Courthouse Steps Decision Webinar: West Virginia v. EPA

Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group Teleforum calls, become a Federalist Society member today at fedsoc.org.

 

 

Guy DeSanctis:  Welcome to The Federalist Society’s webinar call. Today, July 8, we discuss the Courthouse Steps Decision West Virginia v. EPA. My name is Guy DeSanctis, and I’m an Assistant Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today’s call. Today, we are fortunate to have with us our moderator, Garrett Kral, Federal Law Clerk and former Special Advisor for Oversight at the U.S. EPA. Throughout the panel, if you have any questions, please submit them through the question-and-answer feature so that our speakers will have access to them for when we get to that portion of the webinar. With that, thank you for being with us today. Garrett, the floor is yours.

 

Garrett Kral:  Thanks, Guy, for that introduction, and thank you to The Federalist Society for hosting this event. Hello, everyone. My name is Garrett Kral, and we are looking forward to discussing today West Virginia v. EPA and having two distinguished guests on the panel—David Fotouhi, former Acting General Counsel at the U.S. EPA, and Justin Schwab, former Deputy General Counsel U.S. EPA.

 

But before I introduce these two gentlemen, I want to make a couple of points up front, the first of which being I’m here of my own personal capacity, and any statements or presence does not constitute an endorsement of current or former employers of mine. Second point is to the benefit of the audience. If you do have questions, you can type them into the Q&A chat function at the bottom of the screen there. Third point being Justin and I did a similar event on the date of OA in this case, where we discussed our initial impressions, and you can find that on the Society’s website and in the Apple podcast store there for download. The same will be said for this production subsequent to its conclusion.

 

So I’m going to turn now to introducing both David and Justin and then open the floor up for discussion. David Fotouhi is a partner in the Washington, DC office of Gibson, Dunn, & Crutcher. Before rejoining Gibson Dunn in 2021, David spent nearly four years at EPA where he served in a variety of roles in the General Counsel’s Office to include Acting General Counsel. During his time at EPA, David played a critical role in defending EPA’s actions when challenged in court, including the CPP’s repeal and promulgation of the ACE rule. David is a graduate of Harvard Law School and clerked on the Eighth Circuit.

 

Justin Schwab is the founder of CGCN Law, a law practice in Washington, DC focused on environmental, energy, and administrative law. Justin served as Deputy General Counsel at EPA from 2017 through 2019 and has been identified in the press as the leading legal architect of the Trump administration’s Clean Power Plan repeal. Prior to his service at EPA, Justin practiced administrative law in BakerHostetler’s DC office. Justin clerked on the Second Circuit and Utah Supreme Court and has a law degree from Yale and a PhD in Classics from Berkeley. I’m going to hand the mike over to David and Justin now. Gentlemen, the floor is yours.

 

Justin Schwab:  Thank you, Garrett, very much. Thanks to The Federalist Society for hosting this event. I’d like to say, as Garrett did first, that I’m here in a personal capacity, and nothing I say should be imputed to any current or former client or employer. There are many ways to start this story. I’m going to start the tape in the George W. Bush administration, beginning with two beats—first, a 2007 Supreme Court case and then back up a little and discuss a 2005 EPA rule. I’ll explain how these two tracks merged into the Obama administration’s Clean Power Plan and how and why the Trump administration repealed the Clean Power Plan and replaced it with the Affordable Clean Energy, or ACE, rule. David Fotouhi will then tell the story of the litigation that followed up through last week’s Supreme Court opinion in West Virginia v. EPA.

 

The 2007 Supreme Court case was Massachusetts v. EPA, which first got the agency into the greenhouse gas business. The Bush administration had denied a petition to make an endangerment finding under Title II of the Clean Air Act which regulates cars—in other words, a petition to find that cars’ carbon dioxide emissions were contributing to harmful climate change. SCOTUS ruled in Massachusetts v. EPA 5-4 that the Bush EPA was too narrowly reading the general act-wide definition of air pollutant and that the agency’s other reasons for denying the petition were policy arguments better suited for Congress than EPA—for instance, that global warming is a global problem fit only for a comprehensive national or even international approach. “Your act encompasses this stuff,” SCOTUS held. “Now, go do something about it.”

 

After that case and after President Obama took office, EPA made the endangerment finding for cars, and the dominoes began to fall. In 2010, EPA settled with New York and other states and a coalition of NGOs promising to use Section 111 B and D of the Clean Air Act to regulate greenhouse gas emissions from new and existing fossil-fuel-fired power plants. And as the Obama administration reached its halfway point, EPA started to seriously consider just how it intended to do that.

 

This is where the other starting point to the story comes in—a 2005 agency rule that, on its face, had nothing to do with climate. The Bush administration in 2001 had inherited a midnight rule from President Clinton and Administrator Browner. On her way out the door, Administrator Browner made the required finding that regulating coal-fired power plants’ mercury emissions under Section 112, the hazardous air pollutant program, would be “necessary and appropriate.” The Bush EPA didn’t like that because 112 is the Act’s most stringent and least flexible program. So the Bush EPA tried to delist power plants from that program and tried to regulate mercury instead under Sections 111B for new power plants and 111D for existing ones.

