Justices Limit EPA Greenhouse Gas Emissions Regulation, Stop Short of What Observers Hoped/Feared

Client Alert

The Supreme Court severely limited the U.S. Environmental Protection Agency's (EPA) asserted authority to regulate greenhouse gases from existing emission sources such as coal-fired power plants. While devastating to EPA's climate change regulatory efforts, the ruling is notably restrained in other areas that observers hoped and/or feared (depending on your perspective) would be impacted beyond the immediate question before the Court.

At issue was whether the EPA can use an obscure and rarely invoked provision of the federal Clean Air Act (CAA), Section III(d), to effectively drive a sector-wide transition from fossil fuel energy generation to strictly renewable sources for the country. Initially embodied in the Obama Clean Power Plan (CPP), opponents, and later the Trump Administration, argued that EPA's authority extends no further than requiring technology upgrades and retrofits at existing specific facilities as opposed to systemwide transition mandates.

Writing for the six-member conservative majority, Chief Justice Roberts declared that the decision by EPA to drive a transition of the entire American energy sector is a "major questions case." Under the so-called "Major Questions Doctrine," to support executive branch agency action that would have sweeping economic and political consequences for the entire country, the agency must identify a "clear statement" from Congress authorizing it to take such action. The majority held that EPA had not identified such a statement from Congress.

The CPP regime had three basic components or "building blocks." Building block one closely resembled traditional EPA regulatory efforts—requiring efficiency upgrades and emission-limiting technology improvements. But building blocks two and three are where EPA drove so-called "generation shifting" requirements. In block two, coal-fired plants would be driven to transition to natural gas–fueled generation of electricity. And in building block three, both coal and gas would ultimately be replaced by renewable, zero-emission sources, primarily wind and solar. Classifying this regime as the "best system of emission reduction" (BSER), EPA allowed generation facilities to comply at the respective stages in any of three ways. First, they could simply reduce their energy production. Second, they could make the upgrades and facility investments to use the specified energy source or invest separately in such facilities. Finally, the generator could buy credits on a cap-and-trade market to meet its emission reduction obligations.

Citing the Major Questions Doctrine's requirement of a clear statement from Congress, the majority held that just the opposite was true—Congress has not made any clear authorization for a systemwide transition mandate to EPA, notwithstanding the importance of climate change. The majority found that such a broad power had never been identified as the BSER for CAA purposes and pointed to evidence of societal consequences in the record, such as reduced GDP, increased energy costs in certain states but not others, and job losses. The majority also highlighted that efforts to establish a cap-and-trade regime legislatively in Congress had been vigorously debated and failed to pass.

While observers had a keen eye peeled for any retraction of the so-called "Chevron Deference" doctrine, whereby courts defer to agency interpretations of their own regulatory authority in specified circumstances, the majority never addressed it. Similarly, advocates on both sides anxiously watched for implications of the Supreme Court's prior upholding of EPA's authority to regulate greenhouse gases from mobile sources in Massachusetts v. EPA, 549 U.S. 497 (2007). However, keeping with its narrow opinion on the question before the Court, the majority never references or cites to Massachusetts.

Likewise, the opinion is notable as to what the Court declined to rule on with regard to Section III(d). As to the specific question before the Court—systemwide transition of power plants versus only facility-specific upgrades and retrofits—Chief Justice Roberts refused to go as far as the Trump EPA. The majority expressly declined to address whether EPA's authority under Section III(d) was limited to just facility-specific mandates. The majority's express refusal to further wade into the waters of the scope of Section III(d) beyond the facts of the case before it creates the potential for another round of cases in the future.

The decision leaves the federal government having to go back to the drawing board on taking action to curb greenhouse gas emissions from power plants and the prospect of congressional gridlock standing in the way. In the meanwhile, certain states, such as California, in the midst of battling wildfires and other consequences of global warming, are left to their own accord to address the effects of existing power plant greenhouse gas emissions in a patchwork of measures to address the global concern. To that end, just late yesterday, the California Legislature approved AB 205, an omnibus energy budget trailer bill that has been sent to the Governor’s desk. Among other things, the far-ranging bill allows consolidated permitting under the California Energy Commission, which with some exceptions would replace local, state and federal permits for specified clean energy projects and authorizes a streamlined CEQA process for such projects.

Please contact the authors with any questions or concerns you may have about this rapidly evolving regulatory dynamic.



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