An Update on the Clean Power Plan Litigation

The Supreme Court is now hearing the most closely watched environmental case in decades, which may decide the future of greenhouse gas regulation under the Clean Air Act. This case has already been the subject of an unprecedented Supreme Court stay that short-circuited the Obama administration’s climate agenda and not one, but two, 7+ hour arguments before the D.C. Circuit. Jonathan Brightbill and Kevin Poloncarz, who argued the case before the D.C. Circuit, joined us to discuss what it means for the future of climate regulation and administrative law.

Under the Clean Air Act, the Environmental Protection Agency regulates greenhouse gas emissions from various sources including new cars and new industrial sources. But a large proportion of the country’s greenhouse gas emissions come from existing sources, such as the nation’s coal and natural gas power plants, which provide over half of American electricity.

In 2015, the Obama administration issued a regulation for existing fossil fuel power plants under Clean Air Act §111(d), which allows the EPA to “establish a procedure” for each state to adopt “standards of performance” for existing sources of air pollutants. The administration called this rule the “Clean Power Plan.” It was controversial, in part, because it went beyond asking states to make their existing power plants run more efficiently. Instead, it went “beyond the fenceline” of the power plant to encourage non-fossil sources of electricity such as wind and solar power and shrink the fossil-fuel power sector.

The Clean Power Plan never went into effect because the Supreme Court stayed its implementation on February 9, 2016. The D.C. Circuit heard more than 7 hours of argument on the validity of the Clean Power Plan but never ruled on it because the Trump administration repealed it and replaced it with its own rule, which it called the “Affordable Clean Energy Rule,” and was limited to promoting efficiency measures at existing fossil fuel plants. The D.C. Circuit then heard 9 more hours of argument on this new rule, before striking it down on January 19, 2021. The court held that EPA’s authority was not so limited.

The Supreme Court granted certiorari to decide whether Clean Air Act §111(d) gives “the EPA authority not only to impose standards based on technology and methods that can be applied at and achieved by that existing source, but also allows the agency to develop industry-wide systems like cap-and-trade regimes.” The case is an important sequel in the Court’s lines of cases on how much deference executive agencies should receive to decide major questions of policy and whether Congress might authorize dramatic agency action from relatively obscure provisions—hiding an elephant in a mousehole.

Transcript

Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.

[Music]

 

Nate Kaczmarek:  Good afternoon, and welcome to this Regulatory Transparency Project webinar. Today we will be discussion the Clean Power Plan litigation. It’s very timely, and we’ve gathered great experts to lead our discussion. My name is Nate Kaczmarek. I’m Vice President and Director of RTP. As always, please note that all expressions of opinion are those of our guests.

 

Today, we are happy to once more welcome our moderator, Professor James Coleman. James is the Robert G. Storey Distinguished Faculty Fellow and Professor of Law at SMU’s Dedman School of Law. His scholarship addresses regulation of North American Energy companies, focusing on how countries account for and influence regulation of fuel and electricity in their trading partners and also how global energy companies respond to competing pressures from investors and regulators in multiple jurisdictions. James is a great friend to RTP, and we are delighted he was available this afternoon. 

 

If you’d like to learn more about all of our guests today, you can visit our website, RegProject.org, where we have everyone’s complete bios. In a moment, I will turn it over to  James. Once our panel has had ample time to debate and discuss our topic, we’ll go to audience Q&A, so please think in advance of the questions you’d like to offer. Audience questions can be submitted via the Zoom raise hand function. If you raise your hand, we’ll do our best to call on you in the order that you do so.

 

With that, thank you everyone for being with us today. James, the floor is yours.

 

Prof. James Coleman:  Well, thanks so much, Nate. It’s wonderful to be here today.

 

We’re going to be talking about one of the most closely watched environmental cases in decades, which is that on February 28, the Supreme Court will be hearing argument in four consolidated cases that are going to essentially have a huge impact on the Biden administration’s climate agenda as well as possibly the future of administrative law and the administrative state. This case and these regulations, these clean energy carbon regulations for the existing power sources, has already been the subject of an unprecedented Supreme Court stay that short-circuited the Obama administration’s climate regulation efforts and two seven-plus hour arguments in the D.C. Circuit.

 

To discuss it today, we have Jonathan Brightbill and Kevin Poloncarz, who argued the case before the D.C. Circuit, so we’re very excited about that. Just to give you a brief background, under the Clean Air Act, of course, the Environmental Protection Agency regulates greenhouse gas emissions from all kinds of different sources, including new cars and new industrial sources. But of course, most of the country’s carbon emissions come from existing sources, especially those existing coal power plants and natural gas power plants which provide over half of American Power.

 

Now, if you want to think about the background of this case, back at the start of the Obama administration, there were efforts to pass a cap and trade bill for carbon emissions that passed the House in 2009 and died in the Senate in 2010. Toward the end of his second term, the Obama administration issued a regulation called the Clean Power Plan—this was in 2015—that regulated existing power plants under Clean Air Act Section 111(d), which allows EPA to establish a procedure for each state to set its own standards of performance for existing sources of air pollutants.

 

Now, the administration — this was controversial in part because it went beyond, actually, those existing sources and tried to set carbon reduction goals for the entire power plant sector in each state, encouraging them to shut down or run those coal power plants or natural gas power plants less often and turn to renewable sources like solar and wind. So we call that going beyond the fenceline of the plant.

