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The EPA’s Clean Power Plan is Only Mostly Dead

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A version of this insight was published in Law360, February 10, 2021

“It just so happens that your friend here is only mostly dead. There’s a big difference between mostly dead and all dead. Mostly dead is slightly alive.”

— Miracle Max, The Princess Bride

The Obama administration’s Clean Power Plan (“CPP”) — an unprecedented use of the Clean Air Act to regulate greenhouse gas (“GHG”) emissions from power plants — is only “mostly dead” and could soon spring back to life. Yes, the Supreme Court stayed the CPP in 2016. And yes, the Trump administration’s Affordable Clean Energy rule (“ACE”) repealed the CPP in 2019. Between those two actions, the CPP seemed “all dead.” But the Supreme Court’s stay has almost certainly been dissolved, and the D.C. Circuit is on the verge of vacating ACE’s repeal of the CPP. If and when that happens, the CPP will return to legal life. Whether and how the CPP stays dead has important consequences for the Biden administration’s efforts to (re)impose GHG emission limitations on power plants.

This article explores the circumstances that could resuscitate the CPP, and what its final fate means for the Biden administration’s use of the Clean Air Act to impose GHG control measures. Part I provides regulatory context and Part II summarizes the D.C. Circuit’s decision on the ACE rule — readers familiar with these proceedings may safely pass over these parts. Part III discusses how the next steps in litigation over ACE will affect whether the CPP regains life. Part IV outlines options the Biden EPA has to (re)impose GHG emission limitations under the Act, depending on the outcome of the ACE litigation.

I.  Context

The CPP relied on Section 111(d) of the Clean Air Act as authority to establish state-by-state budgets for GHG emissions associated with each state’s assumed amount of power generation, and directed each state to come up with a plan for achieving its assigned degree of GHG intensity per unit of power production. EPA assigned GHG intensities to each state based on its assumptions of how much non-emitting or lower-emitting power production could and should penetrate the generation portfolio of that state (as well as how much each existing coal-fired plant could reduce its heat rate), and so an approvable state plan necessarily would have depended in large on dispatching non-emitting renewable generation in preference to fossil fuel-fired generation. The rule contemplated plan submittal by 2016 to achieve a first stage of reduction by 2020 and the final by 2030.

Opponents of the CPP made the following principal arguments on appeal to the D.C. Circuit:

  1. that it limited the GHG emissions intensity of the entire power sector, rather than setting emission limitations achievable by individual power plants within that sector, arguing for a variety of textual reasons that Section 111(d) authorizes only the latter (the no going “outside the fence line” argument);
  2. that authority for such a major rule must be found as a direct expression of authority or even obligation under a statute (the so-called “elephants in mouseholes” or “major questions” argument);
  3. that to the extent that Congress had spoken to the EPA’s authority to regulate power plant GHG emissions, it had foreclosed it by language in Section 112 of the Act that prohibits regulation of a source category under both Sections 111 and 112 (the “Section 112 preemption” argument); and
  4. that a decision to regulate power plants under Section 111(d) required a finding of endangerment specific to power plants.

The D.C. Circuit declined to stay the CPP pending its consideration of the rule. But the Supreme Court then took the remarkable step of staying the rule “pending disposition of” the D.C. Circuit appeal. In light of the seeming inevitability of Supreme Court review, the D.C. Circuit then took the unusual step of hearing the case en banc, rather than referring it to a panel for disposition. In April 2017, the court held further proceedings in abeyance pending Trump EPA reconsideration of the CPP.

The ACE rule was the end result of the EPA’s reconsideration, which the EPA finalized in July 2019. The rule obligated states to set plant-by-plant emission limitations based only on heat rate improvements applicable to each plant. The rule also repealed the CPP as unlawfully having required states to consider emission reductions through generation shifting. In September 2019, the D.C. Circuit dismissed all appeals of the CPP as moot, considering that ACE had repealed the rule. ACE was timely appealed to the D.C. Circuit, which rendered its decision on January 19, 2021, to vacate ACE and remand it to the EPA.

II.  The D.C. Circuit’s ACE ruling

ACE repealed the CPP based on the EPA’s conclusion that Section 111 did not give it discretion to consider emission reduction measures beyond the fence line of an individual power plant. The EPA therefore replaced the CPP with a rule that required case-by-case determinations of what could be accomplished “inside the fence line” of each power plant based on improving its heat rate.

