Will the Supreme Court Bar EPA from Regulating Greenhouse Gasses?

What’s the issue?

A case is set for oral argument before the Supreme Court at the end of this month that could have major implications for the future ability of the federal government and the EPA to regulate greenhouse gas emissions from the electric industry.

Why does it matter?

If the court decides to address the merits of the case, the basis of that decision could have far reaching impacts on the regulation of the electric industry in this country to the likely benefit of the coal industry, but also to the benefit of the natural gas industry and gas pipelines. The Supreme Court’s position on these highly charged political issues will likely be the final word for a very long time to come.

What’s our view?

It is far from certain how the current conservative majority of the Supreme Court will address the issues before it. However, the fact that it agreed to hear the case certainly increases the chance that it will reach the merits of the case. The decision could limit the EPA’s ability to regulate greenhouse gasses and may even limit Congress’s ability to do so. Almost any decision on the merits would also call into question attempts by FERC to impose limits on pipelines related to the ghg emissions upstream and downstream from the pipeline itself.

 


 

On February 28, the U.S. Supreme Court is scheduled to hear the oral argument in West Virginia v. Environmental Protection Agency, a case that could have major implications for the future ability of the federal government and the EPA to regulate greenhouse gas emissions from the electric industry. If the court decides to address the merits of the case before it, the basis of that decision could have far reaching impacts on the regulation of the electric industry in this country to the likely benefit of the coal industry, but also to the benefit of the natural gas industry and gas pipelines.

It is far from certain how the current conservative majority of the Supreme Court will address the case before it. However, the fact that it agreed to hear the case certainly increases the chance that it will reach the merits of the case. The decision could limit the EPA’s ability to regulate greenhouse gasses and may even limit Congress’s ability to do so. Almost any decision on the merits would also call into question attempts by FERC to impose limits on pipelines related to the ghg emissions upstream and downstream from the pipeline itself.

 

The Push and Pull of Greenhouse Gas Regulation

The case before the court finds its roots in a plan first adopted by the Obama administration, called the Clean Power Plan, that would have required the states to develop plans to address ghg emissions from existing electric generating plants. As conceived by the Obama administration, those plans could have included not only changes to coal-fired power plants to make them less polluting, but also shifting the generation mix in the states away from coal and toward natural gas and renewable energy.

However, the Clean Power Plan never took effect because the Supreme Court issued a stay of the plan and the Trump administration ultimately replaced it with a plan called the Affordable Clean Energy (ACE) rule. In adopting the ACE rule, the Trump administration determined that under the Clean Air Act (CAA), it did not have the power to require measures like generation shifting, but could only consider measures that could be applied to each individual source of emissions, often referred to as within-the-fence measures. For coal-fired plants, the ACE rule determined that the only measures that were practical were a handful of minor efficiency improvements, and for gas-fired plants it determined nothing at all needed to be done. Thus, under the Trump administration’s interpretation of the CAA, it simply lacked the authority to do anything more to address ghg emissions from existing power plants.

The ACE rule and, in particular, its interpretation of the EPA’s limited authority, was challenged in court. In a decision issued last year, the U.S. Circuit Court of Appeals for the District of Columbia Circuit (DC Circuit) decided that the ACE rule must be voided because the entire rule was based on “the erroneous legal premise that the statutory text expressly foreclosed consideration of measures other than those that apply at and to the individual source.” While the DC Circuit voided the ACE rule, it did not revive the Obama-era Clean Power Plan, so, in fact, there is currently no EPA rule that applies to ghg emissions from power plants.

 

The Court Could Duck the Whole Question

The Biden administration, supported by a number of briefs filed by non-parties, referred to as amicus briefs, argues that the court should simply dismiss the case as improvidently granted and not even address the merits of the case. This is based on the fact that the DC Circuit’s decision did not adversely impact any of the petitioners appealing that decision because it did not reimpose the Clean Power Plan. Because the DC Circuit decision just returned the world to how it existed before the Clean Power Plan or the ACE rule were ever adopted, there was no possible harm to those appealing. Normally this argument would have appeal to conservative justices on the court because the typical expectation is that conservative justices do not believe the court should reach out and decide cases unless there is real harm to the party appealing.

As we noted in our discussion of the PennEast case that went to the Supreme Court, PennEast, FERC, the Courts and the Congress, energy cases often are a conundrum because the conservative members of the court would often seem disposed to rule against the energy companies on procedural grounds, but for them on the substantive grounds, and it is just the opposite for the liberal justices. This case is no different.

From a procedural perspective, it would be traditional to assume that the conservatives would be against deciding a case like this one. In fact, that was just the reasoning used in Chief Justice Roberts’s dissent in the 2007 case that first established that the EPA had authority to regulate greenhouse gas emissions. As stated by Chief Justice Roberts and agreed to by current Justices Thomas and Alito, “the Constitution limits the federal judicial power to the adjudication of ‘Cases’ and ‘Controversies.’ ‘If a dispute is not a proper case or controversy, the courts have no business deciding it, or expounding the law in the course of doing so.’”

However, the composition of the Supreme Court has changed substantially since that 2007 decision. The only member of the slim five-member majority in that case that remains on the court is Justice Breyer, who just announced he is retiring at the end of this term. But three of the dissenters, Chief Justice Roberts and Justices Alito and Thomas, remain and they have been joined by Justices Gorsuch, Kavanaugh and Coney Barrett. While Chief Justice Roberts’s dissent in that case questioned whether the court should have even heard the case, a dissent filed by Justice Scalia and joined by the other three conservative justices, also questioned the substantive decision.

