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According to ClearView Energy Partners, the energy industry faces uncertainty after back-to-back U.S. Supreme Court decisions that limit federal agency authority for new rules and dramatically extend the statute of limitations for filing lawsuits the existing regulations under the Administrative Procedure Law.
The Supreme Court refused on Friday Chevron doctrine in Loper Bright Enterprises v. Raimondo and said Monday that plaintiffs can sue the regulations up to six years after being affected by them, instead of six years after they take effect, in Corner Post v. Board of Governors of the Federal Reserve System.
“To the extent that uncertainty can override investment and hurt performance, we suggest Loper Bright could have significant implications for the U.S. energy infrastructure on its own,” ClearView said in a client note Monday. “And, to the extent that corner post provides a means of reopening (or extending) disputes, we believe it could increase the breadth and frequency of future political flow.”
Under Chevron However, investors may have generally assumed the agency’s new rules were largely permanent, the research firm said. Now, they can wait to invest until judicial reviews are completed, and regulated entities can waive early compliance with planned or pending regulations, ClearView said.
“This will inject a higher level of litigation into the courts, extraordinary uncertainty in the coming years about what is and isn’t allowed as far into rulemaking and rulemaking, and likely impair an agency’s ability to move quickly.” Basil Seggos, partner at Foley Hoag, said Tuesday.
The decisions could lead states to take on a more expansive regulatory role, creating a growing set of rules across the country and increasing uncertainty for regulated entities, he said.
The Chevron The doctrine, established in a 1984 Supreme Court decision, held that in cases where a federal statute is ambiguous, courts must give deference to federal agencies in their interpretation of the law, as long as the 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 Chilakamarripartner at K&L Gates.
The two court decisions, plus a decision from Thursday Securities and Exchange Commission v. Jarkesy which will move certain proceedings that were handled by the agency’s administrative law judges to the courts, will likely lead to an increase in litigation in the federal court system, K&L Gates attorneys said during a webinar Monday.
“It really looks like there’s going to be a lot of people going to court for a variety of reasons,” Chilakamarri said. “First is because [without Chevron deference] the universe of cases that you could win now that you didn’t win before just got a lot bigger. . . . To the regulated community, your interpretation of a statute could carry the same weight as the agencies.”
Also, there will likely be increased litigation around new rules and regulations where an agency’s statutory interpretation may be “dubious,” Chilakamarri said. The decision will likely lead agencies to be more cautious when issuing new regulations, K&L Gates attorneys said.
Litigation could take longer because judges will no longer be able to rely on the agency’s expertise to draft decisions on often technical and complex issues. David Finesaid a partner at K&L Gates, noting that judges tend to be “generalists.”
According to Fine, there could be “bum” decisions by some judges who don’t understand the technicalities of technology and science, for example.
“So people who think that being in front of judges instead of agencies helps their cause may find that judges, at least some judges, really don’t have the ability to run with these things to get it right ” Fine said.
The court said that the previous cases decided to use Chevron deference are subject decided, the doctrine that courts follow precedents. The original decisions would likely stand, but could be revised, 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 going forward,” Chilakamarri said. said
FERC, Chevron, and transmission planning
In general, the demise of the Chevron doctrine is not expected to have a major effect on the Federal Energy Regulatory Commission.
However, the Loper Bright i corner post The decisions raise “potentially insurmountable obstacles” to the development of large-scale interregional transmission, they said Ken Irwinpartner at Sidley Austin.
“Arguments that FERC’s aspirations with Order 1920 exceed the grant of authority Congress gave in the Federal Powers Act will find new vigor after Loper Bright” Irvin said in an email Monday. “And the sentence corner post on when the statute of limitations tolls (not until the claimant is harmed by the agency’s final action) has the potential to create dark uncertainty about whether transmission projects can reach commercial service (and so obtain the ability to pay for development financing).
FERC Commissioner Mark Christie said Friday FERC’s recently released Transmission Planning and Cost Allocation Rule (Order 1920) relied on its earlier Order 1000 as the basis for the agency to issue it.
The 1000 order, however, was upheld in court based on Chevron deference, said Christie, who voted against the 1920 Order.
“So the most important legal lifeline that Order No. 1920 needed was removed today, and the final rule’s chances of surviving court challenges were reduced to nothing,” he said Christie.
As FERC considers pending requests for the agency to reconsider Order 1920, Christie said he hopes his new slate of commissioners can turn their decisions “into something that can actually work in the field and be within of our legal authority.”
According to FERC Chairman Willie Phillips, FERC’s Transmission Planning and Cost Allocation Rule rests on a firm legal foundation.
“Both regional transmission planning and cost allocation are practices that have exactly the kind of “direct effect” on the Commission’s jurisdictional rates that the US Supreme Court has held to bring a matter within jurisdiction of this Commission”, he added. Phillips said Monday.
FERC’s authority to regulate regional transmission planning and cost allocation is essential to the agency’s ability to ensure that customers have access to reliable and affordable supplies of electricity, which is the commission’s “most fundamental legal responsibility,” Phillips said.
“That we have this basic authority is not only a reasonable reading of the Federal Powers Act, but the best reading of the statute, exactly as Loper Bright requires,” he said.
In the Order 1000 litigation, FERC argued that it issues transmission rules under Section 206 of the Federal Power Act, which empowers the agency to remedy any “practice.” . . affecting” transmission rates, he said Ari Peskoedirector of the Electricity Law Initiative at Harvard Law School’s Environmental and Energy Law Program.
According to a 2016 Supreme Court case, FERC v. Electric Power Supply Associationthe court said the agency has legal authority to regulate “practices” that directly affect transmission rates, Peskoe said in an email Monday.
“A party should argue that [transmission] planning doesn’t affect rates,” he said. “It looks like a steep hill to climb as the costs of planned projects are recovered through rates.”