SEC Climate Rule Foes Draw on Chevron Death to Fight Regulation

Fracking companies urged the Eighth Circuit to reject the SEC’s claim of authority to issue emissions disclosure regulations after the US Supreme Court ended judicial deference to some agency rulemaking.

The Securities and Exchange Commission lacked flexibility under securities laws to require corporate greenhouse gas emissions reporting and other climate disclosures, Liberty Energy Inc. and Nomad Proppant Services LLC said in a brief to the US Court of Appeals for the Eighth Circuit Tuesday. Bloomberg Law reviewed the brief, which the court has yet to make public.

The Supreme Court’s June ruling in Loper Bright Enterprises v. Raimondo overturned its 1984 Chevron v. Natural Resources Defense Council decision that gave judicial deference to reasonable agency interpretations of ambiguous statutes. A court has yet to weigh in on whether climate disclosure requirements are permissible under broad securities laws the SEC uses to compel reporting it determines is important for investors.

The Liberty Energy and Nomad Proppant Services claims came after the SEC said in an August court brief that the climate rules are still allowed after Loper Bright. The Eighth Circuit consolidated nine lawsuits the oil field services providers, US Chamber of Commerce, Republican attorneys general and others filed over the March regulations, which the agency paused in April amid the litigation.

“The agency’s interpretation of a statute is not entitled to deference,” Liberty Energy and Nomad Proppant Services said in their brief.

Reviewing Arguments

The fracking companies’ filing was part of the second of two batches of briefs the Eighth Circuit sought from climate rule challengers, as the court starts to review the regulations. The court also received friend-of-the-court briefs from supporters and opponents of the rules, in addition to the SEC’s August filing.

The climate rule challengers submitted their first batch of briefs on June 14, two weeks before the June 28 Loper Bright decision. Their arguments included claims the SEC brushed aside a 2022 Supreme Court decision that weakened Chevron. The high court in West Virginia v. Environmental Protection Agency backed the “major questions” doctrine, which says agencies need clear permission from Congress to create rules that have major economic or political effects.

The SEC complied with West Virginia v. EPA when it adopted the regulations, the agency said in its August brief. The agency issued the regulations using the 1933 Securities Act and 1934 Securities Exchange Act, which the agency said clearly permit the agency to require disclosures to protect investors.

Republican attorneys general from West Virginia, Iowa and other states disputed the SEC’s claims Tuesday.

The agency lacked explicit authority to create the regulations, they said in a court brief that focused on West Virginia v. EPA and didn’t mention Loper Bright by name. The rules concern climate change, which is a significant political and economic issue, they said. That brief was also reviewed by Bloomberg Law but hasn’t been made public by the court.

“In arguing otherwise, SEC misapplies its own history, misuses its statutory power, and misunderstands the Rule’s novelty,” the Republican officials said.

The challengers have received support from numerous groups, including more than 30 congressional Republicans, as well as advocacy groups tied to former Vice President Mike Pence and petrochemicals billionaire Charles Koch. The groups filed amicus briefs backing the lawsuits in the Eighth Circuit in June.

Support for the climate rules has come from Democratic Sens. Sheldon Whitehouse (R.I.) and Brian Schatz (Hawaii) and Reps. Sean Casten (Ill.) and Juan Vargas (Calif.), as well as California Attorney General Rob Bonta (D). They were among several climate regulation backers who submitted amicus briefs defending the SEC in the Eighth Circuit in August.

Democratic attorneys generals in 18 states and the District of Columbia also are advocating for rules as intervenors in the litigation. The Securities Act and Exchange Act gives the SEC “clear” authority to mandate climate disclosures and other reporting it deems necessary for investors, they said in a brief filed with the Eighth Circuit in August.

The Eighth Circuit hasn’t requested any other briefs in the litigation and is expected to hold oral arguments in the coming months. The court is unlikely to decide the case this year.

The lead case is Iowa v. SEC, 8th Cir., No. 24-1522, challenger briefs filed 9/17/24.