 

Now, that Clean Power Plan never went into effect because in early 2016, the Supreme Court stayed its implementation. That was an unprecedented stay. The D.C. Circuit then heard more than seven hours of argument en banc on the validity of that Clean Power Plan, but they never ruled on it because the Trump administration eventually repealed that Clean Power Plan and replaced it with its own rule called the Affordable Clean Energy Rule, ACE or ACER. And that rule was limited to promoting efficiency at existing fossil fuel plants, so it didn’t go beyond the fenceline.

 

The D.C. Circuit then heard nine more hours of argument with our two speakers today on this new rule, the Trump administration rule, which they struck down one day before President Biden took office January 19, 2021. And the court held that EPA’s authority was not limited to those within the fenceline measures. Now, the Supreme Court then granted certiorari to decide whether the Clean Air Act Section 111(d) gives EPA the authority not only to impose standards based on technology and methods that can be applied at the source but also to develop industry-wide systems like cap and trade regimes.

 

Of course, in looking at these questions, we’re looking at them as presented by the petitioners. There were actually four questions granted, and some of those questions focused more on the question of whether EPA can decide these major policy questions tying into a series of cases the Supreme Court has looked at where it considered to what extent agencies can decide these major policy questions.

 

Of course, that raises all sorts of additional interesting administrative law questions about the Chevron doctrine, about older topics like nondelegation, etc., about the balance of power between the states and the federal government. And so our speakers today will likely get into all those issues, and we’re excited to discuss that in Q&A as well. 

 

Let me introduce the two speakers and then hand it over to them. First, Jonathan Brightbill is a trial and appellate lawyer at Winston & Strawn. During the Trump administration, he served in Department of Justice’s Environmental & Natural Resources Division, and he was ultimately the Acting Assistant Attorney General. Jon led the defense of EPA rulemakings, permits, and policies.

 

And then we have Kevin — by the way, these are — they wrote them, so if it were just me, I’d be even more effusive and less making fun of them. It sounded like in his intro like he was going to make fun of himself apparently.

 

He’s a partner with Covington & Burling, and he co-chairs the firm’s Environmental and Energy Practice Group, Energy Industry Group, and their ESG Practice Group. Kevin is one of America’s leading climate change lawyers. He’s on the board of directors of the Environmental Law Institute and the Center for Applied Environmental Law and Policy. He’s a fellow and regent of the American College of Environmental Lawyers, and he’s on the advisory board and counsel of the Institute for Policy Integrity at New York University and the State and Energy Environmental Impact Center at NYU School of Law. He’s a graduate of Hobart College, University of Chicago Law School. And President Obama wrote him a letter of recommendation for the clerkships that he did not get.

 

So, anyway, again, these are really, really exciting speakers. We’re very excited to hear from them. And with that, I’ll pass it over.

 

Jonathan Brightbill:  Okay. Well, thank you very much, Professor, for the introduction and the table setting here today. Thank you to The Federalist Society and its Regulatory Transparency Project for hosting this event. I appreciate the opportunity and the invitation to speak. As somebody who lived this all very closely for so long but now finds myself on the outside looking in, it’s fun to have the opportunity to engage in some discussion about what’s going to be transpiring at the Supreme Court.

 

In my opening remarks here, I want to make a couple of observations about the two central questions presented to the Supreme Court, one set of points relating to the interpretation of Section 111(d) and Section 111(a)(1) of the Clean Air Act, and a discussion of the major questions doctrine.

 

I want to start by talking about the statutory interpretation issue presented. Before the Supreme Court will be the question of what limits exist in Clean Air Act Section 111(d)(1) to set standards of performance which, in the case of the Clean Power Plan, were greenhouse gas emissions for electric generating units in this country powered by coal and gas.

 

Now, people following this case are generally aware of the practical consequences of the major interpretive question, and that, as you described, Professor, that it relates to whether EPA is limited to looking at technology and techniques that are capable of implementation at a particular source when determining the emissions rate that can be achieved through a best system of emissions reduction—certain litigants, as you noted, have referred to this as inside the fenceline technologies or techniques—or if EPA can look to whatever system EPA thinks is best, even if the emissions reductions are overwhelmingly coming from wind and solar generators that could sell credits to the owners and operators of existing sources rather than a system that is capable of achieving material emissions reductions at the sources themselves. 

 

Now, Section 111(d) and the key definitional profusion at issue, Section 111(a)(1), are two of the wordiest provisions you will find in any statute. Put them together and it makes your head swim to try and parse through the various clauses and instructions that are contained there. And I think this is part of the challenge that has faced the petitioners opposing the Clean Power Plan, and now the petitioners who are before the Supreme Court.

 

At the end of the day, however, the hinge issue can really succinctly be stated as follows: Does EPA have the authority to determine the emissions rate based on what’s achievable by what EPA thinks is the best system of emissions reduction? Period, full stop, no further limits. In effect, that’s how the D.C. Circuit panel read the statute below. Or is EPA’s authority to determine the emissions rate limited by what’s achievable and adequately demonstrated for any existing source?

 

Now, since this is a webinar and not a podcast, we’re going to take advantage of that by putting up on the screen an exhibit that was provided by one of the petitioners who were challenging the Clean Power Plan repeal below. Professor, can you see that? I just want to make sure we’re working. We’re working? Thumbs up. Okay. 

 

The petitioner’s exhibit here shows the operative legal provision of Section 111(d) with the definitional provision for standard of performance from Section 111(a)(1) inserted. Now, you’ll note the definition for standard of performance in Section 111(a)(1) is written in the singular, so the definitional language is only modified when inserted here in Section 111(d) where Congress itself referred to standards, plural, as opposed to standard, singular, as you’ll see in different parts of Section 111(d). 

