Overview
On June 28, 2024, the US Supreme Court overruled Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (Chevron).1 "A cornerstone of administrative law,"2 Chevron dictated that reviewing courts must sometimes defer to agency interpretations of the statutes they administer. Not anymore. "Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority,"3 Chief Justice John Roberts wrote in the majority opinion, a holding that will have far-reaching implications for regulated industries, including and especially the energy industry.
The Decision
Loper Bright holds that Chevron deference was inconsistent with the judiciary's exclusive authority to interpret the meaning of statutes.4 The Court emphasized the doctrine's incongruity with Section 706 of the Administrative Procedures Act (APA), which directs that in review of agency action, "the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action."5 The Supreme Court explained that while an executive agency's interpretation of its authority could be persuasive under Skidmore deference,6 depending on the facts, it cannot be binding on a reviewing court.7
The decision's penultimate paragraph aptly summarizes the new paradigm:
Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.8
What Comes Next for the Energy Industry
Loper Bright already has, and will no doubt continue to, spur debate. Its implications will be substantial, but will also take a long time to sort out. Some foreseeable issues within the energy industry include:
What Happens to Prior Cases Decided Under Chevron
In the opinion, Chief Justice Roberts explained that "we do not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful…are still subject to statutory stare decisis despite our change in interpretive methodology."9 But statutory stare decisis does not mean that prior holdings can never be re-examined or changed, just that it is more difficult to do so. And for entities seeking re-review of prior agency action, a July 1, 2024 Supreme Court decision—Corner Post v. Board of Governors of the Federal Reserve10—may make it easier to do so. In Corner Post, the Supreme Court held that challenges to federal regulations may be able to be brought many years after the regulation took effect, depending on when the challenger was injured by the regulation in question. Loper Bright and Corner Post, in combination, have the potential to open up a range of settled rules to new challenge.
Challenges may also arise in new cases re-examining old law. For instance, the Federal Energy Regulatory Commission (FERC) has interpreted the term "entity" in its anti-manipulation statutes (e.g., FPA Section 222)11"to include any person or form of organization, regardless of its legal status, function or activities."12 Federal district courts have generally deferred, under Chevron, to this interpretation in reviewing challenges made by individuals who argue that they are not an entity, and thus not subject to the statute.13 Without Chevron deference, it is not clear courts would still agree with FERC's interpretation of the statute.
Are There Particular Ongoing Cases that Will Likely Be Directly Impacted by Loper Bright
One case that will be re-visited is Solar Energy Indus. Ass'n v. FERC.14 In SEIA, the DC Circuit deferred to FERC's interpretation of whether a large solar facility qualified under the requirements of the Public Utility Regulatory Policies Act (PURPA). It held that "because Congress has not spoken to the issue, we…must defer to any reasonable agency interpretation."15 Such an approach is inconsistent with Loper Bright, and on July 2, 2024, the US Supreme Court vacated and remanded the case back to the DC Circuit for further consideration.16
Another ongoing case in which Loper Bright may make an impact is FERC's recent transmission planning rule, Order No. 1920. In finding that it had authority to issue the final rule,17 FERC explicitly invoked South Carolina Public Service Authority v. FERC,18 which in turn had relied on Chevron deference in upholding parts of an earlier similar rule, Order No. 1000. Commissioner Christie, who dissented from Order No. 1920, issued a press release the same day that Loper Bright was issued stating that "given today's Supreme Court decision overturning Chevron, I hope that this Commission, with its new lineup of commissioners, will be willing to work on amending Order No. 1920 into something that can actually work in the field and is within our legal authority, which the current version is not."19On July 1, 2024, Chairman Phillips responded to the press release, stating that "Commissioner Christie's assertions about Loper Bright's implications for Order No. 1920 cannot be squared with the Court's actual holding in South Carolina," and emphasizing his belief that Order No. 1920 was an appropriate exercise of FERC authority.20 It remains to be seen what impact, if any, Loper Bright will have on Order No. 1920.
What About Deference to FERC More Broadly
Under Loper Bright, agencies can still receive deference in particular circumstances, depending on the statute in question.21Chief Justice Roberts explained that phrases like "appropriate" or "reasonable" can leave agencies with flexibility.22 So it is fair to say that FERC will still get some level of deference in some situations, even after Loper Bright. The devil will be in the details. For instance, FERC's interpretation of filed tariffs and contracts have enjoyed a form of deference that is "Chevron-like in nature."23 In a world without Chevron, "Chevron-like" may not survive either. Or it might. There will no doubt be substantial litigation to determine how far a court's flexibility and deference will stretch in a post-Loper Bright world.
The Supreme Court's ruling in Loper Bright represents a significant sea change within administrative law. And that change will be felt throughout the energy industry. Steptoe's energy lawyers and litigators have decades of experience in navigating these thorny issues before agencies and the courts, and stand ready to assist under the new paradigm.
Endnotes
1 The Court's opinion was issued in Loper Bright Enterprises v. Raimondo, 603 U.S. ____ (2024) (Loper Bright). It is available at https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf.
2 Kagan Dissent at 1.
3 Court Opinion at 35.
4 Id. at 7-9.
5 Id. at 13-14 (citing 5 U.S.C. § 706).
6 The name comes from Skidmore v. Swift & Co., 323 U. S. 134 (1944), which held that the "interpretations and opinions" of the relevant agency, "made in pursuance of official duty" and "based upon . . . specialized experience," "constituted a body of experience and informed judgment to which courts and litigants could properly resort for guidance," even on legal questions. Id. at 139–140. "The weight of such a judgment in a particular case…depends upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control." Id. at 140.
7 Opinion at 21.
8 Id. at 35.
9 Id. at 34.
10 https://www.supremecourt.gov/opinions/23pdf/22-1008_1b82.pdf.
11 16 U.S.C. § 824v.
12 Prohibition of Energy Mkt. Manipulation, Order No. 670, 114 FERC ¶ 61,047, P 18 (2006).
13 See, e.g., FERC v. City Power Mktg., LLC, 199 F. Supp. 3d 218, 240 (D.D.C. 2016) (“In sum, absent a statutory definition (and there is none in the FPA) the term 'entity' is ambiguous on this point. Ambiguity cuts in FERC's favor, for the Commission's interpretation of ambiguous terms in the FPA is entitled to Chevron deference.”).
14 59 F.4th 1287 (D.C. Cir. 2023) (SEIA).
15 Id. at 1292.
16 https://www.supremecourt.gov/docket/docketfiles/html/public/22-1246.html.
17 Building for the Future Through Electric Regional Transmission Planning and Cost Allocation, Order No. 1920, 187 FERC ¶ 61,068 at P 86 (2024).
18S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014).
19 https://www.ferc.gov/news-events/news/commissioner-mark-christies-statement-concerning-order-no-1920-and-us-supreme.
20 https://www.ferc.gov/news-events/news/chairman-willie-phillips-statement-concerning-order-no-1920.
21 Opinion at 26 (“That is not to say that Congress cannot or does not confer discretionary authority on agencies. Congress may do so, subject to constitutional limits, and it often has…Judges need only fulfill their obligations under the APA to independently identify and respect such delegations of authority, police the outer statutory boundaries of those delegations, and ensure that agencies exercise their discretion consistent with the APA.”).
22 Id. at 17.
23 Old Dominion Elec. Co–Op., Inc. v. FERC, 518 F.3d 43, 48 (D.C. Cir. 2008).
