Supreme Court Strikes Down Clean Energy Plan—Analysis and Key Takeaways | Brownstein Hyatt Farber Schreck

Yesterday, the United States Supreme Court issued its long-awaited opinion in the case West Virginia vs. EPA regarding the agency’s authority to regulate carbon dioxide (CO₂) new and existing coal and gas-fired power plants. In a 6-to-3 decision, Chief Justice Roberts, writing for the majority, found that the EPA exceeded its authority under Section 111 of the Clean Air Act by enacting the 2015 Clean Power Plan ( the “PPC”). This alert focuses on what the PPC attempted to accomplish, what the decision says, and perhaps equally importantly, what the decision does not say, as well as several key points to remember.

Background: The case focused solely on a provision of the Clean Air Act, Section 111. This section first directs the EPA to create a list of stationary sources that cause or contribute significantly to air pollution. which can reasonably be expected to endanger the health or welfare of the public. Once the sources (such as power plants) are listed, the EPA must then promulgate federal “performance standards” for New and amended stationary sources. A “performance standard” is the amount of pollution that the EPA deems acceptable if the stationary source uses the “best emission reduction system” (“BSER”). More importantly, EPA regulations on New Where amended power plants or whether greenhouse gas (“GHG”) emissions endanger public health or welfare were not at issue in this case. Opinion is instead centered on Section 111(d) of the Clean Air Act and the extent of the EPA’s power to regulate CO₂ of existing power stations.

Once the EPA issues pollutant-specific performance standards for New and amended sources, Section 111(d) requires the EPA to address emissions of that same pollutant to existing sources (provided they are not already regulated under Section 110 or 112). Unlike Section 111(b) (which regulates new and modified sources), Section 111(d) requires a significant state role in developing and implementing new source performance standards (“NSPS”) existing. While the EPA is responsible for determining the BSER for existing sources, states are responsible for developing plans to meet BSER standards.

In issuing the Clean Power Plan in 2015, the EPA defined the BSER under Section 111(b) for New and amended coal and natural gas-fired power plants, which focused on improving the heat rate and using carbon capture. This was relatively uncontroversial.

Simultaneously, the EPA issued Section 111(d) guidance for existing factories made up of three “Building Blocks”:

• Building Block #1: Increase the efficiency of existing coal and gas-fired power plants through heat rate improvements (very few reductions compared to #2 and #3).
• Building Block No. 2: Shift power generation from existing coal-fired power plants to gas-fired power plants, which the EPA says would generate about 50% less CO₂
• Building Block 3: Shift power generation from gas-fired power plants to low- or zero-carbon generation capacity. To reach Building Block 3, generators could replace existing facilities with new wind and solar projects, invest in existing wind or solar projects, or buy emissions allowances if they operate in a state with a regime. cap and trade.

These “Building Blocks”, and in particular Building Blocks No. 2 and No. 3, constituted the heart of the controversy. In other words, the question was whether Section 111(d) and the concept of BSER allowed the agency to use Building Blocks to force “generational change” in existing factories to meet emission limits. established by the EPA and GHG reduction targets. As the Supreme Court called the EPA’s efforts, “[t]The goal, after all, was to force the transfer of power generation capacity from existing sources to wind and solar.

Main aspects of the Court’s decision: Relying on the “major issues doctrine,” the Supreme Court struck down the EPA’s use of Section 111(d) to create the CPP. Major doctrinal cases on the issues, which the Supreme Court observes, have “sprung up from all corners of the administrative state,” including several recent actions by pandemic-related agencies, attorney caution and judicial review. more demanding in “extraordinary cases” where an agency asserts “extravagant statutory power over the national economy.” As the Supreme Court put it, the doctrine “refers to an identifiable body of law that has developed over a series of prominent cases all dealing with a particular and recurring problem: agencies asserting power highly consequential beyond what Congress might reasonably be expected to have granted.” And in such cases, the doctrine demands not only plausible textual arguments, but clear evidence of Congressional intent to delegate authority over underlining the related separation of powers doctrine, the Supreme Court noted that “Congress intends to make major policy decisions itself, not to leave those decisions to the agencies.” In that case, the Supreme Court found that the EPA’s exercise of its authority under Section 111(d) (i.e., the finding that BSER had authorized the forcible transfer of generation) had violated the doctrine of ques major problems for many reasons, including:

• EPA’s use of the word ‘system’ in the BSER to justify the CPP was ‘nowhere near the kind of clear authorization required’, as ‘almost anything could constitute such a ‘system’; stripped of all context, the word is an empty vessel.
• Section 111(d) is an ancillary gap-filling provision of the law, rarely used in previous decades, and this context required further consideration of the EPA’s new interpretation.
• In the limited cases where the EPA had used Section 111(d) before 2015, it had done so only to force individual sources to operate cleaner, and never to impose an emissions cap by seeking a “system which would reduce pollution by moving polluting activity more widely.
• Contrary to the EPA’s view, Congress did not “implicitly instruct[] it, and it alone, in balancing the many vital national policy considerations involved in the basic regulation of how Americans get their energy.”
• Nor has Congress ‘left’ it to ‘agency discretion’ to decide how much coal-based generation there should be over the next few decades”, and there is no no other provision of the Clean Air Act that confers such authority.
• Congress has repeatedly considered and rejected a carbon cap-and-trade system, which the Supreme Court says is presumptive evidence that the EPA was relying on “newly discovered” authority in a law. force for a long time.

Ultimately, the Supreme Court concluded that even if capping carbon dioxide emissions is a reasonable solution, “it is not plausible that Congress has given the EPA the power to enact on its own initiative such a regulatory scheme in Section 111(d) A decision of such magnitude and consequence rests with Congress itself, or an agency acting under clear delegation from that representative body.

Practical effect of the decision: Opinion, Consensus, and Dissent are as much about fundamental constitutional issues such as the separation of powers, congressional delegation of power, and the general role of the administrative state as they are about Section 111(d) of the Clean Air Act. Based on the concerns expressed and the analysis of this notice, we see three important short-term implications:

1. Importantly, the Supreme Court did not reverse its 2006 decision in Massachusetts v. EPA, nor did it consider or reverse the EPA’s endangerment finding, which still allows the EPA to regulate GHG emissions from power plants and other gas emission sources Greenhouse effect. Instead, it limited how far the EPA can go under 111(d) to address GHG emissions from existing power stations. And, it’s worth noting that even though the CPP never went into effect, its emissions reduction targets were met in 2019 – 11 years ahead of schedule – due to the relatively lower cost of natural gas.
2. Although today’s decision is limited to the electricity sector, the ruling will have implications for other industry sectors and agency rules, including oil and natural gas and ongoing development by the EPA Section 111(d) rules for this sector. For example, if the provisions of the Section 111(d) rules for the oil and gas sector seek to compel action or reduce emissions beyond the individual source (i.e. electrification via zero-emission pneumatic controller mandates), the EPA may be more limited in what or how it acts. Likewise, if the collective effect of new NSPS rules imposes outsized costs or ushers in transformative changes in the country’s energy consumption, these actions may come under closer scrutiny. The decision also raises considerations about the power of the Security and Exchange Commission to enact its recently proposed climate disclosure rule.
3. Finally, in a point unrelated to the Clean Air Act, we would be remiss not to mention the rise of the current Supreme Court to reign over the power of the administrative state. Both majority opinion and assent detail the unmistakable growth in size and activity of the executive over the decades. The case appears to be an indicator reflecting the current Supreme Court’s eagerness to scrutinize the agency’s action. This case suggests that the Supreme Court will not hesitate to apply the major issues doctrine in the future, and in appropriate cases the Supreme Court may well be willing to apply the dormant non-delegation doctrine and even reconsider d other principles of agency deference under Chevron and Auer.