U.S. Supreme Court Curtails EPA’s Use of Clean Air Act Regulations to Facilitate Decarbonization of Electricity Markets

By Jeffrey Karp, Senior Counsel, and Edward Mahaffey, Legal Research and Writing Attorney

On June 30, 2022, the United States Supreme Court struck down the Environmental Protection Agency's (EPA's) Clean Power Plan ("CPP"), limiting the agency's authority to address climate change, in the case West Virginia v. EPA. The decision will inhibit the EPA's ability to significantly limit Greenhouse Gas ("GHG") emissions from the power sector, and is likely to impede the United States' goal of decarbonizing the electricity markets by 2035.

Background

Section 111 of the Clean Air Act (42 U.S.C. § 7411) directs EPA to regulate stationary sources of air pollution that may reasonably be anticipated to endanger public health or welfare.[1] The law defines a "stationary source" as "any building, structure, facility, or installation which emits or may emit any air pollutant."[2] While states submit specific plans for standards of performance under Section 111(d), EPA determines both the level of pollution reduction to be achieved and, via Section 111(a)(1), the "best system of emission reduction" for achieving it.[3]

Under the Obama administration, in 2015, EPA promulgated the Clean Power Plan rule, regulating carbon dioxide emissions from existing coal and natural gas power plants. While the rule's "best system of emissions reductions" included heat rate improvements at coal-based power plants, the agency noted that these measures alone would "lead to only small emission reductions for the source category."[4] Therefore, EPA included in its best system of emissions reductions "generation shifting" from coal power plants to natural gas power plants, and from both coal and natural gas plants to cleaner sources of electricity such as wind and solar power.[5]

Lawsuits challenging the rule were filed by states and industry, and on February 9, 2016, the Supreme Court stayed the Clean Power Plan for the duration of the appeals process.[6] On July 8, 2019, while the Clean Power Plan still was pending before the United States Court of Appeals for the District of Columbia, EPA repealed the Plan, concluding that the agency had acted "in excess of its statutory authority" because the concept of a "best system of emissions reductions" under Section 111 should be understood as applying only to measures taken on-site at the level of an individual facility.[7] The Trump administration’s EPA replaced the Clean Power Plan with a much more limited carbon dioxide emissions reduction rule, the Affordable Clean Energy Rule.[8]

The Affordable Clean Energy Rule, in turn, was struck down by the DC Circuit on January 19, 2021, which rejected what it called "the erroneous legal premise that the statutory text expressly foreclosed consideration of measures other than those that apply at and to the individual source."[9] Nevertheless, EPA, now under the Biden administration's control, indicated that it did not intend to implement the Clean Power Plan. Although the rule had never taken effect, the Clean Power Plan's goals already had been met; covered utilities had achieved a 32% decrease in carbon emissions from 2005 levels a decade earlier than expected.[10] Instead, the Biden administration announced that it planned to replace the rule struck down by the DC Circuit with a new rule to further reduce greenhouse gas emissions from existing power plants.

Basis for Decision

The Court first dispensed with the federal government defendants' justiciability arguments, which were based on the fact that there was no rule in effect and thus no controversy to adjudicate. The Court acknowledged the "representation that EPA has no intention of enforcing the Clean Power Plan prior to promulgating a new Section 111(d) rule," but noted that the agency did not deny that it still intended to "reimpose emissions limits predicated on generation shifting," even if not through the exact same regulation.[11]

The Court then turned to the merits. It invoked what it called the "major questions doctrine"[12] that applies to "'extraordinary cases…in which the 'history and the breadth of the authority that [the agency] has asserted,' and the 'economic and political significance' of that assertion, provide a 'reason to hesitate before concluding that Congress' meant to confer such authority."[13] In the Court's view, the doctrine applied to this case, because EPA was "arguing that Section 111(d) empowers it to substantially restructure the American energy market." EPA thus "'claim[ed] to discover in a long-extant statute an unheralded power' representing a 'transformative expansion in [its] regulatory authority,'" even though Section 111(d) "was designed to function as a gap filler and had rarely been used in the preceding decades."[14]

The Court rooted its major questions doctrine analysis in "both separation of powers principles and a practical understanding of legislative intent." In the "extraordinary cases" in which the doctrine applies, "something more than a merely plausible textual basis for the agency action is necessary. The agency instead must point to "clear congressional authorization" for the power it claims."[15]

The Court failed to find such a "clear congressional authorization." It pointed to EPA's supposed lack of relevant expertise regarding certain electricity-related issues[16] and asserted that "the Clean Power Plan essentially adopted a cap-and-trade scheme, or set of state cap-and-trade schemes, for carbon…Congress, however, has consistently rejected proposals to amend the Clean Air Act to create such a program."[17]

