pwr_august-2024 - 17

LEGAL & REGULATORY
Post-Chevron Ushers
in 'New Normal' For
Regulated Community
Joel Johnston
T
he U.S. Supreme Court recently overturned the longstanding
Chevron doctrine, a foundation of administrative law
for 40 years, when it ruled on Loper Bright Enterprises v.
Raimondo. The impacts on a wide range of industries subject
to federal regulations will be significant.
Some are already being felt; others are harder to predict.
Some will likely be positive for the energy sector, but there
are significant business risks to consider. As the post-Chevron
" new normal " takes shape, it is critical for regulated entities
to stay focused on regulatory compliance, and to ensure they
remain active and engaged with legislators and policymakers.
The legal status change of revoking Chevron is that previously
under the doctrine, when reviewing a challenge to a
federal agency action, such as an IRS, Environmental Protection
Agency, or Federal Energy Regulatory Commission (FERC)
rule, regulation, order, or similar, courts were required to defer
to an agency's own interpretation of any ambiguous (or silent)
statute. Under the now-current, post-Chevron law, courts are
instead the ones charged with determining the law, significantly,
without deference to the agency or its interpretations.
If the law underlying some regulatory scheme or agency action
is vague or ambiguous, which virtually all are in one way or
another, it is now for the courts to decide what the law is. This
fundamentally shifts significant administrative power to the
courts and away from federal agencies.
The practical implications are that any agency action-a
regulation or order for example, which relies on an agency's
interpretation of ambiguous or absent language in a statute,
can (will) be challenged. And while a court may consider, or
even solicit, information and briefings from an agency, they
are no longer required to give any deference to such participation,
or any of the agency's interpretations. Given the highly
technical nature of many industries, especially the energy and
power generation sector, statutes regulating areas such as
pollution, engineering or safety standards, or even accounting
protocols are often vague, ambiguous, or silent when applied
to real-world technical activities. It will now be for the courts
to resolve challenges that an agency " got it wrong " when it
interpreted any statute it relies upon for its authority.
The expectation almost universally is that a period of significant
deregulation is before us. Regulations and actions relying
on an agency's own interpretations are almost certain to be
challenged, with the net result ultimately being fewer federal
regulations and dramatically cooled enforcement by agencies.
But it is critical to remember that while deregulation can bring
significant benefits to regulated industries, especially the energy
sector, there are also potentially significant risks. Certain
agency actions extending tax benefits, permit exclusions, or
August 2024 | POWER
other agency-extended benefits are just as likely to be challenged,
potentially risking the loss of benefits.
The eventual impacts of overturning Chevron on regulated
entities cannot be overstated. Federal agencies regulate
virtually every aspect of life for many sectors-from energy
transactions, to tax subsidies, to transmission line approvals
and permits, to environmental regulations, among many,
many others. And though the Supreme Court tried to head off
a flurry of cases being re-filed by stating that prior decisions
relying on Chevron remain settled, the fact is that virtually
every federal regulation relying on an agency's interpretation
is now subject to a potential challenge. Nonetheless, while
the " new normal " is expected to be a period of significant
deregulation, it is critical to maintain an appropriate compliance
posture and strategy.
What is the best path forward in the short and medium term
for the energy sector? First, seek qualified legal counsel. As important,
maintain strict regulatory compliance and foster positive
relationships with regulators. Not much has immediately
changed for most regulated entities. Although a series of highprofile
injunctions have stopped some rules from taking effect,
all those currently on the books should be considered valid
and enforceable until they are changed-whether that occurs
through an agency rule change or a court order. And though
courts are no longer mandated to defer to an agency's interpretations,
the agencies are certain to continue to enforce their
regulations, and rely on their own interpretations, until such
time as those are changed or overturned. It is critical to maintain
and foster productive relationships with federal regulators,
to adhere strictly to all permit obligations, and to maintain and
ensure strict regulatory compliance.
It's also critical for regulated entities to get and stay current
(and engaged) with administrative rulemaking. Although
courts no longer must defer to agencies, the fact is that many
do and will, especially on the most-technical matters. Agencies
often possess reams of data, studies, and findings, which
can be persuasive to courts. Preparing a counter to such expertise
and data can be challenging and time-consuming.
Now, more than ever, it is critical to stay aware and engaged
with federal rulemakings.
With the death of Chevron, a new normal is upon the energy
sector. Regulatory uncertainty is likely to skyrocket, so
stay calm, proceed forward, and succeed by staying current on
rulemakings, maintaining strict regulatory compliance, and engaging
with lawmakers and policymakers. The future holds the
promise of a more flexible regulatory environment compared
to today, but we are not there yet. ■
-Joel Johnston is an environmental, energy, and regulatory
attorney from national law firm Hall Estill in its Denver office.
www.powermag.com
17
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