 

Now, you can see that this is a royal mess of words and clauses, but after you’ve read this all a couple of hundred times, as I have, the interpretive question really boils down to this: Can EPA establish a standard, a rate, which under the Clean Power Plan was 1,305 lbs/MWh of CO2, by what’s achievable though the best system of emissions reduction, generation shifting is what the Clean Power Plan decided, full stop, that’s the limit, and then EPA can apply it for any existing source, or must the standard be achievable through the application of the best system of emissions reduction adequately demonstrated for any source?

 

In other words, it must be technology and a technique that you can implement at the existing source. So the interpretive dispute, all the words that are flying around the Supreme Court, really just boils down to whether these four words, “for any existing source,” are a limitation on what EPA can consider as achievable, or does EPA have free-ranging authority to consider what’s achievable by any system?

 

Now, at this point, there’s been a lot of ink spilled arguing about the plain text, the meaning of application, the meaning of achievable, the presence or absence of indirect objects, whether a definitional provision can be an independent grant of a regulatory authority. Setting all those debates aside, I want to focus just on one point that’s important to the petitioners now who are before the Supreme Court, which is that nowhere in the 147 pages of per curiam opinion did the D.C. Circuit majority actually acknowledge and then respond to and address the first textual argument that the U.S. and EPA made against the Clean Power Plan’s generation shifting system working within the statute.

 

Specifically, the Clean Power Plan’s generation shifting system is argued to fail the final command of Congress in the third sentence of 111(d)(1). When applying a rate, which is really what this all boils down to, to any particular source under the plan, the states should be able to, supposed to take into consideration, among other factors, the remaining useful life of the source to which such standard applies.

 

The Clean Power Plan denied states that authority and instead imposes a statewide carbon dioxide budget cap to each and every state. Those statewide budgets then permit tradeoffs in the aggregate among different sources. But the Clean Power Plan’s generation shifting system did not allow states to look at any particular source than look at the remaining useful life of the source to which the rate applied and grant variants across any particular source.

 

For the Clean Power Plan’s generation shifting model and system to work, states had to be and were denied this authority. They received emission budgets caps that would only have allowed them to consider the remaining useful life of some sources in the aggregate across the whole state, but not the remaining useful life of any particular source. 

 

Now, this statutory problem obviously goes to the federalism aspect of the major question doctrine issue that the petitioner states have raised. But there is a second major question that is actually a bit more of a significant federalism concern that has been raised, particularly on that issue. And that is that, as the D.C. Circuit put it, and they explained in response to the major questions doctrine issue, quote, “Nowhere does EPA explain why reference to a different mechanism, generation shifting, in its calculation of the best system would raise materially different federalism concerns. Under either system, the only direct obligation imposed on states is the same, the federally set emission guidelines. In both scenarios, the states remain equally free to choose the compliance measures that best fit their state and industry.”

 

Now, as you just saw, that’s arguably incorrect, so says the petitioners, because the Clean Power Plan did more than impose an emission guideline. It imposed statewide caps that limited states’ aggregate authority to vary that guideline for any particular source.

 

But perhaps even more significant was EPA’s alleged infringement on states’ traditional authority to determine whether, where, and how to build and pay for electric generation for their citizens when EPA set that cap. The Clean Power Plan at issue right here, and using coal was the example, 1,305 lbs/MWh of CO2, was not generated through EPA’s application of its traditional technical expertise, examining pollution control systems to determine which systems had been adequately demonstrated. And the Clean Power Plan was not merely a plan in the amorphous sense that the EPA planned to have more carbon-free power as a result of all of this.

 

When EPA called this a clean power plan, they meant it. To generate the rates and the budgets for the Clean Power Plan, EPA created and modeled an electric generation power plan for the whole of America. This is reflected in the final preamble that was in front of the discussion before the D.C. Circuit. EPA then used that nationwide EPA generated electric power plan to back into the emission rates for coal and gas power plants and the statewide CO2 budgets that EPA projected would then drive those states and America to change their own electric generation systems to look something like EPA’s electric power plan to achieve those budgets. 

 

In simplified terms, EPA, not state public utility commissions, not interstate regional transmission operators, not FERC, laid out a big map of America, and they figured out where the coal plants were and where the gas plants were, where the renewables were, where water power hydropower and other sources may be, and as a figurative matter, they stuck little black pins in for the coal plants, and yellow for the gas plants, and red pins and blue pins, and figured out what all the state greenhouse gas emissions were at that time.

 

Then, EPA modeled — they drew up their own map through computer modeling and the like, its own EPA electric generation plan for the whole of America, years into the future, projecting what EPA wanted and thought America’s electric generation system could look like down the road. They pulled out some black coal plant pins here and maybe added some gas plants. We expect solar panels and windmills to come on here. But they looked at transmission constraints and geography and all kinds of things to determine, well, maybe we can’t do this here, or we can’t do that there.

 

And after coming up with their own new map for America, their own EPA electric power generation plan for America, they totaled up what they thought the emissions would then be and what they could be, and then that into the rates and the state budgets, and enshrined those into what ultimately became the Clean Power Plan. So the impacts on states and their electricity generation, it was not an incidental effect of environmental emissions controls of the traditional kind that EPA would prescribe under a 111(d) provision. The emissions controls were, in fact, an incidental effect of EPA’s central planning of what the nation’s electricity generation should look like. 