Broader Implications

The West Virginia v. EPA decision has several potentially sweeping implications. First, it limits EPA's authority to effectively address climate change. The dissenting justices accused the majority of stripping "the Environmental Protection Agency (EPA) of the power Congress gave it to respond to 'the most pressing environmental challenge of our time.'"[18] EPA has lost a key tool for hastening the transition away from fossil fuels, even as the effects of climate change become clearer and intensify. A regulation along the lines of the Trump administration’s Affordable Clean Energy Rule is insufficient to address the scale of the problem; EPA, even as it promulgated that rule, acknowledged that its projected emissions reductions and other effects “are modest and do not diverge dramatically from baseline expectations.”[19]

On the other hand, the decision did not directly limit EPA’s authority to regulate greenhouse gases more broadly. The Court itself noted that Section 111’s New Source Performance Standards program is only one of three major programs for regulating air pollution from stationary sources under the Clean Air Act; the two others are the National Ambient Air Quality Standards program and Hazardous Air Pollutants program.[20] These latter programs, however, have their own limitations. Their use in an effort to address climate change likely would be the target of other litigation, including an assertion of the major questions doctrine. The West Virginia decision does not, in theory, prevent Congress from more explicitly delegating to EPA the necessary authority to promulgate generation shifting regulations, although this step provides little comfort for the Biden administration or for environmentalists, given the unlikelihood of such a measure passing in the current Congress as long as the filibuster rules remain in effect.

The West Virginia decision potentially also may limit the future breadth of agency decision-making. The concept of the "major questions doctrine" is not new, but it never was invoked by name in a Supreme Court majority opinion before; the dissenters in West Virginia viewed the previous Supreme Court cases cited by the majority as examples of "normal statutory interpretation."[21] The exact contours of the doctrine are thus unclear: how "extraordinary" does a case need to be before the doctrine is applied, and what is sufficient evidence of "clear congressional authorization"? Critics of the decision and of the major questions doctrine view the doctrine as a dangerously open-ended tool for undermining the authority of regulatory agencies to implement congressionally-enacted statutes. The dissenting justices, for example, assert that among the "broader goals" of the doctrine is to prevent "agencies from doing important work, even though that is what Congress directed."[22]

The decision, nevertheless, did not go as far as it might have in upending administrative law precedent. The Court did not overturn, or even directly mention, Chevron deference, the principle of judicial deference to agencies' interpretations of the statutes they administer; instead, Chevron deference implicitly was trumped by the major questions doctrine, and thus presumably still would apply when an agency does not make an "extraordinary" claim of authority.

The full scope of West Virginia's implications nonetheless remains uncertain; it depends not only on EPA's future attempts to regulate greenhouse gases, but also on how lower courts interpret the case and how the Supreme Court itself interprets the major questions doctrine in future cases. At the very least, the decision will force EPA to make significant changes to its approach in seeking to reduce GHG emissions, and will serve as a key precedent debated in future cases regarding the scope of federal agency authority.

[1] 42 U.S.C. § 7411(b).
[2] 42 U.S.C. § 7411(a)(3).
[3] 42 U.S.C. § 7411(a)(1) and 7411(d).
[4] 80 Fed. Reg. 64727.
[5] 80 Fed. Reg. 64728-29.
[6] West Virginia v. EPA, 577 U.S. 1126 (2016).
[7] 84 Fed. Reg. 32523-24.
[8] Id. at 32532.
[9] Am. Lung Ass’n v. EPA, 985 F.3d 914 at 995.
[10] https://www.epa.gov/sites/default/files/2021-02/documents/ace_letter_021121.doc_signed.pdf; https://cleanenergynews.ihsmarkit.com/research-analysis/biden-moves-past-clean-power-plan-with-an-eye-to-a-clean-elect.html.
[11] West Virginia v. EPA, slip op. at 15-16 (June 30, 2022).
[12] Id. at 11.
[13] Id. at 17, quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 159-60 (2000).
[14] Id. at 20, quoting Utility Air Regulatory Group v. EPA, 573 U.S. 304, 324 (2014).
[15] Id. at 19, quoting Utility Air at 324.
[16] Id. at 25.
[17] Id. at 27.
[18] West Virginia at 1 (Kagan, J., dissenting), quoting Massachusetts v. EPA, 549 U. S. 497, 505 (2007).
[19] 84 Fed. Reg. at 32561.
[20] West Virginia at 3-4.
[21] https://crsreports.congress.gov/product/pdf/IF/IF12077; West Virginia at 13 and 15 (Kagan, J., dissenting).
[22] West Virginia at 28-29 (Kagan, J., dissenting).