On June 28, 2024, the Supreme Court issued Loper Bright Enterprises et al v. Raimondo (‘Loper'),1 which overruled Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc (‘Chevron').2
Chevron was a 40-year-old precedent that held that courts must defer to an agency's interpretation of a statute when that statute is silent or ambiguous, so long as the agency's interpretation was “permissible.”3 Chevron was cited literally thousands of times in court orders upholding agency regulations, and “Chevron deference” was a central concept of administrative law.
The ripples from Chevron's end have already begun to spread. Shortly after issuing Loper, the Supreme Court vacated and remanded the D.C. Circuit's order on Broadview Solar,4 which upheld the Federal Energy Regulatory Commission's (‘FERC' or the ‘Commission') interpretation of “power production capacity” under the Public Utility Regulatory Policies Act of 1978 (‘PURPA'). This remand throws back into doubt a matter that many had treated as settled, puts a number of operating generation projects at risk of losing their Qualifying Facility (‘QF') status under PURPA, and calls into question the future of many mixed renewable and storage projects currently under development.
Meanwhile, at FERC, Commissioner Mark Christie and Chairman Willie Phillips almost immediately issued dueling statements regarding Loper's potential impact on FERC's recently issued Order No. 1920.5 Order No. 1920 reformed the procedures for long-term transmission planning by, among other things, requiring regional transmission planning and cost allocation processes to evaluate all transmission needs as part of the same process, rather than considering only transmission projects driven by traditional considerations such as reliability and cost effectiveness. Oddly, Christie and Phillips actually seemed to agree that Chevron would not have applied to Order No. 1920 in the first place.
The Commission and the Court are split on the importance of Chevron and the impact of Loper
The Supreme Court issued its 6-3 decision in Loper on June 28, 2024. That same day, FERC Commissioner Christie, who wrote a scorching dissent to Order No. 1920, released a statement declaring that, post-Loper, the order would be dead upon appellate review.6 He also argued that Order No. 1920 was so far beyond the Commission's authority that Chevron should not have been applied, even if it still existed. Chairman Phillips responded with his own statement, asserting that Loper would have no effect, as Order No. 1920 was unassailably within the Commission's authority.7
This disagreement between Chairman Phillips and Commissioner Christie mirrors one of the points disputed between the majority and the dissent in Loper – specifically, how much of a practical difference does the end of Chevron make? Chief Justice Roberts, writing for the majority, takes the position that the difference is relatively modest, while Justice Kagan, dissenting, sees Loper as threatening the “warp and woof of modern government.”8 In the view of the Court's conservative majority, Chevron was a poorly considered decision that was never intended to have landmark significance. Moreover, it was increasingly “bypassed” by courts seeking to avoid “a byzantine set of preconditions and exceptions” that had sprouted around Chevron to limit the amount of deference that must be granted to agencies in certain contexts.9 Therefore, according to the majority, Loper simply reestablishes the pre-Chevron status quo; namely that courts are responsible for statutory interpretation, but are bound to extend “respectful consideration, not deference”10 to agency interpretations of the law. They are, however, required to defer to agency fact-finding and policy determinations. By contrast, the dissent fears that Loper is an invitation for courts to impose their uninformed policy preferences without regard for agency expertise, even where Congress intended for an agency to fill in the gaps, leaving a statute ambiguous. Moreover, Justice Kagan fears that Loper, along with the Court's other decisions concerning agency power issued this term, will throw government administration into chaos.
Like Justice Kagan in her dissent, Commissioner Christie views Chevron as having been a fountainhead of regulatory authority, without which agency power will be severely circumscribed.11 In his view, the courts will strike down Order No. 1920 after Loper, because the order was “built on […] a foundation of sand known as ‘Chevron deference,'” and “the most important legal lifeline that Order No. 1920 needed was pulled away […], and the final rule's chances of surviving court challenges just shrank to slim to none.”12 In his opinion, however, Order No. 1920 wasn't even entitled to Chevron deference in the first place, because it “claim[s] legal authority that Congress never granted.”13
Chairman Phillips argues that “[t]he authority of [FERC] to regulate regional transmission planning and cost allocation has long been recognized by bipartisan majorities,” and that Commissioner Christie's “disagreement with how the Commission exercised that discretion in Order No. 1920 does not provide a logical or reasonable basis for calling into question whether we have that authority in the first place.”14 Like the chief justice, the FERC chairman seems to view Chevron as applying primarily at the margins, where a reviewing court decides one interpretation of a statute is “best,” but (under Chevron) must yield to a “permissible” agency interpretation.15 Since Order No. 1920 is firmly within the Commission's authority, there's no need for a court to defer to FERC's interpretation to uphold it.
So, how much does Loper matter?