 

Now, in response to this, the petitioner states, I think, with some force to their argument, believe that this represents a pretty major infringement on traditional state authority, a major question, so to speak, and a lot to come out of what ultimately was four little words, “for any existing source,” and the determination that these four words would no longer link back to and be read as a limitation on what is achievable. 

 

Sorry if I went a little long there. James?

 

Prof. James Coleman:  Well, we’re very fortunate to have both sides of the argument before us, so let’s pass it on to Kevin.

 

Kevin Poloncarz:  Well, thanks. It’s really great to be here. Thank you to The Federalist Society. Thank you to the Regulatory Transparency Project and to Jonathan in joining me in this. Jonathan, I have unfortunately been at this longer than you because I actually argued the statutory point in the en banc argument in the D.C. Circuit in 2016 as well. And here we are again, and I’m still at it in the Supreme Court.

 

I’m not here to outline what our brief we’ll file next month will look like, or, obviously, I couldn’t opine on what the Court’s likely to do in this case. I just wanted to put what’s really at issue in the case into context and describe how narrow the D.C. Circuit’s ruling really was. 

 

Some of the amicus briefs in support of petitioners, they’ve essentially called for the court to annul EPA’s authority to regulate carbon dioxide under the Clean Air Act, at least for stationary sources. Wow, that’s big. And recall how far that is from the Supreme Court’s decision in 2011 in AEP v. Connecticut. That’s where the court decided that EPA’s authority under Section 111 for these existing sources displaced any nuisance claims that could be brought against those emitters under federal common law for their contribution to climate change.

 

And when the court did that, the court held, and I quote, “Congress delegated to EPA the decision whether and how to regulate carbon dioxide emissions from power plants.” And now, we’re seeing arguments that—and I’m not making it up, I’ll go through them—that are coming in through the amicus briefs that Section 111 is an unconstitutional delegation of authority to EPA on its face.

 

Who do I represent in this case? My clients are nine major power companies. They range from the largest municipal utility, the largest state power authority, the largest combined gas and electric utility in the nation. They operate in 49 states. Their generation mix includes coal, gas, wind, solar, hydropower, you name it.

 

They sued to challenge EPA not to defend the Clean Power Plan. Some of them didn’t even like every aspect of the Clean Power Plan. What they sued for was because in repealing the Clean Power Plan, EPA did something that was legally risky, and they did it with the goal of obtaining a decision that would forever tie the hands of future administrations to use this section of the Clean Air Act to achieve some significant reductions in greenhouse gasses. I’ll talk about what they did a little bit later, but it’s all in the context of Chevron I versus Chevron II.

 

In the ACE rule, EPA decided that the statute categorically and unambiguously forbade it from considering anything other than measures that can be installed at and to an individual generating unit. Jonathan walked through it all. That’s what they decided. They went so far as to decide that this narrow interpretation barred the agency from considering not anything like generation shifting in the Clean Power Plan, but it also barred them from using things like averaging and trading as a means of compliance. Both of those have been used, including under a Republican administration. They established a cap and trade program for mercury under this very provision for the power sector.

 

And so if you think the Clean Power Plan was at one extreme, the ACE rule was at the other. And that’s why we sued. We sued to challenge the decision that this was unambiguous on the face of the statute and that it could have the trickle-down effect of essentially disallowing all these regulatory mechanisms that have traditionally been used to reduce power sector emissions.

 

And so all that the D.C. Circuit decided was that EPA had erred when they premised the ACE rule and the repeal of the Clean Power Plan on this conclusion that the statute bound their hands to looking at only things that could be attached at and to an individual plant. It did not hold — the D.C. Circuit did not hold that the Clean Power Plan was lawful. It didn’t say that EPA must include generation shifting within the best system.

 

And the petitioner’s briefs in the supporting amici are really disingenuous in this regard. Let me give you a couple of examples. And Landmark Legal Foundation, in their brief, one of the headings reads, “The lower court erred when it ruled that Section 111 obligates EPA to promulgate the Clean Power Plan.” That’s not what they held. They held that when EPA promulgated the ACE rule, they took a wrong interpretive turn, assumed that their authority was limited, and they said, “Go back and look at the scope of your authority again.”

And so beyond the narrow statutory question which Jonathan went over really well, the briefs from petitioners and all of their supporting amici lay on all these constitutional dimensions. And what they’re ultimately intended to do, from my read, is to really strip Section 111(d) of any power whatsoever.

 

Competitive Enterprise Institute concludes its brief—this is literally the conclusion of its brief—with the statement, “Carbon dioxide and CAA Section 111(d) are a complete mismatch.” So without actually asking the court to overrule Massachusetts v. EPA, they’re essentially asking the court to find that the truly wrong interpretive turn was when a divided court in Massachusetts v. EPA decided that EPA had the authority to regulate carbon pollution under the Clean Air Act if that pollution created any endangerment to human health or welfare. 

 

There was an editorial in The Wall Street Journal, I think it’s two weeks ago now, that essentially noted the change in the makeup of the court and suggested that it revisit the Massachusetts decision. Think about what that means. It’s a big deal, and this case is a big deal, not only because of the administrative law implications, which we can nerd out on a lot. Some of the amicus briefs that come in question whether administrative law exists as a topic area.

 

The other thing I really wanted to point out is that there’s all this hyperbole concerning the Clean Power Plan’s drastic consequences. Petitioners, in all their supporting amici, they talk about the Clean Power Plan’s projected costs and consequences, hundreds of billions of dollars, thousands of lost jobs, EPA usurping energy regulation, forcing coal plants to close down, taking over your thermostat, they say it.

