Last week, State Attorneys General from 24 states submitted a letter to the SEC’s climate-related disclosure docket arguing that the recent Supreme Court decision rolling back Environmental Protection Agency (EPA) authority reaffirms federal agencies need to stay in their regulatory lane. In short, the SEC’s proposed climate disclosure rule is the very essence of “SEC Mission Creep.”
The West Virginia v. EPA decision from late June overturned a lower court ruling that gave the EPA virtually unlimited regulatory power to regulate greenhouse gas emissions at power plants through the Clean Air Act. The AGs’ note that this ruling sets the tone for other agencies like the SEC in that the SEC lacks authority to implement new disclosure requirements and goes well beyond what Congress intended the SEC to regulate.
Applying what is known as the “major questions doctrine,” this canon ensures agencies don’t interpret their congressionally delegated authority in ways Congress didn’t intend. Under this doctrine, an agency’s regulatory authority can be rejected when:
- The underlying claim of authority concerns an issue of “vast ‘economic and political significance,’” and
- Congress has not clearly empowered the agency with authority over the issue.
In their original letter to the docket submitted on June 15, the AGs cited this same legal standard saying their rule “offends” the major questions doctrine explaining that “Congress does not delegate massive and economy-defining power to an agency without speaking clearly.” They also argue that because the agency is not a climate expert, “the SEC’s position here is even weaker than other agencies’ arguments in cases in which the Supreme Court found there was no clear delegation… At least there, the agencies were regulating in their own spheres…”
The AGs draw parallels between the two agencies situations in their latest letter, specifically noting that they both use vague text to interpret and revise the nature of statutes to constrain how public companies function.
Just like the EPA thought it was empowered to effect sweeping changes in the nation’s power grid, the SEC’s fundamental change to the statutory scheme around public disclosures would likely not pass the SCOTUS smell test.