Chairman Phillips and Commissioner Christie both claim that Chevron would not or should not have applied to Order No. 1920 on appellate review, despite having strongly differing viewpoints on its legality. Specifically, Commissioner Christie believes that Chevron would not have, or at least should not have, applied to Order No. 1920 because Congress never gave FERC the power to drive certain policy choices regarding the generation mix, and the applicable statute (the Federal Power Act (“FPA”)) is unambiguous on this point. Chairman Phillips believes that prior precedent and the wording of the FPA clearly give FERC the authority to direct transmission planning in whatever way FERC thinks would result in a reliable system and just and reasonable rates. Thus, a reviewing court would not have had to apply Chevron to uphold Order No. 1920 in the first place.
That Christie and Phillips can disagree so strongly, and yet agree that Chevron would not have applied, spotlights a truth overlooked in many “hot takes” on Loper: even when a court cited Chevron in support of its decision, an agency's regulations rarely stood or fell on appeal based on Chevron alone. Chevron had become emblematic of the modern regulatory state, however, it was only dispositive if a court determined that: (i) Congress intended to delegate authority to interpret the law to the agency;16 (ii) the statute was “silent” or “ambiguous” with regard to the matter the agency sought to interpret;17 (iii) none of the multiple exceptions and limitations to Chevron applied; and (iv) the agency's interpretation was “permissible,” even if it would not have been the court's own interpretation. As a matter of real-world application, the first three factors often provided ample opportunity for a court to conclude that a regulation did not fall under Chevron, thus avoiding the need to extend deference to an agency decision with which it disagreed. Thus, in many cases, Chevron could be seen as a regulatory and judicial shortcut to avoid extensive statutory analysis, rather than a determinative factor requiring a court to uphold a regulation that it would otherwise have interpreted as contrary to law.
The primary dispute between Commissioner Christie and Chairman Phillips is whether FERC can design that regulatory scheme so that the resulting transmission planning accounts for policies and preferences of states and consumers that relate to issues that FERC does not itself have the authority to regulate. For example, FERC lacks the authority to mandate the construction of renewable power facilities, as the FPA reserves that power to the states.18 However, if states want to impose a renewable mandate, or consumers wish to buy a renewable product, can FERC direct transmission planners to take those policies (and the required transmission to support them) into account, or can it only direct transmission planning based on issues under its own jurisdiction, such as reliability and just and reasonable wholesale power rates? Is FERC imposing impermissible policy preferences on states and consumers, as Christie argues in his dissent to Order No. 1920?19 Or does Order No. 1920 simply require that the transmission planning process recognize the demands of a changing world, without dictating outcomes or imposing its own policy preferences?20 Can FERC mandate the allocation of costs to all parties that derive a benefit from a transmission project, even if the primary driver to the project does not benefit – and may even be opposed by—those parties? Can these issues be resolved based on the existing FPA or is this a “major question” for Congress to address? How many of these issues need to be litigated on an as-applied, rather than facial, basis?
These are difficult and complex questions, but not ones easily addressed under Chevron's framework of “permissible” interpretations of ambiguous or silent statutes. Rather than solely questions of statutory interpretation, these are questions of fact, policy, and precedent – such as how much Order No. 1920 claims authority in excess of the Commission's authority under its predecessor, Order No. 1000.21
Regulatory whiplash
Another potential major impact of Loper is mentioned by Justice Gorsuch in his concurrence, namely that Chevron invited “regulatory whiplash”22; in other words, the tendency of agencies to change their regulations based on external factors, perhaps most prominently changes in administration.
For example, in the Broadview Solar proceeding, FERC reversed itself on rehearing regarding the meaning of “power production capacity” for purposes of determining QF status under PURPA.23 Although FERC reversed its decision in Broadview Solar before judicial review was complete, Loper could limit this sort of shift in future cases where the change occurs once an order has been upheld by a court. The standard for a court to change its interpretation of a statute is much higher than the standard that an agency must meet to change its interpretation. A court is bound by prior precedent; an agency must go through the notice-and-comment process, but is largely free to change its regulations if it can provide a “reasoned analysis” for its departure from the prior rule. 24 However, if statutory interpretation is the province of the courts, agencies will be constrained in their ability to reinterpret the statute with each change in policy.
Broadview Solar and regulatory delay
With regard to Broadview Solar, the D.C. Circuit's decision was awaiting review by the Supreme Court when Loper was issued. That order has been vacated and remanded to the D.C. Circuit for further consideration in light of Loper,25 likely because that decision relied heavily on Chevron. The remand, however, does not mean that the outcome will be different – Chevron provided a shortcut to affirming FERC's order, but it is not at all clear whether the D.C. Circuit would have disagreed with FERC's interpretation of the term “power production capacity.”26 Although the D.C. Circuit declined to consider the industry-specific meaning of “capacity,” as FERC had not relied on it, the court nonetheless discussed at some length why FERC's interpretation was consistent with the statute.27
However, considering the speed at which litigation moves, it may yet be a number of years before there is a definitive answer with regard to Broadview Solar,28 which is an order on rehearing from 2021, in which FERC itself reversed an order from 2020. Likewise, it may be a very long time indeed before there is an answer regarding transmission planning. Longer periods of uncertainty and delay may turn out to be the primary impact of Loper.
