The U.S. Supreme Court’s decision last week to overturn the 40-year-old legal precedent known as the ​“Chevron doctrine” will have far-reaching consequences across the federal government. It opens the door to legal challenges for thousands of rules on environment, health care, consumer safety, worker protections, and more — including the Biden administration’s ​“whole of government” push to combat climate change.

Clean energy and environmental groups are now girding for a flood of lawsuits aiming to dismantle federal regulations that limit greenhouse gas emissions and air and water pollution from fossil-fueled power plants, oil and gas pipelines, and cars and trucks. Those challenges may not halt the transition to cleaner energy, these groups say — but they could well make its progress far more uncertain, and potentially more costly. 

Friday’s 6–3 ruling by the court’s conservative majority overturned the so-called Chevron deference doctrine, in place since a 1984 Supreme Court decision in Chevron U.S.A. v. Natural Resources Defense Council, which determined that judges should defer to federal agencies’ interpretations of ambiguously worded dictates of laws passed by Congress. Polluting industries and right-wing advocacy groups have made overturning Chevron a key goal of their anti-regulatory agenda.

Now that they’ve succeeded, ​“I bet you dollars to doughnuts we’ll see a tsunami of litigation challenging every regulation that comes down the pike,” said Devon Ombres, senior director of courts and legal policy at the Center for American Progress, a progressive think tank. ​“This court has decided that it, and not Congress, and not public agencies, is the chief policymaker in the country — even though they say they are not.” 

Well-funded industry and conservative groups already plotting lawsuits against federal agencies are likely to hold a considerable advantage in a federal court system with a large number of conservative judges appointed during the Trump administration, Ombres said. ​“We are seeing a reversion to a pre–New Deal standard of the law, in the sense that the court will almost unerringly side with corporate interests over public interests.”

The Chevron deference has been cited ​“in scores of Supreme Court decisions, many of them unanimous, and in thousands of lower court decisions,” Sean Donahue, a partner at Donahue, Goldberg & Herzog representing the Environmental Defense Fund, said during a Friday media briefing.

The Supreme Court’s scuttling of Chevron has now turned laws and regulations that have been settled for decades into a minefield for potential legal challenges, with uncertain but highly fraught potential outcomes for almost every part of the federal administrative apparatus, Donahue said. He predicted ​“a massive effort by parties that are subject to regulation for their pollution or for many other areas of regulation to challenge long-established policies.” 

Potential challenges to clean energy tax credits introduce ​“uncertainty” for investors

Similar challenges could threaten other key aspects of the Inflation Reduction Act, legal experts said. That includes the tax credits that form the bulk of the law’s hundreds of billions of dollars of federal support for clean energy and carbon-cutting investments, which are administered via rules set by the U.S. Treasury Department’s Internal Revenue Service. 

Some of these tax credits, such as those for wind and solar power, have existed for decades but were modified by the law. Others were newly created by the law and require new Treasury Department rulemakings to implement. Industry groups and environmental advocates have argued fiercely over how many of these should be interpreted, such as the tax credits for clean hydrogen production.

The disputes center on how to interpret the language of the laws delegating authority to the Treasury Department to establish tax-credit rules. Under the new legal regime that is to emerge from Friday’s Supreme Court decision, those Treasury Department rulemaking decisions may be more likely to be overturned by federal judges years down the road. 

That introduces a heightened level of uncertainty among clean energy project developers and their financial backers, said Jeremy McDiarmid, managing director and general counsel of Advanced Energy United, a clean energy industry trade group. ​“And as a matter of general principle, uncertainty is not a friend to efficient market activity,” he said.

“I think you’re going to see creative litigants experiment and challenge the boundaries,” McDiarmid added. ​“In the very near term, there’s likely to be some additional risk for clean energy developers because of the uncertainty that’s going to happen as the aftershocks of this decision are felt across the federal court system. There’s going to be a period of sorting out what it really means. That uncertainty creates risk for developers who rely on federal agencies — and it could very well hurt individual consumers if the court decides, for example, that tax credits are no longer permissible.” 

That uncertainty will persist for the years it will take for new legal challenges to make their way through the federal court system, Donahue said. ​“I think it will be a case-by-case determination of whether, under this new review regime, there’s enough evidence that Congress intended to delegate authority to make policy.” 

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