Federal Regulators Face Power Shift as Supreme Court Rulings Weaken Agency Authority

The U.S. Supreme Court's recent decisions have sent a clear signal to federal regulators: their power is weakening. In a series of rulings during the 2023 term, the Court has shifted the balance of authority away from administrative agencies and into the hands of courts, significantly impacting the regulatory landscape for energy and other sectors.

The most significant change comes from the Court's decision to overrule the doctrine of Chevron deference in Loper Bright Enterprises v. Raimondo. This doctrine required courts to defer to an agency's reasonable interpretation of an ambiguous statute, even if the court thought there was a better interpretation. With Chevron deference now defunct, courts will no longer grant agencies this level of deference, making it easier for regulated parties to challenge regulations in court.

The Court also expanded the six-year statute of limitations under the Administrative Procedure Act (APA) in Corner Post, Inc. v. Board of Governors of the Federal Reserve System. This means that even long-standing regulations can be vulnerable to new challenges, as companies can now sue to challenge the validity of a regulation within six years of being injured by the rule. This decision, combined with the demise of Chevron deference, could lead to a surge in litigation against administrative agencies, as predicted by Justice Ketanji Brown Jackson in her Corner Post dissent.

Another important ruling is the Court's decision in Securities and Exchange Commission v. Jarkesy, which grants regulated entities the right to demand jury trials in federal court for civil penalties sought by administrative agencies. This change could make it harder for agencies to protect the public from wrongdoing, as warned by Justice Elena Kagan in her Jarkesy dissent.

These Supreme Court decisions have significant implications for energy and other sectors. With the demise of Chevron deference, companies will have more opportunities to challenge regulations in court, potentially leading to a "tsunami of lawsuits against agencies." The expanded statute of limitations allows companies to wait until they are directly affected by a regulation before bringing a lawsuit, giving them more time to strategize and prepare their challenges. The right to jury trials in civil administrative penalty cases may create additional hurdles and delays for regulatory agencies in their enforcement efforts, potentially altering settlement dynamics and making it more challenging for agencies to effectively protect the public.

In conclusion, the U.S. Supreme Court's recent decisions have weakened the power of federal regulators, creating a more challenging environment for agencies to enforce regulations and protect the public. Companies in energy and other sectors should be aware of these changes and consider how they may impact their regulatory strategies. As the regulatory landscape continues to evolve, it is essential for companies to stay informed and adapt to the shifting dynamics to ensure their long-term success.