By Deborah Quick, Esq. and Lucille Flinchbaugh, Esq.

The United States Supreme Court has considered whether the “best system of emission reduction” identified by the U.S. Environmental Protection Agency (EPA) in its Clean Power Plan (Plan) was within the authority granted to the EPA by § 111(d) of the federal Clean Air Act (CAA or Act). Analyzing the question under the “major questions doctrine,” the Court concluded that the emissions shifting building blocks of the Plan lacked any clear congressional authorization, and therefore exceeded the EPA’s regulatory authority under the Act. [West Virginia v. Environmental Protection Agency, ___U.S.___, 142 S.Ct. 2487 (2022).]

Background

In 2015, the EPA promulgated the Plan, which addressed carbon dioxide emissions from existing coal- and natural-gas-fired power plants. West Virginia, 142 S. Ct. at 2592. The EPA cited the scarcely utilized Section 111 of the Act as its source of authority, which directs the EPA to: (1) determine, considering various factors, the best system of emission reduction which has been adequately demonstrated, (2) ascertain the degree of emission limitation achievable through the application of that system, and (3) impose an emissions limit on new stationary sources that reflects that amount. 42 U.S.C. §7411(a)(1); see also 80 Fed. Reg. 64510, 64538 (Oct. 23, 2015); West Virginia, 142 S. Ct. at 2601. Under this provision, the States have authority to set the enforceable rules restricting emissions from sources within their borders, while the EPA decides the amount of pollution reduction that must ultimately be achieved. Id. at 2601–02. That standard may be different for new and existing plants, but in either case, it must reflect the “best system of emission reduction” or “BSER” that the EPA has determined to be “adequately demonstrated” for the category. §§7411(a)(1), (b)(1), (d). 142 S. Ct. at 2602.

In its Plan, the EPA determined that the BSER for existing coal-fired power plants included three types of measures which the EPA called “building blocks.” Id. at 2602–03; see 80 Fed. Reg. 64662, 64667 (Oct. 23, 2015). The first building block consisted of “heat rate improvements” that coal-fired plants could undertake to burn coal more efficiently. 142 S. Ct. at 2693; 80 Fed. Reg. at 64727. This type of source-specific, efficiency improving measure was similar to those that the EPA had previously identified as the BSER in other Section 111 rules. However, in this case, the EPA determined that this measure would lead to only small emission reductions because coal-fired power plants were already operating near optimum efficiency. 142 S. Ct. at 2603; 80 Fed. Reg. at 64727. The EPA explained, in order to control carbon dioxide from affected plants at levels necessary to mitigate the dangers presented by climate change, it could not base the emissions limit on measures that only improve power plant efficiency. 142 S. Ct. at 2611; 80 Fed. Reg. at 64728.

As such, the EPA included two additional building blocks in its Plan. The second building block would shift electricity production from existing coal-fired power plants to natural-gas-fired plants (Id.) and the third building block would shift from both coal- and gas-fired plants to new low- or zero-carbon generating capacity, mainly wind and solar. Id. at 64729, 64748; 142 S. Ct. at 2603. In other words, both measures would involve what the EPA called “generation shifting from higher-emitting to lower-emitting” producers of electricity as a means of reducing carbon emissions. Id.; 80 Fed. Reg. at 64728. The EPA explained that such methods for implementing this shift may include reducing the plant’s own production of electricity, building a new natural gas plant, wind farm, or solar installation, investing in an existing facility, or purchasing emissions allowances. Id. at 64731–32; 142 S. Ct. at 2603.

In determining “the degree of emission limitation achievable through the application” of the system, as required under the Act, the EPA settled on what it regarded as a “reasonable” amount of shift, projecting that by 2030, it would be feasible to have coal provide 27 percent of national electricity generation, down from 38 percent in 2014. 80 Fed. Reg. at 64665, 64694; 142 S. Ct. at 2604. From these projections, the EPA determined the applicable emissions performance rates, which were so strict that no existing coal plant would have been able to achieve them without engaging in one of these three methods of generation shifting discussed above. Id.

Following a stay on the Plan in 2016, the EPA repealed the Plan in 2019 following a change in administration, concluding that the EPA had exceeded its own jurisdiction under the Act. Id. On January 19, 2021, the D.C. Circuit reviewed the EPA’s actions and determined that the EPA had misunderstood the scope of its authority under the Act. The court vacated the EPA’s repeal of the Plan and remanded to the EPA for further consideration. Id. at 2605–06 (citing Am. Lung Ass’n v. EPA, 985 F. 3d 914, 995 (D.D.C. 2021, rev’d and remanded by West Virginia, 142 S. Ct. 2587). The court’s decision was followed by another change in administration, and the EPA moved the court to partially stay its mandate. 142 S. Ct. at 2606. Westmoreland Mining Holdings LLC., North American Coal Corporation, and the States filed petitions for certiorari defending the repeal of the Plan. Id.

