Supreme Court rulings in Chevron, Corner Post could delay energy investment, spur lawsuits: analysts

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The energy sector is facing uncertainty following a series of U.S. Supreme Court rulings that have limited the authority of federal agencies to create new regulations and significantly extended the statute of limitations for filing lawsuits challenging existing regulations under the Administrative Procedure Act, according to ClearView Energy Partners.

The Supreme Court on Friday overturned Chevron doctrine in Loper Bright Enterprises v. Raimondo and on Monday he said that plaintiffs can sue under the regulations for up to six years after they are introduced, instead of six years after they go into effect, Corner Post vs. Federal Reserve Board of Governors.

“To the extent that uncertainty can undermine investments and limit returns, we suggest that Loper Light could have significant implications for the U.S. energy infrastructure,” ClearView said in a client note Monday. “And to the extent that Corner post provides a way to reopen (or prolong) disputes, we believe it can increase the amplitude and frequency of future political changes.”

Under Chevron estimate, investors may have generally assumed the agency’s new rules were largely permanent, the research firm said. They may now wait to invest until court reviews are complete, and regulated entities may forgo early compliance with anticipated or pending rules, ClearView said.

“This will result in increased litigation, extreme uncertainty for years to come about what is and is not permissible in the context of rulemaking and promulgation, and likely limit the agency’s ability to act quickly,” Basil Seggos, a partner at Foley Hoag, said Tuesday.

He said these decisions could lead to states taking on a more expansive regulatory role, leading to more inconsistent regulation across the country and greater uncertainty for regulated entities.

This Chevron The doctrine, established in a 1984 Supreme Court decision, held that when a federal statute is ambiguous, courts must grant federal agencies deference in their interpretation of the law, as long as that interpretation is reasonable. It has been cited more than 18,000 times in federal court decisions, making it the most cited administrative law case in history, according to Varu ChilakamarriK&L Gates partner.

Two court decisions and the decision from Thursday in the case Securities and Exchange Commission v. Jarkesy K&L Gates attorneys said during a webinar Monday that the decision to move some proceedings handled by agency administrative judges to the courts will likely lead to an increase in litigation in the federal court system.

“It really looks like a lot of people are going to be coming to court for different reasons,” Chilakamarri said. “First of all, because (without Chevron (…the universe of cases you can now win that you couldn’t win before has become much larger… In a regulated community, your interpretation of the statute could be as influential as the agency’s interpretation.)

In addition, there will likely be more litigation over new rules and regulations, where an agency’s interpretation of the law could be “questionable,” Chilakamarri said. The decision will likely make agencies more cautious when issuing new regulations, K&L Gates attorneys said.

Court proceedings could take longer because judges will no longer be able to rely on the agency’s expertise to make decisions on often technical and complex issues, David Finepartner at K&L Gates, noted that judges tend to be “generalists.”

According to Fine, some judges may make “bad” decisions because they do not understand the technical aspects of technology and science.

“So people who think that going before judges rather than agencies helps their cause may conclude that judges, at least some judges, simply don’t have the skills to handle these cases and do it properly,” Fine said.

The court stated that in previous cases it was decided to use Chevron respect is subject to old decisionsdoctrine that courts follow precedent. The original decisions would likely stand, but they could be reconsidered, according to Fine. “It’s a steep hill, but it’s probably not an insurmountable hill,” he said.

“There are a lot of open questions about what the courts, Congress and agencies will do in the future,” Chilakamarri said. he said.

FERC, Chevron and Transmission Planning

Generally speaking, the demise of the Chevron Doctrine is not expected to have any impact on the Federal Energy Regulatory Commission.

However Loper Light AND Corner post These decisions pose “potentially insurmountable obstacles” to the development of large-scale interregional transmission, according to Ken Irvinpartner at Sidley Austin.

“Arguments that FERC’s aspirations under the 1920 order exceed the authority granted by Congress in the Federal Power Act will take on new significance after Loper Light,” Irvin said Monday in an email. “And the ruling in Corner post “Once the statute of limitations begins to run (until the plaintiff is harmed by a final agency action), there may be uncertainty as to whether transmission projects will ever achieve commercial service levels (and thus be able to repay development financing).”

FERC Commissioner Mark Christie said on Friday FERC’s recent transmission planning and cost allocation regulations—Order 1920—relied on the previous Order 1000 as the basis upon which the agency could issue them.

However, Order 1000 was upheld by the court on the basis of Chevron respect,” said Christie, who voted against Ordinance 1920.

“So the most important legal support that Order 1920 needed was taken away today, and the chances that the final order will survive a court challenge have diminished to zero,” Christie said.

Christie said he hopes that as FERC considers pending applications for the agency to reconsider its 1920 regulation, the new set of commissioners will be able to turn its decisions “into something that actually works in the field and is within our legal authority.”

According to FERC Chairman Willie Phillips, the transmission planning and cost allocation rules have a solid legal basis.

“Both regional transmission planning and cost allocation are practices that have precisely the same ‘direct effect’ on rates within the Commission’s jurisdiction that the United States Supreme Court has found to be a matter within the Commission’s jurisdiction.” Phillips said Monday.

FERC’s authority to regulate regional transmission planning and cost allocation is essential for the agency to ensure customers have access to reliable and affordable electricity, which is the commission’s “most fundamental statutory responsibility,” Phillips said.

“That we have this basic authority remains not only a reasonable interpretation of the federal energy law, but the best interpretation of the law, exactly as it is.” Loper Light “requires,” he said.

In the dispute over Order 1000, FERC argued that it was issuing transmission regulations under Section 206 of the Federal Power Act, which authorizes the agency to remedy any “practices … that affect” transmission rates, it said. Ari PeskoeDirector of the Electricity Law Initiative in the Environmental and Energy Law Program at Harvard Law School.

According to the 2016 Supreme Court ruling, FERC vs. Electric Power Supply AssociationThe court found the agency has the legal authority to regulate “practices” that directly affect transmission rates, Peskoe said in an email Monday.

“The party would have to argue that (transmission) planning does not affect rates,” he said. “That seems like a difficult task because the costs of planned projects are covered by rates.”