 

EPA had issued about 70 new source performance standards under B already, including multiple standards for power plants’ traditional pollution. But it had only done a handful of obscure standards for existing sources under D. D can’t be used on hazardous air pollutants or on so-called criteria pollutants, like soot and sulfur oxides. But mercury isn’t either of those. Neither are greenhouse gasses. So EPA can use 111D to regulate existing sources of emissions of those pollutants. The Bush EPA’s 2005 Clean Air Mercury Rule, or CAMR, was an innovative use of 111D in multiple ways. It regulated power plants, a vast industrial sector of central importance to the economy and politics of the country and of all 50 states.

 

And because not all power plants could afford a state-of-the-art scrubber technology, the rule employed a limited trading scheme under which well-capitalized plants would buy these very expensive controls. They would over comply, and then they would sell credits to other plants to offset their continued emissions. The DC Circuit struck down this rule on other grounds and never held whether or not its cap-and-trade design was legal. But this is where many first got the idea to use Section 111 beyond the strict boundaries of one plant’s fence line. And so, this was the regulatory seed that would one day grow into the Clean Power Plan or, as I’ll sometimes call it for shorthand, the CPP.

 

After some false starts, EPA proposed the Clean Power Plan in 2014. The Section 111 regulatory process begins with EPA identifying the best system of emission reduction that’s been adequately demonstrated to control a particular pollutant from a particular type of source. And here, EPA faced a huge fork in the road. There are essentially no controls that an existing coal-fired power plant can install to limit its carbon dioxide emissions in the traditional sense other than carbon capture, which is vastly expensive and has effectively never been deployed at scale without massive subsidies. If EPA were to limit itself to the traditional approach under 111, under which it identified systems of emission reduction that could be applied to and at individual power plants on-site to address their actual individual emission performance, then the agency would be limited to improving the heat rate performance of the individual existing coal plants.

 

The 2014 EPA saw two main problems with taking this narrower approach. First, they calculated that you couldn’t get all that much reductions from it—high, single-digit reductions of CO2 emissions at best from the power sector by 2030 against a mid-aughts starting point baseline compared to the 30 plus percent that they were preparing to pledge to in the Paris Process in which they felt they needed something like CPP and large-scale generation shifting to get. Second, they were concerned about the so-called rebound effect under which, if coal plants became more efficient, they might be dispatched more and end up emitting more in the aggregate.

 

But instead, if EPA could determine upfront at the grid-wide level its preferred mix of electric generation from coal, gas, and renewables, EPA began to believe that it had the authority to determine how fast the utility sector could shift its generation mix in the aggregate. Then EPA set standards so stringent that no coal and gas plants could actually meet them. Instead, companies who wanted to keep running these plants would have to build additional solar and wind plants or subsidize their competitors’ plants to get credits to blend with their own actual emissions rate. This took the 2005 Mercury Rule’s limited use of cap and trade and radically expanded it, departing altogether from regulation of the source category as such and seeking instead to set the national energy policy and that of all the several states.

 

Here’s the core theory of why CPP was legal. The term “system” in “system of emission reduction” is deliberately broad and open-ended. Dictionaries define “system” as, essentially, a series of interconnected things working towards a common purpose. Generation shifting fits within that definition. It’s adequately demonstrated because multiple states, utility companies, and regional planning authorities are already using it to introduce lower carbon intensity dispatch principles on top of the pre-existing least cost dispatch paradigm, and the statute nowhere explicitly, in one quotable sentence, says that EPA’s identified system has to be applied to and at particular individual power plants.

 

This was backed up by a more policy-focused argument, which had a flavor of, “This ticket is good for one ride only. We promise we won’t ever get this creative again.” This is the argument that the electric grid is different, that it’s really one giant interconnected machine anyway. So if you ramp up wind and solar onto the grid, that will automatically draw down output from coal and gas plants elsewhere. So if you squint, this is kind of sort of facility-specific regulation anyway. This was much clearer in the final CPP than in the proposal, which, on its face, suggests some concern that maybe there was something to this fence line objection after all. And so, EPA attempted to provide a fallback for a reviewing court to say, “Okay, well, we guess this stuff is complicated. Maybe this really is the only time EPA will be doing this kind of thing because it’s just special and different.”

 

Okay. So there are a few obvious problems with this argument. First, it looks a lot like an argument that EPA has a certain power because Congress didn’t explicitly take that power away, which reverses the fundamental axiom of administrative law that Congress has to delegate power to the agencies. By the way, we’ve seen this kind of argument coming from agencies more and more in recent decades as the administrative state becomes more and more openly frustrated with what it sees as an insufficiently active Congress. So CPP’s defenders fall back on system, system, system. That’s deliberately broad. To steal David’s thunder a bit, this is essentially the only argument that Justice Kagan’s dissent really makes on the text. And that leads to the bigger problem.

 

Existing source regulation under subsection 111D, unlike EPA’s direct regulation of new sources under subsection B, has facility-specific language all over it. Justice Kagan’s dissent doesn’t grapple with this at all. States take EPA’s regulation identifying the best system, and then they, the states, write a plan that establishes standards of performance for any existing source. And then, the kicker, Congress explicitly commanded EPA to allow states to tailor standards to the reality of particular individual sources. “Regulations of the administrator under this paragraph shall permit the state in applying a standard of performance to any particular source to take into consideration, among other factors, the remaining useful life of the existing source to which such standard applies.” But EPA in the Clean Power Plan was essentially treating states as giant carbon dioxide bubbles, like a giant factory, instead of as sovereign regulators in a cooperative federalism scheme.

