Given how increasingly conservative the federal judiciary is, especially if we have a change in administration in January, I think you’re going to see more and more decisions that say ‘we’re striking down what an agency did,’” she added. “And there’s not an easy fix for it.”

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