USA – TEXAS Trends and Developments Contributed by: Gerald J. Pels, Gerald D. Higdon and Elizabeth Corey, Troutman Pepper Locke
Impacts on energy development The Loper Bright decision, the West Virginia decision, and the Rollback have raised significant questions regarding how energy development will be affected. No consensus clearly exists, but several develop- ments seem likely if courts sustain the Rollback. Currently, the Rollback is limited because it only removed the predicate for regulating GHG emis- sions from new motor vehicles and new motor vehi- cle engines. Nevertheless, it relied heavily upon the Supreme Court’s reasoning in Loper Bright and West Virginia . The principles established under those deci- sions of (i) not automatically deferring to an agency’s interpretation of ambiguous statutes and (ii) empha- sising the need for clear Congressional authorisation before regulating matters having significant economic and political effects, each carry substantial weight and potential application beyond motor vehicles. The rea- soning behind the decisions can be applied to much of the GHG regulation affecting aspects of the energy sector, particularly as related to the traditional oil and gas industry and the power plant industry. The immediate aftermath of the Rollback will almost certainly entail a lighter regulatory touch over power plant and oil and gas sectors of the energy economy. In fact, the current administration has already sig- nalled such an approach by proposing to repeal the previous administration’s regulatory efforts to require coal-fired and gas-fired plants to implement carbon capture technology or cease operations. Similarly, regarding the oil and gas industry, the current admin- istration has communicated that it intends to under- take a comprehensive reconsideration of new source performance standards and emission guidelines for new and existing emission sources. So, for a time, investment in these energy sectors would seem more likely as the current administration focuses on ena- bling the energy development, production and deliv- ery that recent technological drivers require. Chev- ron’s recent announcement that its wholly owned subsidiary, Energy Forge One LLC, signed an agree- ment with Microsoft to develop a co-located power facility in West Texas to provide dedicated electricity to a Microsoft-operated data centre under a 20-year power purchase agreement is illustrative of recent
power-driven investment that the current regulatory environment will more easily foster. There is, however, some concern that the Rollback, with any subsequent reversal of other regulatory pro- grams tied to the Endangerment Finding, will intro- duce uncertainty into the regulated community that may frustrate development and operational predict- ability, and investment that values such predictabil- ity. These considerations have been raised particu- larly regarding renewable energy producers. Indeed, short-term adjustments are almost certain to occur as EPA re-evaluates more of its regulatory programmes against the backdrop of the demands of Loper Bright and West Virginia . In the longer run, however, more, not less, predict- ability is likely to arise. In recent history, with federal elections empowering administrations that routinely move back and forth between the two major political parties, it is not unusual for wide swings in policy to occur. Those widely varying policy approaches can have profound effects on predictability and the invest- ment of capital if the only constraining force is an agency’s interpretation of decades-old statutes that are ambiguous, especially within the context of cur- rent events and modern market developments. If, instead, regulatory agencies apply an approach that is mindful that courts may second-guess an agency’s statutory interpretations as something less than the “best reading” of a statute, or outside of a clear congressional authorisation to regulate, then abrupt shifts in regulatory approaches are likely to be less frequent, unless specifically predicated upon clear congressional direction. Such a result increases regulatory certainty, and improves predictability upon which investment can be based. But caveats remain. For example, although Federal regulation of traditional energy development may become more constrained, state regulation may increase. Not every state has a judicial or statutory analogue reinforcing the principles of Loper Bright and West Virginia . So, in some states, the battlefront for energy development may simply shift from a fed- eral level to the state level. Yet, this risk has always existed. There have always been states that believed
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