 

There were a lot of claims about how states are free to do whatever they want and even that this is real federalism. So long as these states met the aggregate reduction requirement that EPA was imposing on them—which is mentioned nowhere in the statute—it’s okay to take away their expressed statutory variance authority because they can just play around with credits to make it all good. Well, half the states in the Union didn’t agree, and they still don’t. They just won, albeit on other grounds. And two-thirds of the Supreme Court didn’t fall for this.

 

Actually, Justice Kagan’s dissent doesn’t either. There’s the barest whiff of it in page 26. But really, this gambit to argue that actually that the Obama EPA were the real federalists was, I think, in the end, just not persuasive. Because of the way the case ended up being decided at SCOTUS, a lot of the federalist angle sort of fell away. But I think these issues are going to come up down the road because 111D for existing sources must use this federalist state planning process. And so, whether it’s the putative successor rule to CPP and ACE or whether it’s rules for other industrial sectors, we still don’t know how prescriptive the EPA can be.

 

Okay, back to 2014 and the CPP rulemaking. The proposed Clean Power Plan drew millions of comments, including from a coalition of states headed by West Virginia and Oklahoma, which provided many arguments for why this plan was bad policy and illegal. EPA declined to heed these and published a final rule in the fall of 2015. When the DC Circuit declined to issue a preliminary injunction, many observers thought the restructuring of the electric industry that the Clean Power Plant sought to achieve was now inevitable. Even if the courts eventually ruled that the plan was illegal, it might have set compliance decisions in motion that would be impossible to reverse. And maybe that’s what would have happened if the Supreme Court didn’t shock the legal world by intervening.

 

In February 2016, just days before Justice Scalia died, he cast the crucial fifth vote to grant a longshot stay application. SCOTUS had never before stayed a rule still under review by a lower court. The DC Circuit got the message, went en banc, heard a marathon argument in the fall of 2016, and then put the case in abeyance after the change in administration. So at this point, no court has ruled on the merits of the Clean Power Plan. A new administration has inherited a stayed plan and wants to replace it, and EPA is faced again with a fork in the road. Can you go grid-wide and use Section 111 to shift the aggregate fuel mix of the entire electric sector as such, or do you need to look inward at what individual existing coal-fired power plants can actually do to improve their emissions performance?

 

The Trump EPA chose the latter route—the narrow route. It determined that the Clean Power Plan was illegal because Section 111 was limited to traditional, plant-specific systems of emission performance. And it made two choices that would determine the course of litigation and shape the eventual Supreme Court opinion. First, the Trump EPA determined that Section 111 unambiguously rules out the grid-wide generation-shifting approach. It found that the text and structure of the statute simply left no room for that broad aggregate type of rule design. It didn’t squint to identify and interpret any purported ambiguities. Instead, it determined that this is a source-focused statute and that the Clean Power Plan’s generation-shifting design simply found no basis in the toolbox Congress had given the agency. It went through the problems with even the definition of standard performance being read to allow grid-wide cap-and-trade type schemes, and it made a lot of hay out of the source-specific language in 111D.

 

And second, EPA determined that generation shifting was a major question. EPA was clear that it didn’t need this doctrine to repeal the CPP because standard textual and structural analysis already gets you there, but EPA said that the major questions doctrine confirmed that result. Under a then-obscure doctrine of administrative law, some rules are so sweeping and transformative—they deal with such paramount issues of political and economic significance—that they cannot be supported by Chevron deference arguments from mere ambiguity. Instead, they require a clear statement of congressional intent to authorize this type of rule.

 

Because the EPA found none in Section 111, this corroborated its more traditional textual reading and confirmed that the Clean Power Plan was ultra vires. EPA also cited a similar clear statement doctrine for federalism principles under which invasions of traditional areas of state sovereignty require a clear congressional statement. Basically, if even FERC can’t do this kind of thing because the Federal Power Act carefully leaves resource mix questions to the states, how can EPA possibly have the authority to do it? So in 2019, using this reasoning, EPA repealed the Clean Power Plan and, in a distinct action finalized in the same federal register of publication, replaced it with the Affordable Clean Energy, or ACE, rule.

 

This rule went inside the so-called fence line, returning to the plant-specific focus of all previous rules with the arguable partial exception of the 2005 Mercury Rule, which the repeal rule essentially disavowed. Under the ACE rule, states were to consider what their individual existing coal-fired power plants could actually do to improve their carbon dioxide emissions performance. States would consider a list of candidate technologies that EPA identified as collectively constituting the best system of emission reduction. States would determine which ones were applicable to which power plants and establish binding requirements for individual plants to achieve heat rate improvements accordingly, no cap in trade, no credits, no working backwards from EPA’s view as to what the right mix of renewables and traditional energy is for the grid.

 

I want to close my opening remarks with just a word or two about consequences—about predictions. In 2015, EPA calculated that without CPP, reductions from the sector would be about 17 percent by the 2030s and that with CPP, you’d see about 30 to 33 percent. In other words, CPP would double the baseline expected reductions. Well, three years later, the same team of career civil servant experts had surprising news. These bigger reductions are happening anyway. Even though CPP never went into effect because SCOTUS stayed it—unlike with some other EPA regulations which were in effect for years and did serious damage to the coal sector before SCOTUS ruled they were defective—indeed, the CPP, the ACE rule, and doing nothing under Section 111D all were converging around 30 percent reductions, give or take a few percentage points. A difference that under and understanding was not going to significantly move the climate needle either way.

