By: Paul Bubbosh, CESP Faculty Associate
What is this case about?
On February 28, the U.S. Supreme Court heard oral arguments in the case of West Virginia vs. Environmental Protection Agency. This case involves whether the EPA can issue a regulation that reduces greenhouse gas emissions from existing power plants in the way that the Obama Administration attempted with its Clean Power Plan (CPP).
You might be wondering why a 2015 Obama era rule is under review by the Supreme Court in 2022, and you would have good reason to wonder why because the CPP was repealed in 2017 by the Trump Administration. That’s right. The CPP is gone, removed, and no longer in existence. The fact that the Supreme Court is reviewing a non-existent rule is strange, but I will put this issue aside because it may be more important to understand the substantive argument that some justices are contemplating to prevent the EPA from writing major rules.
At the center of the dispute is a legal interpretation of administrative agency rulemaking known as the “Major Questions Doctrine.” Justice Scalia summarized the doctrine well in the case Utility Air Regulatory Group vs. EPA, 573 U.S. 302 (2014): EPA cannot write a rule that “would bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization.” In other words, administrative agencies need to stay in their lanes and not ask major questions that Congress did not intend for them to ask.
Here, the question is whether Congress authorized the EPA to promulgate a rule that would have an industry-wide impact. The Petitioners, a group of states and coal companies, seek the Supreme Court’s view of the legality of the CPP by employing the “Major Questions Doctrine.”
Why is this case being heard now?
The Biden Administration wants to reduce greenhouse gas emissions in the United States to address climate change. Will it issue a rule to do this? Maybe. What will the rule say? We do not know. But states that wish to prop-up the fossil fuel power sector fear that the administration will try something like the CPP, so they would like to preemptively strike it down.
What I find astonishing is that the CPP was challenged back in 2015 (by many of the same petitioners), but while a lower court was hearing the merits of the case the Supreme Court intervened and slapped a “stay” on the rule, thereby preventing its implementation. This was an extraordinary measure to take because EPA had given the states eight years to implement the rule. But before the lower court could decide the case the Trump Administration repealed the rule.
Fast forward six years to 2022, and the U.S. Supreme Court agreed to hear arguments about the CPP. The Biden Administration informed the court that it had no plans to re-use the CPP. Thus, we have a Supreme Court that stopped the CPP from taking effect in 2016, and now we have the same court trying to stop the idea of the CPP from taking root. In essence, the highest legal authority in our country is considering an advisory opinion about what EPA should or should not do. This would be an unprecedented action by the Court.
What did the CPP say?
To understand the CPP, we need to take a deep dive into the Clean Air Act. The CCP derives its authority from Section 111(d) of the Clean Air Act (“Standards of performance for existing sources”). This section empowers the EPA to issue rules to states which establish “standards of performance” for any existing source for any air pollutant. A “standard of performance” is defined as “a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which…the Administrator determines has been adequately demonstrated.” (bolding mine)
In the CPP, the EPA determined that the “best system of emissions reduction” (BSER) for reducing carbon dioxide from power plants, which the Court determined was an air pollutant, involved three building blocks. First, improving the plant’s efficiency which would result in less use of coal or natural gas to produce the same amount of electricity, thereby emitting less carbon emissions. Second, shifting from coal to natural gas. And third, shifting from coal to renewable energy sources (wind and solar). EPA applied the building blocks to all the coal and natural gas power plants in each region to produce regional emission performance rates for each category.
Once EPA guidance is issued identifying the BSER and the emission reductions achievable under that system, the standards are implemented through state plans submitted to EPA for approval. States are given the flexibility to deploy different systems of emission reduction than the “best” system identified by EPA, so long as they achieve equivalent or better emission reductions.
What is the main argument against EPA’s CPP?
The Petitioners believe that EPA over-stepped its authority to include measures that are considered “outside the fenceline” of a particular power plant (e.g., generation shifting from coal to renewables). Petitioners believe EPA can only issue a BSER measure that involves a per plant emission limit (“inside the fenceline”), and that measures such as generation shifting or using trading schemes are outside EPA’s authority under Section 111(d). Their reasoning is that when EPA takes such a broad approach to rulemaking—a system-wide approach to our energy system—this will have a major, transformative impact on our energy system which Congress did not intend when it passed the Clean Air Act.
What did the judges ask?
