Supreme Court Considers EPA’s Authority to Regulate the Electric Industry’s Greenhouse-Gas Emissions

Under review is a Trump administration rule that relaxed greenhouse-gas regulations for power plants. Challengers, who argue that those regulations lacked statutory authority in the first instance, would give new life to coal- and gas-fired plants.

On February 28, 2022, the U.S. Supreme Court heard oral arguments in West Virginia v. Environmental Protection Agency, No. 20-1530. The case was a consolidation of four appeals from the US Court of Appeals for the DC Circuit. At issue are two rules promulgated by the Environmental Protection Agency (“EPA”) under the Clean Air Act., 42 USC § 7401 et seq., the principal federal statute governing air emissions.

Under President Obama, the EPA in 2015 adopted the Clean Power Plan, 80 Fed. Reg. 64,662 (“CPP”). It sought to limit greenhouse-gas emissions from power plants. Citing language in section 111(d) of the Clean Air Act, the CPP set forth statewide emissions goals for existing power plants. For instance, Nebraska’s reduction target for 2030 was 40% below 2012 emissions.  To accomplish this, the CPP recommended (1) improving heat-rate efficiency at coal-fired plants, (2) replacing coal-fired plants with gas-fired ones, and (3) replacing coal- and gas-fired plants with renewable ones. Each state could determine, for itself, how to achieve its reduction target through the development of a state plan. But if a state did not adequately achieve its goal, the EPA would directly regulate that state’s power plants.

Claiming that such regulation exceeded the EPA’s statutory authority, various states and private parties filed suit. The Supreme Court in 2016 stayed the CPP pending its review. Once President Trump took office, however, the EPA stopped defending the CPP and instead proceeded to repeal and replace it.

In 2019, the EPA issued the Affordable Clean Energy Rule, 84 Fed. Reg. 32,520 (“ACE”). It replaced the CPP and relaxed many of the CPP’s requirements for existing power plants. As justification for this change in policy, the ACE alleged that the CPP had “significantly exceeded” the EPA’s statutory authority.

States and private parties again filed suit, and the DC Circuit agreed to vacate the ACE. By a 2-1 vote, the court disagreed that the CPP had exceeded statutory authority. And, since that had been the ACE’s lone justification, the court deemed the ACE arbitrary and capricious. Am. Lung Ass’n v. Env’t Prot. Agency, 985 F.3d 914, 936 (D.C. Cir. 2021).  The Supreme Court then granted review.

The issue now before the Supreme Court is whether the CPP exceeded the EPA’s authority under the Clean Air Act. Section 111(d) of the Clean Air Act directs the EPA to establish “standards of performance” for existing stationary sources. 42 USC § 7411(b)(1)(B). A “standard of performance” is 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 (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.” § 7411(a)(1).

According to West Virginia and the other challengers, that provision contemplates only on-site control measures, such as emissions-reducing equipment. They allege that the CPP, by contrast, regulated off-site measures. It viewed power plants on a statewide basis. And it effectively required coal- and gas-powered plants in each state to either cease operating or purchase credits that subsidized renewable generators. If Congress had intended to authorize EPA regulations of this type and magnitude, it would have clearly said as much in the Clean Air Act, the challengers argue.

 At oral argument, some justices questioned whether the appeal still concerns a live issue. Neither the CPP nor ACE are presently operative. This arguably makes the case moot and means the challengers lack standing. Still, during oral arguments, a majority of the court sounded persuaded by the challengers’ reasoning.

We predict that the Supreme Court will reverse the DC Circuit’s decision. The EPA will then need to replace the CPP and ACE with a new rule in accordance with the court’s decision.

The court will likely issue an opinion by mid-summer 2022. We will continue to monitor this case and provide updates. Please contact us with any questions regarding the Clean Air Act or any other environmental laws.