The 147-page opinion issued by the two Obama-appointed judges on the panel disagreed with the EPA’s newfound conclusion that the Act did not allow it to consider “outside the fence line” measures. Because the EPA’s defense of its actions rested solely on its conclusion that Section 111 unambiguously disallowed outside-the-fence-line considerations, the court determined that it was not required to defer to the EPA’s reading of the statute. Instead, the court itself assessed whether the text of Section 111 unambiguously compelled the EPA’s reading of the law.

After considering textual and grammatical arguments, as well as various canons of statutory interpretation, the court found that neither the plain meaning of the statute, nor Congress’ intent and purpose in passing the statute, compelled the reading the EPA adopted in the ACE rule. The court also rejected the EPA’s conclusion that, under the major questions doctrine, the “interpretive question raised” — whether the “best system of emission reduction” can include measures other than improvements to and at the physical source — “must be supported by a clear[] statement from Congress.” The court opined that, unlike other cases that have triggered the major questions doctrine, “each critical element of the Agency’s regulatory authority on this very subject has long been recognized by Congress and judicial precedent.”

Finally, the court held that the federalism doctrine did not support the EPA’s reading of Section 111, opining that the CPP’s incorporation of generation shifting into its best system of emission reduction fell squarely within an area of the federal government’s constitutional competence and that the CPP directly regulated only the amount of greenhouse gas pollutants that may be emitted into the atmosphere, an area of unique federal concern.

The court also considered two separate challenges to the EPA’s authority to regulate carbon dioxide emissions under Section 111 at all. Two coal companies challenged the EPA’s legal authority to enact the rule based on: (1) the EPA’s failure to make an endangerment finding specific to the power sector before regulating carbon dioxide emissions; and (2) the EPA’s previous regulation of mercury from power plants under Section 112, which the Coal Petitioners argued precludes the EPA from regulating greenhouse gas emissions under Section 111(d). The court rejected both arguments. The court found that the EPA made an adequate and applicable endangerment finding in the 2015 Section 111 rule imposing emission limitations on new power plants, and that the ACE rule expressly retained that finding. The panel majority also found that the Act allows the EPA to regulate a source’s emission of hazardous substances under Section 112 and other pollutants emitted by the same source under Section 111(d).

Another group of Petitioners made up of think tanks and various businesses challenged the ACE rule as overstepping the EPA’s authority based on the impermissible regulation of carbon dioxide emissions using Section 111 of the Act rather than by national ambient air quality standards under Sections 108 through 110. The court did not address the merits of this challenge due to a lack of standing.

Judge Walker (a Trump appointee) offered a dissent in which he expressed skepticism that Congress had authorized in Section 111 the ability to consider “off-site solutions,” but avoided a direct conflict with the majority by finding the ACE rule unlawful for another reason: Judge Walker would have held that any regulation of GHG under Section 111 is precluded by Section 112.

III.  The CPP could spring back to life based on the ACE appellate proceedings

Dismissal of the CPP appeals in September 2019 almost certainly ended the Supreme Court’s stay of the CPP. Now that the ACE repeal of the CPP is on the verge of being vacated, the CPP is poised to spring back to life. This section discusses the litigation options that will affect whether and when the CPP does so.

The Supreme Court’s CPP stay has almost certainly been dissolved

The Supreme Court’s order that stayed the CPP contemplated the usual course of appellate proceedings in the D.C. Circuit — namely, a decision on the merits by the D.C. Circuit that certainly would have been appealed to the Supreme Court. The terms of the order are important, and so are set forth here in full:

The application for a stay submitted to The Chief Justice and by him referred to the Court is granted. The Environmental Protection Agency’s “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units,” 80 Fed. Reg. 64,662 (October 23, 2015), is stayed pending disposition of the applicant’s petition for review in the United States Court of Appeals for the District of Columbia Circuit and disposition of the applicant’s petition for a writ of certiorari, if such writ is sought. If a writ of certiorari is sought and the Court denies the petition, this order shall terminate automatically. If the Court grants the petition for a writ of certiorari, this order shall terminate when the Court enters its judgment.

Justice Ginsburg, Justice Breyer, Justice Sotomayor, and Justice Kagan would deny the application.

