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The U.S. Supreme Court's recent decision to overturn a 40-year-old precedent will change how companies across industries — particularly the energy industry — interact with regulators, experts say.
On June 28, the Supreme Court struck down the Chevron deference. Under that precedent, judges deferred to a federal agency’s interpretation of its powers described under law if those powers were ambiguous. Energy analysts and trade groups primarily applaud the June 28 decision and view the move as an opportunity to rein in regulators acting beyond their authority.
Although the ruling affects all industries, the Chevron deference was born out of the energy industry. The precedent came from the 1984 case Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc., where there was a disagreement on the Environmental Protection Agency’s interpretation of permitting under the Clean Air Act of 1977. Since then, if an agency’s interpretation of a law was considered reasonable and not arbitrary, federal courts would defer to that interpretation in a dispute.
In the 2024 cases Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Department of Commerce, the Supreme Court reversed the Chevron deference precedent, ruling that federal courts may not defer to an agency’s interpretation of an ambiguous statute.
“I feel like in the last 10, maybe 15 years, we've seen regulatory agencies, I don't want to say run amok, but they’ve certainly gone outside of where they should be when it comes to the interpretation of what congressional laws are,” Eric Byer, CEO of trade group Alliance for Chemical Distribution, told the Houston Business Journal.
Byer accuses regulatory agencies like the Environmental Protection Agency and the Occupational Safety and Health Administration of overreaching their bounds in order to win political favor, especially in the 2024 election year.
“We are on the precipice of having the most regulatory actions thrown at our industry that we've ever seen historically, in the history of our country,” Byer said. “And a lot of them are being based on politics instead of need and justification.”
Travis Wussow, partner at law firm Jackson Walker LP, hopes the new ruling will lead to more stability as an agency’s authority is more clearly restricted to its Congressional mandate. However, he anticipates the ruling will result in many more court cases, including many that could end up going to the Supreme Court.
“It creates an opportunity for the regulated community to have their voice heard in the courts when they may have been reluctant to share those concerns because of Chevron deference and the ways that courts defer to agency interpretation,” Wussow told the HBJ.
In the past, many disputes would not necessarily be taken to court because a court would be most likely to simply side with a regulator’s interpretation of their authority. In anticipation of the overturn of Chevron deference, Wussow is already seeing an uptick in new challenges, and he expects that uptick to accelerate.
“If federal agencies have less power, then those who are regulated may take a different footing when engaging with their regulators because there are other options available to them. They can go to court if they feel that the agency has stepped out of line,” Wussow said.
When the Chevron deference was overturned, several industry trade groups came out with their support of the ruling.
Ryan Meyers, general counsel of the American Petroleum Institute, said: "We agree with the court that agency actions must faithfully implement the laws passed by Congress. [This] decision is a reminder that it’s time for both parties to work together and advance bipartisan, commonsense policies that provide regulatory certainty and secure an affordable, reliable energy future."
The American Chemistry Council also noted, "We will be closely monitoring how Congress and executive branch agencies respond to the Loper Bright decision overruling Chevron deference, but we welcome this opinion as an opportunity for courts to rein in regulatory overreach.”
Ultimately, time will tell how much the litigatory relationship between the energy industry and federal agencies will change with the new ruling, but the scale of the decision is undeniable.
“I do think this is one of the most consequential cases that the Supreme Court has decided in many years, and it will be interesting to see how it plays out,” Wussow said. "But the thing we know for sure is that it will lead to a much greater role for the courts when it comes to federal regulatory matters.”
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