 

All these exaggerated characterizations were based on what the Clean Power Plan was projected to do back in 2015 before it was stayed by the Supreme Court. However, in the rule that actually is at issue in this case, the ACE rule, which repealed the Clean Power Plan, EPA found that on a nationwide basis, the reductions that were required to occur by 2030 under the Clean Power Plan, they had actually occurred a decade earlier, even though the rule never went into effect. EPA therefore concluded that the difference between a world with and without the Clean Power Plan was $0 of cost to industry and no difference in emissions.

 

So think about what that means. Even though the Clean Power Plan never went into effect, its targets were achieved a decade in advance due to completely other forces all at play in the power sector, rapid declines in the cost from critical technologies, consumers’ demand for clean energy. Many of those coal plants did retire, but not because of the Clean Power Plan; because it made economic sense to do so.

 

Petitioners and their supporting amici, they use all these drastic consequences and the costs as the primary basis, projected costs, for arguing that the major questions doctrine applies. Essentially, they’re saying it’s a threshold inquiry before you actually examine the text. And one of the petitioners briefs, they don’t actually start talking about the text like Jonathan did until page 33 of their brief. And one of the amicus briefs criticizes the D.C. Circuit’s ruling for spending 40 pages dispensing with EPA’s grammatical arguments. So much for textualism. 

Jonathan went through what EPA did. From my view, they spliced together two sections of the statute to manufacture these artificial constraints. Section 111(a) defines the standard of performance, gives EPA the ability to decide what that standard of performance should be, and then 111(d) leaves it up to the states to submit plans that will achieve that for any existing source.

 

EPA did something really contorted. It said that application must take an indirect object. They won’t go into the indirect object. Jonathan and I have spent way too much time learning what indirect objects are, what nominalizations are. But all the D.C. Circuit decided was that, no, we found that application, it’s a verb. It isn’t a verb. It’s a noun. It’s a nominalization, and it doesn’t need to take an indirect object. They said that even if it did, the one it could take was for any existing source. It wasn’t for any existing source. It could be pollution, air pollution writ large.

 

And what they said ultimately was when EPA took for existing source, standards could be for an existing source, regardless of whether they look at a trading program or otherwise. Trading programs apply to sources all the time. What EPA did is they substituted two other prepositions, at and to, for the one that actually exists in the statute, for, to conclude that now that what EPA was constrained to do was only look at what you can install at an individual source. As I said, that eliminated, took off the table anything like trading. And all the EPA did was they basically said the statute doesn’t unambiguously command this hamstringed view, and so we’re sending it back to you to figure out what is the scope of its authority.

 

And so with that, I’ll turn it over to the Professor for Q&A, hopefully — with the panel before we open it for Q&A. I don’t mean to confuse you. Sorry.

 

Prof. James Coleman:  Well, thank you so much, both of you. I really appreciate the — from the absolute 40,000 foot level of does the Clean Air Act regulate greenhouse gasses to the really nitty gritty of whether it’s the nominalization. That’s incredibly helpful. And I also appreciate putting the text on the screen. That’s wonderful. 

 

So let me ask — let me take a reminder to everyone a little bit of that bigger context which is that we have Massachusetts v. EPA — if you wanted to talk, what’s the biggest environmental decision of the last 40 years, certainly that would be at the top of many a list. And a 2007 decision, a 5-4 decision saying that greenhouse gasses are a pollutant under the Clean Air Act, and so the EPA needs to determine whether they endanger health and welfare. And that decision — interestingly, of the five majority members, only Justice Breyer remains of that majority, where we still have three of the dissenters, Justice Thomas, Chief Justice Roberts, and Justice Alito, on the Court.

 

I do think there has been this big question, ongoing, is the Court really comfortable with that Massachusetts v. EPA decision? And as Kevin indicates, that could have an incredibly huge impact because it could simply suggest, oh, well, maybe you don’t get to regulate greenhouse gasses under the Clean Air Act at all. And that’s sort of been the other shoe that’s been potentially there to drop.

 

And one thing in interim cases, as Kevin mentioned, he had the AEP v. Connecticut case which the Second Circuit had said that there was federal common law so that because of the impact of one state’s emissions on another state, the federal courts basically were put in a position where they had to make up law to control that to pool that harm. And the court said, “No, there’s actually a statute to address that through 111(d).”

 

Then there was the UARG decision, which was very important, that narrowed in some ways greenhouse gas regulation. But one interesting thing about that is at that time, Justice Kennedy was still on the Court. And in the oral argument, he said, “I’m looking for something I can respect, not just the letter of Massachusetts v. EPA, but also the spirit of Massachusetts v. EPA.” Obviously, Justice Kennedy is no longer on the Court. And one question is whether the new Court wants to go in a different direction.

 

Obviously, as we move more narrowly, this question is about existing source regulation. And the Biden administration has wanted to pursue existing source regulation. The first day executive order was that they planned to adopt this for oil and gas sources as well. And so we could see this becoming more important if the Biden administration focuses on using the Clean Air Act to regulate.

 

So I guess I wanted to know what do each of you see as the practical impact of different potential decisions in this case on the ability of the Biden administration to regulate carbon through executive action, regulatory action, particularly given that with the hiccups or failure of the Build Back Better bill or reconciliation bill that some of its allies are pushing them to take executive action on carbon emissions. And also, with Jonathan — and also, of course, feel free, both of you, to respond to each other on any other topics that you see fit. 