In summary, the CPP was stayed pending disposition of the appeal in the D.C. Circuit, unless that appeal was further appealed to the Supreme Court.

On September 17, 2019, the D.C. Circuit granted a motion by various petitioners to dismiss the pending CPP appeals because the Trump administration had in July repealed it through the ACE rule. The United States supported the motion to dismiss. Upon the issuance of the mandate dismissing the petitions, the D.C. Circuit disposed of the CPP appeals. Because the Supreme Court’s stay order was effective “pending disposition of the applicant’s petition for review” in the D.C. Circuit and there were no petitions for a writ of certiorari appealing the dismissal, it is almost certain that dismissal of the CPP appeals satisfied the expressed conditions for dissolution of the Supreme Court’s stay order. Which means that the disposition of the ACE rule appeal — largely, but not entirely — controls whether the CPP springs back to life.

What’s next?

The CPP had been prevented from becoming effective by two events: the Supreme Court stay and the EPA’s repeal of the rule by way of ACE. The Supreme Court stay has almost certainly been dissolved, and the D.C. Circuit is poised to vacate the ACE repeal of the CPP. The CPP is therefore on the verge of springing back to legal life, and will do so once the D.C. Circuit issues its mandate in the ACE appeal. Barring any additional proceedings in the D.C. Circuit or the Supreme Court, the mandate could be issued — and the final barrier to the effectiveness of the CPP will fall — as early as March 12, 2021. It is possible, however, that the Department of Justice will seek to hold the D.C. Circuit proceedings in abeyance — including the time period for filing a petition for rehearing and the issuance of the mandate — to give the new Administration time to review the posture of the litigation.

Supporters of the CPP will want to see that mandate issued as quickly as possible, putting the final nail in the coffin of ACE and breathing life back into the CPP. Opponents of the CPP will want to avoid or delay issuance of the ACE mandate. Here are some of the options open to the litigants.

Petition for a D.C. Circuit order vacating the mandate in the CPP appeal. Opponents of the CPP successfully persuaded the D.C. Circuit to dismiss their appeals once the ACE rule repealed the CPP. But given the January 19 decision and the impending issuance of a mandate that will bring the CPP back to life, the D.C. Circuit might be open to vacating its mandate dismissing the CPP appeals. If it does not, then there will have been no effective opportunity to litigate the merits of the CPP. If the court grants a motion to vacate its CPP mandate, then the Supreme Court’s 2016 order would effectively (re)stay the CPP, because the appeal of that rule will not have been finally disposed. If the court denies the motion, opponents of the CPP could appeal that denial to the Supreme Court, as discussed in more detail in the Supreme Court section below.

Petition for panel reconsideration of remedy. The panel opinion in effect declares the ACE rule insufficient, not unlawful. Perhaps one or more of the litigants then might seek panel reconsideration of the remedy, asking that the rule be remanded without vacatur. This would allow the ACE obligations to remain in place (with its ongoing obligations for states to develop case-by-case heat rate improvement plans) while EPA considers use of the additional authority that the panel has declared not foreclosed to the agency. If ACE is not vacated, its repeal of the CPP would not take effect.

Petition for rehearing en banc. In addition, opponents of the CPP could file a petition for rehearing the ACE rule en banc in the D.C. Circuit. The filing of a petition for rehearing automatically stays the mandate. By staying the mandate, the ACE rule’s repeal of the CPP would remain effective.

Disposition of the en banc rehearing. It is possible that the en banc D.C. Circuit would grant the rehearing petition and issue an opinion affirming the ACE rule. In that case, opponents of the ACE rule/supporters of the CPP could appeal to the Supreme Court, and it is all but certain that the ACE rule (and its repeal of the CPP) would remain effective during a Supreme Court appeal. In that situation, the Biden EPA would have to find ways to delay or reconsider the ACE rule. On the other hand, it also is possible that the en banc D.C. Circuit would deny the rehearing petition (allowing the panel’s decision to stand), or grant the rehearing petition but then — like the January 19 panel decision — issue an opinion vacating the ACE rule.

A motion to the D.C. Circuit for a stay of the ACE mandate pending a petition for certiorari. To avoid the issuance of the mandate upon the denial of rehearing or an en banc decision upholding the ACE rule, opponents of the CPP could file a motion in the D.C. Circuit to stay issuance of the mandate pending the filing of a petition for writ of certiorari. If granted, the ACE rule — and its repeal of the CPP — would remain effective pending disposition of the Supreme Court appeal. In that case, the CPP would remain mostly dead. If denied, opponents of the CPP would head to the Supreme Court immediately.

