Gray Skies for U.S. Power Generation? Uncertainty and Turmoil on the Horizon
The Supreme Court’s landmark decision this past summer in Loper Bright Enterprises v. Raimondo marks a significant shift in administrative law by overturning the long-standing principle of Chevron deference, which was established in Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc. in 1984.
The Loper ruling from earlier this year is poised to have profound implications across various sectors, including the power generation industry. By eliminating Chevron deference, the court has introduced a new era of regulatory uncertainty and inevitable litigation, which could significantly impact the operations, compliance strategies, and future planning of power generation facilities.
Understanding Chevron Deference
Chevron deference has been a cornerstone of administrative law for nearly four decades. Under Chevron, federal courts deferred to federal agencies’ interpretations of ambiguous statutes that they administer, provided the interpretation was reasonable. This doctrine granted agencies considerable leeway in shaping and enforcing regulations, allowing them to adapt to changing circumstances and policy priorities.
COMMENTARY
In Loper, the Supreme Court overturned Chevron deference, fundamentally altering the relationship between federal agencies and the judiciary. The court held that it is the judiciary’s role to interpret ambiguous statutes, not governmental agencies. While not the first Supreme Court decision to place limits on executive branch deference under Chevron, it constitutes a definitive rejection of judicial deference to its sister branch. This decision effectively removes the deference previously given to agencies’ interpretations, requiring courts to independently review statutory ambiguities with only limited weight granted to the agencies.
Impact on Power Generation Entities
The power generation industry is heavily regulated, with numerous federal agencies overseeing various aspects of its operations, including environmental protection, safety standards, and energy production. The evisceration of Chevron deference introduces several key challenges for power plants.
Without Chevron, power generation entities are likely to face increased litigation as third-party stakeholders will be emboldened to challenge agency interpretations of statutes, particularly permitting decisions. Previously, courts would defer to agencies’ expertise in interpreting complex regulatory frameworks for new power plant construction and operation. Now, courts will independently assess these interpretations, leading to more legal disputes over regulatory compliance and enforcement actions.
Power generators may find themselves embroiled in legal battles over the interpretation of environmental regulations, emissions standards, and other critical issues, and facing new threats from environmental organizations and NIMBY parties. This increased litigation could result in significant legal costs and divert resources away from other critical operational needs.
Regulatory Uncertainty
The elimination of Chevron deference further creates a landscape of regulatory uncertainty for power generators. Agencies will need to navigate a more stringent judicial review process when interpreting statutes, potentially leading to inconsistent rulings and a lack of clear guidance for industry compliance across the states.
Power generators rely on stable and predictable regulatory environments to make long-term investments in infrastructure and technology. Regulatory uncertainty at the federal level can hinder these investments, as power generators may be reluctant to commit resources without a clear understanding of future compliance requirements across the federal landscape.
Power generators must comply with a complex web of federal regulations governing emissions, safety, and energy production. The removal of Chevron deference means that agencies’ interpretations of these regulations are more likely to be challenged in court. This could result in frequent changes to compliance requirements as courts issue differing interpretations.
Strategic Planning and Investment
The power generation industry is capital-intensive, with long planning horizons for new projects and infrastructure upgrades, which are heavily influenced by both state and federal level regulatory controls. Regulatory certainty is crucial for making informed investment decisions. The removal of Chevron deference introduces a level of unpredictability that can complicate strategic planning.
While not likely to result in any short-term investment, the exposed legal environment awaiting power generators post-Loper may delay or scale back investments in new technologies or facilities due to concerns about future regulatory changes across the long-term planning horizon. This could slow the transition to more diversified power portfolios in many key domestic markets.
Federal agencies overseeing power plants will need to adapt to the new legal landscape created by the Supreme Court’s Loper decision. Agencies may become more cautious in their rulemaking and enforcement actions, knowing that their interpretations are subject to rigorous judicial scrutiny.
This cautious approach could lead to slower regulatory processes and delays in implementing new rules or updating existing ones. Power generators may experience longer timelines for obtaining permits or approvals for new projects, impacting their ability to respond to market demands and technological advancements.
Conclusion
The Supreme Court’s decision in Loper represents a significant shift in administrative law with far-reaching implications for the power plant industry yet to be fully understood by regulators and the regulated community. By eliminating Chevron deference, the Supreme Court has introduced increased litigation and regulatory uncertainty that will challenge power generators’ operations, compliance strategies, and long-term planning.
Power generators must navigate this new legal landscape by closely monitoring judicial interpretations of regulatory statutes and adapting their compliance efforts accordingly. While the removal of Chevron deference aims to ensure greater judicial oversight of agency actions, it also underscores the need for clear and consistent regulatory frameworks that provide stability for industries critical to the nation’s energy infrastructure.
As power generators grapple with these changes, collaboration among industry stakeholders, regulators, and policymakers will be essential to mitigate the impacts of increased litigation and regulatory uncertainty. By working together, they can strive to create a regulatory environment that balances judicial oversight with the need for predictable and effective regulation in the ever-evolving energy sector.
—Timothy M. Riley is a Florida-based attorney with Gunster who is experienced in representing power generation clients.