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Leonard Hyman & William Tilles

Leonard Hyman & William Tilles

Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…

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Supreme Court Kills Climate Rules

  • Supreme court ruling is a blow to Biden's plan to decarbonize power grid.
  • The Supreme Court’s decision today effectively overturns the court’s prior policy of judicial restraint.
  • The narrow takeaway from today’s ruling is that the Supreme Court has made it extremely difficult for the federal government to regulate CO2 emissions.

On June 30, by a six to three vote, the US Supreme Court issued its long awaited ruling for West Virginia vs the Environmental Protection Agency. Lawsuits filed mainly by US coal companies challenging the EPA’s regulatory authority were consolidated into this one case. The narrow legal issue here, simply stated, is whether the Environmental Protection Agency (EPA ) had the authority to regulate carbon emissions from so-called “stationary sources, ” such as coal fired power plants, or whether this regulation constituted an excessive and inappropriately broad grant of power from Congress to a federal regulatory body. The court made the latter interpretation. Justice Roberts writing for the majority stated that “A decision” (like power plant pollution standards and their remediation) “of such magnitude and consequence rests with Congress itself or an agency acting pursuant to a clear delegation from that representative body”.

In terms of precedent, in 2007 the US Supreme Court ruled in Massachusetts vs the Environmental Protection Agency that carbon pollution is subject to regulation under the Clean Air Act and that the EPS was required to act if this pollution endangered public health and welfare. The Clean Air Act was first signed into law by President Nixon in 1970 and reauthorized by President Bush in 1990. In 2012, the Obama administration issued its Clean Power Plan to regulate power plant carbon emissions and the Supreme Court voted to stay these new regulations. What was at issue before the court technically was an obscure paragraph (7411d) in the Clean Air Act which broadly authorized the EPA to issue pollution limiting rules (including those affecting CO2 emissions) so long as the agency also took into account “cost, nonair impacts, and energy requirements”.

This ambiguous phrase was first interpreted broadly by the Democratic Carter administration and then narrowly under Republican President Reagan in a manner far more favorable to polluters. Environmental groups sued for more vigorous enforcement and the Supreme Court issued what has become known as the Chevron deference which states that the courts should defer to federal agencies— in this particular case President Reagan’s EPA.

The Supreme Court’s decision today effectively overturns the court’s prior policy of judicial restraint under the Chevron deference. Using what is called the nondelegation doctrine the court found a way to effectively eliminate the Chevron deference. The so-called nondelegation doctrine permits the high court to invalidate federal regulatory decisions which lack explicit Congressional mandates. The potential scope of this Supreme Court ruling utilizing the nondelegation doctrine is potentially breathtaking in that virtually all major federal laws include some delegation of often imprecise (and sometimes contradictory) rulemaking powers to federal agencies. One might quickly respond that a motivated Congress simply has to rewrite precise laws that will pass muster. However, given the realities of the filibuster and a highly politically polarized Congress, this would be literally impossible. Every major piece of federal legislation granting any regulatory authority whatsoever will now be scrutinized under a new, harsher light of potentially aggressive court review.

At a minimum, this severely weakens the federal government’s regulatory authority in the near term and produces a potential schism among different states that will have to fill in the administrative void created by the courts. We expect at a minimum cases involving workers rights, consumer protection, the environment, and healthcare to receive similar close scrutiny by a newly emboldened Supreme Court. It would not be a stretch to suggest that the OSHA, regulating workplace health and safety under the Department of Labor, might be found invalid. In a related comment last week Justice Clarence Thomas suggested that, in addition to reviewing laws regarding contraception and same sex marriage, that laws restricting child labor were in need of review. We believe the scope of this court’s radical departure from precedent will not be fully known or understood for several years. And for a simple reason: most people simply won’t believe it. Related: EU Imports More U.S. LNG Than Russian Pipeline Gas For The First Time Ever

Supreme Court Justice Amy Coney Barrett was a law professor at the University of Notre Dame. Along with her co-author Professor John Copeland Nagle, they published the following in a 2016 article titled “Congressional Originalism” which appeared in the University of Pennsylvania Journal of Constitutional Law: They wrote that “Adherence to originalism arguably requires the dismantling of the administrative state, the invalidation of paper money, and the reversal of Brown vs Board of Education.” What is also striking is that this originalist position is virtually identical to the end-all-federal-government-agencies stance adopted by the Libertarian Party. We should quickly add that oil billionaire David Koch was that party’s vice presidential candidate in 1980. So whether the court’s conservative justices are motivated by pure originalism or simply warmed over Libertarianism, the end result is the same—a dramatically weakened federal bureaucracy.

Is this decision a throwback to nineteenth century regulatory policies that trace back to ancient times in which legislature or king sets precise prices and policies? Legislatures tried that in the UK and USA in the nineteenth century and it did not work. The legislators could not keep up with changing times. Companies eagerly embraced nonpolitical regulation by expert agencies to protect themselves from arbitrary, overly political or corrupt legislatures. The agencies still had to satisfy the courts, which, in the USA, adhered to a set of supposedly constitutional but wholly unrealistic standards, skewered by Justice Brandeis in his Southwestern Bell dissent (1923). The matter was finally settled in the Hope case (1943), with the decision written by Brandeis’ successor, William O. Douglas. That decision gave regulatory commissions wide discretion, as long as they reach reasonable results. Much of the world has adopted our system of regulatory discretion within broad rules. Hope, though, was decided almost 80 years ago, when justices had real world experience and before they switched from fountain pens back to goose quills. We are uncertain why businesses think they will be better off depending on legislatures to make decisions. Populists, historically, dislike big businesses.

If the Supreme Court continues to act on so-called originalist principles it will undermine the constitutional authority of every federal administrative body created in the twentieth century including for example the FDA, the Federal Reserve, not to mention the entire administrative legacy of the New Deal. Regulatory power, or what’s left of it, will quickly devolve to fifty individual states to use or not as they see fit.

The narrow takeaway from today’s ruling is that the Supreme Court has made it extremely difficult for the federal government to regulate CO2 emissions. And we would expect similar prohibitions for other climate related issues. However, the implications of this ruling are likely to be felt for years across the entire federal government. This case is not really about pollution or the environment. Using the nondelegation doctrine as justification, the court has opened the door for a dramatic challenge to the authority of every federal administrative agency. Like the announcer said, “Bold move, Cotton.”

By Leonard Hyman and William Tilles for Oilprice.com

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Leave a comment
  • Phillip 1851 on July 01 2022 said:
    Too bad, so sad, you can't use the Federal Bureaucracy to bankrupt ordinary Americans...

    If "Goosequill pens" mean are freedoms are secure, then I'm fine with Horse Drawn carriages as well...

    It's "sustainable" after all, and prevents you Ghoulobalists from managing the human "wildlife" just like the snail darter.

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