Justice Breyer, Kagan, and Sotamayor, the three liberal justices,were critical of the “inside the fence” versus “outside the fence” bifurcation. Per Breyer, a rule employing an “inside the fenceline” measure could have just as devastating an impact on the economics of coal plants as an “outside the fenceline” measure. Thus, the distinction between the two makes no sense in terms of cost and impact to the coal industry. In fact, Justice Thomas, part of the conservative supermajority, questioned the relevance of this distinction (“But what’s the difference? If you can do it indirectly or directly, isn’t it the same result?”). This is relevant because it implies that the Major Question Doctrine should not be used in the distinction between an energy system-wide measure versus a plant-by-plant measure.
The Petitioners focus on the fact that Section 111(d) imposes limits om EPA’s determination of BSER, such as considering costs and using adequately demonstrated measures, and such limits would only logically apply on a per plant basis. Justice Kagan was quick to remind Petitioners that “unfortunately for your position, [the law] says “system” which suggests that what Congress wanted to do, understanding that this was an area that was going to move very fast, has lots of technical components to it, that it wanted to give the agency flexibility to regulate as times changed, as circumstances changed, as economic impacts changed, all things that they could not possibly have known at the time.”
The “Major Question Doctrine” rests on what the Court considers a major transformation for the energy industry. Something transformative would imply a radical change in our energy system today; however, shifting from coal to natural gas or renewables is already happening. According to the U.S. Energy Information Administration, coal production has dropped from 1.2 billion short tons in 2010 to 535 million short tons in 2020, the lowest level of coal production in the United States in any year since 1965. This is largely due to the economic competition from natural gas and renewables. In fact, the CPP’s goals have already been met. I find it difficult to argue that a rule that imposes generation shifting is risking a transformative change to our country’s energy system or economy when that change is in mid-course.
Further, the Petitioner’s arguments seem to restrict the flexibility built into the Clean Air Act. Why should EPA or states be limited to measures it can take on a plant-by-plant basis if it can find a less costly alternative for coal plants that involve an “outside the fence” measure? Justice Sotomayor hammers away at this point: “the entire structure of the EPA … says you look at the structure of the plant, that very directly says that the state’s plan can include incentives, such as fees, marketable permits, and auctions of emission rights.” In fact, arguing in favor of the CPP—joining the government’s case—are large investor-owned utilities that want to preserve the flexibility afforded to them by the law. These utilities fear that the Petitioners will restrict their ability to meet the Act’s goals through, for example, cap-and-trade programs.
Most convincing, however, is the argument that the Clean Air Act already imposes limits on EPA’s BSER. The Act requires that EPA consider costs, consider only adequately demonstrated measures (i.e., what is the sector already doing), ensure the reliability of the electric grid, and consider items that come under the rubric of a “system” which, by its definition, would exclude items such as shutting down an industry. The premise of the Petitioner’s argument is that EPA cannot enact measures that shut down an entire industry, but the Clean Air Act explicitly prevents that from happening. EPA’s role, per the Clean Air Act, is to reduce emissions and maintain production.
Finally, we must recognize that the Supreme Court has already found that regulating greenhouse gas emissions is within EPA’s legal authority. This is not a case of some new and extraordinary exercise of power hidden away in an obscure statutory provision never used before. In a sense, the issue of major questions and transforming an industry has no application to EPA’s authority in this regard. Congress granted EPA the authority to regulate “standards of performance” for any existing source for any air pollutant, and the Supreme Court has affirmed that standard as it applies to greenhouse gases.
Next move: will the Supreme Court preserve the integrity of the Clean Air Act or move to upend Congressional delegation?
 West Virginia vs. EPA, Oral Arguments; Official Transcript (page 42) (accessed at https://www.supremecourt.gov/oral_arguments/argument_transcript/2021 )
 West Virginia vs. EPA, Oral Arguments; Official Transcript (page 31) (accessed at https://www.supremecourt.gov/oral_arguments/argument_transcript/2021 )
 U.S. Energy Information Administration, Annual Coal Report, 2021 (accessed at https://www.eia.gov/todayinenergy/detail.php?id=48696 )
 West Virginia vs. EPA, Oral Arguments; Official Transcript (page 50) (accessed at https://www.supremecourt.gov/oral_arguments/argument_transcript/2021 )
 West Virginia vs. EPA, Oral Arguments; Official Transcript (page 106) (accessed at https://www.supremecourt.gov/oral_arguments/argument_transcript/2021 )
 Massachusetts vs. EPA, 549 U.S. 497(2007); American Electric Power vs. Connecticut, 564 U.S. 410 (2010)