Supreme Court rulings paring federal regulatory power will impact energy policy

The U.S. Supreme Court issued two highly consequential decisions this week that upended the government regulatory framework in place for decades, with ramifications for environmental and energy policy.

First, the Supreme Court discarded a 1984 precedent from the case Chevron v. Natural Resources Defense Council, which had provided significant leeway to federal agencies in deciding how to regulate the energy sector and other industries.

By abandoning the doctrine, the justices have given parties unhappy with agency decisions more opportunities to overturn regulations by persuading federal judges that agency officials exceeded their authority.

A number of rules and programs related to environmental regulation may be at risk without the Chevron deference; parts of the Inflation Reduction Act including guidance related to eligibility for tax credits, rules promulgated under the Clean Air Act, regulations guiding public lands management, and more could be vulnerable to legal challenge.

Eliminating Chevron is a positive outcome for the oil and gas sector, Wells Fargo analyst Roger Read said in a note, because most of the efforts to reduce fossil fuels and their carbon emissions have leaned heavily on administrative interpretations, not congressional action.

The Supreme Court decision will not halt the energy transition but should alter its path and pace, Read wrote, since it implies that Congress will need to pass specific legislation to compel changes in how energy is produced and consumed.

The Court also blocked the Environmental Protection Agency’s “good neighbor” plan, which would have strictly limited smokestack emissions from power plants and other industrial sources in 11 states, as well as air pollutants the EPA said can drift downwind into other states.

The Biden administration said the rule would protect the health of people in downwind states suffering from emissions by their neighbors; the challengers said the rule would impose billions of dollars in costs and threaten the reliability of the electricity grid by forcing generators into early retirement.

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