Impacts of West Virginia v. EPA Ruling on Future Energy Regulations
On June 30, the U.S. Supreme Court issued a ruling in West Virginia v. EPA, reversing a D.C. Circuit opinion, which vacated the Affordable Clean Energy Rule (ACE Rule) issued by the Environmental Protection Agency during the Trump administration, vacated the Trump EPA’s repeal of the Clean Power Plan (CPP), which was issued by the Obama EPA, but delayed reinstating the CPP at the request of the Biden EPA. Confused?
In short, the CPP sought to regulate carbon dioxide (CO2) emissions from existing electric generation plants by forcing a transition to cleaner forms of energy generation. The ACE Rule determined that the CPP exceeded EPA’s authority under the Clean Air Act and replaced it with more limited regulations aimed at reducing emissions from coal-fired plants. The D.C. Circuit vacated the ACE Rule (and CPP repeal), but the Biden EPA did not want the CPP reinstated, preferring to issue its own ruling. The Supreme Court reversed it all. A more detailed explanation follows.
Clean Power Plan
After Congress failed to pass cap-and-trade legislation in 2010, President Barack Obama charted a regulatory route to reduce carbon emissions, directing EPA to “use your authority under sections 111(b) and 111(d) of the Clean Air Act to … address carbon pollution” from new and existing emissions sources, i.e., electric generation plants. Section 111 involves a two-step process.
First, under Section 111(b), EPA identifies categories of sources contributing to air pollution and issues regulations to reduce harmful emissions from new sources. Second, under Section 111(d), EPA regulates existing sources. Regulations for both new and existing sources identify the “best system of emission reduction” (BSER) to address the pollution. Described by one court as “a gap-filler,” empowering EPA to regulate harmful emissions not already controlled under EPA’s other authorities, Section 111 was an odd choice to transform the electric industry — the statute had been used only a few times and, significantly, never tested by judicial review.
In 2015, EPA issued Section 111(b) regulations to regulate CO2 emissions from new fossil-fuel generation plants: EPA determined that that BSER for new coal-fired plants was using an efficient boiler and partial carbon capture/storage, while using combined-cycle technology was the BSER for baseload gas-fired plants. Having issued regulations for new plants, EPA next issued regulations for existing plants (the CPP), but the BSER was much more aggressive.
The CPP provided each state with a goal for reducing CO2 emissions from existing power plants; the BSER was three “building blocks” to reach the goal. The first building block was, essentially, make coal-fired plants burn coal more cleanly. The second and third building blocks required “generation shifting” — shifting from coal plants to combined cycle gas plants, then shifting from coal and gas plants to renewable resources (e.g., wind and solar). Each state would decide how to meet its goal, submit an implementation plan, and begin reducing CO2 emissions by 2022. If a state did not submit a plan, EPA would impose one (basically, a cap-and-trade program). By 2030, EPA projected that power plant emissions of CO2 would be 32 percent lower than in 2005.
Repeal, Vacate and Appeal
Once EPA issued the CPP, “Red States” immediately filed with the D.C. Circuit petitions for review and a stay of the CPP’s effectiveness. The Supreme Court eventually granted the stay. Afterward, President Donald Trump was elected, and the D.C. Circuit held the appeal in abeyance and eventually dismissed it, allowing the Trump EPA to reconsider the CPP. In 2019, the Trump EPA repealed the CPP, finding that it exceeded EPA’s authority under the Act, and replaced it with the ACE Rule, which was similar to CPP’s first building block.
“Blue States” disagreed and filed appeals of the ruling in the D.C. Circuit, while Red States intervened to defend the repeal. On appeal, the D.C. Circuit found that the Clean Air Act authorized the Obama EPA to require generation shifting, vacated Trump EPA’s repeal of the CPP, vacated the ACE Rule and remanded the proceedings back to the EPA. The opinion was issued the day before President Joe Biden’s inauguration. Coincidence?
Appellate opinions do not take effect until the court issues a mandate. The Biden EPA asked the D.C. Circuit for a partial stay of its mandate to prevent the CPP from immediately going into effect, giving the Biden EPA time to consider its own plan, while ensuring that ACE Rule was killed and buried. The court agreed. Red States filed petitions asking the Supreme Court to review the D.C. Circuit opinion. The Court agreed.
Supreme Court Ruling
The Supreme Court ruling (with the concurring and dissenting opinions) is 89 pages, but a short summary follows. Chief Justice John Roberts wrote the majority opinion and explained:
Capping carbon dioxide emissions at a level that will force a nationwide transition away from the use of coal to generate electricity may be a sensible “solution to the crisis of the day.” But it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme in Section 111(d). A decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.
Justice Neil Gorsuch in a concurring opinion joined by Justice Samuel Alito stated:
EPA claims the power to force coal and gas-fired power plants “to cease [operating] altogether.” Whether these plants should be allowed to operate is a question on which people today may disagree, but it is a question everyone can agree is vitally important. Congress has debated the matter frequently. And so far it has “conspicuously and repeatedly declined” the Clean Power Plan (CPP).
Justice Elena Kagan’s dissenting opinion (joined by Justices Stephen Breyer and Sonia Sotomayor) argued: “The majority’s decision rests on one claim alone: that generation shifting is just too new and too big a deal for Congress to have authorized it in Section 111’s general terms. But that
President Biden promptly released a statement:
The Supreme Court’s ruling in West Virginia vs. EPA is another devastating decision that aims to take our country backwards. While this decision risks damaging our nation’s ability to keep our air clean and combat climate change, I will not relent in using my lawful authorities to protect public health and tackle the climate crisis.
Next spring, the EPA is expected to issue its replacement for the CPP. Gina McCarthy, Biden’s National Climate Advisor, recently told reporters that the administration needs to get “creative.” Remember, when McCarthy was the EPA Administrator in 2015, reporters asked whether she had a backup plan, in case the CPP were overturned by the courts, she said no: “It will be legally solid. I don’t need a Plan B if I’m solid on my Plan A.”
Last year, the Biden EPA quietly announced: “Preliminary data indicates that CO2 emissions from the electric power sector in 2019 were 34 percent below the level in 2005.” The CPP’s goal was exceeded without the CPP’s onerous regulations, due primarily to market forces that replaced old coal-fired generation plants with new plants fueled by abundant shale gas. As such, would it be too “creative” for the EPA to forgo new regulations and instead allow the natural gas industry to fuel even more CO2 reductions?
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Washington Watch is a regular report on the energy pipeline regulatory landscape. Steve Weiler is an attorney at Dorsey & Whitney LLC in Washington, D.C. Contact him at firstname.lastname@example.org.