 

So when people argue about the impact of the CPP, they’re really arguing more about the status of its underlying theory of authority. Again, to steal David’s thunder a little, Justice Alito’s questioning in oral argument and portions of Chief Justice Roberts’s majority opinion focus on the fact that even if CPP’s reductions ended up happening anyway because of market trends and other policies, you still are faced with a we-can-do-whatever-we-want interpretation here, and that’s just not how we do business in the separation of powers system. And with that, David Fotouhi will now tell the story of everything that followed the repeal.

 

David Fotouhi:  Well, thank you very much, Garrett and Justin, and to The Federalist Society for hosting this discussion and for inviting me to participate in it with you. Before I get into it, let me just say that my remarks today are my own views and not those of my employer or a client of my firm. So let me pick up the story where Justin left off.

 

Just as soon as the ink was dry on the pages of the Federal Register on the repeal rule and the Affordable Clean Energy rule, multiple parties filed challenges in the DC Circuit. Environmental and other NGOs, Democratic-led state APs, and wind and solar energy companies challenged the basis of EPA’s repeal of CPP and the ACE rule as inadequately stringent. Also, various members of the coal and manufacturing industry and conservative policy groups supported CPP’s repeal, but they also challenged EPA’s authority to issue the ACE rule. And a coalition arguing that ACE was deficient because it did not recognize emission reductions from biomass cofiring also filed petitions for review. EPA was taking criticism from many sides. A group of Republican-led state AGs and a group of electric generators did intervene and support both the CPP repeal and the ACE rule.

 

All these parties spent copious briefing pages on splicing statutory text, arguing over the precise meanings of particular words like system, achievable, application, sources, and the like. When considered through the lens of how much statutory interpretation the parties engaged in in the DC Circuit, it’s remarkable to me how comparatively little statutory interpretation made its way into either the majority or the dissent’s opinions in the West Virginia case, which I’ll get into momentarily.

 

But as Justin previewed, EPA argued as well that CPP was based on a system that’s self-consciously sought to overhaul the economics of the American electricity industry and rework its costs of productions as such. In other words, this concept of generation shifting and the reordering of the electric sector EPA said was not a potential side effect of the rule as much as it was the intended mechanism for how the rule would work. With this understanding, EPA then argued in the DC Circuit that whether it had authority to impose generation shifting raised a major question of agency power and that such a sweeping grant of authority required a clear statement from Congress that was not found in Section 111.

 

So briefing from all these parties went for hundreds, if not thousands, of pages. EPA’s brief alone was 280 pages long. A panel at oral argument kept the argument going for over nine hours—truly extraordinary. On the last day of the Trump administration, the DC Circuit issued its opinion vacating the CPP repeal and the ACE rule. So there was a majority comprised of Judges Millett and Pillard. They held that Section 111 did not constrain EPA to identifying a best system of emission reduction, BSER, that consisted only of controls that could be applied at or to a stationary source.

 

The Court engaged in a lengthy rebuttal to the textual arguments that supported CPP’s repeal. And importantly, the Court also addressed the major questions doctrine, and it rejected the application of that doctrine to 111 because they said the regulation of greenhouse gas emissions by power plants across the nation falls squarely within EPA’s wheelhouse, and EPA had a duty to regulate once it made the endangerment finding that Justin discussed, and further, that the act required consideration of available technology and the cost of compliance such that it was not some sort of bound Bush delegation with no guardrails to the agency. As the Court said, “The statute’s terms foreclosed using the major questions doctrine to write additional extratextual and inflexibly categorical limitations on into a statute, whose broad language reflects an intentional effort to confer the flexibility necessary to forestall obsolescence.” And that latter piece quotes Massachusetts v. EPA.

 

Judge Walker, the third judge on the panel, concurred in part and sent in part. He agreed with the Trump EPA that it was compelled to repeal the CPP resting—his reasoning—almost entirely on major questions. He went on to agree with the vacatur of ACE based on an industry argument—that because EPA regulates coal-fired power plants under Section 112, it could not promulgate a rule under 111. The Supreme Court did not grant cert on that latter question.

 

The procedural posture here becomes a little tricky, and it also becomes important. In February of 2021, after the change in administration, the Biden EPA issued a memo saying the Court’s decision did not put CPP back into effect and that doing so would make no sense given that the outdated compliance states were still in the rule. Contemporaneously, DOJ requested that the DC Circuit grant withholding of its mandate as to the CPP repeal, essentially preventing the Court’s decision from becoming effective and resurrecting the CPP until EPA finalized a new rule to replace both ACE and CPP, and the Court granted that motion.

 

Republican state AGs and certain industry players then sought cert of the DC Circuit’s decision, and the Supreme Court surprised many when it said, in October of last year, it would take up the case. Oral argument was held in February, after which many commenters suggested EPA’s authority was drawing a skeptical reaction from key justices at argument. With that background in mind, on the last day of this term, the Court reversed the DC Circuit and held that EPA had exceeded its Clean Air Act authority when promulgating CPP.

 

Let me start by diving into the opinion in a somewhat unorthodox way with Justice Kagan’s dissent, written for herself and Justice Breyer and Sotomayor, because she adopted many, if not most, of the DC Circuit’s majority opinion’s reasoning that I just summarized. And, as Justin previewed earlier, Kagan rejected the application of the major questions doctrine as the clear statement rule and said, essentially, that determining such a canon applies before courts apply traditional Chevron framework of statutory interpretation is an abandonment of textualism -- is generally what she laid out.

