Supreme Court Biden’s EPA on greenhouse gases

On June 30, 2022, the United States Supreme Court released its decision in West Virginia vs. EPA, 597 US __, 2022 WL 2347278 (June 30, 2022), a case involving the Obama administration’s Clean Power Plan (CPP) and the Trump administration’s Affordable Clean Energy (ACE) rule. Applying the “substantial issues” doctrine, the Court ruled that the EPA exceeded its statutory authority in enacting the CPP. The move has implications for the Biden administration’s planned reshuffle and reissue of the CPP and other options to reduce greenhouse gas (GHG) emissions from electric power and other sectors. It also has implications outside the environmental realm, providing litigants with a powerful new administrative law precedent to challenge the agency’s rules.

Key takeaways and issues to watch out for

1. Doctrine of the “big questions”. The most important takeaway from the opinion is the Court’s development and application of the “big issues” doctrine, as a limit on the regulatory power of federal agencies. The majority opinion of Chief Justice Roberts held that in “certain extraordinary cases” where an agency asserts broad authority “of economic and political significance”, the courts should seek a clear statement of congressional authorization before giving the green light to action. Based on the “big issues” doctrine, the Court rejected the CPP’s partial reliance on generation transfer (from coal-fired electricity to natural gas or renewable electricity generation) as a component of the ” Best Emission Reduction System” (BSER) to reduce carbon dioxide from coal-fired power plants. The Court held that Section 111(d) of the Clean Air Act, 42 § 7411(d), a rarely used statutory provision, was not sufficient to support regulation that “restructures[ed] the nation’s overall power generation mix…. Because the Court determined that this result would have consequences of economic and political significance, the Court concluded that the rule triggered the “major issues” doctrine. The Court reiterated that although Section 111(d) authorizes the EPA to establish emission guidelines for major existing sources of air pollution based on the BSER, the Agency could not do so using such transformative measures.

This decision represents the Supreme Court’s first formal affirmation of the “major issues” doctrine, applicable when an agency claims broad authority based on new interpretations of older statutes or statutes in which the assignment of authority is not explicitly stated. While not the first Supreme Court case employing this logic, it was the first case in which the Court formally used the phrase “big issues” doctrine. Administration (FDA) to regulate tobacco products, such as cigarettes, as drug delivery “devices”, and more recent cases in this Supreme Court term regarding the authority of the Occupational Safety and Health Administration and the Centers for Disease Control and Prevention (CDC) apply longstanding legal authorities in the context of COVID-19.

2. Herringbone doctrine of deference. The Court does not invalidate Chevron as some parties had predicted or sought. This doctrine – requiring courts to defer to an agency’s reasonable interpretation of the ambiguous law it is charged with administering – survives for the time being. Indeed, the majority opinion did not even cite Chevron respect.

3. Biden EPA. This decision immediately affects the scope of the Biden administration’s approach to regulating GHG emissions from the electricity sector. The administration said it wanted to start these rules from a clean slate.

a. On-site measurements. As noted in the decision, the Administration may be more likely to consider on-site measurements such as BSER. These options could include partial carbon capture and storage (CCS) or natural gas co-combustion. The Obama EPA had declined to use these options for existing sources because it believed generation switching was a cheaper way for industry to comply. But the EPA had used partial carbon capture to set the limits for new sources, so it might revisit that issue now. Since the publication of the CPP, the IRS Section 45Q tax credit for CCS and the commercialization of CCS technologies that did not exist when the CPP was written may also affect the current approach of the EPA.

b. Generation leaving the table. At least to set the rigor of the BSER, the EPA will not be able to rely on generation transfer measures. Advances in CCS technologies and the Section 45Q tax credit may also affect how the EPA sets BSER for coal-fired power plants in particular.

vs. Seek GHG reductions as “co-benefits” of other electricity sector rules. The Biden EPA may also consider other power plant emission rules under other CAA programs to achieve GHG reductions as “co-benefits.” Regional haze, interstate air pollution, and hazardous air pollutant programs regulate other emissions, but often have the effect of reducing GHGs as well.

D. Other climate authorities will likely take a more intense look. The decision may also cause the Biden EPA to consider other, more clearly established sources of GHGs or authorities to seek additional reductions in GHG emissions (e.g., mobile sources, HFCs).

4. Congress action remains essential. The court’s decision underscores that some regulations will need to rely on clear legislative authority to withstand legal challenges. Notably, the decision does not deprive Congress of the ability to delegate “major matters” like this to federal agencies; it only requires that these delegations be clearly indicated. Congress retains the power to act on climate change in a variety of ways — including with economy-wide emissions programs (as it envisioned during Obama’s first term) or by drafting clearer authority for the EPA — but with a tightly divided House and Senate, those actions seem unlikely.

5. Practical effects of the electricity sector. The practical outcome for the electricity sector is limited. This sector, in many ways, has already decarbonized at a faster pace than the RPC predicted, largely for economic reasons.

6. States. This decision will likely encourage some states to use their authority to regulate GHG emissions, given the limited scope of the EPA’s authority.

seven. Future challenges. Expect litigants to rely heavily on the West Virginia ruling in further regulatory challenges in the future, whenever agencies act under existing authorities in a way that, in the Chief Justice’s words, “raises eyebrows.” This may include not only the EPA’s regulatory efforts to address modern environmental challenges, but also the actions of other federal agencies such as the Federal Communications Commission’s efforts to regulate internet service providers to enforce neutrality of the net, or the efforts of the Securities and Exchange Commission to establish ESG disclosure. terms. Litigants will have a powerful tool to challenge these rules if they can frame the issue persuasively in terms of a ‘major issue’.

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