How the Overturning of Chevron Impacts Water Power

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How the Overturning of Chevron Impacts Water Power

DATE:

July 29, 2024

BY:

Renee Chester, Operations and Communications Intern, National Hydropower Association

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How the Overturning of Chevron Impacts Water Power

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On June 28, the Supreme Court overturned the Chevron doctrine, thereby sharply curtailing federal agency power.

Loper Bright Enterprises v. Raimondo, the case which overturned Chevron, was decided 6-3, with Chief Justice Roberts authoring the majority and Justices Sotomayer and Jackson joining Justice Kagan in her dissent. In his opinion, Roberts emphasized a “respectful consideration” that treats agency interpretation as “informational” rather than “binding.”

While the immediate implications of this decision are yet to be seen, the water power industry can likely expect an increase in litigation surrounding agency rulemaking.

BACKGROUND

Before Loper, the courts relied on the Chevron deference from Chevron U.S.A., Inc. v. Natural Resources Defense Council (1984), a two-step doctrine that prioritized agency expertise. Under Chevron, a judge would first determine whether Congress spoke directly to the question at hand in the statute. An ambiguous statute intended for a federal agency to resolve any questions as guided by their expertise. Therefore, courts were instructed to defer to the relevant agency’s interpretation insofar as it was reasonable.

Robert’s opinion, however, rejects this standard, arguing that Chevron requires the judiciary to abdicate their responsibility to interpret the law, which violates both the principles of separation of powers and the Administrative Procedure Act (APA). Ambiguity, Roberts argues, does not equal legislative intent, and the courts are well-suited to resolving the kind of legal questions at play.

However, the Court’s opinion preserves the standard for agency deference in Skidmore v. Swift & Co. (1944).  Skidmore allows for agency deference “proportional to its power to persuade,” shifting the assumption from deference towards reasoned argument. Where Chevron instructed courts to resolve statutory ambiguity with agency interpretation, Skidmore requires agencies to defend decisions on a case-by-case basis using the record in the rulemaking process.

Panorama of the U.S. Supreme Court (Credit to Joe Ravi)

MOVING FORWARD

The water power industry should expect the following impacts from the ruling.

First, there will likely be an increase in litigation, at least in the short term. CNBC reports the potential for a slew of litigation challenging agency decisions, but Roberts was clear in his opinion that prior cases regarding “specific agency actions” are still valid under stare decisis, the legal principle of determining points in litigation according to precedent, thereby requiring a plaintiff prove the past case both unreasonable and unworkable to succeed in their suit. Regardless, agencies face both higher scrutiny and level of risk for lawsuits related to new rulemaking.

Edison Electric Institute, et. Al. v. Federal Energy Regulatory Commission, a case surrounding a qualifying facility under the Public Utility Regulatory Policies Act (PURPA), which could impact Federal Energy Regulatory Commission decision-making, is one of nine cases the Supreme Court remanded back to lower courts with instructions to apply Loper.

In these cases, Roberts urges the courts to consider agency expertise as a resource, especially in matters of fact. In matters of law, however, Loper is explicitly clear that agency interpretation is subject to judicial analysis regarding its reasoning, consistency, and workability.

Congress, in turn, has authority to draft prescriptive laws with less room for ambiguity or explicitly grant deference to federal agencies in enacting laws. Regardless, the Supreme Court’s ruling in Loper could be helpful in addressing agency overreach by placing federal agencies under stricter judicial review.

Although the decision handed down in Loper materially impacts agency rulemaking, agency fact-finding within the boundaries of the law is not impacted. Though rulemakings like FERC’s recent Order 1920, which modified how long-term transmission planning and cost allocation is undertaken, could be ripe for litigation, agencies still have discretion within the law in the day-to-day decision-making.

With respect to FERC, the Commission still has discretion to accept filings under Section 205 of the Federal Power Act if they are to be found “just and reasonable.” Regarding hydropower licensing, FERC can still issue original licenses or new licenses if the application satisfies the nine criteria (seven for original licenses) found in Section 15 of the Federal Power Act.

Without Chevron, regulatory bodies like FERC face sterner judicial oversight regarding their interpretation of the law, and this increased standard means two things:

  1. The efficiency and discretion in rulemaking federal agencies enjoyed in the past may be lessened.
  2. Lawsuits seeking to check agency overreach stemming from rulemaking are more likely to be successful. Decision-making that remains within the explicit boundaries of the law, however, will remain largely unaffected.

The exterior of the Federal Energy Regulatory Commission’s headquarters in Washington D.C.

NEXT STEPS

For more information, Amy Howe’s article “Supreme Court strikes down Chevron, curtailing power of federal agencies” provides a more in-depth legal analysis of the opinion. Additionally, National Hydropower Association (NHA) will continue to provide updates as they become available.

National Hydropower Association