The U.S. Supreme Court is poised to decide the scope of the Environmental Protection Agency’s authority to regulate greenhouse gas (GHG) emissions from existing fossil-fuel-fired power plants under Section 111(d) of the Clean Air Act—a question that has left the electricity generation industry in a state of whiplash over the better part of the past decade.
The court recently granted certiorari to hear four consolidated cases involving coal mining companies and several states contesting the January U.S. Court of Appeals for the D.C. Circuit ruling that vacated the Trump EPA’s Affordable Clean Energy Rule, which in turn had rescinded the Obama EPA’s Clean Power Plan. But the question the high court is set to examine may be both narrower and broader than some stakeholders had hoped, and the court’s answer may not provide the certainty that stakeholders seek.
Notably, the question before the Supreme Court is not whether the Clean Air Act gives the EPA authority as a threshold matter to regulate GHG emissions from existing power plants. The Supreme Court already decided that question in 2011 in American Electric Power Co. v. Connecticut.
Instead, the question now before the court is about how the EPA may exercise that authority.
Specifically, the focus is whether the EPA may consider “beyond-the-fence” or “beyond-the-source” measures like cap-and-trade or “generation shifting”—i.e., shifting power generation from higher-emissions sources (such as coal) to less-polluting sources (such as wind and solar)—when determining the GHG “emission limitation” level that is “achievable” for existing power plants “through application of the best system of emission reduction,” under Section 111(d) and 111(a) of the Clean Air Act.
The D.C. Circuit held that the EPA could consider those beyond-the-fence guidelines, but wasn’t required to do so, and the EPA’s position that it could not was improper.
At a high level, petitioners advance several legal theories attacking the D.C. Circuit’s ruling. They argue that because Section 111(d) requires states to develop plans “for” any “existing source,” the “best system of emission reduction” must be systems that can be applied “at” and “by” an individual source—i.e., within the fence line.
They also posit that the “major questions” doctrine and the “federalism clear statement rule” require a statute to be much clearer before agencies can impose regulations with significant economic impact or intrude on traditional state responsibility.
Finally, petitioners contend that the D.C. Circuit’s interpretation of Section 111(d) is so broad that it violates the Constitution’s separation of powers framework and the non-delegation doctrine, which bars Congress from delegating legislative authority to agencies without guidance or an intelligible principle.
Similar arguments were rejected by the D.C. Circuit, but the Supreme Court could revisit and agree with petitioners on one or more of these positions.
The Supreme Court could also take another approach and decide, as the EPA urged in its brief opposing certiorari, that the case is unripe because there is no actual rule currently in place to review and the EPA is undertaking a new rulemaking.
Further, petitioners’ arguments could become moot if the EPA’s next iteration of Section 111(d) emission guidelines for GHG emissions from power plants is limited in scope and does not propose beyond-the-fence options for state implementation.
It seems unlikely, however, the Supreme Court would have taken up the case just to decide it on ripeness or mootness grounds.
The Supreme Court’s decision—regardless of whether it upholds or overturns the D.C. Circuit—may not provide the regulatory certainty for which petitioners hope.
Because the EPA plans to undertake a new Section 111(d) rulemaking for GHGs from existing power plants irrespective of prior iterations of its rules or the Supreme Court’s decision, the EPA will need to renew an analysis of what specific measures are properly viewed as part of the “best system of emission reduction.” Additional uncertainty is embedded in the flexibility the Clean Air Act affords states in creating and implementing their own Section 111(d) plans.
Alternatively, some intervenors argue that, regardless of any EPA or Supreme Court decisions, a shift away from fossil fuel power plants is inevitable because technological advancements in renewable energy generation, associated cost-reductions, increasing consumer preferences for clean power, and other market forces are collectively already driving generation-shifting and emissions reductions in the power sector.
The Supreme Court’s decision could also have implications for other sources of GHGs. For example, if it were to agree with petitioners’ position that emissions-trading is impermissible under Section 111(d), that could fuel a challenge to the longstanding EPA regulation (promulgated under Section 111(d) and Section 129) authorizing states to include emissions-trading in their regulatory plans for municipal solid waste combustors’ nitrogen oxide emissions.
Other parties are concerned that the D.C. Circuit decision might open the door for the EPA to impose additional kinds of beyond-the-fence measures, like carbon taxes, on additional types of emissions sources, such as factories, hospitals, or even homes.
But this is largely speculative, and precursor EPA determinations would be necessary, such as officially “list[ing]” those other types of sources as “caus[ing], or contribut[ing] significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare,” and then establishing “Federal standards of performance for new sources within [that] category” under Section 111(b) of the Act, before the EPA could prescribe regulations for existing sources.
Any time the Supreme Court takes on a question regarding the extent of agency authority, there could be broader administrative law implications. This ultimately rests on how the Supreme Court approaches and decides this case. The Supreme Court’s decision and EPA’s renewed rulemaking will be closely watched.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
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Megan Houdeshel is a partner at the law firm of Dorsey & Whitney LLC, and co-chair of the firm’s Energy & Natural Resources Industry Group.
Kayla Race is an associate attorney at Dorsey & Whitney LLC, practicing in regulatory affairs and environmental compliance.