The Limits of Regulation After the Chevron Doctrine Was Struck Down

 

     In the recent SCOTUS striking down of the Chevron Doctrine, what shifted was who is given deference in cases where there is significant uncertainty or ambiguity. Before the decision, it was the regulating agency that was given deference. Now the power will go back to Congress, but also to the courts. Congressional action is often slow to happen. Cases will likely arise where a plaintiff argues that the regulating agency overstepped their bounds, and it will be up to the courts to decide the cases. What the courts will often have to determine is whether there is enough uncertainty in the science to side with the plaintiff. I think that one potentially negative effect is that with more ruling power given to the courts, it could make partisan rulings more likely. How the law is interpreted could become a matter of where it is interpreted, whether it is a conservative or liberal district or judge. This already happens considerably in environmental rulings, but the new ruling could make it happen more. In essence, the recent decision is a ruling about rulings.

     Kevin Kosar of the liberal American Enterprise Institute writes in an opinion piece for The Hill, that the new ruling could not only curb the power of agencies like the EPA but also hamper executive branch overreach, say a new Trump administration’s executive order-based immigration policy. Others have suggested the new ruling could hamper enforcement of new administrative statutes. Having worked for a short time at the county level where part of my job was to enforce compliance with state codes I can understand being hampered. People could delay and neglect environmental compliance, but this was often due to the inability to pay for it. In those cases, enforcement possibilities were limited. I can also distinguish between disagreeing with a rule but maintaining compliance with it and ignoring or challenging compliance. I would guess that cost and financial liability can be a reason for challenging compliance by filing suits, and bringing the issue to the courts and their regional biases. Some have suggested it could lead to the courts second-guessing decisions of federal agencies like the FAA. It could even compromise safety if decisions are made that lead to regulatory failures. Sen. Chris Murphy (D-Conn) called it a quiet coup. Kosar asks:

 

“But is the sky really falling?”

 

“Certainly, companies, industries and individuals who feel they have been burdened by regulations they believe to be beyond the scope of the law may start filing lawsuits. And, yes, the federal courts will have to make time to hear these cases.”

 

“Different judges will take different views of what laws mean and whether agencies’ actions are appropriate. Some policies that formerly survived judicial scrutiny may fall. So, yes, we may have some regulatory uncertainty.” 

 

Generally speaking, regulatory uncertainty is not desirable and can be harmful. However, I think arguments may shift to a debate about the determination of whether there is sufficient ambiguity, but the courts would have the final say.

 

Kosar thinks the new ruling will affect Congress and goes on to say:

 

“The upshot of the loss of Chevron deference is that Congress is going to feel pressure to up its policymaking game. It is going to be much harder for Congress to do what it has so often done: pass a vague law, let agencies enact policy and then hoot at bureaucrats for going beyond the law.”  

 

He suggests that Congress may create a nonpartisan Congressional Regulation Office. Kosar and Phillip Wallach wrote an article in 2016 making their case for such an office. He predicts that the ruling will lead to policy development aligning more with Congress and less with the executive branch and that those who lose cases will demand Congress to act.

     Biden’s climate czar John Podesta noted that the ruling was not shocking and that the administration had already factored it into recent rules about vehicles and power plants. He suggested that the White House's Office of Management and Budget (OMB) has recorded the details of the rules and determined their legal status so they will be upheld in court.

     Former Trump Interior Secretary David Bernhardt thinks the ruling will lead to new lawsuits challenging offshore wind projects. Those projects have already suffered supply chain issues and cost and inflation problems.

     In an article for High Country News, Erin Wong noted that the authority to clarify written law was passed from agencies to the courts. Wong also said that deference to regulatory experts resulted in a kind of uniformity of interpretations of the law that will now become a patchwork dependent on the decisions of various regional courts. Others have argued that the way it was before the ruling made it easier for new presidential administrations to have their own regulatory experts interpret laws according to their political bias. More pressure will be put on Congress to make easily interpretable laws. Business interests are no doubt pleased about the checking of regulatory powers. Wong writes:

 

“Chevron’s repeal will have huge ramifications across the West, opening the door to a wave of litigation that could result in countless reinterpretations of foundational laws governing clean air and water, public lands, forest management and climate policy, as well as healthcare, taxes and emerging technology.”

