The Supreme Court and EPA Authority

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On June 30, the Supreme Court announced its decision in West Virginia v. EPA, a case that concerned the scope of the Environmental Protection Agency’s (EPA) authority under the Clean Air Act (CAA) to regulate greenhouse gases emissions from existing power plants. Given the ideologically conservative make-up of the Court following the addition of three far-right leaning Justices during the Trump administration, the Court’s decision to constrain the EPA was both expected and yet also radical.

The ruling significantly narrows the scope of EPA’s authority to reduce climate pollution. The decision, moreover, also strongly suggests that the Court will take a skeptical attitude toward ambitious Executive Branch action in future cases as well. This section explains the West Virginia case and the Court’s ruling and analyzes its implications for future climate policymaking by the Biden administration.

Background

West Virginia v. EPA centered on Section 111(d) of the CAA, which gives EPA authority to regulate existing sources of air pollutants. Under that section of the CAA, the EPA administrator decides the amount of pollution reduction that must be achieved based on the “best system of emissions reduction” (BSER) that has been adequately demonstrated, along with considerations of cost, human health, environmental impacts, and energy requirements.

During the Obama administration, EPA promulgated the Clean Power Plan (CPP) under Section 111(d). The CPP used three “building blocks” for existing coal-fired power plants. The first “involved heat-rate improvements” – measures plants could take to burn coal more efficiently. But EPA acknowledged that these would lead only to small emission reductions and determined that much larger reductions were needed to address climate change. Thus, EPA used two additional building blocks, both of which involved “generation shifting” from higher-emitting to lower-emitting electricity fuels and/or producers. Building block two sought to shift electricity production from existing coal-fired power plants to natural-gas fired power plants. Building block three sought to shift electricity production from both coal-fired and natural gas-fired power plants to new low- or zero-carbon emitting electricity production, mainly wind and solar. Most of the CO2 reduction anticipated from the CPP was to come from building blocks two and three.

EPA identified three ways a plant operator could shift production to cleaner sources: (1) reduce the plant’s electricity production; (2) build a new natural gas plant, wind farm, or solar array or invest in another facility and increase production there; or (3) purchase emission credits as part of a cap-and-trade regime. EPA considered that this approach would produce a sector-wide shift in electricity production from coal to natural gas to renewables. Whether by having a power plant reduce its own production or subsidize an increase in production by cleaner sources, or both, EPA sought to produce a shift toward natural gas, solar, and wind.

But how much of a shift should EPA seek to produce? The Obama EPA settled on what it described as a “reasonable” shift based on modeling of how much more electricity — both natural gas and renewables — could supply without causing undue cost increases or reducing overall power supply. Accordingly, the CPP projected that coal’s share of national electricity generation could be reduced from 38 percent in 2014 to 27 percent by 2030. 

The rule never went into effect because West Virginia and 17 other states sued EPA – on the same day the rule was promulgated in 2015. In an unusual decision, the Supreme Court ultimately delayed implementation of the CPP until the case could be decided by the lower courts on its merits.  

Before any decision could be reached, Donald Trump’s administration asked the Court to not proceed until EPA could reconsider the CPP.  In 2019, Trump’s EPA moved to repeal the CPP and replace it with the new Affordable Clean Energy (ACE) rule. In doing so, the Trump administration EPA decided that the original CPP put forward by the Obama administration exceeded the agency’s legal authority by making “generation shifting” part of the BSER. The ACE rule would have limited the BSER to systems that a plant could put in place with “add-on” controls and inherently lower emitting processes.

President Trump’s EPA also decided that whether a system of emission reduction could include “generation-shifting” measures fell under the “major questions” legal doctrine. Under this “doctrine,” the agency asserted that courts expect Congress to speak clearly if it wishes to assign to an agency any decisions of vast economic and political significance. Neither the U.S. Constitution, the CAA, nor any other legislation, act of Congress, or prior Supreme Court decision mentions the “major questions doctrine.” The Trump administration’s position, while popular with conservatives wishing to constrain EPA and other Federal regulatory agencies, was considered outside the mainstream of U.S. jurisprudence. 

Then, before the Trump Administration could implement its ACE Rule, a number of states and private parties asked the D.C. Circuit Court for review, challenging EPA’s repeal of the CPP and its effort to replace it with the ACE Rule. This lower Court subsequently determined that EPA had the authority to use “generation shifting” and that the “major questions” doctrine did not apply. Its decision was handed down on January 19, 2021 – right before President Biden’s inauguration.

EPA quickly asked the Court to hold off issuing its mandate so that Biden’s EPA could have time to consider a new rule altogether. States and others who sought repeal of the CPP then asked the Supreme Court to consider the issue.

Because neither the CPP nor ACE was in effect at that point, some observers had expected that the Supreme Court would dismiss West Virginia v. EPA on the grounds that the case is “moot,” or no longer active (given that the regulations at issue had not been implemented). This would have been a way for the Court to deal with the case on procedural grounds without ever reaching the question of the extent of EPA’s authority. In addition, it would have been consistent with the Court’s precedents and general practices in similar cases in the past. For that reason, the Court’s subsequent decision last year to hear the case and issue a ruling this year was widely regarded as a radical departure from tradition and another sign that the current highly conservative Court is willing to discard longstanding precedent in its efforts to reshape U.S. law. 

The Court’s Ruling

In its 6-3 decision in West Virginia v. EPA in late June 2022, the Supreme Court ruled that EPA does not have the authority under section 111(d) of the CAA to regulate emissions from power plants at a system-wide level, as the agency sought to do under the CPP. The ruling does appear to leave open the possibility that EPA could require power plants to take more limited emission reduction measures, such as carbon capture and gas co-firing, although for reasons explained below, there is some uncertainty about even this.