Loper, along with other Supreme Court orders this term,29 is likely to drive an immense amount of litigation. Parties that oppose a particular regulatory outcome now have, at least in theory, a greater chance of defeating the agency in court, and the Court's numerous orders limiting agency power have been understood to be an invitation to such litigation. Meanwhile, less regulatory whiplash also means the stakes are higher – a new administration cannot simply “fix” an unwanted regulation.
Administrative delay will not only increase due to more litigation, but because agencies – and the courts – will have to work harder to justify a particular outcome. Without Chevron deference as a shortcut, agencies seeking to impose regulations will have to exhaustively document how the regulation is not only consistent with the statute, but that it is the best interpretation of its statutory authority. Because fact-finding and policy are still areas in which the courts must defer to agency expertise, those segments of agency decisions will likely become even more exhaustive in their content. Meanwhile, a court that wants to uphold an agency action cannot merely determine that a statute is ambiguous and the agency's interpretation is a reasonable interpretation; instead, courts will need to thoroughly analyze the underlying statute to determine that the claimed authority is there and is being exercised as Congress intended. Of course, each exhaustive analysis will be answered by an equally exhaustive analysis by the opposing parties.
Although there is, and will continue to be, significant disagreement as to the impact of Loper and whether or not the end of Chevron is a positive development, that the administrative process will move even more slowly may be a change that everyone will come to regret.
Footnotes
1. Loper Bright Enterprises et al v. Raimondo, Docket No. 22–451 (June 28, 2024).
2. Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
3. See Loper at 2.
4. See Edison Electric Institute, et al. v. FERC, No. 22-1246 (July 2, 2024) (“EEI Docket”), at: https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/22-1246.html; Solar Energy Industries Association v. FERC, No. 21-1126 (D.C. Cir. Feb. 14, 2023) (“SEIA”); Broadview Solar, LLC, 174 FERC ¶ 61,199 (2021) (“Broadview Solar”).
5. Building for the Future Through Electric Regional Transmission Planning and Cost Allocation, Order No. 1920, 187 FERC ¶ 61,068 (2024) (“Order No. 1920”).
6. Commissioner Mark Christie's Statement Concerning Order No. 1920 and U.S. Supreme Court's Overruling of Chevron Deference, available at: https://www.ferc.gov/news-events/news/commissioner-mark-christies-statement-concerning-order-no-1920-and-us-supreme (“Christie Statement”).
7. Chairman Willie Phillips' Statement Concerning Order No. 1920, available at: https://ferc.gov/news-events/news/chairman-willie-phillips-statement-concerning-order-no-1920 (“Phillips Statement”).
8. Loper, Kagan, J., dissenting at 2.
9. Loper at 27-29.
10. Id. at 27.
11. Christie, a Republican, and Kagan, one of the liberal Justices, obviously differ on whether such regulatory authority is positive or negative.
12. Christie Statement.
13. Id.
14. Phillips Statement.
15. Loper at 17-19.
16. This “step” comes not from Chevron itself, but from United States v. Mead Corp., 533 U.S. 218 (2001).
17. Loper at 19-20.
18. See, e.g., Entergy Nuclear Vt. Yankee, LLC v. Shumlin, 733 F.3d 393, 417 (2d Cir. 2013).
19. Order No. 1920, Christie, Commissioner, dissenting at 5.
20. See generally Phillips Statement.
21. Transmission Plan & Cost Allocation by Transmission Owning & Operating Pub. Utils., Order No. 1000, 76 FR 49842 (August 11, 2011), 136 FERC ¶ 61,051 (2011), Order No. 1000-A, 77 FR 32184 (May 31, 2012), 139 FERC ¶ 61,132 (2012), order on reh'g & clarification, Order No. 1000-B, 141 FERC ¶ 61,044 (2012), aff'd sub nom. S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014).
22. Loper, Gorsuch, J., concurring at 24.
23. Broadview Solar, LLC, 174 FERC ¶ 61,199 (2021).
24. Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 57 (1983).
25. See EEI Docket.
26. SEIA at 6.
27. Id. at 7-9.
28. We plan to release an article in the near future that will take a deep dive into Broadview Solar and its future prospects.
29. The Supreme Court has issued a number of orders this term that constrain agency authority (CITES). These orders, combined with Loper, will likely drive an immense amount of litigation, even in relation to regulations that have been in place for decades. For example, the Supreme Court's order in Corner Post (CITE) changes the six-year statute of limitations to challenge a regulation to be six years from when an alleged harm occurs, rather than six years from the issuance of the regulation. In theory, this means that newly created subsidiaries could challenge decades-old regulations, as such a subsidiary would not have suffered harm until it was created.
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