February 2016, Vol. 243, No. 2

Web Exclusive

Supreme Court Vacancy Leaves Energy Industry in Limbo

The death of U.S. Supreme Court Justice Antonin Scalia will likely prove to be a turning point in U.S. history, and no one will be immune – not oil, not coal, not natural gas, and not renewable energy. The future of the entire energy industry, which was already upended by the Environmental Protection Agency’s (EPA) Clean Power Plan, is now murkier than ever.

A little over a week ago, the Supreme Court—at the time divided five to four, issued a temporary stay on the implementation of the EPA’s Clean Power Plan – a monstrosity of a plan at 1,560 pages – that would reduce carbon emissions from power plants in an effort, according to the EPA, to combat climate change.

The ruling was bad news for renewable energy and the EPA, and great news for coal—the industry that stood to lose the most from the plan.

Although the Supreme Court issued a temporary halt, the case is actually being heard by a lower appeals court after 29 states filed suit against the EPA. Scalia’s death left the U.S. Supreme Court split down the middle with four justices appointed by Democratic presidents, and four justices appointed by Republican presidents. With the court now split 4-4, the EPA’s plan will likely revert to the lower court’s decision, which is probably bad news for coal.

Beyond the Clean Power Plan

A Reagan appointment, Justice Scalia was known for his constitutionalist views, his unfettered comments, and his passion for interpreting the constitution as the founders would have—he is also heralded by many on both sides of the aisle as the most consequential judge the U.S. Supreme Court has ever seen.

Scalia’s death has the potential to vastly change the dynamic of the court for a variety of hot-button issues, and the void has implications far beyond the Clean Power Plan, and generally speaking, could be a positive turn of events for the EPA.

Scalia served as the very ammunition for the states that are questioning the constitutionality of the Clean Power Plan. In a 2014 ruling with regards to the Clean Power Plan’s predecessor, the Clean Air Act, Scalia said “EPA’s interpretation is also unreasonable because it would bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization,” implying that the EPA cannot regulate without congressional approval.

The idea that the EPA might have to operate within the confines of stricter congressional oversight is now but a remote possibility – at least in the short term. And without Scalia, the 4-4 split could very well reopen the door for further broad-stroke EPA actions.

Sigh of Relief

Conservatives, the oil industry, and especially coal producers are all holding their breath, fearing that Obama’s nominee, whoever that may be, may for now, swing the Supreme Court in favor of natural gas and eventually, renewable energy.

But a sigh of relief may be in order. Although Obama will most certainly put forth a new nominee to take the place of Justice Scalia—a nominee that would, if approved, tip the blind scales of justice towards a more liberal and environmentally friendly agenda – in no realistic scenario would the current Senate approve such a nominee.

Senate majority leader Mitch McConnell has already announced that the Senate will reject any candidate that Obama puts forward.

If Obama were to successfully choose the next Supreme Court justice, it would be the most noteworthy of Obama’s legacies – a third Obama-chosen life-term justice, making a definitive mark on the Supreme Court with one-third of the justices being his appointees.

What are the Odds?

That scenario is unlikely, but that’s not Obama’s only path to appointing a new justice. Obama may very well submit a nominee when the Senate is not in session, bypassing the need for Senate approval with a recess appointment. The Senate is currently in recess right now, leaving the door open for Obama to do just that. To prevent any recess appointments, the Senate is planning on holding as many pro forma sessions as necessary.

Another probable scenario is that the vacancy will remain until a new President is elected. While some are claiming that an extended vacancy is unprecedented, the U.S. has a history of long Supreme Court vacancies, especially when a vacancy occurs during the last year of a president’s term.

The longest vacancy was during President Tyler’s term, when the Supreme Court was one justice short for a whopping 835 days after the Senate rejected nine separate nominees.

Just days before Scalia’s death, presidential candidate Hillary Clinton said that the suggestion that she should nominate President Obama as a Supreme Court justice was “a great idea.”

If one of the many Republican candidates are elected, a conservative nominee for justice would be put forth, but the chances are that any other justice would be less conservative than Scalia.

Winners, Losers

Whatever the final outcome, the current situation has, at least for the time being, winners and losers.

Coal producers – Loser. The death of Scalia is bad news for coal. The EPA regulations that the Supreme Court placed on hold may be reinstated short-term.

Shale/natural gas – Winner. At least temporarily. If the halt on the Clean Power Plan is lifted, and with the EPA left to champion the efforts to move away from coal in favor of cleaner natural gas without the restriction of the Supreme Court or Congress, natural gas will get a share of the market currently held by coal. Longer term, any loosening of the EPA reins will be bad for natural gas as the shift to renewables is its ultimate goal.

Renewables – Winner. Although it may not be seen for quite some time, Justice Scalia’s death is good for clean and renewable energy efforts.

American Petroleum Institute – With the Supreme Court currently split down the middle, a recent lawsuit filed by the American Petroleum Institute against the EPA may never make it to the Supreme Court, or if it does, the court would be unable to read a decision, leaving its fate in the hands of the lower Court of Appeals. If unsuccessful, the lawsuit would favor biofuels over petroleum.

The energy industry must now hold its collective breath until such matters are resolved, and brace itself for the possibility that we will not see a ninth justice for quite some time.

Written by Julianne Geiger, Oilprice.com


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