In making this decision, the Court relied upon the “major questions” doctrine, essentially siding with Trump’s EPA. More specifically, the Court held that, in attempting to require power plants to shift power generation from one source to another, EPA sought to answer a question of major economic and political significance — namely how the country should generate electricity — that should instead be decided by the Congress. In doing so, the Court held that EPA overstepped its authority. 

As law professor Nathan Richardson explains below, the consequences both for EPA and the Executive Branch more generally of the Court’s embrace of the “major questions” doctrine are potentially quite significant:

The resurgent major questions doctrine gives the six justices in the majority, open opponents of administrative-agency power, a powerful and nearly unbounded tool to limit regulatory power—not just EPA action on climate, but any significant agency action on any issue is now subject to much greater judicial scrutiny.

The Court has left it almost entirely unclear what constitutes a major question, in effect leaving the scope of agencies’ authority up to future decisions of the Court itself. Consequently, Richardson adds, “every agency general counsel is now surely advising rulemakers to tread lightly and sweating over what already-implemented rules will be challenged next.”

Nevertheless, some in the environmental policy community have expressed relief that the Court did not go further, noting that the ruling neither deprives the EPA of its authority to regulate greenhouse gases in more limited ways than the CPP nor rescinds the Court’s longstanding policy of deferring to administrative agencies’ reasonable interpretations of statutory language (known as “Chevron deference”). However, others have suggested that it may be a matter of time before the Court acts to restrict EPA’s authority even further in future cases. 

In particular, some observers note that the 2007 case that upheld the EPA’s authority to regulate greenhouse gases — Massachusetts v. EPA — would almost certainly have been decided differently by the present Court. (Three of the justices who dissented from the majority opinion in that case – Roberts, Alito and Thomas — were in the 6-3 majority in West Virginia v. EPA, and the others – Gorsuch, Kavanaugh and Coney Barrett are Trump appointees who are unlikely to have ruled for EPA in 2007 had they been on the Court at the time).

Considering that fact, some legal experts expect that the Court may overturn Massachusetts v. EPA in a future case, possibly on the grounds that Congress has not specifically given EPA the authority to regulate greenhouse gas emissions. This would deprive EPA of any authority to issue climate regulations in the power sector and perhaps more broadly. Others argue, however, that the Court has no need to overturn that ruling, given that West Virginia v. EPA and a handful of other cases have already limited EPA’s authority to regulate greenhouse gases.

As for Chevron deference, some have suggested that, while the Court has not formally reversed this policy, the “major questions” doctrine empowers judges (including lower-court judges) to substitute their own interpretations of statutes for those of administrative agencies. In addition to making it more difficult for agencies to know whether regulations they craft will withstand judicial scrutiny, this Court’s reliance on the “major questions” doctrine will likely discourage EPA from taking bold action and encourage climate opponents to challenge any new economically significant regulations promulgated by EPA and other agencies. Given the current makeup of the Supreme Court, this situation is unlikely to change for the foreseeable future.

Implications for Future Regulation and U.S. Climate Goal

As the above already begins to make clear, the West Virginia ruling has significant implications for future attempts by the Biden administration (and future Presidencies) to address climate change through executive action. In particular, the Court’s decision significantly limits the Biden administration’s ability to use the CAA to regulate greenhouse gas emissions from power plants.

The administration now seems to have several other options, some of them riskier than others. The safest approach may be to tighten existing rules governing emissions of mercury, sulfur dioxide, particular matter, and other substances, as well as those regulating regional haze. Because the EPA has used its authority in these ways for a long time and has been supported by the courts in doing so, there may be fewer objections to strengthening such regulations.

Other options include requiring coal plants to use carbon capture and storage (CCS) technology or to do some degree of co-firing with gas. With these strategies, however, the administration could still encounter problems. For instance, if they are too stringent, courts might regard these strategies as concealed attempts to shift generation away from fossil fuels. Under the CAA, EPA would need to establish that CCS technology is “adequately demonstrated.” Opinions differ on whether CCS technology currently satisfies this standard.

Agencies must thus be extremely cautious in future rulemakings if they wish to avoid running afoul of the courts. For example, EPA must now consider carefully how stringent it should make vehicle fuel economy standards. If they are too stringent, courts may see them as an attempt to shift the U.S. vehicle fleet away from internal combustion engine vehicles.

As with “generation shifting,” courts could hold that EPA lacks authority to decide a matter of such great “economic and political significance” regarding vehicles. In fact, a group of state attorneys general has already challenged the latest fuel economy standards on “major questions” grounds.

In addition, while some legal experts believe that the CAA gives EPA the authority to regulate methane and nitrous oxide emissions from agriculture and carbon dioxide emissions associated with industrial processes, the agency may be reluctant to promulgate rules in light of the Court’s decision.

Regulations promulgated by other agencies may also be in jeopardy, including forthcoming regulations from the Federal Energy Regulatory Commission governing construction of gas pipelines and regulations from the Securities and Exchange Commission requiring publicly traded companies to disclose their emissions and climate targets. For either set of regulations, challengers could allege that agencies are attempting address matters of great economic or political significance that Congress has not given them the authority to decide.

Ironically, while the Supreme Court’s West Virginia v. EPA ruling will not help the United States achieve its climate targets, initial analyses suggest it will not cause the United States to go backward on climate. In part, this is because coal use continues to decline because of market factors, including the lower costs of alternatives and fear of future regulation.