Industry experts explain how Chevron doctrine reversal might impact clean energy sector
The US Supreme Court struck down Chevron in its Loper Bright Enterprises vs Raimondo case, which could result in some states seeing a slowdown in renewable energy project efforts, impact the Inflation Reduction Act (IRA) progress and qualifying facilities (QF) status.
Nathan Morales, litigation partner in the Portland, Oregon office of Stoel Rives, told NPM what the next few months and years might look like post-Loper.
To explain the situation, Morales first stated what Chevron had done, which was allow courts to defer to the interpretations of administrative agencies when deciding what a specific statute means. He said Chevron was overturned on the basis that it ran contrary to the Federal Administrative Procedures Act.
“Under this act, it is the court’s sole responsibility, independent of administrative agencies, to determine what the legislature intended when enacting a statute,” he said.
This means that the courts can no longer use agency interpretation to determine the legislature’s intention of a statute.
Morales explained that in Loper, the decision does not mean that any prior interpretation decided under Chevron is bad.
“All prior interpretations under Chevron are still good under the law unless someone re-challenges them,” he said. “What I think we will see are people going back to prior cases under Chevron and challenging those prior interpretations under the Loper law. Moving forward, I think we will see fewer federal administrative programs based on a broad interpretation presented by the agency.”
Morales said that many environmental programs came about through the application of Chevron and that he believes environmental protections “will very quickly” be challenged. Chevron was first established in 1984, and these challenges could span all the way back to then to the original case which was regarding the EPA’s plans to measure pollutants under the Clean Air Act.
On a state level, he said this will only impact states that followed Chevron. Other states, like Oregon, have an entirely different framework that interprets state statutes, and the Loper case will not impact state law.
States will need to answer in individual state courts if they want to overturn the application of Chevron to state law. If these states do that, and Chevron is overturned at the state level as well, then there will be a slowing down of renewable projects to the extent that they are based on flexible interpretations of law by these agencies.
Morales said that currently 25 states recognize some judicial deference to a state administrative agency on interpretations of state law. Only nine allow for significant difference to Chevron. These include Alaska, California, Iowa, Missouri, Montana, North Carolina, Virginia, and Washington state.
Other states have formally rejected this approach. Idaho, Nebraska, and Indiana signed 2024 bills into law expressly ending judicial deference to state agency interpretations of state law.
Impacting the renewable energy industry
A source familiar with the situation told NPM that there are three developments being tracked in the Chevron-Loper aftermath.
The first is the D.C. Circuit’s opinion in the Broadview case, which the Supreme Court recently vacated following its decision in the Loper case. At issue in Broadview is how to measure a facility’s “power production capacity,” which has implications for solar and battery facilities, and potentially QF status. The D.C. Circuit in Broadview affirmed FERC’s long-standing use of measuring that capacity in MW AC, but the issue will now have to be relitigated before the court absent Chevron deference.
The source is confident that FERC can still win the case on the merits, though noted that the Supreme Court’s recent action inserts some uncertainty.
The second issue being tracked surrounds transmission planning and cost allocation. In FERC’s recent Order No. 1920, it required RTOs and utilities to engage in long-term, wholistic regional transmission planning. The order was issued on a 2 - 1 vote with Commissioner Mark Christie dissenting and questioning FERC’s legal authority to issue the rule.
The source explained that there is a long-standing precedent establishing FERC’s authority to require changes to transmission planning via major rulemaking, but that the Loper decision could be used to challenge some of that precedent. Under a worst-case scenario, a court could find that Congress has not granted FERC the ability to issue major rulemakings regarding transmission planning. Under this scenario, RTOs and utilities would be left to devise their own individual approaches to transmission planning, as is the case with MISO and its multi-phase USD 10.3bn Long Range Transmission Plan.
The third issue being tracked is IRA implementation and potential challenges to final rulemakings from the Department of Treasury. Though the legal path to challenging IRA rulemaking is not entirely clear, the potential challenges add another layer of uncertainty to IRA guidance. The industry is still waiting on final guidance from the IRS on key elements, including energy communities, domestic content, and the tech-neutral tax credits.
That final guidance, if and when it gets issued, might be challenged.
Morales said he expects a slowing down of the federal agencies creating clean energy programs and an unwinding of programs based solely on Chevron deference and thinks there has already been a slowdown for new programs.
“There are a lot of federal administrative agencies that saw the writing on the wall for Chevron and stopped applying it six months to a year ago,” he said. “There was a case where the labor department had argued Chevron deference in the beginning but, in the same case, at the end had abandoned arguing Chevron.”
Ultimately, Morales said this “only impacts the interpretation of federal law when dealing with a federal agency,” he said.
This could include offshore wind efforts led by the US Bureau of Ocean Energy Management (BOEM), regulation of greenhouse gas emissions (GHG), and certain point sources under the Clean Water Act. Under BOEM, he pointed to a May issuance of the renewable energy leasing modernization rule that further creates regulatory flexibility and efficiency for offshore renewables.
“That probably will be suspect now,” he said.
Additionally, he looked to the US Bureau of Land Management (BLM) clean energy efforts. Under the Energy Act of 2020, BLM is authorized to reduce acreage rental rates and capacity fees, or both, for existing and new wind and solar authorizations. In that case, he said Chevron does not come into play and likely will not be challengeable under Loper.
However, the rule addresses expanding agency discretion to process applications for solar and wind energy generation rights-of-way, such as many efforts seen in Nevada.
“To the extent that the BLM has looked at the Energy Act of 2020 and interpreted it to expand their discretion, they likely would have done so under Chevron and that interpretation of the energy act in a manner that expands discretion likely would be challengeable under Loper because it likely impacts Chevron,” he said. “If the administrative agency used the Chevron doctrine to create the program, this will be impacted.”
Ultimately, Morales believes that this will be similar to other cases out of the Supreme Court in the last few years where states will react in a way that they think is appropriate. States may ensure programs through state action if they see a renewable energy program going away due to Loper.
“States are free to create those programs solely within that particular state,” Morales said.
*This story was originally published exclusively for NPM subscribers last month.
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