So once again the conservatives may find themselves not wanting to hear this case for procedural reasons, but wanting to address the merits. It is certainly possible that the Chief Justice will side with the three liberal members of the court and vote to dismiss the case, but that would still allow it to go forward.

 

Importance of the Case

The significance of the case is maybe best shown by the amount of interest it has generated from the parties and non-parties.

 

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As seen above, the court has received 43 briefs on this case totaling almost 1800 pages. But the character of the non-parties filing briefs is interesting, as well. Three briefs were filed by members of Congress: one representing 91 Republicans who asked the court to overturn the DC Circuit decision; another representing 192 Democrats who asked the court to uphold the DC Circuit decision; and one independently filed by Senators Whitehouse, Blumenthal, Sanders and Warren asking the court to outright dismiss the case on the procedural grounds like those expressed by Chief Justice Roberts in 2007.

 

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In all, 47 Republican senators and 33 Democratic senators filed briefs with the court.

Also interestingly, although the Clean Power Plan and the ACE rule were really directed at power plants, the owners of electric generation facilities have all filed in support of upholding the DC Circuit decision or at least not overturning it on any sweeping constitutional grounds. An ad hoc group of utilities consisting of Consolidated Edison, Exelon, National Grid USA, New York Power Authority, Power Companies Climate Coalition, and Sacramento Municipal Utility District argued that the ACE rule’s interpretation of the CAA was simply wrong and that, because of the “uniquely interconnected nature of the electricity grid, utilities, many States, and EPA have all recognized that” EPA’s power must not be “restricted to measures ‘at and to’ each individual plant operated in isolation from one another.”

Similarly, the Edison Electric Institute, which represents “all U.S. investor-owned electric companies—the largest entities regulated by the EPA rules under review,” all but begged the conservative majority to show restraint. In its brief, it acknowledged that the court may want to reverse the DC Circuit decision, but should only “do so using traditional tools of statutory construction; without doing violence to its prior rulings; and without entirely voiding EPA’s authority to engage in fact finding regarding the effects of pollutants and to regulate emissions of those pollutants according to the policies Congress set forth.”

Finally, the top five companies in the S&P 500 jointly filed a brief also asking the court to uphold the DC Circuit decision. Those five companies, Apple, Amazon, Google, Microsoft, Meta Platforms (fka Facebook) and Tesla acknowledged that they “have varied and sometimes competing interests, [but] they are united in their efforts to combat” the threat of climate change. They also noted that each of the companies and many in the private sector are already taking voluntary measures to address this crisis, but “only EPA can promulgate regulations that set consistent, nationwide baselines for reducing greenhouse gas emissions.” According to their brief, climate change is not limited to any particular state, but rather affects the entire country and indeed the globe, and therefore nationwide “regulation is needed to ensure that emissions are reduced at the scale necessary to mitigate the impacts of climate change.”

 

Ramifications of Possible Outcomes

If the court reaches the merits of the case, it is possible that the court will uphold the DC Circuit’s decision, but that outcome seems remote. Instead, a decision on the merits will likely mean a decision to overturn the DC Circuit because the easier way to uphold the DC Circuit would be to simply dismiss the appeal as the Biden administration has requested. Almost any decision to overturn the DC Circuit will have far reaching implications for the power industry, but also for the natural gas and pipeline sectors.

The court could determine that Congress did not clearly delegate authority to the EPA to regulate ghgs from existing sources. That decision would have the broadest impact on all industries. But even a more limited determination that upholds the Trump administration’s reading of the CAA would essentially gut the ability of the EPA to impose limits on existing power plants. As acknowledged by the Trump administration itself, that interpretation as implemented in the ACE rule, “would lower power-sector CO2 emissions by less than one percent by 2030. And in more than a dozen States, emissions would increase compared to a baseline of no regulation at all.”

However, a decision to overturn the DC Circuit on either ground would represent a major change in the baseline expectations about the future for both coal and natural gas fired power plants. Any such decision would almost certainly lead to both types of existing plants being used for a longer period of time and perhaps more often, as expected by the Trump administration when it issued the ACE rule.

In the brief filed by the Democratic members of Congress, they accuse the Republicans who have asked the court to overturn the DC Circuit decision of using the court as a political tool to achieve something they have failed to achieve through the political process, which is a restriction on the EPA’s authority to regulate ghgs. The Democrats urge the court to “not reward this attempted end-run around the legislative process.” Given the polarized nature in Congress right now, however, the reality is likely that whoever loses in the Supreme Court will be unable to modify the CAA in any meaningful way. Thus, the Supreme Court’s position on this highly charged political issue will likely be the final word for a very long time to come.

A decision reversing the DC Circuit will also likely spread to other areas as well. In FERC Democrats Seek to Assume Role of Carbon Emissions Regulator, we discussed Chairman Glick’s efforts to regulate ghgs through the certificate process for pipelines by taking into account the upstream and downstream emissions that are purportedly “caused” by pipeline projects. If the Supreme Court rules that the EPA, which has clearly been given authority over air pollution, may not consider the ghg emissions beyond the fenceline of projects it regulates, it is hard to imagine how FERC would be able to sustain a policy that looks beyond the direct emissions of a project as a basis for denying that project a certificate.

Given how late in the Supreme Court’s calendar this oral argument is being held, past history would indicate that the decision will likely not come out until the end of June, but we will be listening to the arguments on February 28 to see if we can read the tea leaves as to how the justices are splitting on this issue.

If you would like to discuss the case with us following the arguments on February 28, please contact us.

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