 

Former FDA Commissioner now at the conservative American Enterprise Institute Dr. Scott Gottlieb noted that deference to agencies made it easier for regulators to make rules in new areas or for new products as the FDA often does. He also notes that the 1984 decision to defer to agencies was at the time strongly supported by conservatives as Ronald Reagan was in power then and wanted his agencies to be adequately empowered. He says now the politics are reversed.

     As a result of the new decision, some House Republicans are demanding regulatory reviews. They appear to be targeting the EPA, the SEC, and the Labor Department. EPA chief Michael Regan noted that the ruling “hits the EPA extremely hard." Moody’s Ratings suggested that climate and EV rules would likely be challenged, investment could be affected or slowed, and delays and confusion could become more common:

 

 "The lack of clarity on future EPA mandates increases uncertainty and makes it more difficult for power companies to determine their most appropriate and cost-effective generation mix." They also noted that "The burden of statute interpretation may overwhelm lower courts, causing delays and potential inconsistencies.”

 

     Republicans are focusing on rules that can have an effect on the economy of $100 million or more in their quest for a procedural reform known as the REINS Act that lays out a Congressional approval process for proposed rules. Democrat climate hawk Sheldon Whitehouse told the Washington Examiner that the new ruling gives courts too much power:

 

“It cries out for a legislative fix, and puts us in a stupid position in which some judge who knows nothing about the substance of a complicated, technical topic is now encouraged to substitute his own judgment for the person who spent their life studying this and knows exactly what the answer is.”

 

Similarly, Sen. Angus King (I-ME) who caucuses with Democrats quipped:

 

“Unelected bureaucrats who know what they’re doing are being replaced by unelected judges who don’t know what they’re doing.”

 

Sen. John Hickenlooper (D-CO) says that Congress will have to step up and debate more of these issues as they are challenged. It has also been suggested that if the rule strikes down rules on grounds of legislative vagueness that have bipartisan support, then Congress will have to clarify those laws. Getting back to Kosar’s idea of a Congressional Regulation Office, the concern there is that it would require hiring people to staff it, making the legislative branch grow. Bigger government is especially not an attractive idea to conservatives. An article in the Washington Examiner notes that this might bring us closer to the past:

 

“According to the Congressional Management Foundation, the legislative branch in 2015 had several thousand fewer employees than in the 1980s and 1990s. Funding for the executive branch, on the other hand, was 120 times greater than the funding for Congress. However, the number of constituents the House represents has increased significantly over time.”

 

     Others ask whether the new ruling will hamper rulemaking altogether as lengthy court battles ensue.

     The EPA proposed new power plant pollution standards in April that require a 90% reduction in greenhouse gas emissions from the power sector by 2032, which were upheld by an appeals court in July. West Virginia Attorney General Patrick Morrissey (R) vowed to appeal the stay to the Supreme Court as soon as possible. West Virginia is a holdout on carbon-intensive energy, with coal still providing nearly 90% of the state’s electricity, despite local, adequate, inexpensive, and cleaner natural gas availability. The rule would require more power plants to add carbon capture and sequestration, which is just beginning to be deployed and where the ultimate costs and operational issues have yet to be worked out. The rule is likely not feasible and also likely to increase costs for consumers and ratepayers.

     Lazard's executive chairman Kenneth Jacobs thinks the new ruling will harm innovation and the economy:

 

"By restricting the executive branch’s ability to craft and enforce regulations, the Supreme Court has opened the door to the Balkanization of the US economy," Jacobs wrote. "The rulemaking vacuum at the federal level will mean that important issues are increasingly addressed by the states. Instead of a large and cohesive economy of 330 million people subject to the same rule of law, the US will likely end up with smaller regional and state economies, often organized around ideology and local business interests."