 

Jonathan Brightbill:  Sure. Thank you, Professor. If the Supreme Court were to reverse the D.C. Circuit for any of the variety of arguments that have been presented and hold that “for any existing source” is and continues to be a limitation on what is achievable through the best system of emissions reduction, I want to know — that isn’t an argument that EPA came up with in 2019. That is an argument that EPA and the position of EPA uniformly throughout the history of 111(d), including in the final preamble of the Clean Power Plan which interpreted the statute and acknowledged that the “for any existing source” language was the important limitation on the EPA’s authority and argued that.

 

And, in fact, the D.C. Circuit and many of the petitioners who challenged the CPP repeal, their interpretation actually strays from what EPA even was saying in 2015 when it finalized the Clean Power Plan. But I do think that if the Supreme Court were to hold that those four words duly back to achievable—ultimately, it boils down to that—and that the Clean Power Plan doesn’t work because it doesn’t allow consideration variants to the rate for any particular source, then I do think that that would impose limitations on the systems that EPA can implement under the statute.

 

Now, what EPA did in the ACE rule was, for that reason, limited compared to what might have otherwise been attained, because by definition, if you have limits, that constrains your option set. But I do think it’s important to recognize that part of it is a function of a snapshot in time. Technology, techniques, they change over time. 

 

EPA and the ACE rule concluded that carbon capture and storage was not ready for prime time yet. There was no carbonlytic converter that could be stacked onto the top of a smokestack to suck up all of the carbon coming out and crystalize it like you have with automobiles and their catalytic converters. They take a lot of the nasty stuff out of the emissions from combusting gasoline. Part of why there is a constraint, or was a constraint, on EPA at the time of the ACE rule under that interpretation was a function of what technologies and techniques were available that would otherwise meet the limitations that existed under the Clean Air Act Section 11(d).

 

On the flipside, I do think — because I’ve thought a lot about this and tired out a lot of hypotheticals over the time as to what the unconstrained reading of Section 111(d) could mean. And at the end of the day, there’s no statutory constraint on their ability to go out and decide here are sources of carbon dioxide emissions, and we’re going to tamp down on this. So it’s just a matter of record support, arbitrary and capricious or not, as to they now want to take 111(d) what existing sources. They want to take 111(d) and potentially go and regulate.

 

And there’s no limitation on the system as it could be applied. So you could — EPA could, if this statutory interpretation is greenlighted, take essentially this same system, presumably put together records for it, but there’s no statutory limits that would prevent the following.

 

EPA could go out and declare existing sources are outdoor sources of restaurant — so electric space heaters, gas, wood fireplaces. And they could go and impose the same system of emissions reduction on restaurants, every restaurant in the country, and basically impose that if you want to have — if you’re a restaurant, and you’re slope side at the ski resort, and you want to have a wood combusting fireplace that emits at a higher rate of pounds of CO2 than an electric space heater, you would have to buy credits from the restaurants that are using electric space heaters. 

 

The model that you have here, you could apply it to concrete plants, any source at this point because there’s no statutory limit. It’s just the limit of what, from a record perspective, they could go out and justify from what’s arbitrary and capricious or not.

 

And so going back and looking at the D.C. Circuit argument that occurred en banc, at that time, the United States articulated a number of limitations that they argued to the D.C. Circuit representing the limitation on EPA’s authority. And it’s true, there were limitations, but they were all record-based limitations. There were no statutorily imposed limitations if you go through and you tick through those five things, that actually constrained, ultimately, EPA’s legal authority to act under the Clean Air Act.

 

So I do think it’s a very, very consequential case, and I do think that it is one that if the Supreme Court greenlights the expansive authority of that interpretation of the D.C. Circuit, that could grant EPA a tremendous amount of authority to regulate the carbon emissions of many, many things.

 

And just as a final point, I’ll note that this is not paranoia. Go back and read the proposal for the Clean Power Plan, the original proposal. There were four building blocks, building blocks one, two, three, and four. And that fourth building block really was consumer demand side. And EPA at least proposed at that period of time to really drive really granularly into the everyday lives of folks in America, pursuant to their expansive interpretation of the statute.

 

Kevin Poloncarz:  I’ll respond and say, first, Professor, I think that this is an incredibly consequential case for more than the statutory question that Jonathan highlights. The major questions doctrine in its application here and some of the arguments that are put forth by some of the petitioners in amici really sidestep the whole statutory question on inside the fenceline, outside the fenceline.

 

In Cato’s brief, which was filed yesterday, the Cato Institute, they don’t just go after the Clean Power Plan as an example of what they call unlawful interstitial rulemaking. They actually take aim at the proposed methane rules, quote, unquote, “historic expansion” of authority over existing oil and gas producers, quote, “as the centerpiece of President Biden’s marquee international climate policy, the Global Methane Pledge.”

 

The suggestion is clear that effectuating global climate pledges through existing authority necessarily implicates the major questions doctrine and renders the resulting rule unlawful. That is beside the point of whether or not the controls on those existing oil and gas sources are at the source or to the source or beyond the source. And so, from my perspective, when I read these briefs, the petitioner’s briefs and their supporting amici, they really are going big. They are seeing this as an opportunity to really handcuff the Clean Air Act as a vehicle for even at the source regulation. And so you can be sure we are paying very close attention to how we argue not just the statutory question but the major questions doctrine and its applicability here. 

 

My view is that, as I suggested, some of these briefs like CEI’s brief really try to annul the Clean Air Act without overturning Massachusetts v. EPA, saying, “Well, you weren’t talking about stationary sources. You were talking about mobile sources.” That’s what 91 members of Congress said yesterday in their brief. “Oh, and by the way, we know how to do climate change regulation. We did the Americans with Innovation and Manufacturing Act,” which is the HFC’s bill, “at the end of the year, and we did that outside of the Clean Air Act. So the Clean Air Act really shouldn’t be used to address climate change.”