The Supreme Court’s Decision-Majority Opinion

The Court explained that the main issue under consideration in this case was whether restructuring the nation’s overall mix of electricity generation, to transition from 38 percent coal to 27 percent coal by 2030, can be the BSER within the meaning of Section 111. Id. at 2595. In analyzing this issue, the Court looked to a variety of cases where agencies were found to have exceeded their regulatory power because, under the circumstances, common sense as to the manner in which Congress would have been likely to delegate such power to the agency at issue, made it very unlikely that Congress had actually intended to do so. Id. at 2609. The Court explained that extraordinary grants of regulatory authority are rarely accomplished through “modest words,” “vague terms,” or “subtle device[s],” Whitman v. Am. Trucking Ass’ns, 531 U. S. 457, 468 (2001), and the Court presumes that “Congress intends to make major policy decisions itself, not leave those decisions to agencies.” United States Telecom Ass’n v. FCC, 855 F. 3d 381, 419 (D. D.C. 2017); 142 S. Ct. at 2609.Accordingly, the Court determined that this question must be analyzed under the body of law known as the “major questions doctrine.” Id.

The Major Questions Doctrine

In arguing that Section 111(d) empowered it to substantially restructure the American energy market, the EPA “claim[ed] to discover in a long-extant statute an unheralded power” representing a “transformative expansion in [its] regulatory authority.” Utility Air Regul. Grp. v. EPA, 573 U. S. 302, 324 (2014). 142 S. Ct. at 2610. Prior to 2015, the EPA had always set emissions limits under Section 111 based on the application of measures that would reduce pollution by causing the regulated source to operate more cleanly, but it had never previously devised a cap by looking to a “system” that would reduce pollution simply by shifting polluting activity from dirtier to cleaner sources. 80 Fed. Reg. at 64726. 142 S. Ct. at 2610. Under its prior view of Section 111, the EPA’s role was limited to ensuring the efficient pollution performance of each individual regulated source, and if a source was already operating at that level, there was nothing more for the EPA to do. Id. at 2612.

In contrast, the Court argued that under the Plan, the EPA was able to demand much greater reductions in emissions based on its own policy judgment that coal should make up a much smaller share of national electricity generation. Id. The EPA would be able to decide, for instance:

. . .how much of a switch from coal to natural gas is practically feasible by 2020, 2025, and 2030 before the grid collapses, and how high energy prices can go as a result before they become unreasonably ‘exorbitant.’ Id.

The Court asserted that under this view, the EPA could go even further, perhaps forcing coal plants to “cease making power altogether.” Id. The Court explained that Congress:

. . .certainly has not conferred a like authority upon EPA anywhere else in the Clean Air Act. . .[and and the]. . .last place one would expect to find it is in the previously little-used backwater of Section 111(d). Id. at 2613.

As such, the Court determined it would be highly unlikely that Congress intended to leave to agency discretion the decision of how much coal-based generation there should be over the coming decades.

Under the major questions doctrine, to overcome the Court’s skepticism, the Government must point to “clear congressional authorization” to support its assertion of regulatory power. Utility Air, 573 U. S., at 324. 142 S. Ct. at 2614.The Government looked to other provisions of the Act for support, such as where the word “system” or similar words to describe cap-and-trade schemes or other sector-wide mechanisms for reducing pollution are used, such as in the Acid Rain program or Section 110 of the NAAQS program. Id. at 2614–15. However, the Court rejected the Government’s argument, differentiating these sections and finding that the references to “system” in other provisions do not equate to the kind of “system of emission reduction” referred to in Section 111. Id. at 2615. The Court concluded that these provisions do not provide adequate support to make a finding of clear congressional authorization. Id. at 2615–16. Notably, however, the Court refused to answer the question of whether the statutory phrase “system of emission reduction” refers exclusivelyto measures that improve the pollution performance of individual sources, such that all other actions are ineligible to qualify as the BSER. Id. at 2616.

Congress Had Not Intended to Give EPA Such Broad Authority

In total, the Court determined that while capping carbon 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,” based on the language of the statute and the lack of any other clear congressional directive, it is not plausible that Congress intended to give the EPA the authority to adopt a regulatory scheme of such magnitude in Section 111(d). The Court reversed the D.C. Circuit’s decision and remanded for further proceedings.