 

But despite these criticisms of the major questions doctrine, Kagan, in many ways, accepts the need to determine whether Congress spoke to the question at issue and simply disagreed with the majority that Congress had not spoken with adequate clarity. She wrote, “The majority says it is simply not plausible that Congress enabled EPA to regulate power plants’ emissions through generation shifting, but that is just what Congress did when it broadly authorized in EPA in 111 to select the best system of emission reduction for power plants. The best system, full-stop, no ifs, ands, or buts of any kind relevant here.” So the breath of this delegation in Justice Kagan’s view was fine in light of the breath of the problem of climate change and that, in her view, Congress knew EPA would need to adapt to “new and big problems in the future.”

 

So turning to Chief Justice Roberts, who wrote for himself and five other justices in the majority, the Chief Justice concluded that the case was first justifiable and that at least the states had standing and could challenge the vacatur of EPA’s repeal of the CPP. The Court rejected arguments that a combination of EPA’s voluntary succession memo and the Court’s withholding of the mandate would withdraw or deprive the states of standing or alternatively mooted the appeal. And so, that was the initial question that Chief Justice Roberts looked at.

 

And just as an aside, in many of the articles that I’ve seen published about this case in the aftermath of the decision, the fixation on the idea that this is merely an advisory opinion or that CPP is a dead rule that no longer exists has really puzzled me. It’s quite a thinly supported argument to say that the mere combination of an agency memo and a request to partially withhold a court mandate that one party itself requested, when combined, deprives challengers of standing or moots an appeal. And I think these points are more likely part of a rhetorical narrative that the Court somehow needlessly reached out and pulled up this case without any reason other than it was a convenient vehicle to elaborate on its views on congressional delegation to agencies.

 

So having addressed that issue, Chief Justice Roberts gets into the merits. And I think it’s noteworthy, not only what the Chief says, but the order in which he said it. Most of the statutory discussion in the opinion occurs in the background section, where he lays out his view that 111 is an ancillary provision used infrequently in the 50 years since the Act’s passage and meant to fill a gap between two other pillars of the statute, the National Ambient Air Quality Standards program and the Hazardous Air Pollutant program. This framing is a significant predicate for the major questions analysis that’s to come. The Chief then endorses the view that CPP’s foundational goal was to reduce carbon pollution mostly by moving production to cleaner sources, which were then translated into rates of reduction that EPA deemed reasonable. Roberts wrote, “The point, after all, was to compel the transfer of power generating capacity from existing sources to wind and solar.” That view of CPP, that the reordering of the nation’s grid wasn’t just an effect or a consequence of the rule, but it was how the rule was meant to operate to lead to emissions reductions, is a critical piece to the Court’s application of the major questions doctrine.

 

Roberts then makes clear that when considering questions of statutory interpretation that confer power to agencies, courts should not simply begin with the text but rather with an inquiry that must be shaped at the start of the analysis by whether Congress, in fact, meant to confer the power the agency has asserted. And in extraordinary cases—that’s the term he uses, extraordinary cases—where the agency has asserted authority of vast economic and political significance, it is not enough for the Court to find the authority rooted in a mere colorable, textual basis, but rather that the agency must point to clear congressional authorization for the power that it claims.

 

Now, Robert says that this approach is supported both by separation of powers principles and a practical understanding of legislative intent. And he cites prior Supreme Court cases which adopted this approach, including Brown and Williamson, pertaining to the FDA’s assertion of authority to regulate tobacco; also the Alabama Realtors case just decided this term, pertaining to the CDC’s assertion of authority to regulate the landlord-tenant relationship; as well as NFIB v. OSHA, also this term pertaining to OSHA’s assertion of authority to impose a vaccine or test mandate on large employers.

 

Now, Justice Kagan, in her dissent, pushes back against this, saying, “These cases and the others sided by Roberts simply apply traditional statutory interpretive tools and did not hold agency claims of authority to a higher standard based on the scope or breadth of the authority claimed.” Roberts then concludes that EPA’s assertion of authority to substantially restructure the American energy market based on an ancillary gap filler, rarely used provision of the Clean Air Act made this a major questions case and that it raised skepticism for the Court of whether EPA, in fact, had the authority it claimed. Thus, a colorable reading of 111 was not enough, in Justice Roberts’s view, in order to rebut that skepticism. A clear statement was required, and such a clear statement does not exist in 111.

 

A capacious reading of the phrase “best system” could not support such a transformative power, unlike what Justice Kagan seemed to advance. In her dissent, she pushed back on this as well, saying EPA’s assertion of authority was nothing special. It regulated emissions from power plants to address climate change. This was a traditional, well-fitting EPA rule, and it’s nothing extraordinary. Roberts clearly disagrees, and so did the justices who joined him.

 

Now, Roberts also rejects the Biden EPA’s reference to the 2005 Mercury Rule that Justin described as fundamentally different from CPP because, although it allowed some trading, the caps in that rule were based on existence of [inaudible 39:07] technology that could be installed at sources. And so, he says, “This is materially different from the best system as described in CPP.” He then calls out this specifically by saying, “By contrast and by design,” which I think are the key words there, “there’s no control a coal plant operator can deploy to attain the emissions limits established by the Clean Power Plan.” And indeed, EPA’s levels set under Section 111B that applied to new power plants were, in fact, less stringent than under CPP for existing plants, which is a discrepancy that Roberts found revealing.

