Supreme Court Says EPA Went Too Far on Regulating Climate Change

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On June 29, 2022, the U.S. Supreme Court ruled that an arcane portion of the Clean Air Act (“CAA”), infrequently used by the EPA, could not serve as appropriate delegation of legislative authority to regulate greenhouse gas. West Virginia v. EPA (No. 20-1530, June 2022). In the 6-3 decision, the Court found the EPA had no congressional authority to require the United States power sector to reallocate its power generation from existing power plants to newer cleaner sources of energy, such as wind, solar and natural gas, to achieve “best system of emission reduction (“BSER).” Instead, the Court found that the “major questions doctrine” required Congress to expressly enact such requirements.

The West Virginia v. EPA case makes it clear that there must be clear congressional authorization for the EPA to regulate major issues when the regulation changes the focus of the CAA.  EPA relied on the little used § 111(d) to impose significant restrictions on new and existing power plants, including phasing out, cap and trade and other types of limitations. A textual reading of the CAA § 111 states that the EPA can regulate power plants by setting “standard of performance” for their emission of certain pollutants into the air. That standard would be different depending on whether it was a new or existing plant but would reflect the “best system of emission reduction” (“BSER”).  The EPA concluded after calculating the BSER levels for states that the country would not meet emission reduction goals without more creative thinking.

In 2015, the Obama administration produced a broad new set of rules to regulate the new and existing power plants. One of those rules was the Clean Power Plan (“CPP”). The CPP was complex and required numerous calculations to determine allowable limits as BSER. States were to implement the plan, but the EPA, as opposed to the states, implemented 111(d). Where a state could not meet the BSER, it had to reduce coal-fired power plants, find ways to cap and trade emissions and other types of measures. The EPA used what it regarded as a reasonable amount of shift, which it based on modeling of how many renewable and cleaner sources of energy could supply without an undue cost and availability of power. In essence, the EPA was compelling the transfer of power generating capacity from existing sources to wind and solar.

The EPA repealed the Clean Power Plan in 2019 and replaced it with the Affordable Clean Energy (“ACE”) plan. The Petitioners in the case below asked for and received a stay of the CPP from the U.S. Supreme Court. West Va. v. EPA, 577 U.S. 1126(2016). The Court of Appeals then concluded that the statute could reasonably be read to encompass generation shifting and concluded the major questions doctrine did not apply.  It rejected the need for a clear statement of congressional intent to delegate power to the EPA and accordingly overturned the vacatur of the CPP and vacated and remanded the ACE.  With the new administration in 2021, the EPA then moved the Court of Appeals to partially stay the issuance of its mandate as it pertained to the CPP, even though the EPA was planning to rewrite it before it was otherwise effective. So, the case before the Supreme Court did not involve any existing rule that was effective.

Chief Justice Roberts summed up the issue in the case:

The issue here is whether restructuring the Nation’s overall mix of electricity generation, to transition from 38% coal to 27% coal by 2030, can be the “best system of emission reduction” within the meaning of Section 111.

Said more clearly, the Court was determining whether 111(d) of the CAA empowers EPA to substantially restructure the American Energy market.

Instead, to attain the necessary “critical CO2 reductions,” EPA adopted what it called a “broader, forward-thinking approach to the design” of Section 111 regulations. Id., at 64703. Rather than focus on improving the performance of individual sources, it would “improve the overall power system by lowering the carbon intensity of power generation.” Ibid. (emphasis added). And it would do that by forcing a shift throughout the power grid from one type of energy source to another.

The Supreme Court ruling does not spell the end of EPA’s efforts to curb carbon dioxide emissions from one of the largest emitters, existing power plants, but it is clear that the EPA cannot restructure the power industry without a more traditional method. Since the rule was never effective anyway, its threat more than the actual reality is over. Despite the rhetoric, the Supreme Court did not strike down EPA’s right to regulate carbon emissions; rather it stated that at some point they are going to have to get Congressional authorization.

While there is broad speculation that this decision will mark a new chapter in Administrative Law, the actual case is limited to the specific section of the CAA and whether Congress expected pollution limits to be determined based on a restructure of the nation’s energy system. Certainly, this case can be an arrow in the quiver of every litigant challenging the validity of a rule and will continue to be cited.

The Court will hear Sackett v. EPA  in its Fall 2022 session. With the Court’s clean and shiny new “major questions” doctrine in mind, the definition of waters of the United States may be fertile grounds. The definition in the Clean Water Act of “Navigable waters” simply means “waters of the United States” with no further description. The EPA and Corps of Engineers have tried for some 30 years to provide a clear, durable definition of waters of the United States, but that has led to substantial litigation and at least three Supreme Court decisions.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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