Five Quick Takes on West Virginia v. EPA

The U.S. Supreme Court issued today, June 30, 2022, its much-anticipated decision in West Virginia v. EPA.  The 6-3 decision is the latest chapter in a years-long dispute—in which Hunton Andrews Kurth has played a key role since the beginning—over how the U.S. Environmental Protection Agency (EPA) may regulate greenhouse gases under Section 111 of the Clean Air Act.  The decision does not affect whether EPA has authority at all to regulate greenhouse gases, but it makes clear that absent further direction from Congress, there are limits on how EPA may do so.  And more broadly, the decision provides important guidance on how the Supreme Court will evaluate assertions of “extraordinary” authority by federal agencies.

West Virginia involved a challenge to an EPA regulation of greenhouse gases for the electric utility sector.  The regulation, called the “Clean Power Plan,” relied on a cap-and-trade program in which the overall caps on emissions were predicated on the regulated electric utility units shutting down entirely and being replaced with other means of electricity generation.  This approach has been referred to as “generation-shifting.”

Chief Justice Roberts’ majority opinion concluded that Congress did not grant EPA in Section 111 of the Clean Air Act the authority to set emission standards based on this generation-shifting approach.  Section 111 standards require EPA to determine the emission limit “achievable” by applying the “best system of emission reduction” (“BSER”) that “has been adequately demonstrated” to covered sources in a given source category—here, electric utilities.  42 U.S.C. § 7411(a)(1).  In the Clean Power Plan, EPA determined BSER for existing coal and natural gas electric utilities based on shifting generation from coal to natural gas and from both to renewable sources.  This stands in contrast to other Clean Air Act standards issued under Section 111 where EPA set BSER based on emissions reductions that could be achieved directly at the covered source.

The Court held that EPA’s use of generation-shifting as a system of emission reduction under Section 111 required clear congressional authorization under the major questions doctrine and found Congress had not given such clear authorization.  Here are five significant takeaways from the Court’s decision.

First, the Court has made clear that the major questions doctrine has a long history in Supreme Court decisions and is “distinct” from routine statutory interpretation.  The Court explained that “in certain extraordinary cases,” “something more than a merely plausible textual basis for the agency action is necessary.”  Instead, the agency “must point to ‘clear congressional authorization’ for the power it claims.”  Moreover, this is a question that must be answered “before accepting a reading of a statute that would, under more ‘ordinary’ circumstances, be upheld.”

Second, the Court identified a number of factors that shed light on the application of the doctrine in the future.  The Court considered the fact that EPA found vast regulatory authority in a rarely used section of the Clean Air Act.  Prior to 2015, EPA had always set Section 111 emission limits based on the application of measures that would reduce pollution by causing sources to operate more cleanly, never based on shifting economic activity to other sources.  As the Court explained, EPA prior to 2015 had universally taken the view that Congress in Section 111(d) required a technology-based approach.  The Court characterized EPA’s new approach as a “fundamental revision of the statute.”

The Court also expressed concern with the authority that EPA could, but had not yet, exercised under its newfound interpretation, noting that such authority would perhaps allow EPA to force coal plants to shift away virtually all of their generation.  The Court found it “‘highly unlikely that Congress would leave’ to ‘agency discretion’ the decision of how much coal-based generation there should be over the coming decades.”  Rather, “[t]he basic and consequential tradeoffs involved in such a choice are ones that Congress would likely have intended for itself.”  And relatedly, the Court considered the fact that Congress had expressly declined itself to enact a cap-and-trade program for greenhouse gases, noting also “the earnest and profound debate across the country.”

Third, with respect to regulation under Section 111, the Court noted that its decision was limited to whether the generation-shifting measures EPA identified as the “best system of emission reduction” are within the authority Congress granted under Section 111 of the Clean Air Act.  It did not opine on what other measures EPA might take, beyond stressing the importance of EPA’s more limited, historical view of its authority under Section 111.

Fourth, on a more procedural note, the Court made clear that a lower court’s decision staying its mandate does not moot or deprive the losing party the ability to appeal.  Rejecting the government’s argument, the Court noted that there is no authority for this proposition and that “it does not make sense.”

Fifth, the Court made clear that it is not saying that EPA lacks authority to regulate greenhouse gases under the CAA.  It is merely addressing the ways in which Congress intended the agency to use its powers under the specific statutory provision, Section 111, that EPA invoked to issue the Clean Power Plan.

Finally, the immediate procedural effect of the decision is worthy of further analysis, due to the case’s complex history.  The Clean Power Plan was issued in 2015, but was stayed by the Supreme Court in 2016.  Then, the EPA issued a replacement rule, called the Affordable Clean Energy Rule, and also repealed the Clean Power Plan.  But the D.C. Circuit vacated both the repeal and replacement, which led to the current decision by the Supreme Court.  Given that the deadlines in the replacement Affordable Clean Energy Rule have now passed, it is reasonable to think that the D.C. Circuit and/or EPA will speak soon to the effect of the Supreme Court’s decision on that rule and any obligations under it.