How a diminished Chevron doctrine could weaken Biden’s climate law

By Pamela King | 01/25/2024 01:25 PM EST

The Biden administration is rolling out new rules under the Inflation Reduction Act as the Supreme Court appears poised to undercut federal agencies’ regulatory powers.

Inflation Reduction Act signing.

President Joe Biden and top Democratic lawmakers are seen during the signing ceremony for the Inflation Reduction Act. Drew Angerer/AFP via Getty Images

As the Biden administration prepares to put action behind the most significant climate legislation in U.S. history, the Supreme Court appears ready to revoke a legal tool that — at one time — would have helped federal agencies defend their Inflation Reduction Act rollout against legal ambush.

While the high court is not expected to decide the fate of the Chevron doctrine until early summer, the justices indicated during oral arguments last week that they are deeply skeptical of the 40-year-old legal theory, which says courts should generally give leeway to agencies’ reasonable interpretations of their authority under ambiguous statutes.

Unlike other bedrock environmental laws passed 50 years ago, Congress enacted the Inflation Reduction Act in August 2022, leaving plenty of room for federal courts to battle it out with the Biden administration — or any future White House — over who has the best reading of the federal government’s powers under the landmark climate law, said Kirti Datla, director of strategic legal advocacy for Earthjustice.


A Supreme Court ruling that overturns Chevron, she said, “might raise the stakes for a very new statute, and there may be things to think about that you might not have to under an old statute.”

The Inflation Reduction Act is a sprawling piece of legislation that aims to bolster consumers’ purchasing power by tackling the federal budget deficit, lowering the cost of prescription drugs and investing in clean energy.

The legislation serves primarily as a funding mechanism, providing more than $270 billion in tax credits for electric vehicles, hydrogen, carbon sequestration and other technologies.

To implement those tax credits, federal agencies like the Treasury Department have created rules and guidance that have already drawn criticism — and sparked litigation threats — that the Biden administration is claiming too much authority under the Inflation Reduction Act to push policy goals such as promoting EVs.

At one time, the Chevron doctrine would have helped government lawyers fend off those claims in court.

Although the Supreme Court has not officially overruled Chevron, the doctrine has over the last decade fallen out of favor with conservative jurists. With that in mind, government lawyers have moved away from using the doctrine in their legal defenses, particularly in the Supreme Court — but they haven’t abandoned it completely.

“The Chevron doctrine is still actively used in a number of cases in the lower courts,” said Matt Leopold, a partner at Hunton Andrews Kurth and former EPA general counsel under former President Donald Trump.

That’s how the Chevron matter reached the Supreme Court in the first place: Two lower benches had used the doctrine to uphold a NOAA Fisheries rule that requires herring vessels to pay the salaries of overcatch monitors. Conservative lawyers then used those appeals court rulings to ask the justices to overturn the doctrine.

If the Supreme Court does do away with Chevron, the doctrine would no longer be available to government attorneys. And Datla said the court’s decision could become fodder for critics of rules crafted under the Inflation Reduction Act — and any other federal regulation.

“If the court overrules Chevron, that’s just a tool that people who are challenging regulations will have,” Datla said, “and I’m sure they’ll use it.”

‘Congress was very explicit’

For an agency to use Chevron to defend a rule, it must show that the language of the authorizing statute was unclear.

And while the limits of the federal government’s regulatory authority under the Inflation Reduction Act are still undefined, the statute also offers several directives that legal observers say are not up for interpretation.

For instance, the legislation left no room for doubt when it instructed the Interior Department to reinstate a massive oil lease sale in the Gulf of Mexico, said Kelly Johnson, a partner at Holland & Hart and a high-ranking official in the Department of Justice’s environment office during the George W. Bush administration.

“The IRA has good examples where Congress was very explicit,” she said.

Mike Kaercher, senior attorney adviser and director of NYU School of Law’s Climate Tax Project, said that while the Inflation Reduction Act is a new statute, it builds on preexisting tax provisions and prior interpretations of older federal laws. As one example, he said, EPA has advised the Treasury on the definition of “significant indirect emissions” under the Clean Air Act as the department formulated its clean hydrogen tax credit.

“We weren’t starting fully from scratch here,” Kaercher said.

But provisions of the Inflation Reduction Act that require agencies to make regulatory interpretations about tax credits and other issues are still likely to face litigation — and debate over exactly what powers the Inflation Reduction Act gave to federal agencies.

Rich Powell, CEO of the conservative clean energy nonprofit ClearPath, said he sees legal vulnerability for rules proposed by the Treasury in December that he said would limit existing nuclear plants’ access to funding for clean hydrogen development in violation of the statute.

The rules include “very assertive interpretations” of the Inflation Reduction Act, Powell said during an event hosted by Resources for the Future, leaving the proposal “significantly open to legal risk.”

Chevron alternatives

Because the Supreme Court now relies infrequently on the Chevron doctrine, government lawyers and their legal allies have focused in recent years on other arguments that are more likely to help them win in court, said Datla of Earthjustice.

A Supreme Court ruling this year that overrules Chevron, she said, is unlikely to unravel the Biden administration’s defense of its federal rules under the Inflation Reduction Act and other statutes. Federal agencies have other tools to protect their regulations, such as the Administrative Procedure Act, which sets out standards for rulemaking.

“At the agency level, the status quo is that — especially for highly politically salient regulations — the agency lawyers and policymakers are already aware that even though the Chevron doctrine exists, it is less likely to be applied in the Supreme Court and by certain lower court judges,” Datla said.

She added: “That’s the world we’re already dealing with.”

During arguments last week, some members of the Supreme Court appeared open to a ruling that would not necessarily overturn Chevron — but could have a chilling effect on lower courts that had previously used the doctrine.

Some of the court’s most conservative members appeared eager to do away with the doctrine and replace it with something like Skidmore deference, which says judges should yield to agencies’ interpretations of federal law only when they are persuasive.

If the court replaces Chevron with Skidmore, it would add an additional level of scrutiny for government lawyers’ defense of rules under the Inflation Reduction Act and other federal laws.

Skidmore is shorthand for simply the power to persuade,” said Leopold of Hunton Andrews Kurth. “In the oral argument, we heard justices talk about federal agencies as a co-equal branch. They have significant expertise, and they do make persuasive arguments.”

He added: “But Skidmore wouldn’t be the thumb on the scale that Chevron is.”

Reporter Niina H. Farah contributed.