The Concurrence

Justice Gorsuch’s concurrence, joined by Justice Alito, builds on Gorsuch’s prior opinions in Gundy v. United States, 139 S. Ct. 2116 (2019) (dissenting) and Nat’l Fed. of Ind. Bus. v. OSHA, 595 U.S. ___ (2022) (concurrence) (NFIB), in which Gorsuch has argued for an expansive application of the major questions doctrine.

In Gundy, Gorsuch traced the asserted deterioration of the “intelligible principle” doctrine by which courts determine “whether Congress has unconstitutionally divested itself of its legislative responsibilities.” Gundy (Gorsuch, dissenting), Slip Op. at 15, quoting J.W. Hampton, Jr. & Co. v. United States, 276 U.S. 394, 409 (1928) (“[A] statute ‘lay[ing] down by legislative act an intelligible principle to which the [executive official] is directed to conform’ satisfies the separation of powers.”). Gorsuch identifies the “traditional” separation of powers test as providing that “as long as Congress makes the policy decisions when regulating private conduct, it may authorize another branch to ‘fill up the details.” Gundy (Gorsuch, dissenting), Slip Op. at 10 (citing Wayman v. Southard, 10 Wheat. 1, 46 (1825). Subsequent cases were consistent with the:

. . .theme that Congress must set forth standards ‘sufficiently definite and precise to enable Congress, the courts, and the public to ascertain’ whether Congress’s guidance has been followed. Gundy (Gorsuch, dissenting), Slip Op. at 11 (quoting Yakus v. United States, 321 U.S. 414, 426 (1944).

However, beginning in the 1940s, according to Gorsuch, the intelligible principle doctrine “mutated” far from its origins in the constitutional principle of separation of powers into a toothless box-ticking exercise, so that it was relied on “to permit delegations of legislative power that on any other conceivable account should be held unconstitutional.” Gundy (Gorsuch, dissenting), Slip Op. at 17.

In both Gundy and NFIB, Gorsuch proposed utilizing the major questions doctrine as a corrective to shore up the intelligible principle doctrine where an agency relies on a “statutory gap” concerning “a question of deep ‘economic and political significance’ that is central to the statutory scheme.” Gundy Gorsuch, dissenting), Slip Op. at 20 (quoting King v. Burwell, 576 U.S. ___, ___ (Slip Op. at 8). In NFIB, Gorsuch concurrent champions the major questions doctrine as “guarding against unintentional, oblique, or otherwise unlikely delegations of the legislative power,” in contrast with the nondelegation doctrine’s rule “preventing Congress from intentionally delegating its legislative powers to unelected officials.” NFIB (Gorsuch, concurring), Slip Op. at 5.

In West Virginia, Gorsuch cited to his opinions Gundy and NFIB and then articulated his understanding of the “good deal of guidance” provided by prior opinions of the Courts on application of the major questions doctrine. West Virgina v. EPA (Gorsuch, concurring), Slip Op. at 9. The doctrine is to be applied when:

. . .an agency claims the power to resolve a matter of ‘great political significance,’ or end an ‘earnest and profound debate across the country.’

Further, the major question doctrine requires:

. . .that an agency. . .point to clear congressional authorization when it seeks to regulate ‘a significant portion of the American economy.’ Id. at 10.

And the doctrine “may apply when an agency seeks to ‘intrud[e] into an area that is a particular domain of state law.” Id. at 11. This list of “triggers” for application of the major questions doctrine is, per Gorsuch, not exclusive, but in any event are all present when considering the constitutionality of the Plan. A history of Congressional failure to regulate greenhouse gas emissions from coal-fired plants, the dominance of the electricity sector in the national economy, and that the regulation of utilities is a matter traditionally left to the states, all support, in Gorsuch’s view, application of the doctrine here.

The Dissent’s Argument

Justice Kagan’s dissent, joined by Justices Breyer and Sotamayor, relies on traditional principles of statutory interpretation and points to the purposefully broad delegation of authority in the Act allowing EPA to define a “system,” characterizing this grant of broad authority as typical, but noting that while broad the delegation is not vague:

Congress used an obviously broad word (though surrounding it with constraints) to give EPA lots of latitude in deciding how to set emissions limits. And contra the majority, a broad term is not the same thing as a “vague” one. A broad term is comprehensive, extensive, wide-ranging; a “vague” term is unclear, ambiguous, hazy. (Once again, dictionaries would tell the tale.) So EPA was quite right in stating in the Clean Power Plan that the “[p]lain meaning” of the term “system” in Section 111 refers to “a set of measures that work together to reduce emissions. Another of this Court’s opinions, involving a matter other than the bogeyman of environmental regulation, might have stopped there. West Virginia v. EPA (Kagan, dissenting), Slip Op. at 8 (internal citations omitted).

