SCOTUS Rules on Two Environmental Issues, the ‘Chevron Doctrine’ and the EPA’s ‘Good Neighbor’ Rule: What Are the Implications?

Rule 1: The Rejection of the ‘Chevron Doctrine’

     According to Microsoft Copilot (AI) and Ballotpedia the so-called Chevron Doctrine, also known as te Chevron deference refers to an “administrative law principle that compelled federal courts to defer to a federal agency's interpretation of an ambiguous or unclear statute that Congress delegated to the agency to administer.”

“The principle derives its name from the 1984 U.S. Supreme Court case Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. which concerned disagreement over a change in the Environmental Protection Agency's interpretation of a permitting provision of the Clean Air Act of 1977. The case established a two-step review approach used by courts to analyze an agency's legal interpretations. Under the review process, courts considered Congress' clear intent in passing a law and (if the court found ambiguities in the law) whether an agency's rule was reasonably construed and not arbitrary, capricious, or manifestly contrary to the statute.”

Thus, the ending of applying the doctrine in practice ends a 40-year precedent. Basically, it gives the regulatory agency the benefit of the doubt in interpretation when there is ambiguity or uncertainty.

“The Supreme Court ruled on June 28, 2024, in Loper Bright and Relentless to overturn the Chevron deference doctrine, holding that federal courts may not defer to an agency’s interpretation of an ambiguous statute.”

This changes a long-standing legal precedent. Basically, it takes away interpretation powers from the regulatory experts which in most cases will give corporate and industry experts more power of interpretation. Scientists work for regulatory agencies. Scientists also work for corporations and in industry. Andrew Mergin of Harvard Law School thinks the change will result in many new “challenges to government regulations in the environmental area in food safety, in the health care, health care administration.” It seems like the change will make it easier for companies to challenge the EPA.

     Conservatives have argued that the doctrine has mostly been used to support regulations put in place by Democrats. Changing regulations with changing administrations is very common and brings regulatory instability and uncertainty. Mergin thinks the business community is split on the rule, much like in other environmental disagreements such as how some car companies support EPA rules and others don’t.  

     According to some the doctrine was instituted by judicial activists to give power to unelected bureaucrats, or so-called experts. Many are scientific experts. Conservatives argue that the doctrine took power away from the legislative branch in law-making and gave it to these unelected bureaucrats in an administrative state that issues statutes. It is a fair argument to say that regulatory scientists should not be lawmakers. They should be advisors for sure, but according them automatic deference does seem as if it can tip the scales in favor of the regulators own preferences. Conservatives are lauding the SCOTUS decision as a restoration of the balance of constitutional powers and a limit to the power of the administrative state which is sometimes called the fourth branch of government. With Trump saying at the recent debate, he wanted regulation cuts to go with tax cuts, the ruling comes at a time that can help that goal, for better or worse. The ruling gives more power to judges to interpret laws based on science with which they may be unfamiliar. Thus, conservative judges would be more likely to rule one way and liberal judges another way, ensuring another clearly marked left-right divide. Will there be more lawsuits and challenges to the EPA? It seems likely.

   The agencies in question such as the EPA are part of the executive branch and so in essence the new ruling puts a limitation on the executive branch in favor of the legislative branch. The judicial branch, which interprets the law, I might point out, is also unelected, being appointed by the executive branch in a manner that has significant randomness. This is how we got to a 6-3 conservative majority when American voters are much closer to a 50/50 split. Jason Lindquist writes in RBN Energy blog that “Chevron grew out of the realization that delegated authority is not always black and white. While Congress may pass lengthy and complex laws, they can be void of important details. Hence, statutory law may set frameworks and standards, but individual agencies with subject-matter expertise were deemed best equipped to handle the details and respond quickly to changing conditions.” He also notes that the ruling does not exclude the agencies from contributing to decision-making, but rather cedes the final decision to the legislative branch:

 

“It is important to note that while the majority opinion listed several ways in which Chevron was wrongly decided and impractical, that doesn’t mean that an agency’s expertise is unimportant or immaterial, just that it shouldn’t be determinative. What this means is simply that on something the agency knows more about — usually technically or factually — than anyone else, it will be listened to. But if the agency is trying to tell the world what an act of Congress means, a court is welcome to show up and say, “Au contraire.””

 

He thinks that the energy industry will be most affected by the new ruling and that the Biden administration’s ambitious regulatory agenda for decarbonizing power plants and industry will be curbed. He also notes that the decision would make it harder for the executive branch to make new rules such as the executive orders to roll back and re-interpret statutes that are clearly in the works if Trump is elected. Anything specifically authorized by Congress will be more difficult to change. In her dissent, Justice Elena Kagan opined that Congress assigned decision-making authority to the agencies and not to the judicial branch. The ruling may help ward off challenges to projects invoking the National Environmental Policy Act (NEPA) and other statutes that have been used extensively to sue, delay, and increase costs for many infrastructure projects, especially energy projects like pipelines.

