West Virginia v. EPA: The Major Questions Doctrine and Novel Federal Administrative Actions

On June 30, 2022, by a 6-3 vote, the United States Supreme Court in West Virginia v. U.S. Environmental Protection Agency, 597 U. S. ---  (West Virginia v. EPA), held that Section 111(d) of the Clean Air Act (42 U.S.C. § 7411) does not give the United States Environmental Protection Agency (EPA) broad authority to regulate greenhouse gas emissions from power plants as set forth in the Clean Power Plan (CPP). While the issue before the Court was narrow, the Court’s application of the “major questions doctrine” (whereby a court will not defer to an agency’s interpretation of a statutory provision in circumstances where the case involves an issue of deep economic or political significance) to invalidate the EPA’s exercise of authority will likely have significant consequences for federal agencies and the entities they regulate, particularly where an agency seeks to implement a novel regulatory program that is not explicitly authorized by statute.

Background

In 2015, the Obama administration adopted the CPP, which set individual goals for each state to cut power-plant emissions by 2030. Under the CPP, the EPA calculated individual greenhouse gas emissions caps for states, and set performance rates for existing coal- and gas-fired plants to encourage shifting of power generation by requiring the power plants to reduce production or subsidize natural gas, wind, or solar competitors through the purchase of credits.  Following a number of legal challenges, the Supreme Court stayed implementation of the CPP.

Then, in 2019, the Trump administration repealed the CPP on the basis that it exceeded the EPA’s authority under Section 111 of the Clean Air Act. In its essence, Section 111 of the Clean Air Act directs the EPA to “determine[],” taking into account various factors, the “best system of emission reduction which . . . has been adequately demonstrated,” ascertain the “degree of emission limitation achievable through the application” of that system, and impose an emissions limit on new stationary sources that “reflects” that amount.  42 U.S.C. § 7411. As summarized by the Supreme Court:

Although the thrust of Section 111 focuses on emissions limits for new and modified sources—as its title indicates— the statute also authorizes regulation of certain pollutants from existing sources. Under Section 111(d), once EPA “has set new source standards addressing emissions of a particular pollutant under . . . section 111(b),” 80 Fed. Reg. 64711, it must then address emissions of that same pollutant by existing sources—but only if they are not already regulated under the [National Ambient Air Quality Standards (NAAQS) or the Hazardous Air Pollutants (HAP)] programs. Existing power plants, for example, emit many pollutants covered by a NAAQS or HAP standard. Section 111(d) thus “operates as a gap-filler,” empowering EPA to regulate harmful emissions not already controlled under the Agency’s other authorities. American Lung Assn. v. EPA, 985 F. 3d 914, 932 (CADC 2021).

Slip op. at 5. The Trump administration reasoned that Section 111 of the act only allowed the EPA to prescribe measures that can be implemented on the physical premises of a power plant, but the CPP’s generation-shifting measures applied industry-wide. The Trump administration then repealed the CPP and replaced it with the Affordable Clean Energy Rule (ACE Rule), which does not provide for generation shifting.

Following a legal challenge to the Trump administration’s action, the D.C. Circuit held that the EPA was empowered by Section 111(d) of the Clean Air Act to adopt generation-shifting measures. Thus, the circuit court vacated both the repeal of the CPP and the ACE Rule, and remanded the matter to the EPA for additional proceedings. The United States Supreme Court granted review of the D.C. Circuit’s decision. Before the Supreme Court, state and industry petitioners argued that Section 111(d) only permitted the EPA to set standards of performance based on systems that could be applied to or at the individual source; the EPA countered that argued that the CPP’s plan to encourage generation shifting was the “best system of emission reduction” available under Section 111(d). Additionally, the Biden administration indicated that it does not plan to reinstate the CPP, but rather intends to issue a new rule on carbon emissions from power plants, and that the EPA voluntarily decided to not enforce the CPP.

SCOTUS Opinion

The Majority’s Decision

In the 31-page majority opinion authored by Justice Roberts, the Court first considered whether the challenge presented a live controversy for the Court’s review and whether the state petitioners had standing to lodge the legal challenge. The Court held that notwithstanding the Biden administration’s plan to issue a new rule on carbon emissions and the EPA’s voluntary decision to not enforce the CPP, the case did present a live controversy for the court’s review because the Biden administration “vigorously” defended the Obama administration’s CPP and did not assert that it would not reimpose emissions limits predicated on generation shifting in the future, thus it was not “’absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur.’” Slip op. at 16. Additionally, the Court concluded that the petitioner states had standing to raise the challenge because reinstating the CPP would require states to regulate emissions pursuant to the CPP.

As to the merits, the majority concluded that Congress did not authorize the use of generation-shifting to reduce emissions under the Clean Air Act. In so holding, the Court applied the major questions doctrine, by which a court may strike down an agency’s attempt to exert authority over a “major question” (i.e., issues with “economic and political significance”) if Congress was not explicit enough in granting that authority. In such “extraordinary cases,” the Court explained that it must “hesitate before concluding that Congress meant to confer such authority” and that it will “presume that Congress intends to make major policy decisions itself, not leave those decisions to agencies,” therefore an agency asserting expanded regulatory authority “must point to a clear congressional authorization for the power it claims.”  Slip op. at 17-19. While the Court did not identify a specific test for what amounts to a “major question,” the Court identified the following factors as supporting judicial intervention via application of the major questions doctrine:

• When an agency relies on “vague terms” in the text of a statute to expand its regulatory power;
• When there is language elsewhere in a statute granting an agency the power in question;
• When an agency’s authority conflicts with the agency’s established practice;
• When Congress considered but failed to enact legislation to provide the agency authority to undertake similar regulation;
• When an agency lacks comparative expertise specific to the issue it seeks to regulate; and
• When an agency concedes that the new program moves beyond its traditional authority.

