Supreme Court rulings limiting federal regulatory powers will impact energy policy

The U.S. Supreme Court issued two highly significant decisions this week that upend decades of government regulatory frameworks, with implications for environmental and energy policy.

First, the Supreme Court rejected the 1984 Chevron precedent v. Natural Resources Defense Council, which gave federal agencies significant discretion in deciding how to regulate the energy sector and other industries.

By abandoning the doctrine, the justices gave parties dissatisfied with agency decisions greater ability to overturn regulations by convincing federal judges that agency officials had overstepped their authority.

Without respect for Chevron’s rights, many environmental laws and programs could be at risk; portions of the Inflation Reduction Act, including tax credit eligibility guidelines, regulations issued under the Clean Air Act, regulations governing management of public lands, and others, could be subject to legal challenge.

The elimination of Chevron is a positive outcome for the oil and gas sector, Wells Fargo analyst Roger Read said in a note, because most efforts to limit fossil fuels and their greenhouse gas emissions have relied largely on administrative interpretations rather than congressional action.

The Supreme Court’s decision won’t stop the energy transition, but it should change its path and pace, Read wrote, because it means Congress will have to pass detailed legislation to force changes in how energy is produced and consumed.

The court also blocked the Environmental Protection Agency’s “good neighbor” plan, which would have sought to strictly limit emissions from power plant smokestacks and other industrial sources in 11 states, as well as air pollutants that the EPA said could travel downwind to other states.

The Biden administration has said the rule will protect the health of people in downwind states suffering from neighbors’ greenhouse gas emissions; challengers argued that the rule would impose billions of dollars in costs and threaten the reliability of the power grid by forcing generators to retire early.

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