 

He says that financial markets will become less predictable. He also thinks that entrenched companies will be favored over upstarts, hampering innovation:

 

"When there is more state-level regulation, the US economy will come to look like Europe, where innovation is undermined from the start by the complexity of differing standards and requirements," Jacobs said. "The reversal of Chevron poses an existential threat to the core pillars of the American economic miracle: uniform rule of law and a cohesive national economy."

 

These arguments counter the arguments that the ruling solves the problem of regulatory overreach. The banking industry praised the new ruling and others have said that financial regulation will be the hardest hit.

    

 

 

References:

Opinion: The end of Chevron deference isn’t the end of regulation. Kevin R. Kosar. The Hill. July 7, 2024. Opinion: The end of Chevron deference isn’t the end of regulation (msn.com)

Key climate rules issued with Supreme Court decision in mind, Podesta says. Valerie Volcovici. Reuters. July 9, 2024. Key climate rules issued with Supreme Court decision in mind, Podesta says (msn.com)

Former Trump official: Chevron decision could spark ‘hurricane’ for offshore wind. Benjamin Storrow, Heather Richards. E&E News by Politico. July 3, 2024. Former Trump official: Chevron decision could spark ‘hurricane’ for offshore wind - E&E News by POLITICO (eenews.net)

Supreme Court curtails agencies’ ability to enforce regulations: The repeal of the bedrock Chevron doctrine throws climate and conservation laws into doubt. Erin X. Wong. High Country News. June 28, 2024. Supreme Court curtails agencies’ ability to enforce regulations - High Country News (hcn.org)

Former FDA Commissioner Dr. Scott Gottlieb on Supreme Court overturning the 1984 Chevron precedent. CNBC. Squawk Box. July 11, 2024. Former FDA Commissioner Dr. Scott Gottlieb on Supreme Court overturning the 1984 Chevron precedent | Watch (msn.com)

US House Republicans demand regulatory reviews after Supreme Court ruling. Moira Warburton. Reuters. July 11, 2024. US House Republicans demand regulatory reviews after Supreme Court ruling (msn.com)

Analysts say Supreme Court's Chevron ruling may limit action on climate, EVs. Seeking Alpha. July 14, 2024. Analysts say Supreme Court's Chevron ruling may limit action on climate, EVs (msn.com)

Congress braces for change following Supreme Court ruling against Chevron doctrine. Nancy Vu. Washington Examiner. July 15, 2024. Congress braces for change following Supreme Court ruling against Chevron doctrine (msn.com)

FHLBs Invoke End of Chevron Doctrine in Face of New US Rules. Noah Buhayar. Bloomberg. July 16, 2024. FHLBs Invoke End of Chevron Doctrine in Face of New US Rules (msn.com)

Appeals court unanimously sides with Biden administration on updated power plant rules. Zack Budryk. The Hill. July 19, 2024. Appeals court unanimously sides with Biden administration on updated power plant rules (msn.com)

US court will not halt power plant emissions rule as states challenge it. Brendan Pierson. Reuters. July 19, 2024. US court will not halt power plant emissions rule as states challenge it (msn.com)

The Supreme Court’s ‘Chevron’ ruling is an existential threat to the ‘American economic miracle’ and will make the U.S. more like Europe, Lazard chair says. Jason Ma. Fortune. July 20. 2024. The Supreme Court’s ‘Chevron’ ruling is an existential threat to the ‘American economic miracle’ and will make the U.S. more like Europe, Lazard chair says (msn.com)

The Case for a Congressional Regulation Office. Philip Wallach & Kevin R. Kosar. Fall 2016. National Affairs. number 60. summer 2024. The Case for a Congressional Regulation Office | National Affairs