The dissent also notes that the Court has previously described cap and trade schemes to regulate acid rain and greenhouse gases as “systems,” in the course of affirming their constitutionality. Id. at 9.

The dissent argues that the Court’s statutory interpretation precedents have typically found an impermissible delegation of legislative authority “an agency was operating far outside its traditional lane, so that it had no viable claim of expertise or experience,” and where “the action, if allowed, would have conflicted with, or even wreaked havoc on, Congress’s broader design.”

In short, in assessing the scope of a delegation, the Court has considered—without multiple steps, triggers, or special presumptions—the fit between the power claimed, the agency claiming it, and the broader statutory design. Id. at 15.

Criticizing the majority and concurrence for their reliance on the major question doctrine, the dissent argues that Congress appropriately relies on delegation to expert agencies in order to implement complex policies across an advanced industrial economy in a rapidly evolving world. Congress, in the dissent’s view, appropriately looks to expert agencies staffed with “people with greater expertise and experience” to implement broad policy goals, including “to keep regulatory schemes working over time.” Id. at 30.

The Inflation Reduction Act

In mid-August, Congress passed and President Biden signed the Inflation Reduction Act of 2022. The Act defines various greenhouse gases as pollutants under the Clean Air Act in the course of authorizing numerous subsidies and incentive programs to support moving away from reliance on fossil fuels. Widespread commentary to the contrary, nothing in the Inflation Reduction Act nullified the Court’s central holding in West Virginia v. EPA that Congress cannot delegate to EPA the authority to mandate generation shifting away from fossil fuels.

It remains to be seen whether the Inflation Reduction Act’s minute specification of numerous, specific subsidy and incentive programs will illustrate or undercut Justice Kagan’s observation of the necessity for Congress to delegate broad and continuing authority to expert agencies in order to meet evolving challenges with appropriately evolving regulations.

Conclusion and Implications

The Court’s embrace of the major questions doctrine as a robust constraint of Congressional delegation raises questions as to whether the Securities and Exchange Commission’s proposed climate-related disclosure rules are at risk (see https://corpgov.law.harvard.edu/2022/08/03/west-virginia-v-epa-casts-a-shadow-over-secs-proposed-climate-related-disclosure-rule/), and further afield casts doubt on evolving agency regulation in numerous technical fields not related to climate change, such as healthcare (see https://oneill.law.georgetown.edu/unpacking-west-virginia-v-epa-and-its-impact-on-health-policy/).

The Inflation Reduction Act—adopted on a party-line vote in the House of Representatives—illustrates the path forward for federal regulation: minute, specific and explicit direction to agencies to implement detailed legislatively-mandated programs. The disadvantages of this approach include that it requires an enormous expenditure of political capital, is vulnerable to repeated reversals on the House’s two-year election cycle, and cannot be expected to keep pace with the pace of social, economic and scientific change that is an inevitable consequence of a modern, advanced economy. Individual states, meanwhile, may choose to delegate broadly to expert agencies and thereby exceed the federal regulatory threshold, perpetuating a patchwork approach.

Climate change is the paradigmatic collective action problem writ a global scale. West Virginia v. EPA throws into stark relief the question of whether there is a constitutionally sound and politically viable path to collective action sufficient to meet the demands of moment?

Deborah Quick, Esq. is Senior Counsel at the law firm, Perkins Coie, LLP, resident in the firm’s San Francisco. Debbi represents clients seeking land-use and resource permits and entitlements and compliance with environmental laws, including the California Environmental Quality Act (CEQA) and the National Environmental Policy Act (NEPA), before administrative agencies. She defends those entitlements in litigation at both trial and appeal courts. Her practice also includes representing clients in complex civil appeals and trial court litigation in anticipation of possible appeals. Debbi sits on the Editorial Board of the Environmental, Energy and Climate Change Reporter.

Lucille Flinchbaugh, Esq. is an Associate at Perkins Coie, LLP, San Francisco. Lucy focuses her practice on land use entitlements, site selection, permitting, and environmental compliance, representing major developers in all stages of the development process for mixed-use, commercial, and residential development projects. Her experience covers a variety of programmatic areas of environmental and land use laws and policy, from the local to state level. Specifically, she has helped businesses navigate complex matters implicating the California Environmental Quality Act (CEQA), Subdivision Map Act, National Environmental Policy Act (NEPA), redevelopment law, and California housing laws.