Supreme Court Case to Determine Scope of Federal Agency Jurisdiction

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--It's not unusual for industry to complain of regulatory overreach. Increasingly, in recent years, the Republican Party has more ever-more-loudly complained about a "runaway administrative state" that needs to be constrained. Steve Bannon, a member of then-president Donald Trump's administration, went so far as to say that president aspired to "deconstruct the administrative state," or tear down federal agencies.

It remains to be seen how far those anti-regulatory aspirations will go during the just-started term of the U.S. Supreme Court. The court has agreed to hear oral arguments during the current term, which began October 2, to reverse an earlier Supreme Court case on the scope and authority of federal regulatory agencies. Energy companies are not among the plaintiffs in the case at hand, but the ruling could potentially affect the regulation of mining companies, oil and gas producers, pipeline companies, power companies, and other industries operating under federal regulatory oversight.

Nearly 40 years ago, the Supreme Court ruled in Chevron v. Natural Resources Defense Council that courts must defer to a federal agency's interpretation of an ambiguous statute providing that interpretation is reasonable. The so-called "Chevron doctrine" will be revisited during this term when the highest court in the land will hear oral arguments in Loper Bright Enterprises v. Raimondo, in which a group of commercial fishing companies are challenging a rule issued by the National Marine Fisheries Service that requires the fishing industry to pay for the costs of observers who monitor compliance with fishery management plans.

Traditionally, courts have followed a doctrine of "stare decisis," which means precedent should be followed. Once a court rules on a specific issue, that issue is determined to be settled.

But the commitment to following precedent is not iron-clad, and some of the current court's more conservative justices have questioned stare decisis on several other matters--most notably in last year's decision in Dobbs v. Jackson Women's Health Organization, which overturned a 50-year-old precedent establishing a woman's constitutional right to an abortion.

Some members of the court's conservative majority have been critical of the Chevron doctrine in recent years. For example, Associate Justice Clarence Thomas said in a 2015 opinion that deference to regulatory or administrative agencies under Chevron "wrests from Courts the ultimate interpretative authority 'to say what the law is,' and hands it over to" the executive branch. Last year, Justice Neil Gorsuch wrote that the court "should acknowledge forthrightly that Chevron did not undo, and could not have undone, the judicial duty to provide an independent judgment of the law's meaning in the cases that come before the Nation's courts."

In one recent about-face decision that did directly concern energy companies, last year, ruling in West Virginia v. EPA, the Supreme Court limited the Environmental Protection Agency's ability to regulate carbon dioxide (CO2) emissions from the Power sector. For more on that, see July 1, 2022, article - Supreme Court Kicks Clean Air Case Back to EPA.

Many industries operate under some form of regulatory oversight. For a body that has trouble passing a federal budget, it seems neither possible nor feasible for ask Congress to decide complex regulatory matters, such as what level of CO2 emissions are permissible or the amount of "forever chemicals" like PFAS that are safe for drinking water. What has been the practice since Chevron is for Congress to enact a law and delegate to federal agencies the authority to implement it through regulations. If there was some lack of clarity about an agency's regulation, the courts generally sided with regulatory agencies, as they typically are more expert than Congress or the courts on technical matters.

Conservative legal scholars have argued that this constitutes a massive shift in power from Congress and the courts to the executive branch. Most of the administrative agencies subject to Chevron are run by presidential appointments, and professional staffers in those agencies usually have detailed expertise. Ultimately, regulations proposed by subject-matter experts in the EPA, Department of Energy, Bureau of Land Management, Fish and Wildlife Service, Bureau of Indian Affairs and many others are, in fact, political judgments, which the Constitution requires to be made by Congress, not technical experts deep in a regulatory agency.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).