Supreme Court Raises ‘Major Questions’ About EPA Climate Change Authority

Last week, the Supreme Court held that EPA lacks broad flexibility in how it may regulate greenhouse gas (“GHG”) emissions from power plants. Specifically, the Court ruled that Congress did not “clearly” assign to EPA an “extraordinary grant of regulatory authority” which would have allowed the agency to effectively force electric utilities to shut down or limit output of existing coal-fired power plants and replace the lost output by building or investing in cleaner energy sources. More broadly, Congress must make a “clear statement” of delegation for an agency to take an action with substantial political or economic significance, or in an area traditionally regulated by States.

The decision forces EPA to rely on its tested Clean Air Act (“CAA”) authorities and focus on “inside-the-fenceline” methods—technical improvements at the plant itself—of reducing emissions from power plants. But other regulated sectors—such as transportation, agriculture, forestry, and manufacturing—should also take note. Below, we discuss three key consequences of the ruling.

CPP Replacement

The agency has been drafting a CPP replacement and may have to shift course due to the Court’s ruling. EPA Administrator Michael Regan indicated earlier this year that the agency has an array of “bread and butter” regulations that do not stem from Section 111(d) that could pressure coal plants into retirement.[1] Administrator Regan reiterated that stance following the Court’s decision.[2] And although Chief Justice Roberts seemed to foreclose a new cap-and-trade system under Section 111(d), he suggested that a scheme not strictly limited to a set of inside-the-fenceline controls could pass muster.[3]

Effect on Other Rulemakings

We also expect the ruling to affect other agency actions with substantial and far-reaching economic impacts. First, a federal court recently enjoined a number of agencies from using certain interim estimates for the social cost of GHGs in their rulemakings, citing in part the major questions doctrine;[4] that decision is being appealed. Second, numerous states (including many that joined West Virginia here) and several trade associations have challenged EPA’s most recent set of GHG emissions standards for new light-duty vehicles;[5] the D.C. Circuit rejected a major questions argument in this context last year,[6] but the Court’s decision here could provide a stronger basis for raising the argument again. Third, early next term, the Court will hear arguments in Sackett v. EPA concerning the agency’s interpretation of (and exercise of jurisdiction over) “navigable waters” under the Clean Water Act, and at least one amicus has raised the major questions doctrine.[7] Finally, the Securities and Exchange Commission recently proposed to require GHG emissions disclosures by public companies, and at least one party raised the doctrine during the public comment period.[8] In these and similar cases, unforeseen risks may be harder to regulate because they would require Congress to proactively and clearly update agency delegations.

Effect on Justiciability

Finally, by rejecting the Government’s argument that because it did not intend to enforce the CPP, the case was moot, the Court may have opened the door to more frequent and earlier challenges to agency actions. Chief Justice Roberts wrote that an agency must be “absolutely clear” that it will not enforce a rule that is in effect, meaning that some suits alleging future or attenuated injury could no longer be deemed too speculative for review.

Conclusion

The Supreme Court’s decision marks a new era both in how the executive branch regulates GHG emissions from power plants and how it tackles policy challenges of vast significance. We will continue to track and unpack subsequent rulemakings and challenges to those rulemakings, as each could significantly reshape the contours of federal regulatory authority. For more information or to discuss possible representation, please contact Jack Lyman at 202-716-8653 or jlyman@martenlaw.com.