 

The opinion then explains why it’s highly unlikely that Congress delegated such vast authority to EPA in Section 111. Now, Justice Kagan retorts in her dissent that the rule proved not to be as major as EPA predicted, given subsequent market trends that Justin discussed, thus undercutting, in her view, the majority’s position about the economic significance of the rule. But Roberts, in the concurrence, maintained that what matters is what the agency thought it was doing at the time when assessing its claimed authority. Now, the Chief includes some important limitations in his opinion, and let me talk briefly about one of them.

 

Most critically for EPA, although he notes some skepticism to EPA’s authority to set the best system of emission reduction without regard to technology at the facility level, he concludes the Court has no occasion to decide whether the statutory phrase “system of emission reduction” refers exclusively to measures that improve the pollution performance of individual sources such that all other actions are ineligible to qualify as BSER. So, in other words, there’s no need to draw the outer boundary here in this case because CPP was clearly on the impermissible side of the line.

 

So finally, let me touch briefly on Justice Gorsuch’s concurrence joined by Justice Alito and then provide a couple of thoughts on where we go from here. In a phrase, the concurrence provides a much more detailed explication of the major questions doctrine, which Gorsuch says is akin to many of the Court’s other clear statement rules and flows from the concept of separation of powers. And the major questions doctrine, he says, serves to enforce principles of the larger nondelegation doctrine by giving narrower constructions to statutory delegations that “might otherwise be thought to be unconstitutional.”

 

Gorsuch expands on when the major questions doctrine applies by providing a nonexclusive list of triggers. So per Gorsuch, the doctrine applies when an agency claims the power to resolve a matter of great “political significance” or “earnest and profound debate across the country” or when an agency seeks to regulate “a significant portion of the American economy” or when the agency seeks to “intrude into an area that is the particular domain of state law.” Now, he moves on to address the other half of the major questions inquiry, which is if a clear statement rule is required, how clear is clear enough?

 

And he says, “We look at the provision structurally within the statutory scheme. We also look at the age and focus of the statute as well as the agency’s prior interpretations.” And he says that skepticism may be merited where there’s a mismatch between an agency’s challenged action and its congressionally assigned mission and expertise. And it’s notable that this more specific direction to lower courts did not make its way into the majority opinion, at least at this level of detail.

 

So with that overview of the opinions in the case, the questions before us now, I think, are twofold. One, where does EPA go from here in its effort to reduce greenhouse gas emissions from coal- and gas-fired power plants? And two, how does this opinion change the way agencies develop major rules and courts review those rules when they’re challenged? Now, of course, I don’t have answers to these, but let me share a few initial thoughts.

 

So the threshold question in my mind about where EPA goes from here is, do they plow forward with a new 111D rule—as they said they would—proposed by March of next year in the most recent regulatory agenda working within the circumscribed bounds of its authority under this opinion? Or does the agency look elsewhere in the Clean Air Act and focus on regulating greenhouse gasses as more of a co-benefit to increased stringency of regulating other pollutants? Could it use rules like the proposed updates to the cross-state air pollution rule or the anticipated reduction of the particulate matter National Ambient Air Quality Standards to reduce GHGs of the co-benefit and spur the kind of shift in the electric generating landscape that Justin described and that many would argue was spurred by the mercury and air toxics rule and regional haze, which, of course, did not directly regulate GHGs, but -- and also were not based on a generation shifting approach, but likely resulted in, effectively, generation shifting by means of imposing high regulatory costs on coal-fired units and raising the cost of the electricity they generated? If EPA moves forward with a 111 view for GHGs, the next question is, does it test the elasticity of Roberts’s statement that the Court did not decide whether BSER must be based on technology applied at the source? Is there room in the joints there?

 

And then lastly, just briefly to wrap up, as to the impact on agency rulemaking generally, we will need to see how lower courts interpret the applicability of the major questions doctrine. How rare are these “extraordinary cases of agency aggrandizement of authority” that warrant this heightened clear statement requirement? And separately, I think it’s to be determined what kind of chilling effect—which I think some would say is either desirable or not depending on your view of the administrative rulemaking process—a chilling effect on future agency rules. What rules will never be proposed because an agency is not interested in testing the boundaries of the major questions doctrine?

 

So in this sense, the opinion is, I think, a major brushback against agencies that are roving so-called statutory backwaters of their existing authority for power to address new and unforeseen problems in novel ways. So in that sense, I do think it is clearly a significant opinion moving forward across the executive branch and just at the EPA. So with that, again, thank you to the Society, and I’ll turn it back over to Garrett.

 

Garrett Kral:  Thank you, David and Justin, for your remarks. We have a couple of questions from the audience, but please do remember to enter them into the chat bar. Several of them, to begin, are about major questions, unsurprisingly. As you all said, this was the first majority opinion which stated this is a major questions case. I’ll choose from one of the questions. It asks, “How might major questions implicate other agencies’ rulemakings,” which is kind of what you were wrapping up with, David, “such as the FTC’s anticipated competition rulemaking? And if you’re not specifically familiar with that one, because we are environmental practitioners, might it impact the SEC’s proposed climate-related disclosures? What does major questions mean for future rulemaking?” And then, if you feel you’ve already addressed that, then I might add an addendum to that question, which would be it sounds like the Court is going to do major questions first. Is that what we can expect to see before a traditional Chevron-style analysis going forward?

