Tag: climate disclosure regulation
Chamber seeks to intervene in environmental group challenges to SEC climate disclosure rules
As you probably remember, the SEC’s climate disclosure rules were challenged not only by those contending that the rules went too far and that the SEC had no authority—think, for example, Liberty Energy, the State of Iowa and the Chamber of Commerce—but also by the Sierra Club and the Natural Resources Defense Council, which claimed that the SEC did have the legal authority to adopt the rules but did not go far enough and left out some important information. All those cases have recently been consolidated in the Eighth Circuit. Now, the Chamber of Commerce has moved for leave to intervene in the cases brought by the Sierra Club and the NRDC “to defend those portions of the final rule that refrained from imposing the additional disclosure requirements the environmental groups would have this Court require the SEC to impose.” The Sierra Club, the motion contends, “intends to argue that the SEC should have required public companies to disclose not only their own greenhouse-gas emissions, but also the emissions from the ‘use of [their] products’ and across their ‘supply chains’”; that is, that the SEC failed to impose a requirement to disclose Scope 3 GHG emissions.
Another House hearing on climate disclosure rules?
Yesterday, the House Financial Services Committee held a hearing entitled “Beyond Scope: How the SEC’s Climate Rule Threatens American Markets.” Since, as one of the committee members observed, this is their sixth hearing on the SEC and twelfth on climate change, there was a lot of the same old, same old—just from different witnesses. (One Committee member called this topic a “manufactured culture war” that the Committee is relitigating; why was the Committee wasting time on this topic when they should be dealing with the problems in housing?) At the hearing, we heard familiar statements to the effect of: the SEC is just pandering to political interest groups; the rules require “extensive and granular” disclosure of information that many do not view to be material; the rules are outside the SEC’s authority and an instance of “mission creep”; this is an attempt by the Biden administration to use regulation to force on the public the climate agenda that it was unable to get through Congress; the costs will be burdensome especially for smaller companies and will result in higher costs and fewer public companies. Or: investors have been demanding this information; voluntary disclosure is inconsistent, unreliable and not comparable; and many companies will already need to comply with the more rigorous rules of the EU and California anyway, so the cost will not be as great as some fear; the SEC acted completely within its wheelhouse. Sound familiar? But there were some highlights, so let’s hit those.
In its discretion, SEC issues stay of final climate disclosure rules
The SEC has determined, in this Order posted today, to exercise its discretion to stay the final climate disclosure rules “pending the completion of judicial review of the consolidated Eighth Circuit petitions.” If you have been following the SEC travails regarding the climate disclosure rules, you know that there were ten different petitions—the tenth petition having been filed by the National Legal and Policy Center and the Oil and Gas Workers Association—consolidated in the Eighth Circuit, challenging the rules and several asking the court for a stay. The SEC had opposed the stay. (See, e.g., this PubCo post, this PubCo post and this PubCo post.) (One of the petitioners, Liberty Energy, even filed a precautionary complaint challenging the final rules in a Texas District Court, just in case jurisdiction was ultimately not accepted in the Court of Appeals.) At the end of March, the SEC had filed a motion to establish a consolidated briefing schedule relating to all of the motions seeking a stay; 31 petitioners opposed the SEC’s motion, instead asking the court to expedite briefing on the existing and expected emergency stay motions. Under the Exchange Act and the APA, the SEC “has discretion to stay its rules pending judicial review if it finds that ‘justice so requires.’” According to the Order, the SEC has determined that justice requires that the SEC stay the final rules.
Commissioner Uyeda warns: the SEC “has gone astray”
In remarks at PLI’s SEC Speaks, SEC Commissioner Mark Uyeda expressed his concern that the SEC “has gone astray”: instead of focusing on “its narrow mission,” Uyeda fears, the SEC is acceding to the pressure of political activists who “seek to transform the agency’s authority to achieve policy objectives that are outside of its statutory mandate.” To illustrate, Uyeda highlights two examples: the climate disclosure rules, just adopted by the SEC, and the conflict minerals rules, which were adopted by the SEC over a decade ago and are here presented as a cautionary tale. While the conflict minerals rules were actually mandated by Congress, the climate disclosure rules are something different: the SEC has “acted on its own volition,” Uyeda contends, in adopting “a climate disclosure rule that seeks to exert societal pressure on companies to change their behavior. It is the Commission that determined to delve into matters beyond its jurisdiction and expertise.” To Uyeda, “this action deviates from the Commission’s mission and contravenes established law.”
