June 30, 2022Client Alert

The US Supreme Court Narrows EPA’s Authority to Regulate GHG Under the Clean Air Act

In a 6-3 decision issued today in the case West Virginia v. EPA, the United States Supreme Court held that the U.S. Environmental Protection Agency (EPA) exceeded its statutory authority when it attempted to enact an economy-wide, power generation shifting rule in 2015 known as the Clean Power Plan. Writing for the majority, Chief Justice John Roberts cited a series of recent decisions where the Court held that administrative agencies had attempted to regulate the economy far beyond Congressionally delegated powers, implicating serious constitutional separation of powers questions. Citing its “major questions” doctrine, the Court concluded that Section 111 of the Clean Air Act does not empower EPA to substantially restructure the American energy market. Rather, the statute empowers the agency to regulate emissions and not direct an economy-wide shift of energy sources, that Congress “conspicuously and repeatedly” rejected. The Court noted that its “major questions” doctrine refers to “an identifiable body of law that has developed over a series of significant cases all addressing a particular and recurring problem: agencies asserting highly consequential power beyond what Congress could reasonably be understood to have granted.” The decision does not disturb EPA’s authority to regulate GHGs under the Clean Air Act, but significantly narrows that authority. The decision also fails to directly address the scope of EPA’s authority to regulated GHG’s under Section 111(d) of the Clean Air Act.

The Court’s decision is a major setback in the Biden Administration’s efforts to regulate GHG emissions from the power sector. Congress has been unable to agree on a comprehensive regulatory program that is purposely designed to address GHG emissions. Congress also failed to pass the Build Back Better Bill which would have earmarked roughly $500 billion for climate-related initiatives. Today’s decision now significantly restricts EPA from using the Clean Air Act as a mechanism to directly regulate GHG emissions from the power sector.

EPA seems to have anticipated this ruling. Last year the Agency acknowledged working on its third proposed rule to regulate GHG emission from the power sector which it believed would withstand legal scrutiny. It is thought that this third rule will focus on “inside the fence” GHG emission control strategies which are much less aggressive than the “system wide” approach deemed illegal by the Court today. These new strategies could include efficiency improvements on boilers/generation equipment and/or the use of low carbon generation sources that could be collocated with fossil fuel units. 

Going forward, the West Virginia decision will also impact the rulemaking authority of other agencies. The decision threatens existing and future regulations that have profound societal impacts but are not clearly authorized by statutes.  For example, the SEC’s proposed ESG and climate disclosure rules seem vulnerable to a “major question” challenge as defined by the West Virginia v. EPA decision (i.e., the SEC has not traditionally regulated in these areas, climate change/ESG issues are not clearly within SEC’s authority and the estimated costs of these rules are quite substantial).

Michael Best represented a party in the Clean Power Plan litigation and will continue to track rulemaking and other GHG regulatory efforts at EPA and beyond. The environmental team at Michael Best has experience advising clients on GHG and Clean Air Act related issues. If you have any questions or concerns about how this SCOTUS decision may impact your facility, please contact your Michael Best attorney or any of the authors listed here.

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