Coming mere days after the Securities and Exchange Commission (SEC) released a final rule requiring registrants to disclose certain climate-related information, a federal appeals court has issued a temporary stay halting implementation of the regulation.
A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit in an unpublished, one-sentence order on March 15 granted the stay requested by Liberty Energy and Nomad Proppant Services—energy companies that are challenging the SEC’s new guidance.
Liberty and Nomad filed their suit the same day (March 6) the SEC voted along party lines to finalize the rulemaking, arguing, among other things, that the SEC exceeded its authority in issuing the new rule. Just two days later, on March 8, plaintiff Liberty requested the stay.
In that March 8 filing, Liberty argued that a stay was necessary to address the “irreparable injury in the form of unrecoverable compliance costs and constitutional injuries” resulting from the SEC’s rulemaking.
The final rules require a registrant to disclose, among other things:
- Climate-related risks that have had, or are reasonably likely to have, a material impact on the registrant’s business strategy, results of operations, or financial condition;
- Activities to mitigate or adapt to such risks, including a description of material expenditures incurred and material impacts on financial estimates and assumptions that directly result from such mitigation or adaptation activities;
- Information about the registrant's board of directors' oversight of climate-related risks and management’s role in managing material climate-related risks; and
- Information on any climate-related targets or goals that are material to the registrant's business, results of operations, or financial condition.
For its part, the SEC in a March 13 filing responded that issuing a stay would be premature and that the claims by Liberty were speculative. “Petitioners seek emergency relief, but their asserted harms are not immediate. The challenged rules, which have not yet been published in the Federal Register, have extended compliance dates that will not require any disclosures before March 2026 at the earliest,” the SEC’s appellate counsel argued.
At last check, at least five suits have been filed regarding the rule. Louisiana, Texas and Florida, along with the U.S. Chamber of Commerce, Texas Association of Business and the Longview Chamber of Commerce have signed on to the Liberty and Nomad suit. The other suits include those filed by attorneys general for various Republican-led states, the Ohio Bureau of Workers’ Compensation, and one by the Sierra Club, which contends that the rule did not go far enough.
In addition to the Fifth Circuit, the current challenges have been filed in the Sixth, Eighth, Eleventh and D.C. Circuits. According to various reports, the suits will likely be consolidated, and a lottery will determine which court hears the challenges.
Meanwhile, Congress is also taking aim at the SEC’s climate-disclosure rulemaking. On March 18, the House Financial Services Subcommittee on Oversight and Investigations held a field hearing in Lebanon, Tennessee entitled “Victims of Regulatory Overreach: How the SEC’s Climate Disclosure Rule Will Harm Americans.”
In his opening statement, Rep. Bill Huizenga (R-MI), who is chair of the subcommittee, stated “In the two years since the climate disclosure rule was proposed, we have witnessed an unprecedented assault on our capital markets. The Commission finalized the climate rule despite no clear congressional authorization. Although Chair Gensler has repeatedly reminded the public that he is not a ‘climate regulator,’ under his leadership, the SEC has strayed far from its clear statutory mission.”
