The U.S. Supreme Court issued a landmark 7-2 decision on June 20, 2025, in Diamond Alternative Energy, LLC v. EPA, clarifying the standing requirements for stakeholders challenging agency actions based on market effects rather than direct government regulation. The ruling, authored by Justice Brett Kavanaugh, emphasized that courts may rely on 'predictable, commonsense inferences' about market behavior when assessing whether unregulated parties have Article III standing. This decision lowers the bar for businesses seeking to challenge regulations that indirectly impact their markets.

The case stems from the EPA's 2022 reinstatement of a Clean Air Act (CAA) waiver for California's Advanced Clean Cars (ACC) Program, which allows the state to set stricter vehicle emissions standards than federal requirements. Fuel producers and several states challenged the reinstatement, arguing that the ACC Program would reduce demand for liquid fuels, thereby harming their economic interests. The U.S. Court of Appeals for the District of Columbia Circuit initially dismissed the challenge, citing insufficient evidence that vacating the waiver would redress the fuel producers' injuries. However, the Supreme Court reversed this decision, ruling that the fuel producers had 'readily established standing' by demonstrating a predictable chain of economic consequences.

The Court pointed to record evidence, including declarations that prior California rules had harmed fuel producers and statements from the EPA and California acknowledging the ACC Program's likely impact on fuel use. The ruling also noted affidavits from automakers supporting the rule to ensure a level playing field in the electric vehicle market. The decision underscores that plaintiffs need not provide expert economic evidence if they can show a clear, predictable link between regulatory action and their injuries.

This ruling has significant implications for regulatory challenges across industries, particularly in energy and transportation, where regulations often have cascading market effects. It also sets the stage for the D.C. Circuit to reconsider substantive arguments against the EPA's 2022 waiver reinstatement. Meanwhile, the Trump Administration has signaled plans to reassess the waiver, potentially reigniting the ping-ponging regulatory battle over California's emissions standards. The decision arrives amid broader uncertainty about the scope of CAA Section 209(b) and the impact of recent administrative law developments, such as West Virginia v. EPA and Loper Bright.

Congressional action in May 2025 further complicates the landscape, as lawmakers used the Congressional Review Act to nullify other California CAA waivers, raising questions about the legality of future waiver reinstatements. Holland & Knight will continue monitoring these developments, which could reshape the regulatory environment for years to come.