     Energy writer Robert Bryce notes that the decision will ease requirements on speeding up the retirement of coal-fired plants and ease the restrictions on building new gas-fired plants. Bryce argues that the Biden administration EPA has been out of control, citing cumbersome new rules on climate financial disclosures, tailpipe emissions from automobiles, power plant emissions, and a complex rule about high voltage transmission. Bryce gives a quote about the decision from Meredith Angwin, author of’ Shorting the Grid,’ a good book that I have read:

 

“In recent years, agencies have taken the Chevron deference too far. Agencies are not just interpreting Congress’s intent, they are adding their own de facto laws. Ending the Chevron deference can be a useful corrective. For example, Congress would be unlikely to pass a law requiring coal plants to shut down, but under the Chevron deference, EPA made rules that basically require coal plants to shut down. I have noticed that legal issues tend to swing from one extreme to another. Over-deference to the agencies may be followed by over-deference to non-technical judges. However, I think that the end of the Chevron deference gives us an opportunity to reach a middle ground.”

 

Thus, she thinks the new ruling will make things fairer in the long run as well as curbing agencies like the EPA from enacting statutes that are difficult and costly for companies to achieve compliance. Electric reliability will be less threatened, power costs for consumers will be less likely to rise in the near term, and energy project viability will be less subject to regulatory hurdles. Thus, I tend to agree with Angwin that a middle ground will be the result of the ruling. I don’t believe that the ruling will affect our goals toward decarbonization, except to slow them down a bit, which in several ways can be a smarter approach by not getting ahead of technology, preserving power reliability, and curbing mandates that are too excessive. 

 

Rule 2: A Hold on The EPA’s ‘Good Neighbor Rule’

     The so-called Good Neighbor rule provides for those who are downwind of a polluting source in another state and regulates the polluters from the other state. The Good Neighbor rule is a provision of the Clean Air Act and the latest version finalized in March 2023 is an update to the rule. It is a sensible rule in principle since a state boundary should obviously not be a place where pollution rules change. Pollution is an established public health concern, and it should be regulated fairly and evenly. A major aspect of the rule is that it “requires that the state submit documentation to the EPA showing how it is reducing air pollution drifting into other nearby states, known as a “good neighbor” plan.” That really seems like a reasonable request of the polluter. Submit documentation about reducing pollution. There are many ways to reduce pollution including making operations more efficient, technology improvements, using less polluting energy sources, adding and optimizing abatement equipment, monitoring and leak detection, bettering air emissions capturing, reducing downtime of emissions control systems, and more. As for the legal arguments for putting the rule on hold, I am not sure of the details of the case. SCOTUS deferred the case for a lower court to decide.

 

“Building on the long and successful track record of EPA’s CSAPR ozone season trading program, this program will secure significant reductions in ozone-forming pollution.”

 

     The EPA’s final Good Neighbor Plan was issued in March 2023:

 

“The Good Neighbor Plan ensures that 23 states meet the Clean Air Act’s “Good Neighbor” requirements by reducing pollution that significantly contributes to problems attaining and maintaining EPA’s health-based air quality standard for ground-level ozone (or “smog”), known as the 2015 Ozone National Ambient Air Quality Standards (NAAQS), in downwind states.”

 

     The chief pollutant that contributes to ground level ozone, or smog, is NOx, or nitrogen oxides. Burning coal in power plants or in industries like steel production is a major source of NOx. Oil, natural gas, and biomass also produce NOx. Combustion is the source of NOx.

     Those who oppose the rule have argued that it can make local power grids less reliable. EPA addresses that issue by saying they have made several adjustments to the pollution reduction requirements to promote grid stability based on feedback from affected power plants and other stakeholders. EPA also put out a fact sheet detailing all they have done and are doing to address power reliability and to make the rule as flexible as possible for those that need to comply. Those measures are of several varieties: 1) a flexible NOx allowance trading program – this builds on cross-state pollution rules and frameworks in place since 1995. It also allows choice of abatement technology; 2) full engagement with stakeholders to develop the rule – this was done to develop achievable emissions limits and compliance deadlines that can accord with power generators reliability planning and concerns. Other parties were engaged in these series of meetings including system operators, reliability organizations, the DOE, and the FERC; 3) rules were made more lenient for some – providing “greater compliance flexibility for power plants by deferring “backstop” emission rate requirements for plants that currently do not have state-of-the-art controls until no later than 2030.” They also enhanced allowance availability and allowed power generators to bank allowances at a higher level through 2030 and to establish a predictable minimum quantity of allowances through 2029. These keep the incentives; 4) additional flexibility was added based on the meetings  - this includes changing how emissions budgets were determined, a more gradual phase-in of emissions reduction, and limits penalties for non-compliance; 5) a memorandum of understanding between the DOE and the EPA to cooperate more on power reliability.

