Energy & Infrastructure Alert | March.01.2022
On February 28, 2022, the Supreme Court heard oral argument in West Virginia v. EPA (consolidated with North American Coal Corp. v. EPA, Westmoreland Mining Holdings v. EPA, and North Dakota v. EPA), a case that has the potential to significantly curtail the EPA’s ability to address greenhouse gas emissions without additional legislative action.
Our quick takeaways from the argument are:
At issue in the litigation is the proper interpretation of Section 111 of the Clean Air Act, 42 U.S.C. § 7411. That provision authorizes the EPA to identify “categories of stationary sources” that cause or contribute to pollution and then, for new sources within that category, to adopt standards of performance for emissions that reflect “the degree of emission limitation achievable through the application of the best system of emission reduction … [that] has been adequately demonstrated.” 42 U.S.C. §§ 7411(a), (b)(1). For existing sources, states submit plans to the EPA for approval for setting, implementing, and enforcing the EPA’s standards of performance. 42 U.S.C. § 7411(d)(1).
In October 2015, during the Obama administration, the EPA relied on Section 111 to issue the Clean Power Plan, which established the first national limits on carbon pollution from U.S. power plants. The Plan set performance standards for air pollutant emissions that reflected the agency’s view that “the best system of emission reduction” prioritized energy generation from lower-emitting plants over generation from high-emitting plants. To that end, the Plan sought to shift the generation of electricity from steam-generating units to natural gas-fired units, and from fossil-fuel fired units to renewable energy sources.
Twenty-seven states and many other parties challenged the Clean Power Plan in the U.S. Court of Appeals D.C. Circuit. After that court refused to stay the Plan, the Supreme Court did so. Thereafter, the Trump administration repealed the Plan, saying it exceeded the EPA’s authority under the Clean Air Act.
A new group of states and parties challenged the repeal and the Trump Administration’s replacement of the Plan. In January 2021, the D.C. Circuit vacated that repeal and replacement. The court explained that the repeal of the Clean Power Plan “hinged on a fundamental misconstruction” of the Clean Air Act.
Several states and power companies petitioned the Supreme Court for review. The Biden administration urged the Supreme Court not to take up the case because the Clean Power Plan is no longer in effect and the administration intends to issue a new rule in its place. The Supreme Court nevertheless granted review.
Petitioners contend that, under Section 111 of the Clean Air Act, the EPA has the authority to regulate only “inside-the-fence” of an energy source and lacks authority to regulate in a grid-wide manner across sources (“outside-the-fence”), as it did in the Clean Power Plan. According to Petitioners, the major question canon requires that Congress clearly state if it intends to give the EPA the authority to transform the power industry through a generation-shifting scheme. Petitioners argue that because Congress did not provide such a statement, the EPA lacks such authority.
Similarly, Petitioners assert that that if Congress intends to disrupt the traditional division of responsibilities between states and the federal government, it needs to do so clearly. Petitioners further argue that a plain reading of Section 111 does not give the EPA the authority to set standards that require a shift in energy.
In response, Respondents—including the federal government, certain states and municipalities, and various power companies—argue that Petitioners are effectively seeking an advisory opinion intended to constrain the EPA in its future rulemaking. On the merits, Respondents assert that the repeal and replacement of the Clean Power Plan rests on an erroneous view of Section 111.
At the Supreme Court oral argument today, the Court grappled with the proper way to articulate and apply the major questions doctrine. In one of the first questions at argument, Justice Thomas asked about the difference between the clear statement rule and the major questions doctrine. Similarly, the Chief Justice and Justice Barrett asked about the relationship between the major questions doctrine and the nondelegation doctrine. Several Justices also posed questions about when the major questions doctrine is relevant in the process of statutory interpretation and about how to know when a question is “major” enough to implicate the doctrine.
How to describe the major questions doctrine and the particular agency action at issue could affect whether the Justices think that doctrine has any bearing on this case. For example, at argument, Justice Kagan articulated her limited view of the major questions doctrine: It comes into play only when there is ambiguity in the statute, the agency has taken action outside of its wheelhouse, and the interpretation—though conceivable on the face of the statute—would wreak havoc on other statutory provisions. According to Justice Kagan, because regulating greenhouse gas emissions is within the EPA’s wheelhouse, the major questions doctrine would not be at issue in this case.
Justice Barrett doubted whether an agency action at issue has to be outside of the agency’s wheelhouse for the major questions doctrine to apply and suggested that, instead, the action just needs to be an exercise of power of vast significance. And Justice Kavanaugh suggested that the issue here isn’t whether the EPA can regulate greenhouse gas emissions but, rather, whether it can use a cap-and-trade mechanism to do so.
In addition to the proper understanding of the major questions doctrine, the argument also focused on the distinction Petitioners seek to draw between permissible “inside-the-fence” regulations and impermissible “outside-the-fence” regulations. In Justice Kagan’s view, that distinction bears no “necessary relationship” to the question of whether the regulation at issue is “major”: Regardless of whether they are inside-the-fence or outside-the-fence, regulations pursuant to Section 111 can be cheap and straightforward to implement or they can be costly and potentially destructive, and both types of regulations can effect generation-shifting.
Justice Thomas likewise expressed skepticism that there was a clean line between inside-the-fence and outside-the-fence regulations. In his view, inside-the-fence regulations can easily lead to generation-shifting, and he wondered why the EPA would be prohibited from doing something directly that it can simply do indirectly. Moreover, in questions later echoed by Justice Sotomayor and Justice Kagan, Justice Breyer emphasized that Section 111 uses the word “system” in describing the standard of performance that the EPA can develop—a broad word that does not seem to limit the EPA to regulating at the source level.
The Solicitor General, arguing for the EPA, explained that the inside-the-fence/outside-the-fence distinction does not map onto the not-major/major question distinction. In response to questioning from Justice Alito expressing concern about how far regulations under Section 111 could go if outside-the-fence regulations are permissible, the Solicitor General explained that ruling in favor of Respondents would not give the EPA carte blanche to enact hypothetical extreme measures because textual limitations in the statute protect against such actions.
Throughout argument, the Solicitor General emphasized that there is no agency regulation in effect for the Court to analyze at this time, and she suggested that what Petitioners were seeking was an improper advisory opinion. Chief Justice Roberts, however, expressed the view that the Petitioners are clearly injured by the D.C. Circuit’s judgment because they want the Trump Administration replacement rule to be in effect, but it was vacated.
Based on the argument, it did not seem like the Court was interested in avoiding the merits of the case. On the merits, there were mixed signals about what interpretive doctrines apply (or how they apply) in this context. A majority of the Court, however, seems skeptical about the EPA’s exercise of authority under the Obama Administration. How sweeping the Court’s ultimate ruling will be regarding the EPA’s authority, and whether the Trump Administration’s replacement rule is reinstated, remain to be seen. The Court is expected to issue a decision by late June.