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Liberty (LBRT) Wins Litigation, Challenges SEC's Climate Rule

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U.S.-based energy services company, Liberty Energy Inc. (LBRT - Free Report) has released an update regarding the decision by the United States Court of Appeals against the petition filed by Liberty and Nomad Proppant Services LLC. The court ruled in favor of temporarily halting the enforcement of the rule while awaiting further litigation.

Liberty Energy Gets SEC Climate Disclosure Rules Halted

The U.S. Court of Appeals for the 5th Circuit has granted an administrative stay of the Securities and Exchange Commission’s Climate Rule. The rule titled “The Enhancement and Standardization of Climate-Related Disclosures for Investors” was adopted on Mar 6, 2024.

The rules are designated to standardize climate-related company disclosures regarding greenhouse gas emissions and weather-related risks. It also aims to discuss the strategies that companies plan to adopt to transition toward a low-carbon future. However, LBRT challenged the rules stating that it will increase the burden of costs on the energy industry, which will result in potentially higher energy costs for U.S. consumers.

Liberty Energy filed a litigation to challenge it stating that it exceeded the SEC’s authority and applied increased costs on the energy sector without any clear, foreseeable benefit.

The court’s decision was received with gratitude by the CEO of the company. Liberty stood clear on its position, stating the importance of affordable and reliable sources of energy for an improved quality of life. However, regulatory actions like the SEC’s Climate Rule, are making it difficult to provide affordable energy.

Liberty’s CEO also highlighted the need to engage in open, fact-based dialogue on energy policy issues instead of resorting to litigious means. The company respects the SEC’s role in protecting investors from financial fraud. However, on this occasion, it feels the need to challenge the Climate Rule, as it believes that the SEC may have overstepped its authorities because of political pressure. As per Liberty, involving itself in matters related to climate and environment is not something that the SEC can do without proper authorization by Congress.

Furthermore, Liberty argues that the Climate Rule adopted by the SEC is arbitrary and capricious as it requires public companies to spend a significant amount of resources to provide climate-related information in their SEC filings, without any resulting benefits. The Climate Rule also infringes on the First Amendment rights of companies by compelling them to comment on a controversial political issue, which is climate change.

While Liberty Energy has managed to get a favorable court decision, companies in the Oil/Energy space often find themselves embroiled in climate-related issues. Here are a couple of examples.

Recent Instances of Energy Company’s Brush With Law

Chevron Corporation (CVX - Free Report) , one of the largest oil companies in the world, agreed to pay more than $13 million in fines for a series of oil spills that occurred in California. One of the most significant fines imposed on Chevron is associated with a devastating oil spill in Kern County in 2019. The spill, which dumped more than 800,000 gallons (3 million liters) of oil and water into a canyon, shook the core of the state's oil industry. While Chevron has already undertaken the cleanup efforts for this spill, it now faces a $5.6 million fine, marking a substantial punitive measure. In addition to the Kern County incident, Chevron has agreed to pay a $7.5 million fine for more than 70 smaller spills that occurred between 2018 and 2023.

In another case, Amplify Energy Corporation (AMPY - Free Report) , a U.S.-based upstream energy player, reported that the sheen off the coast of Huntington Beach in California, seen on Mar 8, is not known to be related to their operations. The incident was reported at the site of a massive spill in 2021. Amplify Energy Corp. owns the pipeline that had previously spilled nearly 588 barrels (25,000 gallons approximately) of crude oil in the ocean and along the coast of Huntington Beach in 2021. However, as mentioned earlier, the company believes that the sheen is not related to its operations.

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