 

And so while we might have once thought this was a nice argument about nominalizations, applied indirect objects, and the text, it has now assumed outsize dimensions, particularly some of the constitutional glosses, which the nondelegation doctrine was raised as essentially supporting the view that you want to avoid constitutional problem. And if the EPA has this authority, as the D.C. Circuit purports, we would view that as constitutionally problematic, so avoid that interpretation, to now into supporting brief’s wholesale arguments that 111(d) is per se constitutionally unconstitutional because it doesn’t have any direction to the agency on what it should be doing. And that’s really scary to me.

 

Professor, to your question, given the difficulty enacting legislation even through the reconciliation process, even when the Democrats hold all three branches of — or both Houses and the White House, to not have the tools available under the Clean Air Act to do this is something that worries me because I think the Clean Air Act could do lots of things even with a modest interpretation of what EPA’s authority is. And now we’re facing questions about whether that authority will remain.

 

Prof. James Coleman:  Okay, wonderful. And I loved how that highlighted — I think it’s important to note that even the narrowest question here, which is, is this going to apply within the fenceline versus outside the fenceline, I think it’s important to understand how crucial that is for carbon regulation.

 

That’s something that Jonathan really highlighted because one thing that’s different about carbon regulation is the whole point of burning fossil fuels is to get carbon dioxide and energy. That’s how you release the energy is by releasing carbon dioxide. Apologies, I used to be a physics teacher, so I’ve gone back into that mode. But in any event, that’s the whole point. 

 

And so that means that you can have efficiency improvements so that you get more energy for the amount of carbon that you’re emitting, but the really big reductions in carbon often are driven by simply burning less fossil fuels. And that’s why this question of — is it just a question of making our coal and natural gas plants more efficient, or is it a question of moving the whole energy system away from fossil fuels is a very important question, even if you’re focusing on the most narrow part of the question at issue here. This is why this is such a blockbuster case. 

 

But it can go so much broader. And this is why people who aren’t really that interested in environmental issues, who are concerned about vaccine mandates or any of the other issues of the administrative state are laser focused on this case because of the questions that Kevin raised about will this really impact the way that the administrative state operates from now on if, then, there’s going to be this carveout from Chevron where you get less deference when it’s a major policy question.

 

Or maybe it’s a species of nondelegation doctrine where if it’s a major policy question, really, Congress has to say what it wants. Or maybe it’s clear statement. Congress has to make clear that they want regulation here. So these are huge questions for the entire administrative state, not just for environmental law, even though the climate questions themselves are big blockbuster ones.

 

Okay. At this point — and you know, Jonathan, since you didn’t talk as much about the major policy, if you wanted to talk about that at some point in your answers, but I want to make sure we get to Q&A as well because I think we already have more excellent questions in the chat than we’re going to have time for to discuss. Unless there’s something somebody wants to briefly chime in with — okay, great.

 

Let me move to one of the questions. The first question is actually for Kevin, which is just why do your clients — why are your clients taking the position that they are? What’s their interest in not overturning the D.C. Circuit decision? If they’re in favor of more broad regulations, why wouldn’t they simply comply with them on their own? Why did they want to uphold the D.C. Circuit decision? What difference does it make to them?

 

Kevin Poloncarz:  Well, first, the D.C. Circuit’s decision puts back on the table averaging and trading and all these traditional tools which my clients love. They love efficiencies, and they recognize that if you’re given a target and you have the ability to have two units averaged, you can do it more efficiently. And the ACE’s rules interpretation forbade even two units sitting right next to each other from averaging to achieve the emissions limit. So that’s off the table.

 

Secondly, and what’s really the fundamental issue, is my clients, a lot of them serve millions and millions of customers who want clean power, but the power grid is all inextricably linked. And assuring reliable delivery of power requires that you buy power from a big pool at times. And unless that pool gets cleaner, you can’t be sure you’re actually delivering clean power to your customers.

 

And so that’s a strong motivation for them to be sure that it’s not just coastal states or blue states that put in place carbon regulation because power — the electricity grid crosses state lines, and you’re going to be getting electricity that’s generated from higher emitting sources at times of the day when that power is needed to maintain the reliability of the grid. And that’s one reason why they’re really invested in it.

 

And otherwise, frankly, I think the clients are very concerned about the prospect of handcuffing the administration’s ability to address climate change.

 

Prof. James Coleman:  Let me give Jonathan a chance to respond, if he would like.

 

Jonathan Brightbill:  The only thing I wanted to note was on this issue of efficiency in trading because it is correct that the ACE rule took a very, very tight read of the authority under 111(d) and did not — would have limited trading in a lot of ways.

 

But one thing I want to note was on this issue of what the Bush administration at least proposed to do or initially implemented with respect to the MATS rule. The trading program there was fundamentally different than the trading program that was promulgated under the Clean Power Plan because the trading program under the MATS rule was not about creating the standard for emissions. The statutory authority for the trading program in the MATS rule was derived from the third sentence, from the regulations under this paragraph shall permit the state applying standards to undertake variances.

 

So there was really a very fundamental difference between what EPA did in terms of allowing some level of trading in the MATS rule, or would have allowed some level of trading in the MATS rule, and the use of trading as the system for generating the rate that would be achievable for any existing source. So I just wanted to flag that distinction between those two. And of course, the legality of the MATS rule trading program, even deriving from a different statutory authority as a compliance mechanism was never ultimately litigated and determined by the D.C. Circuit because the rules have vacated for other reasons.

