Supreme Court Hears Arguments for Limiting EPA Regulation of Greenhouse Gases

The U.S. Supreme Court heard arguments this week in a case seeking to limit EPA’s authority to regulate greenhouse gas (“GHG”) emissions. The principal issue in West Virginia v. EPA is the applicability and scope of the “major questions” doctrine. Under that doctrine, Congress must provide a “clear statement” if it seeks to give a federal agency authority to make decisions of vast economic and political significance.[i] Nearly two dozen Republican-led States as well as two coal companies sought to portray EPA climate change regulations as an administrative overreach.

The Clean Power Plan and the ACE Rule

Clean Air Act Section 111(d) authorizes EPA to impose emissions control standards known as the “best system of emission reduction” or “BSER” for existing stationary sources of air pollutants.[ii] The Obama Administration used that authority to issue the Clean Power Plan (“CPP”) to regulate GHG emissions from existing power plants. Instead of specifying rules at the individual source level, the CPP provided States with targets for grid-wide emissions reductions that States could achieve through initiatives that promoted “generation shifting” from carbon-intensive energy sources to renewable energy sources. The Obama Administration framed this generation shift as a “system” when applying BSER.[iii]

The Trump Administration repealed the CPP and in the same rulemaking replaced it with the Affordable Clean Energy (“ACE”) Rule. The ACE Rule regulated only existing coal-fired plants by requiring marginal technological changes that would decrease their GHG emissions. The Trump Administration justified this move with the legal conclusion that BSER could not encompass sector-wide regulations like generation shifting. Rather, BSER was limited to technological changes within individual powerplants.[iv] The shorthand for this debate is whether EPA may regulate “beyond the fenceline” of the plant.

As we discussed in a previous article, in a 2-1 ruling issued the day before President Biden took office, the U.S. Court of Appeals for the District of Columbia Circuit vacated both the Trump Administration’s decision to repeal the CPP and its ACE Rule.[v] The court held that the ACE rulemaking was conducted in an arbitrary and capricious manner meant “to slow the process for reduction of emissions,” and that its implementation “hinged on a fundamental misconstruction” of Section 111(d).[vi]

Briefing and Argument before the Supreme Court

The petitioners’ briefing in the Supreme Court argued that Section 111(d) does not clearly grant EPA authority to “upend the power industry” because such a grant would run afoul of the “major questions” doctrine and violate core federalism principles that divide responsibilities over environmental issues between the States and the federal government. They also argued that the text of Section 111(d)—including its language, structure, and context—indicates that the “system” of BSER excludes beyond the fenceline solutions. Finally, they argued that, in the face of statutory ambiguity, the Court should avoid the question of whether Congress in Section 111(d) provided sufficient guidance for how EPA should implement it by rejecting the government’s broad interpretation of the provision.[vii]

The Biden Administration contended that the Clean Air Act’s statutory text does not preclude EPA from looking beyond the fenceline for achieving emissions reductions. It cited an explicit grant of authority to establish a “system” that reaches beyond individual sources (the acid rain program) and an explicit limit to permissible components of a particular “system” (the technological system of continuous emission reduction required by the New Source Performance Standards authorized in amendments to Section 111). Thus, EPA argued, Congress consciously omitted a source-specific requirement for existing sources in Section 111(d). EPA also pushed back on the petitioners’ major questions and nondelegation arguments, saying that a recognition by the Court of “EPA’s authority to include some generation-shifting mechanisms (or beyond the fenceline measures more generally) in its BSER would not compel the agency to utilize such measures at all, let alone to utilize the most impactful versions of them.” Furthermore, EPA contended that statutory constraints on its authority are already in place.[viii]

The justices heard more than two hours of argument from the parties on Monday.[ix] Much of the questioning revolved around the application and scope of the major questions doctrine and, to a lesser extent, the non-delegation doctrine. Justice Thomas questioned West Virginia Solicitor General Lindsay See over whether the petitioners needed the major questions doctrine to win and how their statutory construction arguments fit in with the doctrine.[x] Justice Barrett asked about how to distinguish the major questions doctrine from the non-delegation doctrine, and seemed to root the major questions doctrine in linguistic assumptions about statutory drafting rather than the Constitution.[xi] Similarly, Justice Kavanaugh focused his questioning of EPA on the major questions doctrine, asking whether the agency disagreed with the doctrine generally or only its application here.[xii] Kavanaugh expressed skepticism of the U.S. position in other ways, noting “Congress knows how to do cap-and-trade” and characterizing Section 111(d) as “an old statute that wasn’t necessarily designed for something like” what the U.S. was arguing.[xiii]

Potential Outcomes

The Court could craft its decision in a number of ways.

It could decline to reach the merits, agreeing with the U.S. that there is no rule yet in place for it to review. The petitioners argued that the repeal of a regulation harmed their business interests in a legally cognizable way.[xiv] Adopting this position would strengthen FCC v. Fox’s requirement that an agency changing course at least needs to recognize the change.[xv] The Court has cautioned that “it is not that further justification is demanded by the mere fact of policy change; but that a reasoned explanation is needed for disregarding facts and circumstances that underlay or were engendered by the prior policy.”[xvi]

The Court could rule more broadly and provide its own clear statement of the major questions doctrine. Chief Justice Roberts and Justices Thomas, Alito, Gorsuch, and Kavanaugh each have questioned agency authority to enact sweeping regulations in recent opinions.[xvii] Justice Barrett did so in a 2014 law review article.[xviii] The justices may see this case as an opportunity to address the reach of executive agencies to promulgate rules under environmental statutes—and in other contexts as well.

What’s Next

EPA has been working to develop a replacement for the CPP and ACE Rule, although indications of what form that rule would take have been vague.[xix] When asked directly about a timeline by Justice Kavanaugh, the Solicitor General indicated the agency “expects to issue a notice of proposed rulemaking by the end of this year.”[xx] EPA may need to set those efforts aside in light of the arguments and the case outcome. EPA Administrator Regan indicated recently that the agency has an array of “bread and butter” regulations that could similarly pressure coal plants into retirement (e.g., programs concerning regional haze, mercury, and coal ash).[xxi] A decision is likely to be issued by the close of the Court’s term in June.