CLIMATE REGULATION
Liberty Energy Inc. v. SEC
Date: March 26, 2024
Issue: Whether the Securities and Exchange Commission’s (SEC) climate disclosure final rule violates the Administrative Procedure Act.
Case Summary: The Eighth Circuit will determine whether the Securities and Exchange Commission’s climate disclosure final rule violates the Administrative Procedure Act (APA).
In a 3-2 vote, a divided SEC adopted its final rule which requires public companies to disclose information in three key areas. First, public companies must disclose climate-related financial risks that are reasonably likely to have a material impact on the registrant’s business strategy, operational results, or financial condition. Companies must also disclose the actual and potential material impacts on any identified climate-related risks on their strategy, business model and outlook. Second, companies must disclose information on their greenhouse gas emissions. Companies with a publicly traded equity value of $75 million or more must file information about their Scope 1 and 2 emissions. Scope 1 covers emissions from sources that an organization owns or controls directly. While Scope 2 are emissions that a company causes indirectly. These emissions come from where the energy it purchases and uses is produced. Finally, companies must disclose any climate-related targets or transition plans. Registrants must disclose any goals related to climate change that materially affect the registrant’s business.
Several entities sued the SEC challenging its authority to promulgate its final rule. Nine lawsuits spanned six appellate courts seeking to overturn the final rule. Ten states led by West Virginia and Georgia petitioned the Eleventh Circuit to review the rule, arguing the SEC lacks the authority to enact climate regulations because it is a financial regulator.
In Liberty Energy Inc. v. SEC, Liberty Energy Inc. and Nomad Proppant Services LLC (the petitioners) filed an emergency motion for an administrative stay pending judicial review. The petitioners argued they are likely to succeed on the merits. According to the petitioners, the final rule: violates the major questions doctrine; is arbitrary and capricious; and violates the First Amendment. The petitioners also argued that they will suffer irreparable injury if the final rule is implemented. The SEC estimated that compliance with the final rule will cost at least $4.1 billion with over $2.6 billion of that in the first year alone. The petitioners contended complying with a regulation later held invalid almost always produces the irreparable harm of nonrecoverable compliance costs. In a 3-0 decision, a Fifth Circuit panel granted the administrative stay without providing reasoning on its decision.
The SEC asked the U.S. Judicial Panel on Multidistrict Litigation to consolidate the legal challenges to a single federal court. In a lottery, the Eighth Circuit was randomly selected to review the consolidated lawsuit. Subsequently, the Fifth Circuit lifted its temporary stay of the final rule. In a letter to the clerk, Liberty Energy urged the Eighth Circuit to grant their emergency motion for an administrative stay and a stay pending judicial review, arguing the case law is the same in both the Fifth and Eighth Circuits. Liberty Energy asserted that briefing is complete on the motion. Moreover, Liberty Energy emphasized that given the time sensitivity and efficiency benefits of relying on the existing briefing the Eighth Circuit should grant the stay.
Bottom Line: The Eighth Circuit has not ruled on the emergency motion for a stay.
Documents: Petition