 

Justin Schwab:  I’ll take that last one first if that’s okay. So in the day-of webinar that Garrett and I did on February 28, when the argument happened, we sort of kicked this question around of what some people call the order of operations pretty thoroughly. And the Chief’s opinion last week is a little reticent on this. Right? He does not provide, as I read it—and David, I don't know if you agree here—he does not expressly say what his questioning at argument strongly suggested, the Chief here. At argument, he all but explicitly -- he didn’t quite, I think, use the phrase “order of operations,” but that was clearly what he was talking about. The Chief was clearly at argument, seemed to be— his dialog, especially with the Solicitor General and [inaudible 48:30] with Justice Kagan—to say, “If I look at what the agency did --” and both he and Justice Kagan keep using the phrase “my eyebrows go up.” Whether it’s the CDC eviction moratorium or there’s FDA regulating tobacco or whether it’s EPA deciding what the right balance of fuel mix on the whole electric grid is, that is first.

 

And if you decide this rule raises major questions, then when you go to the statute, you’re not approaching it in the traditional Chevron frame already. You’re looking for something else. The flip side of that is, if you do not view the agency action as raising a major question or addressing a major question, being a major rule—I think we’re still going play around with these formulas going forward, but it’s the major questions doctrine now according to six justices—if you do not see that, then it’s regular Chevron all the way down, assuming that the criteria for Chevron are met as an agency rulemaking and issuing a statute and so forth. Is the text unambiguous? Did Congress speak precisely to the question at issue? Is the formulation in Chevron itself? If so, you stop. If not, if there is an ambiguity that traditional tools of statutory interpretation can resolve, then you go on to step two and decide whether the agency’s construction is permissible.

 

But he does not, in the opinion, literally say the words “you start by looking at [inaudible 50:03].” Justice Gorsuch’s concurrence also doesn’t do that, but it comes a lot closer. And there’s a footnote, I think, in justice Gorsuch’s concurrence where Gorsuch, joined by Alito, says, “I’m joining the majority because it is finally clarifying this is a clear statement rule,” which in context, I think, the concurrence means you do it on the front end. It’s the point of departure. But because there is not explicit guidance given to the lower courts on this count, there’s going to be a process of trial and error in district courts, where there’s regular APA jurisdiction to do so, and circuit courts, either on review of the district court opinions or if it’s statute like the Clean Air Act does -- tells you go to circuit court first.

 

And it may be a while before the Supreme Court, if it ever does, actually comes up with a multistep test in that clear way. But I think the balance is shifting—Justice Kagan, notwithstanding, who, as David notes, insists that this should be a step three almost as a tiebreaker at the very end of irresolvable ambiguity—that is not where the Court is, and it’s clearly not where the doctrine’s headed.

 

David Fotouhi:  Yeah, I agree with that, Justin. And I think on this issue of, “Will this affect some of these pending agency rulemakings, the SEC rulemaking on climate disclosures?” I think it’s too early to tell. I think it would require a pretty detailed analysis of the statutory authority that’s being claimed and the economic and political significance of the rule. And, of course, those are not technical criteria. Those are subjective criteria. So I think it really depends on how broadly the Court views this category of extraordinary cases where an agency is reaching out and using a statutory provision that it has not used this way before. And, of course, there’s disagreement in this case about whether the Mercury Rule was using the statute in this way or not. I think the majority rejects that here.

 

But is it using a statutory provision that’s an ancillary provision in a way that it hasn’t in the past? And is it aggrandizing its power over an area that, as Justin said, sort of raises eyebrows? Why is the CDC interfering with the landlord-tenant relationship nationwide under a public health statute passed decades ago? And so, if the Court is viewing it that way, it’s going to be -- I think we need more data points on the line, on the continuum, to figure out where the line is to determine what fits this criteria. Is it truly a very small set of extraordinary rules like this one that sought to reorganize an entire industrial sector? Or is it something short of that that nonetheless is significant and expands the agency’s authority into areas that it had not regulated previously?

 

Garrett Kral:  Great. And next question here. We've got a couple coming in, but please do keep them coming. This one talks about -- “What role does Congress have to play? Since West Virginia v. EPA may shift policy questions like this to Congress, does Congress needs to beef up its policy expertise, its legislative drafting, make it clearer? What can it do? What role does it have to play going forward?”

 

Justin Schwab:  I might echo that first briefly. So let’s look at what the Court did not do. Right? The majority and even the concurrence do not give a formal, explicit test or flow chart either to an agency for an agency to know, “Okay, am I in danger of triggering major questions?”—they gave a little grab bag of nonexclusive factors, but it was kind of impressionistic—nor did they give any clear instruction to Congress—even the concurrence, certainly not the majority—“Okay, Congress, here’s how you provide the requisite clear statement.” Right? There is still not a bright-line test in either of those regards. So that has the tendency to still, in frankness, retain a fair amount of power in the judicial branch, especially in the Supreme Court, to wait for these extraordinary cases, which do seem to be happening, in their view, more frequently these days and to kind of zot a rule as a brushback pitch both to the agency itself but then also in a realism way, structurally speaking to the executive saying, “Let’s rein it in a little, folks. Let’s not have to keep doing this at every turn.” Right?

 

So I think the answer to the question is, yes, Congress would be very well advised both just for general principles of good governance and then now with this large majority of the Court now. We’re sort of saying, “Can you hear us now? We’ve had to do this three times this term. We don’t want to have to keep doing this. Stop looking for these mouseholes and then pulling these elephants out of them.” So that will shift the power to Congress to maybe look either at existing statutes on the books or, certainly when it’s passing new statutes, to really think, “Okay, it’s not good enough for us in Congress to just drop it off and say, ‘Good luck with that.’ You agencies have to do the job.” They’re going to need to provide more explicit guidance.