Applying these factors to the EPA’s authority to implement the CPP, the Supreme Court reasoned that the major questions doctrine applied because:  

• Section 111(d) is a gap-filling provision, which merely authorizes the EPA to pursue the “best system of emission reduction”;
• Other provisions of the Clean Air Act specifically authorize the type of generation-shifting contemplated by the CPP, however Section 111(d) lacks equivalent language;
• In practice, the EPA has rarely exercised its authority under Section 111(d), and has never exercised it in this manner;
• Congress had considered but did not enact legislation to create a generation-shifting program similar to the CPP;
• The EPA did not possess expertise to implement the plan; and
• Traditionally, the Federal Energy Regulatory Commission (FERC), interstate Independent System Operators (ISOs), and state public utility commissions (PUCs), not the EPA, are responsible for the oversight and regulation of electrical power generation.

The Court concluded that because the major questions doctrine applied, the EPA was required to point to “clear congressional authorization”  – “something more than a merely plausible textual basis” –  to sanction the EPA’s adoption of generation-shifting as a “best system of emission reduction.” Slip op. at 19. Finding no such clear authorization in the Clean Air Act, the Court reversed the D.C. Circuit Court and held that EPA lacked the authority under Section 111(d) to adopt the CPP, thus the CPP violates the Fourteenth Amendment.

Justice Gorsuch’s Concurring Opinion (joined by Justice Alito)

In a concurring opinion, Justice Gorsuch, joined by Justice Alito, agreed with the majority’s application of the major questions doctrine, and further observed that precedent provided ample guidance for when a court must apply the doctrine, to wit, when an agency: (1) claims the power to resolve a matter of great “political significance,”; (2) seeks to regulate “‘a significant portion of the American economy’”; and (3) attempts to “intrud[e] into an area that is the particular domain of state law.” Concurring slip op. at 9-12 (citations omitted). Justice Gorsuch noted that while this “list of triggers may not be exclusive, each of the signs the Court has found significant in the past is present here, making this a relatively easy case for the doctrine’s application,” id. at 12, concluding that:

When Congress seems slow to solve problems, it may be only natural that those in the Executive Branch might seek to take matters into their own hands. But the Constitution does not authorize agencies to use pen-and-phone regulations as substitutes for laws passed by the people’s representatives. In our Republic, “[i]t is the peculiar province of the legislature to prescribe general rules for the government of society.” Fletcher v. Peck, 6 Cranch 87, 136 (1810). Because today’s decision helps safeguard that foundational constitutional promise, I am pleased to concur.

Concurring slip op. at 19.

Justice Kagan’s Dissenting Opinion (joined by Justices Breyer and Sotomayor)

In dissent, Justice Kagan, joined by Justices Breyer and Sotomayor, reasoned that the case was not appropriate for the Court’s review in light of the Biden administration's announcement that it did not intend to reinstate the CPP. As to the merits, the dissent opined that the majority’s decision “rests on one claim alone: that generation shifting is just too new and too big a deal for Congress to have authorized it in Section 111’s general terms.” Dissent slip op. at 5.  However, Justice Kagan reasoned that Congress did intend to empower the EPA to exercise such authority, explaining that:

A key reason Congress makes broad delegations like Section 111 is so an agency can respond, appropriately and commensurately, to new and big problems. Congress knows what it doesn’t and can’t know when it drafts a statute; and Congress therefore gives an expert agency the power to address issues—even significant ones—as and when they arise. That is what Congress did in enacting Section 111. The majority today overrides that legislative choice. In so doing, it deprives EPA of the power needed—and the power granted—to curb the emission of greenhouse gases.

Id.  Additionally, the dissent questioned the Court’s declaration that its application of the major questions doctrine is supported by the Court’s own precedent, observing that “[t]he Court has never even used the term ‘major questions doctrine’ before.” Dissent slip op. at 15. Justice Kagan concluded:

The subject matter of the regulation here makes the Court’s intervention all the more troubling. Whatever else this Court may know about, it does not have a clue about how to address climate change. And let’s say the obvious: The stakes here are high. Yet the Court today prevents congressionally authorized agency action to curb power plants’ carbon dioxide emissions. The Court appoints itself—instead of Congress or the expert agency—the decisionmaker on climate policy. I cannot think of many things more frightening.

Dissent slip op. at 32-33.

Looking Forward

While the Supreme Court’s decision invalidates the CPP, the EPA has already voluntarily agreed that it would not enforce the CPP and the Biden administration has already expressed that it plans to adopt a new rule aimed at reducing carbon emissions. Moreover, the decision does not affect the EPA’s authority to regulate greenhouse gas emissions under other provisions of the Clean Air Act and under the AIM Act of 2020. Nevertheless, while the Court’s decision does not affect the status quo, it will provide guidance to the Biden administration’s future attempts at carbon emission reduction policy.

However, the Court’s application of the major questions doctrine in West Virginia v. EPA reaches far beyond the EPA and environmental regulation. While the Court stated that it has applied the major question doctrine previously to, inter alia, attempted federal agency regulation of the tobacco industry and Covid response programs, West Virginia v. EPA is the first time the Court has expressly addressed the doctrine as a threshold question in a courts’ statutory interpretation analysis and specifically identifies factors that may be considered by the court’s in addressing whether an agency has unlawfully exceeded its administrative power.  As a result, federal agencies must tread carefully when wading into unchartered waters via new regulatory schemes targeting politically and economically significant issues. Likewise, the Court’s treatment of the “major questions doctrine” may provide an additional avenue for regulated industries to challenge economically significant federal regulatory actions, particularly where a federal agency acts beyond its traditionally-exercised authority without clear legislative authorization.