SEC requests court deny stay in climate disclosure rules litigation
It’s been a day or two now—what’s going on with the SEC’s climate disclosure rules litigation? When we left our tale, petitioners Liberty and Nomad had submitted this notice of pending emergency motion advising the Eighth Circuit of their request for a new administrative stay and a stay pending judicial review in connection with their petition challenging the rules. And the SEC was directed to file a response by the close of business yesterday. (See this PubCo post.) As directed by the Court, the SEC did submit a letter of response. Now, another petitioner, the U.S. Chamber of Commerce, has also moved for a stay pending appeal. And a new petition for review has been filed.
Back on the SEC climate rules rollercoaster in the Eighth Circuit—will a new stay be granted?
Liberty Energy Incorporated and Nomad Proppant Services LLC decided to give it another go. Are you surprised? In this notice of pending emergency motion, Liberty and Nomad advise the Eighth Circuit of their request for a new administrative stay and a stay pending judicial review in connection with their petition challenging the SEC’s final climate disclosure rules. As you may remember, a petition for review of the final rules was filed by Liberty and Nomad on March 6 in the Fifth Circuit and their motion for an administrative stay was granted on March 15. That case was just one of nine challenging the SEC’s rules in six different circuits. Upon request of the SEC, on March 21, 2024, the Judicial Panel on Multidistrict Litigation issued a consolidation order in these cases, randomly selecting the Eighth Circuit as the court in which to consolidate these petitions. Following that consolidation order, the Fifth Circuit ordered the transfer of Liberty’s petition to the Eighth Circuit and the dissolution of the administrative stay. (See this PubCo post.)
Stay of SEC climate disclosure rules lifted
As discussed in these PubCo posts from Monday, Saturday, Tuesday and Thursday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine challenging the SEC’s rules in six different circuits. As previously reported, upon request of the SEC, on March 21, 2024, the Judicial Panel on Multidistrict Litigation issued a consolidation order in these cases, randomly selecting the Eighth Circuit as the court in which to consolidate these petitions. Bloomberg has reported that, of 17 appellate judges in the Eighth Circuit, only one was appointed by a Democrat. Not that the politics should matter, of course.
Judicial Panel consolidates petitions challenging SEC climate disclosure rules
As discussed in these PubCo posts from Monday, Saturday and Tuesday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine challenging the SEC’s rules in six different circuits, with seven petitioners contending that the SEC went too far and had no authority to issue the rules and two affirming the SEC’s authority and contending that, in rolling back the proposal, the SEC has “fallen short of its statutory mandate to protect investors.”
New Cooley Alert: “Comparing the SEC Climate Rules to California, EU and ISSB Disclosure Frameworks”
If you’ve been following the developments in climate disclosure regulation, you know that many U.S. companies may well be subject to disclosure regulations beyond those of the SEC; regulations adopted in the European Union, countries outside the EU and in some states, such as California, could be applicable. And some aspects of those regulations are more sweeping—or just different—than those recently adopted by the SEC. For example, the EU employs the concept of “double materiality,” meaning the impacts of companies’ “business on the environment and society irrespective of the positive or negative effect of such impacts on companies’ financials”; by contrast, the SEC looks at materiality from the perspective of the reasonable investor making investment or voting decisions. In light of these and other differences, companies may face challenges in attempting to implement all of the applicable rules. This essential new Cooley Alert, Comparing the SEC Climate Rules to California, EU and ISSB Disclosure Frameworks, from our ESG group provides some welcome guidance in sorting through the requirements of the different frameworks.
Where will the fate of the SEC’s final climate rules be determined?
As discussed in these PubCo posts from Monday and Saturday, on March 15, in a one-sentence order, the Fifth Circuit granted a motion by Liberty Energy Inc. and Nomad Proppant Services LLC for an administrative stay of the SEC final climate disclosure rules. That case was just one of nine filed (so far) challenging the SEC’s rules in six different circuits, with seven petitioners contending that the SEC went too far and had no authority to issue the rules and two affirming the SEC’s authority and contending that, in rolling back the proposal, the SEC has “fallen short of its statutory mandate to protect investors.” As previously noted, the longevity of the Fifth Circuit stay, as well as the ultimate outcome of litigation about the rules, could well be determined by another court that is designated by the Judicial Panel on Multidistrict Litigation to hear the multiple pending challenges to the rules on a consolidated basis. How does that work? This article in Bloomberg does some explaining.
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