 

And where they really do need and wish the agency to make the decision in the first place, they’re going to have to bite the bullet and explicitly say so in clear enough terms that the judicial branch in Article III will then say, “Okay, we’ve got our clear statement here.” We know that they need to do that, but the majority opinion and even the concurrence didn’t give them all that much guidance on how to do it.

 

David Fotouhi:  Yeah. And I’ll just add another point about another item that the opinion did not include, which is it didn’t say, “No matter how clearly Congress spoke here, it’s not in a position to delegate this type of authority to the agency. The Court did not make a broad statement about the nondelegation doctrine.” But it did, especially in the concurrence, if you read justice Gorsuch, to say, “Look, this doctrine, this major questions idea, is sort of -- it’s a lesser included part of the nondelegation doctrine because we interpret it or we apply it in order to prevent there from being nondelegation issues. And so, I do think that that is something that is noteworthy from a congressional perspective—that the Court is not saying that authority to regulate the energy sector in this way could never be delegated rather from Congress to an agency. No matter how clearly Congress speaks, that’s just not a question that was presented in this case. And the Court did not reach out and answer that question.

 

Garrett Kral:  We’ve got a question here asking if you can address the mootness ruling. Was it simply a signal that the Court was willing to use the case as a vehicle to make a broader statement? Or is it invitation for lower courts to expand their perspectives on what might be revealed while moving forward and some of these rules we’ve been discussing?

 

David Fotouhi:  I think the factual underpinning of the procedural posture was so unique here that it’s just not going to come up very often where you have a vacatur of a repeal rule, but then an agency, after a change in administration, asks the Court to stay its mandate, essentially trying to prevent the rule that, in theory, it supports from coming back into effect because it’s outdated and wants to do something different. It’s just a very unusual set of circumstances. I think it is significant that the Court reaffirmed -- if we’re talking about Mass v. EPA, the Court, without being explicit about it, said, “Look, at least the states here have standing to challenge the vacatur of the repeal of a rule they didn’t like.”

 

And the idea that voluntary cessation through a memorandum combined with the same party moving to withhold a mandate does not strip standing from states. I think it could have pointed to the special solicitude concept from Mass v. EPA if it had wanted to. But I don’t think Justice Roberts really felt the need to do that. I don’t think it’s easily translatable to other contexts because the posture is so unique. But like I said in my remarks, I’ve been puzzled a bit by -- I understand why this argument got the weight that it did in the context of a cert petition. I don’t quite understand why it got so much weight at the merits stage.

 

Justin Schwab:  And if I could just add to that. While at the time, just as a personal matter, I thought, “Oh, this is an interesting strategic move, a tactical move, in terms of trying to withhold the mandate,” I think, in retrospect, that was ill-advised. If their goal was to avoid cert, I think they would have been better off just making traditional cert   [inaudible 59:11] arguments. And I just want to speak to what this implies both at the history in this matter and then EPA, in particular, going forward. Recall that after the DC Circuit declined to put a preliminary injunction on the Clean Power Plan in the fall of 2015, SCOTUS unprecedentedly intervened. It didn’t give an analysis. It just said, “You have met the factor for a stay, so here it is.” But as we all know, that requires a finding of likelihood of success on the merits on at least some aspect of the challenge.

 

Then, the sort of games, I can only call them, to try to avoid cert and to make the case go away after just said, “What is it that they’re so afraid of? What is it they’re trying to hide here?” Couple that with the fact that, given the regulation of this sector, in particular, has such a long lead time to make these decisions and investments, both by industry and policy decisions by the states -- the Supreme Court is now fully aware of this. And in another case we didn’t talk about, which was the review of the Obama administration’s mercury rule, Michigan v. EPA—which years after the rule was issued, the Supreme Court held the Obama EPA violated the Clean Air Act because it didn’t take cost into account when reaffirming that it was necessary and appropriate to regulate coal-fired power plants under Section 112—the day they issued that ruling, then-administrator, Gina McCarthy, said almost literally, “It doesn’t matter. We already did it. The industry’s already complied. They’ve already shut down a lot of coal. You can’t stop us.”

 

Well, both now National Climate Advisor McCarthy and, to a lesser extent, EPA Administrator Regan have been saying even before the Supreme Court ruled in as many words, “It doesn’t matter. They can’t stop us. We have so many tools available. We’re going to shut down coal. We’re going to shut down gas. We’re going to shut down fossil. We’re going to make this transition happen.” These collisions will recur if this sort of structural tension between the solid majority on the Court that feels that this is not the right way to regulate and an administration that announces that it has this mandate and it has this authority and it has this mission—we will see more chapters in this story.

 

Garrett Kral:  All right. Well, we’re coming to the end of our questions here. David, Justin, do you guys have any closing remarks you’d like to make? If not, we can close it out right now. Thank you to the Society again for hosting this event, and thank you to our audience for attending. We appreciate your participation in the question portion and look forward to future events. Thank you.

 

David Fotouhi:  Thank you very much.

 

Justin Schwab:  Thank you, Garrett. Thank you to the Society. Thank you, David.

 

Guy DeSanctis:  On behalf of The Federalist Society, I want to thank our experts for the benefit of their valuable time and expertise today. And I want to thank our audience for joining and participating. We welcome listener feedback by email at [email protected]. As always, keep an eye on our website and your emails for announcements about upcoming virtual events. Thank you all for joining us today. We are adjourned.

 

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Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.