On June 6, the United States Supreme Court began issuing the remainder of its opinions for the current term, with as many as 33 rulings in pending cases expected during the month of June (and perhaps carrying over into July). For those closely following the Court’s climate change jurisprudence, this means we are just weeks, if not days, away from a decision in West Virginia v. EPA, which involves hotly contested legal questions about the scope of EPA’s authority to control greenhouse gas emissions from existing power plants under Section 111(d) of the Clean Air Act.

Based on the briefing and lengthy oral argument in February, at least five key issues are worth tracking on your first read through the Court’s opinion. Baker Botts will publish a summary and analysis of the opinion once it is released.

Background

The Obama Administration’s Clean Power Plan (“CPP”) adopted a broad view of EPA’s Section 111(d) authority, requiring the electric power sector to shift generation away from fossil fuels to renewables; however, the CPP was stayed by the Supreme Court in 2016 and never went into effect. For its part, the Trump Administration’s Affordable Clean Energy (“ACE”) Rule adopted a narrow view of Section 111(d), seeking to curtail greenhouse gas emissions based only on pollution control measures applied at or to the source.

On January 19, 2021, the D.C. Circuit issued a judgment vacating and remanding the ACE Rule. See American Lung Ass’n, et al. v. EPA, 985 F.3d 914 (D.C. Cir. 2021). The D.C. Circuit found that Section 111(d) of the Clean Air Act does not require the best system of emission reduction (“BSER”) to be limited to only those measures that can be applied at and to an individual source. Because the Trump EPA expressly based its repeal of the CPP and its promulgation of the ACE Rule on the premise that Section 111(d) limits BSER to such “behind-the-fenceline” measures, the D.C. Circuit held that the CPP Repeal and ACE Rule must be vacated. Id. at 995.

On October 29, 2021, the Supreme Court granted review of the case, specifically agreeing to hear the parties’ arguments on whether EPA’s Section 111(d) authority allows the agency to regulate the power generation industry in a manner as broad as the CPP. Oral argument occurred on February 28, 2022.

Scoring the Big Questions in West Virginia v. EPA

1. Is there standing to hear the case?

Based on the argument, several justices—though likely not a majority—are skeptical that the case still presents a live “case or controversy” such that the Court may still properly decide the case under Article III of the Constitution. The Biden Administration hopes—not unreasonably so—that the Court will decide to forego further review on the basis that EPA is no longer seeking to implement the CPP or the ACE Rule. Justices Sotomayor and Gorsuch seemed intrigued by this point, though Chief Justice Roberts was less so, commenting that the case “seems justiciable” since the agency has adopted a change in legal interpretation that will govern its Section 111(d) regulations going forward; Justice Alito also seemed comfortable proceeding with the case. This will be among the first issues addressed in the Court’s opinion. Most observers expect the Court to find the matter justiciable and continue on to the merits.

2. Does the Court think Section 111(d) is clear and unambiguous?

Assuming the Court reaches the merits, we may finally have clarity on the nature and scope of EPA’s authority to adopt emission limits under Section 111(d). That provision, in combination with definitions in Section 111(a), authorizes EPA to set “standards of performance for any existing source” based on limits “achievable through the application of the best system of emission reduction” that has been “adequately demonstrated.” 42 U.S.C. 7411(d). Unlike the approach in the CPP, which relied on agency deference, the ACE Rule took a “plain meaning” approach, finding that Section 111(d) is capable of one “permissible reading.” When reviewing the merits, we would anticipate the Court to address the threshold question of whether the relevant language of Section 111(d) is clear and unambiguous (and thus, subject to just one interpretation) or ambiguous enough to support a variety of agency interpretations that may be entitled to deference.

3. Does the Supreme Court rely upon the “Major Questions Doctrine”?

West Virginia argues that the ACE Rule’s plain reading approach is reinforced by the Major Questions Doctrine (MQD), which requires an agency to have a clear statutory authorization from Congress in order to decide an issue of major national significance. Based on the oral argument, a majority of the Court did not seem inclined toward adopting the MQD in this case, though the outcome is far from clear. This case may present an opportunity for several justices, if not a majority of them, to further define the MQD, particularly as it relates to the Clear Statement Rule (requiring a clear statement from Congress if it intends to achieve a result that differs from the Court’s long-standing view of a matter) and the Non-Delegation Doctrine (prohibiting Congress from delegating its legislative powers to other entities, such as administrative agencies). If adopted by the Court, the “MQD” would have significant implications for agency actions across the federal government.

4. Is EPA’s Section 111(d) authority limited to measures applied at or to individual power plants?

Depending upon the outcome of the interpretive questions, the Court also is likely decide whether Section 111(d) may allow EPA to control power sector emissions via measures that go beyond the source, i.e., “outside the fenceline” measures to reduce greenhouse gas emissions. The CPP was premised on “generation shifting” as a means of emissions limitations, while the ACE Rule focused more narrowly on those measures “that can be put into operation at” a particular facility, such as heat rate improvements at a coal-fired power plant. Justices Sotomayor and Kagan opposed the narrower view, and Justice Thomas intimated potential skepticism about the inside vs. outside the fenceline distinction.

5. Does the Court leave the door open for EPA to adopt system-wide measures like averaging and emissions trading?

Related to the “fenceline” question discussed above, the Court also may address whether Section 111(d) allows EPA to require performance standards based on emissions averaging and trading programs. The state challengers argued that Congress explicitly added language to the statute allowing cap-and-trade under other Clean Air Act programs, but it did not do so in Section 111—Justice Kavanaugh seemed to agree while Justice Kagan seemed to disagree. The United States and the power company respondents, however, argued that trading programs are “adequately demonstrated” in the power sector. It is unclear whether the Court ultimately will reach this question, as it may determine that it is only necessary to address the “fenceline” question and save the “system-wide” question for another day.

Scorecard

Based on the questions raised above, we have developed the following scorecard that may assist your review of the opinion—or even facilitate some pre-opinion predictions and debate about the expected outcome. A variety of other issues could also come up in the Court’s final analysis, which we will address in a subsequent alert following issuance of the opinion.

Scorecard: Supreme Court Ruling in West Virginia v. EPA

	Roberts	Thomas	Breyer*	Alito	Sotomayor	Kagan	Gorsuch	Kavanaugh	Barrett	Outcome?
Case or Controversy?
Plain Reading or Agency Discretion?
Major Questions Doctrine?
Limited to Measures Applied at or to the Plants?
Allow Emissions Averaging & Trading?

* Justice Breyer is participating in this case. His replacement on the Court, Justice-designee Ketanji Brown Jackson, is not participating in this case. She will succeed Justice Breyer upon his official retirement from the Court at the end of this term.

ABOUT BAKER BOTTS L.L.P.
Baker Botts is an international law firm whose lawyers practice throughout a network of offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit bakerbotts.com.