 

Kevin Poloncarz:  I’ll just add that what we’re talking about is the Clean Air Mercury Rule, which was the predecessor to MATS, actually. And that was a trading program under 111(d), but ultimately, the D.C. Circuit found it was unlawful to try to delist those sources from 112 and regulate them under 111(d) instead.

 

There, Jonathan, I don’t disagree with you, but I also think it’s a matter of degree. EPA in the camera rule, they didn’t intend that all sources would be able to install the control technology. They based their limits and the stringency of the caps on the availability of what they called dispatch changes as a means of compliance. They said, “We can make sure that the caps are in a way because not every source needs to comply. We’re going to do it through trading.” So it’s all a matter of degree. I just wanted to clarify that.

 

The other thing I just wanted to note in the question about why my clients are doing this, it’s important to note that not one member of the power sector has petitioned for cert to challenge the D.C. Circuit’s ruling. Basin and some co-ops came in in support, but you don’t have major power producers challenging the D.C. Circuit’s ruling.

 

Prof. James Coleman:  All right. Well, let me highlight another fascinating question that we’re well aware that neither of you have the answer to, but that’s fine. We understand that we’re asking for you to — we all get to speculate a little bit, which is that the Clean Power Plan was the Obama administration’s approach to regulation of existing sources. The ACE rule was the Trump administration approach to existing sources. Any guesses, ideas, possibilities of what the Biden administration approach would be?

 

One thing that’s in the background of this case is there’s many people that would like the court to not decide it and simply drop it, or many people that didn’t want the court to grant cert specifically because the Biden administration said it was not going to reimpose the Clean Power Plan.

 

On the other hand, they didn’t say what they were going to impose, and so other — the parties that petitioned for cert were able to do so successfully. A lot of people were surprised that the Supreme Court took it, given that the Clean Power Plan, the Biden administration said it’s not going to through it, but we don’t know what they are going to do. And I wondered if you wanted to lay out some possibilities of what you thought the Biden administration could think about, or might be thinking about, or if we have any clues of what they might do where they’re planning to do this, i.e., power plants and existing oil and gas systems. I’ll start with Jonathan.

 

Jonathan Brightbill:  Well, I think what we’ve seen from the Biden administration so far is a focus on co-benefits as a way of regulating carbon dioxide emissions. In other words, I think one of the things that you’re seeing as subtext of many of the things that they’re doing is that they are using the Clean Air Act and they’re using the regulation of conventional pollutants as a proxy for going after carbon dioxide emissions, again, as a co-benefit to regulation through conventional pollution sources. So I think that’s one thing that you’re seeing the focus on, first of all.

 

As to what they’re going to do specifically with the authority under 111(d), I think there’s no coincidence on the timing of when they’ve signaled they’re going to come up with a plan or release a plan to proceed with something as it relates to the timing of when we can expect to see a Supreme Court decision coming out in this case.

 

Prof. James Coleman:  Just to be clear, you’re saying they’ll wait until we have a Supreme Court decision to —

 

Kevin Poloncarz:  — Their regulatory agenda indicates as such, that they wouldn’t issue a proposal until the summer. And we know when this case will be decided.

 

Prof. James Coleman:  Right. One thing I know I heard it from people that were in part responsible for developing the plans, the Obama — sometimes, people describe the Clean Power Plan as in some sense a head fake. If you look at the reductions that were actually made in fossil fuel use for electricity, they tended to be driven more by the federal rules as opposed to by the Clean Power Plan.

 

And I think one thing Kevin mentioned that, in fact, even without the Clean Power Plan, we’ve had reductions that have brought down carbon emissions more than that was expecting to. And so one question would be would you have the same approach where you can lower fossil fuel emissions through other regulatory approaches?

 

  I do want to give Kevin a quick chance to say what — if he has any thoughts on what the Biden administration might do.

 

Kevin Poloncarz:  All I’ll say is they said they’re going to consider the scope of their authority on a clean slate. We need to take them at that.

 

And I think that there are lots of things they could do, and there are lots of things I’m interested in seeing the ability to be preserved that the at and to formulation might not preserve, such as biogas and gas fired power plants. The CO2 coming out of the stack is the same, but when you consider the life cycle of emissions, that happens somewhere else. It’s actually significantly lower. And so that’s something that applies to a power plant, but it requires looking more broadly than what you an actually do at and to that individual plant to really understand where the reduction occurs.

 

Prof. James Coleman:  All right. Well, I just wanted to thank Nate, Kevin, and Jonathan. This has been wonderful. Thank you so much for this discussion.

 

Kevin Poloncarz:  And thank you.

 

Jonathan Brightbill: Thank you.

 

Nate Kaczmarek:  Yes. And unfortunately, we’re out of time. I would have liked to see the discussion go even further, but we’ll have to have the three of you gentlemen back again. Again, our gratitude for your expertise and time this afternoon. We welcome feedback by email at RTP@regproject.org. Thank you all for joining us. Have a great one.

Jonathan Brightbill

Partner

Winston & Strawn LLP


Kevin Poloncarz

Partner

Covington & Burling LLP


James W. Coleman

Robert G. Storey Distinguished Faculty Fellow and Professor of Law

Southern Methodist University Dedman School of Law


Energy & Environment

The Federalist Society and Regulatory Transparency Project take no position on particular legal or public policy matters. All expressions of opinion are those of the speaker(s). To join the debate, please email us at rtp@regproject.org.