Senate Republicans Introduce Resolution to Overturn Climate Disclosure Rules
Commentary by Samuel Ramer
Senate Banking Committee Republicans introduced a Congressional Review Act resolution of disapproval to overturn the SEC’s recently finalized climate disclosure rules. (See related coverage.)
Ranking Member Tim Scott (R-S.C.) led the group of 32 Republicans and West Virginia Democratic Senator Joe Manchin. Mr. Scott argued "[t]he SEC’s mission is to regulate our capital markets and ensure all Americans can safely share in their economic success – not to force a partisan climate agenda on American businesses. This rule is federal overreach at its worst, and the SEC should stay in its lane." He stated further that the rule is an example of SEC Chair Gensler's "aggressive regulatory agenda..."
The SEC recently stayed the rule, pending judicial review.
Commentary
The Congressional Review Act is an increasingly used tool that enables Congress, on simple majority votes, to nullify recently enacted regulations by administrative agencies like the SEC. Once passed by Congress, if the President signs the Resolution of Disapproval, the agency rule is invalidated as if it never went into effect.
There are complex time constraints, known as the “lookback” period, during which Congress can invalidate a rule under this Act. It is estimated that any rule finalized after late May 2024 will be vulnerable to a Congressional Review Act Resolution of Disapproval in this Congress or the next. However, this date is subject to the Congressional calendar, which can change.
Ranking Member Scott’s resolution would be likely to pass the House, but the chances it passes the Senate are lower. Even if approved by the Senate, President Biden would be unlikely to sign it. However, unsuccessful and untimely CRA resolutions can also serve as instruments of position taking, to show active resistance to the Executive Branch, and as a way to place political accountability for the agency rule on the opposing party. In addition, legislators will introduce such resolutions to place markers for action in the next Congress, should the opposition party take power.
It is unusual for the SEC to be the target of a Resolution of Disapproval ("RD"). According to the George Washington University, the SEC has only been targeted 5 times by RDs since 1996. By comparison, the EPA has been targeted a whopping 42 times during the same period. It is unsurprising that the SEC’s entrance into climate issues would receive similar treatment as the EPA, as elected officials calculate the political costs to rivals in allowing this type of agency action. Should there be a change in administration this November, companies and trade associations negatively affected by the SEC’s rule should seriously consider becoming involved in challenges to the rule under both the Administrative Procedures Act and the increasingly relevant Congressional Review Act.
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The SEC issued an Order staying its climate reporting rules for public companies in light of the fact that "petitions seeking review of the Final Rules were filed in multiples courts of appeals."
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Witnesses at a House Financial Services Oversight Subcommittee hearing titled "SEC Overreach: Examining the Need for Reform" reviewed the agency's approach to rulemaking.
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At a House Financial Services Subcommittee Oversight hearing titled "Victims of Regulatory Overreach: How the SEC’s Climate Disclosure Rule Will Harm Americans," witnesses testified on the SEC's "aggressive" regulatory agenda, describing an "onslaught of rushed rulemaking."
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House Financial Services Subcommittee on Oversight and Investigations Chair Bill Huizenga (R-MI) asserted that the SEC overstepped its authority by "advancing a progressive climate agenda."