Supreme Court Takes Away EPA’s Toys
July 7, 2022
“Capping carbon dioxide emissions at a level that will force a nationwide transition away from the use of coal to generate electricity may be a sensible ‘solution to the crisis of the day,’ [b]ut it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme in Section 111(d) [of the Clean Air Act].
- West Virginia v. EPA, 597 U.S. __ (June 30, 2022).
Thus, a majority of the U.S. Supreme Court declared that EPA lacked authority under the Clean Air Act to regulate existing coal-fired power plants with a system that forced a “sector-wide shift in electricity production from coal to natural gas and renewables.” Congress has never granted EPA the express right to use the Clean Air Act to control climate change. EPA, however, spent untold hours searching for ways to do just that with the existing statute. In 2015, it settled on Section 111 of the Clean Air Act to devise the Clean Power Plan rule, and years of litigation and rulemaking followed.
Section 111 requires EPA to list “categories” of air pollution sources that may endanger public health or welfare. For each category, EPA must issue emission “performance” standards applicable to each new source of the pollutants. The standard of performance is one that “reflects the degree of emission limitation achievable through application of the best system of emission reduction…adequately demonstrated” (which includes the cost of achievement). Thus, the performance standards are designed to reduce emissions to some practicable level and are not tied to achieving compliance with an ambient standard. Once EPA issues standards for new sources, it is then obligated to develop a “best system of emissions reductions” for existing facilities as well.
In 2015, EPA first issued standards for new coal-fired power plants and natural gas turbines. For coal-fired plants, the rule required high efficiency equipment and carbon capture technology. But that rule was not the source of the Supreme Court litigation because power generators had already determined that the uncertainty of other EPA regulatory programs and competition from gas generally foreclosed the use of coal for new power generation. The real fight was over EPA’s regulation of existing power plants.
And for existing coal plants, EPA did NOT develop a “system of emissions reduction” for individual plants that depended on the use of greater emissions control or more efficient equipment. Instead, treating the entire electricity grid as a “system,” it developed three “building blocks” that effectively forced coal fired plants to reduce or eliminate their emissions altogether in favor of new gas-fired generation or renewable generation. Having determined that the “building blocks” represented the “best system of emissions reduction,” EPA was obligated also to determine the “degree of emission [reduction] achievable through that application” of that system. EPA used complex economic modeling to determine how much it could shift generation from coal to gas or renewables without causing unreasonable cost increases or reducing overall power.
The Supreme Court held that the rule devised by EPA exceeded its statutory authority. Normally, that analysis relies on so-called “Chevron deference”—unless a statute has clearly spoken to an issue, courts will normally defer to any reasonable interpretation of the statute by the agency charged with administering it. Here, the Court conceded that EPA’s regulatory assertions were “colorable,” but nonetheless declined to accord Chevron deference to its interpretations. Instead, the Court invoked an exception to Chevron known as the “major questions doctrine.” The doctrine has been used by the Court to reject claims of agency authority when: 1) the underlying claim of authority concerns an issue of vast economic and political significance; and 2) Congress has not clearly empowered the agency with authority over the issue. Where an agency claims broad authority, the Court has insisted on clear textual evidence of that authority, declaring that “Congress does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not…hide elephants in mouseholes.” 
The Court unequivocally announced that “this is a major questions case.” The Court was clearly bothered that the authority EPA claimed was not in aid of achieving compliance with some statutorily or regulatory CO2 emissions limit or ambient standard, but included determining what level or control of CO2 was appropriate. As the Court observed “having decided that the ‘best system of emission reduction…adequately demonstrated’ was one that would reduce carbon pollution mostly by moving production to cleaner sources, EPA then set about determining the degree of emission limitation achievable through application of that system.” The Court was bothered that EPA then arrogated to itself the authority to decide how much electricity generation should be shifted away from coal to gas and renewables (“put differently, [under its reading of the statute] EPA could choose whether to require anything from a little generation shifting to a great deal.”). Absent that component of EPA’s assertion of authority, it is not clear that the Court would have invoked the “major questions doctrine.”
