Not So Major Questions: Clarifying the Regulatory History Behind Key Claims in West Virginia v. EPA
*This post from last week provides relevant context on West Virginia v. EPA, a case concerning the scope of EPA’s authority to regulate greenhouse gas emissions from the power sector, and the major questions doctrine.
During Monday’s oral argument in West Virginia v. EPA, the West Virginia Solicitor General closed her argument before the Supreme Court by repeating familiar claims that the Clean Power Plan was impermissibly novel because it reduces emissions through actions taken beyond the fencelines of individual sources, such as by shifting some electricity generation from higher- to lower-emitting facilities. But as the power companies supporting EPA explained in their brief, these are standard methods of regulatory compliance: “EPA, States and industry have long demonstrated that measures shifting generation from some producers to others are part of an effective emission-reduction system.”
West Virginia’s argument rewrites regulatory history and attacks the flexible, and cheaper, compliance strategies preferred by power companies. An amicus brief submitted by Richard L. Revesz, the AnBryce Professor of Law and Dean Emeritus at the New York University School of Law and the Director of the Institute for Policy Integrity, explains how, almost two decades ago, EPA took the availability of beyond-the-source controls into account when determining the stringency of mercury standards for power plants. Like the Clean Power Plan, that Bush-era rule was issued under Section 111(d) of the Clean Air Act. And that rule was not an outlier. Numerous regulations issued under related provisions of the Clean Air Act — and under administrations of both political parties — have been based on the same premise.
The 2005 Clean Air Mercury Rule Anticipated Generation Shifting and Other Beyond-the-Source Controls
Even the West Virginia Solicitor General stopped short of calling the Clean Power Plan entirely unprecedented, acknowledging the 2005 Clean Air Mercury Rule which was also premised on beyond-the-source controls. (It would be strange for West Virginia to deny awareness of the 2005 Clean Air Mercury Rule, given that the state intervened to defend that rule and its use of emissions trading — a measure that by definition reduces emissions outside the fencelines of individual sources.)
Instead, the West Virginia Solicitor General attempted to distinguish the 2005 Clean Air Mercury Rule from the Clean Power Plan. As clarified by West Virginia’s briefing, her argument was that the 2005 Clean Air Mercury Rule allowed cross-source trading as a means of complying with the rule’s emissions limitation, but EPA set the limitation itself based on source-specific technological controls.
But does this distinction hold up?
When EPA set out to promulgate the 2005 Clean Air Mercury Rule, it modeled how power plants would comply with the rule, “projecting that Hg reductions [would] result from units that are most cost effective to control, which enables those units that are not cost effective to install controls to use other approaches for compliance including buying allowances, switching fuels, or making dispatch changes,” i.e., generation shifting. EPA expected that “[m]any of these reductions” would “result from large units installing controls and selling excess allowances.”
If EPA assumed sources would comply only through at-the-source technologies, it would have needed to factor in the costs to all units to install the control technology — even those that could not do so cost-effectively. Since cost is one of the factors that EPA must consider when setting standards under Section 111, EPA may well have set a less stringent rule — and potentially at a higher cost. It’s not hard to see why the power companies — and common sense — would prefer the more flexible and economic option available.
While the D.C. Circuit did vacate the 2005 Clean Air Mercury Rule, it did so on grounds entirely unrelated to generation shifting or the stringency of the rule’s emission budgets. Additionally, EPA amended the Section 111 implementing regulations in 2005 to provide that a state’s “[e]mission standards [may] be based on an allowance system.” That language remains on the books.
EPA Has Also Relied on Beyond-the-Source Measures when Issuing Rules Under Other Clean Air Act Provisions
EPA has also relied on generation shifting and other beyond-the-fenceline compliance measures when setting emission limits under other Clean Air Act provisions, resulting in stricter standards than would be achievable through source-specific technological improvements alone. Some of those provisions, like Section 111(d), do not expressly mention such flexible measures.
For example, over four decades and administrations of both parties, EPA has consistently used emissions trading mechanisms to regulate new motor vehicles and motor-vehicle engines under Section 202. EPA has consistently recognized this approach “is an integral part of the standard setting itself . . . allowing EPA to set a standard that is numerically more stringent” than it would through technological controls on individual automobiles or fleets. Section 202 is particularly instructive for EPA’s Clean Power Plan because like Section 111(d) it also calls for certain standards to “reflect the greatest degree of emission reduction achievable through the application of technology.”
Similarly, under Section 111(b), EPA has also based standards for new stationary internal combustion engines on flexible programs that it expected to shift production to cleaner engines. Under the George W. Bush administration, EPA issued such standards and deemed the averaging, banking, and trading mechanisms that enable this production shifting “essential elements” in its determination that the final standards reflected the best demonstrated technology. The George W. Bush administration’s EPA included similar provisions in another set of standards for a different type of combustion engine in 2008.
Further, for more than 20 years under the Good Neighbor Provision (Section 110(a)), EPA has limited interstate pollution from stationary sources by consistently relying on generation shifting and other beyond-the-fenceline measures. When EPA has set the emissions budgets for regulations under this provision, it has considered the costs in light of sources using these beyond-the-fenceline measures, including in a regulation upheld by the Supreme Court, (the Clean Air Transport Rule.) Under the Trump Administration, the EPA continued to rely on beyond-the-source measures when issuing regulations under the Good Neighbor Provision. (Note that Section 110 explicitly notes the option for states and EPA to use market mechanisms for compliance.)
For further discussion of each of these provisions, and more detailed support, read Section II of the amicus brief submitted by Professor Revesz.
Judicial Skepticism About the Importance of an Inside/Outside-the-Fenceline Distinction
So why this romp through the regulatory weeds? West Virginia and other petitioners argue that the Supreme Court should find the Clean Power Plan unlawful in light of the major questions doctrine. Under this doctrine, the Supreme Court treats agencies’ use of “unheralded powers” under long-standing statutes with some suspicion. But the above regulatory history contradicts petitioners’ claims that the Clean Power Plan’s use of beyond-the-fenceline emission reduction techniques was unheralded.
During oral argument, some justices expressed broader skepticism of prohibiting EPA from relying on outside-the-fenceline controls under Section 111(d). Justice Kagan emphasized that such a distinction “bears no relationship” to whether a rule facilitates an economic transformation, noting that certain inside-the-fenceline measures could have enormous and expensive effects that lead to generation shifting, while outside-the-fenceline measures could have limited impacts. Justice Sotomayor agreed that such a distinction could not be definitive of a major question. She explained that to treat it as such would enter the territory of “how” the agency should regulate, (as opposed to which industries or products it can regulate), in a marked departure from the Supreme Court’s previous application of the doctrine.
Their skepticism is well-placed. Fundamentally, all power sector regulations under the Clean Air Act make polluting more expensive and thus encourage increased use of cleaner electricity sources.
And even if the regulatory history was less established, Congress designed the Clean Air Act to be “technology forcing.” In other words, Congress wanted EPA rules to encourage wider adoption of the latest methods for reducing emissions from industrial facilities. Prohibiting the agency from doing anything novel would directly contradict this statutory aim and prevent EPA from fully meeting its mandate to protect public health from air pollution.
The regulatory history cuts against petitioners’ claims, and the Court should not draw this artificial and unprecedented distinction.
