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Supreme Court Grapples With EPA Authority on Climate Change

March 9, 2022, 9:00 AM

At oral arguments on Feb. 28, several members of the U.S. Supreme Court appeared prepared to rein in the Environmental Protection Agency’s authority to reshape the energy economy away from coal-operated plants toward alternative sources.

The case has implications not only for President Biden’s ambitious commitment to cut carbon emissions in half by 2030, but also for whether other federal agencies can use their existing authority to effect dramatic economic and social change.

The case before the court, West Virginia v. EPA, concerns whether the Trump administration lawfully repealed and replaced the Obama administration’s Clean Power Plan, which effectively sought to achieve decarbonization by forcing coal producers to reduce production, switch to perceived cleaner forms of energy, or subsidize their competitors (alternative energy sources) to meet certain emission targets.

In repealing the Clean Power Plan, the Trump-era EPA concluded that it lacked the authority to adopt “outside the fence” measures like trading carbon credits to reduce greenhouse gas emissions. Rather, in 2019, the EPA adopted the Affordable Clean Energy Rule (ACE Rule), which required only “inside the fence” measures, or mitigation measures that could be achieved within individual plants.

As the Supreme Court previously stayed the Clean Power Plan in 2016, and because the lower court in this case vacated the ACE Rule, there are currently no federal emissions limits for greenhouse gases in place for coal-powered plants. The U.S. thus urged the Supreme Court not to resolve this case before the EPA under President Biden decides what measures to put in place next. Several Justices seemed skeptical that they needed to wait, and rightly so.

First, the states and regulated industries bringing this case to the court would like to see the ACE Rule vindicated and put in place, unless and until the EPA lawfully repeals it, as it provides both the states and industry with flexibility and regulatory certainty.

Second, the U.S. Court of Appeals for the D.C. Circuit ruled in this case ruled that the EPA must consider “outside the fence” measures such as generation-shifting when selecting the best means to reduce greenhouse gas emissions. If that ruling were left in place, investors and coal operators would certainly have to think harder about building new plants if the EPA can confidently assert virtually unlimited authority to remake the power grid in its image. Given the current administration’s priorities, it is quite plausible that the current EPA would use that authority aggressively in fashioning new rules.

The ‘Major Questions’ Doctrine

On the merits, several justices focused their questions on how the “major questions” doctrine applied to the facts of this case. Under that doctrine, courts assume that Congress would have spoken clearly before entrusting an agency with power to decide questions of vast economic significance.

Among other things, since Congress itself repeatedly tried and failed to enact “cap and trade” policies into law, it stands to reason Congress did not expect the EPA to be able to adopt such comprehensive and consequential policies itself. On at least two recent occasions related to the Covid-19 pandemic, the Supreme Court held that Congress did not speak sufficiently clearly to implement a significant nationwide policy.

First, the court put in place a stay of OSHA’s vaccine mandate, which would have mandated that employers ensure that approximately 80 million employees be vaccinated or undergo regular testing. Second, the court lifted the CDC’s nationwide moratorium of evictions of tenants who live in areas experiencing significant Covid-19 transmission. Both these cases were briefed and decided on an accelerated timetable on emergency applications to the Supreme Court, pursuant to its so-called “shadow docket.”

West Virginia v. EPA provides the court with the opportunity to reflect holistically on the “major questions” doctrine and put in place a more definite standard to guide the court in future cases.

Other Opportunities for ‘Major Questions’ Doctrine

Opportunities for future application of the “major questions” doctrine may not be long in coming. Later this year, the court will take up for the second time a longstanding dispute concerning whether the EPA has authority under the Clean Water Act to regulate construction of homes on wetlands, on the theory that such property constitutes “waters of the United States.” The court could conclude that Congress did not speak sufficiently clearly to give the EPA jurisdiction over lands that may have subsurface water but otherwise appear dry.

In the future, the “major questions” doctrine could also play a role if the FCC reinstates Obama-era “net neutrality” rules. While still a judge on the D.C. Circuit, Justice Brett Kavanaugh wrote an opinion arguing that Congress did not speak clearly enough to treat all broadband service providers as common carriers under the Communications Act.

If history is any guide, expect more litigants to challenge agency action on the basis that a rule concerns a question of major economic or political importance that only Congress can resolve. West Virginia v. EPA may illuminate how the current Supreme Court views that doctrine and expects it to apply in the future.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Tom Johnson is a partner at Wiley Rein LLP, where he represents clients in high-stakes appellate and regulatory litigation matters. Prior to joining Wiley, he was the general counsel at the Federal Communications Commission.

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