Having decided this was a “major questions” case, the Court has little difficulty disposing of it and determining that Congress had not granted EPA clear authority to devise both the means of reducing CO2 and the appropriate endpoint.
- A concurring opinion by Gorsuch and Alito spends more time discussing their view that the “major questions” doctrine is rooted in the concept of “separation of powers”—it is intended to salvage legislative authority from executive overreach.
- Justice Kagan, joined by Justices Sotomayor and Breyer, authored a lengthy dissent. Much of the opinion decries the need to address climate change, notes that “this Court has obstructed EPA’s efforts from the beginning” and shifts the analysis from “where in the statute is EPA’s claimed authority clearly set out” to “nothing in the Clean Air Act precludes EPA’s selection of controls.”
- Concerns that the opinion will foreclose climate initiatives or signal a rebirth of coal-fired generation are all overblown. The majority notes that EPA projected that under the terms of its generation-shifting rule “it would be feasible to have coal provide 27% of national electricity generation by 2030, down from 38% in 2014.” Ironically, even though the rule never took effect, coal’s percentage of domestic electricity generation is already far below EPA’s 2030 target. The Energy Information Agency reports that as of February 2022, utility scale generation of coal-fired power is as follows:
- Coal 21.8%
- Natural Gas 38.3%
- Renewables 20.1%
- Nuclear 18.9%
Of course, even though the Clean Power Plan rule never took effect, the mere prospect that it might take effect likely affected investment and technology decisions by utility scale electricity generators.
- The Clean Power Plan rule struck by the Court was stayed by the Supreme Court on petition from West Virginia in 2016. The Trump-EPA later rescinded the Clean Power Plan after determining that it had exceeded its statutory authority. It also replaced the Obama-era rule in favor of the Affordable Clean Energy rule, which determined that the “generation shifting” components of the Clean Power Plan were impermissible as a “system of emission reduction.” The D.C. Circuit Court held that EPA’s repeal of the Clean Power Plan rested on a mistaken reading of its own authority—that EPA in fact had the authority to use generation shifting as a system of emission reduction. Accordingly, that Court vacated both the Clean Power Plan and Affordable Clean Energy plan rules and remanded them to EPA. EPA later informed that Court that it did not intend to enforce the Clean Power Plan and intended to issue a new §111(d) rule. Thus, at the time of the current decision, there was no Clean Power Plan rule in effect. EPA argued that as a result, the challengers had no injury and thereby no standing. The Court, however, framed the issue as one of “mootness” rather than standing; noted that the government has the burden of proving mootness; and that the government had not declared that it would not re-adopt a similar rule. Accordingly, the Supreme Court declared the controversy was not moot and that it could review the Clean Power Plan rule.
 We have written before about the Clean Power Plan rule. See:
 See Utility Air Regulatory Group v. EPA, 573 U.S. 302, 324 (2014) (discussed in Congressional Research Service, “The Major Questions Doctrine” (April 6, 2022) available at https://crsreports.congress.gov/product/pdf/IF/IF12077. The doctrine has been used to reject claims of agency authority, including:
- The FDA’s regulation of tobacco using statutory authority over “drugs” and “devices.” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000).
- The Environmental Protection Agency’s (EPA’s) consideration of costs in regulating air pollutants under its authority to prescribe ambient air quality standards that “are requisite to protect the public health” with “an adequate margin of safety” (Whitman v. American Trucking Ass’ns, 531 U.S. 457 (2001).
 Whitman, 531 U.S. at 468.
 The Court reiterated its concern with the broad scope of authority EPA had asserted: “It is one thing for Congress to authorize regulated sources to use trading to comply with a preset cap, or a cap…based on some…objective criterion…. It is quite another to simply authorize EPA to set the cap wherever the Agency sees fit.” The Court also noted that “EPA has admitted that issues of electricity transmission, distribution, and storage are not within its traditional expertise,” further calling into question the notion that Congress tasked it—and it alone—with deciding such questions of vital national importance.