     The National Rural Electric Cooperative Association (NRECA) said that electric co-ops applauded the ruling as a boon to electric reliability. The co-ops, which can be coal-heavy, are more vulnerable to having difficulties financing emissions reductions investments due to limited access to capital. They refer to the rule as the Ozone Transport Rule. They argue that they can now retain their coal plants longer and use them more, which will improve reliability by providing enough dispatchable and baseload power. NRECA represents 900 electric co-ops often in rural areas.

     Further details add several heavy industries in 20 states to the rule:

NOX Emissions Standards for Nine Large Industries in 20 States

“Beginning in the 2026 ozone season, EPA is setting enforceable NOX emissions control requirements for existing and new emissions sources in industries that are estimated to have significant impacts on downwind air quality and the ability to install cost-effective pollution controls. These standards would collectively achieve an approximately 15% reduction in NOx emissions from 2019 ozone season, point source emissions. The reduction in NOx emissions comes from the following types of emissions sources:

o reciprocating internal combustion engines in Pipeline Transportation of Natural Gas;

o kilns in Cement and Cement Product Manufacturing;

o reheat furnaces in Iron and Steel Mills and Ferroalloy Manufacturing;

o furnaces in Glass and Glass Product Manufacturing;

o boilers in Iron and Steel Mills and Ferroalloy Manufacturing, Metal Ore Mining, Basic Chemical Manufacturing, Petroleum and Coal Products Manufacturing, and Pulp, Paper, and Paperboard Mills; and

o combustors and incinerators in Solid Waste Combustors or Incinerators.”

EPA may extend compliance deadline further out for some of those companies. EPA notes that the states of Arizona, Iowa, Kansas, and New Mexico are heavily contributing to downwind NOx in adjacent states. The goal of the rule is to substantially reduce summertime ozone levels. We have had several high ozone alerts in 2024 due to the recent heat dome heatwave where people were advised to avoid driving during the day to keep levels down. I remember these requests were given in California and Texas and perhaps more states as well. EPA argues that the benefits in improved health outcomes far exceed the costs to companies. They also note co-benefits “including improving visibility in national and state parks and increasing protection for sensitive ecosystems, coastal waters and estuaries, and forests.”  

     As for the legal details of the Good Neighbor rule, I have less certainty. The Supreme Court’s pause of the rule suggests that the conservative majority is not happy with the rule as currently interpreted and may seek to change it. Since coal burning is a major source of cross-state air pollution the hold on the rule could delay some coal plant retirements.  

 

References:

Chevron deference (doctrine). Ballotpedia. Chevron deference (doctrine) - Ballotpedia

The far-reaching implications of the Supreme Court’s decision curbing regulatory power. PBS Newshour. June 28, 2024. The far-reaching implications of the Supreme Court’s decision curbing regulatory power | PBS News

Supreme Court's pause of “good neighbor” air quality rule praised by U.S. Steel, panned by environmental groups. Steve Bohnel. Pittsburgh Post-Gazette. July 1, 2024. Supreme Court's pause of “good neighbor” air quality rule praised by U.S. Steel, panned by environmental groups (msn.com)

EPA’s “Good Neighbor” Plan Cuts Ozone Pollution – Overview Fact Sheet. U.S. EPA. https://www.epa.gov/system/files/documents/2023-03/Final%20Good%20Neighbor%20Rule%20Fact%20Sheet_0.pdf

The Good Neighbor Plan And Reliable Electricity. U.S. EPA. March 2023. Reliability and the Good Neighbor Rule.pdf (epa.gov)

Good Neighbor Plan for 2015 Ozone NAAQS. Cross-State Air Pollution. U.S. EPA. Good Neighbor Plan for 2015 Ozone NAAQS | US EPA

Chevron Doctrine goes down and the Constitution is back! Hannah Cox. Video post on LinkedIn.

Electric Co-ops Applaud SCOTUS Emergency Stay of EPA Ozone Transport Rule, a Major Threat to Reliability.

Electric Co-ops Applaud SCOTUS Emergency Stay of EPA Ozone Transport Rule, a Major Threat to Reliability. National Rural Electric Cooperative Association. June 27, 2024. Electric Co-ops Applaud SCOTUS Emergency Stay of EPA Ozone Transport Rule, a Major Threat to Reliability - America's Electric Cooperatives

Stop! In The Name Of Love - Supreme Court Throws Out 'Chevron Deference,' Upends Regulatory Law. Jason Lindquist. RBN Energy Blog. July 1, 2024. Stop! In the Name of Love - Supreme Court Throws Out 'Chevron Deference,' Upends Regulatory Law | RBN Energy

Supreme Court Axes Chevron Deference, Spanks Federal Bureaucracy. Robert Bryce. Substack. July 1, 2024. Supreme Court Axes Chevron Deference, Spanks Federal Bureaucracy (substack.com)