Supreme Court Decides West Virginia v. Environmental Protection Agency

Faegre Drinker Biddle & Reath LLP

On June 30, 2022, the U.S. Supreme Court decided West Virginia v. Environmental Protection Agency, No. 20-1530, holding that the Environmental Protection Agency does not have the authority to require existing coal-fired power plants to reduce their production of electricity or alternatively subsidize increased generation by natural gas, wind, or solar sources.

The Clean Air Act establishes several regulatory programs to control air pollution from stationary sources, such as power plants. Section 111 addresses the New Source Performance Standards program, which directs EPA to (1) “determine[ ],” taking into account various factors, the “best system of emission reduction [BSER] which . . . has been adequately demonstrated,” (2) ascertain the “degree of emission limitation achievable through the application” of that system, and (3) impose an emissions limit on new stationary sources that “reflects that amount.” 42 U.S.C. § 7411(a)(1). This section acts as a “gap-filler” that empowers EPA to regulate harmful emissions not already controlled under the Agency’s other authorities.

In October 2015, EPA promulgated rules addressing carbon dioxide emissions from existing coal-fired and natural gas electricity generating plants under Section 111(a). The new rules identified BSER with numerical emission ceilings that required regulated plant operators to either (1) reduce the regulated plant’s production of electricity; (2) build a new natural gas plant, wind farm, or solar installation, or invest in someone else’s existing facility and then increase generation there; or (3) purchase emission allowances or credits as part of a cap-and-trade scheme. Based on the proposed changes, EPA projected that by 2030, coal would provide 27% of national electricity generation, down from 38% in 2014.

Litigation ensued, and the Supreme Court stayed EPA’s action on the Clean Power Plan in 2016. In 2019, EPA promulgated the Affordable Clean Energy (ACE) Rule, which repealed the Clean Power Plan and replaced it with BSER measures that would result in smaller reductions in carbon dioxide emissions. A number of States and private parties challenged EPA’s repeal of the Clean Power Plan and the enactment of the replacement ACE Rule. The Court of Appeals concluded that the Clean Air Act could reasonably be read to encompass the Clean Power Plan’s generation shifting. The Court remanded to the Agency for further consideration and vacated and remanded the replacement rule. Shortly thereafter, EPA successfully moved to partially stay the issuance of the Court of Appeals mandate relating to the Clean Power Plan to ensure the Clean Power Plan would not immediately go back into effect.

The Supreme Court reversed and remanded, holding that the Clean Power Plan exceeded the agency’s authority. After holding that the state petitioners had Article III standing and the controversy was not moot, the Court determined that this was a major questions case. The major questions doctrine refers to “extraordinary cases” where agencies have asserted highly consequential power beyond what Congress could reasonably be understood to have granted. Here, the Clean Power Plan represented a “transformative expansion of EPA’s regulatory authority” to “substantially restructure the American energy market.” The Clean Power Plan changed the Clean Air Act from a scheme of regulation into a scheme of forward-looking policy judgments that EPA had no comparative expertise to make. This exercise of power was suspect because Congress had conspicuously and repeatedly declined to enact such programs itself. The Court observed that Congress would not have conferred such authority “in the previously little-used backwater of Section 111(d).”

The Court rejected that there was any “clear congressional authorization” for EPA to regulate in this manner under Section 111 of the Clean Air Act. Although the Court acknowledged that generation shifting could be described as a “system,” capable of reducing admissions, that statutory grant was too vague because almost anything could constitute such a “system.” Further, the Court doubted that Congress intended to authorize EPA to set an emissions cap. Although other parts of the statute were amended to allow cap-and-trade regimes, there was no similar amendment under Section 111.

In its holding, the Court did not decide whether the statutory phrase “system of emission reduction” refers exclusively to measures that improve the pollution performance of individual sources, such that all other actions are ineligible to qualify as the BSER. Instead, the Court’s opinion more narrowly determined that it was not plausible that Congress gave EPA the authority to adopt on its own the Clean Power Plan in Section 111(d) because a decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.

Chief Justice Roberts delivered the opinion of the Court, in which Justices Thomas, Alito, Gorsuch, Kavanaugh, and Barrett joined. Justice Gorsuch filed a concurring opinion, in which Justice Alito joined. Justice Kagan filed a dissenting opinion, in which Justices Breyer and Sotomayor joined.

DOWNLOAD OPINION OF THE COURT

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