An application to the Supreme Court for a stay of the mandate pending a petition for certiorari. If the D.C. Circuit declines to stay the issuance of its mandate, the Supreme Court could stay the mandate pending its review of a petition for writ of certiorari. The basis for a Supreme Court stay of the mandate would be that it is likely that: (1) the substantive requirements of the ACE rule and its repeal of the Clean Power Plan are lawful (i.e., the Court agrees with the ACE rule’s inside-the-fence-line argument); (2) that the Act does not authorize regulation of existing power plants at all (i.e., the Court agrees with the Section 112 preemption argument, the major question argument, or some other argument); or (3) that the Act does not authorize regulation under ACE — and by extension, the Clean Power Plan — of existing power plants on the record presented (i.e., the Court agrees that the Section 111 endangerment finding is deficient). Such a stay would be an extraordinary remedy, but not so extraordinary here, as each of the above arguments were before the Court when it granted the stay in 2016. And the Court undoubtedly would recognize that failing to stay the mandate vacating the ACE rule would cause the Clean Power Plan — a rule that the Court has already implicitly found likely unlawful — to spring back to life.

A petition to the Supreme Court to vacate the CPP dismissal mandate. There is a way for the Court to prevent the CPP from springing back to life without granting the extraordinary remedy of staying a D.C. Circuit mandate vacating the ACE rule. If the D.C. Circuit denies a petition to vacate the CPP dismissal mandate, that decision could be appealed to the Supreme Court, likely well before any en banc decision in the D.C. Circuit. The Court would then have the option to reinstate the CPP appeal by vacating the dismissal mandate and clarifying that its 2016 stay was still effective as to the CPP. That would allow the ACE appeal to proceed along the usual course without extraordinary remedies and without the risk that the CPP would spring back to life. And if the final disposition of the ACE appeal is to overturn the ACE rule, the quiescent CPP appeal could recommence.

Fresh “grounds arising after” litigation over a resuscitated CPP.

Let us suppose that the patient miraculously revives. Does that mean it will have any immediate effect on obligations to control GHG emissions from power plants? No. The Act normally allows one shot at judicial review of a final rule, and that shot was taken in the litigation that (arguably) ended when the D.C. Circuit dismissed the case in 2019. But the Act does allow for later petitions for review based on “grounds arising after” the 60-day deadline. Recall that the CPP rule as written required the submittal of plans more than five years ago, with the first wave of reductions to have been achieved in 2020, and the final GHG intensities to be achieved in 2030. The retroactive reactivation of that rule and its deadlines create an impossibility of compliance that may amount to grounds arising after sufficient to allow for new petitions for review of the CPP. This could provide the grounds for a new appeal of the CPP.

The options described above are some that could be used to stop the CPP from returning to life. Supporters of the CPP would be expected to dispute each of them vigorously. And because many of the options rely on extraordinary remedies being granted by the D.C. Circuit or the Supreme Court, supporters of the CPP have some reason for optimism for their position. That optimism rightly should be tempered by the awareness that the Supreme Court has already telegraphed skepticism about the lawfulness of the CPP.

Regardless of which of the above paths the ACE/CPP litigation takes, or some other, the onward journey will provide additional guidance on what the federal judiciary will accept or require of EPA to accomplish under cover of Clean Air Act authority. And so the Biden administration’s options to (re)impose GHG limitations on power plants under the Clean Air Act depends, at least in part, on the disposition of the appeals of the CPP and the ACE rules. The next section summarizes some of those options.

IV.  What next for GHG limitations for power plants?

The Biden EPA could attempt to implement the CPP. If the ACE appeal mandate issues and the CPP dismissal mandate remains in place, the Biden EPA could reasonably conclude that the Supreme Court stay of the CPP has been dissolved. The Biden EPA might then move to begin implementation of the CPP with new implementation deadlines, with those deadlines themselves likely the subject of additional litigation. But a Biden EPA is unlikely to get any closer to using Section 111 to redirect each state’s generation mix than did Obama’s, or at least not get it past a Supreme Court that has already stayed the rule once. Without comprehensive judicial review of the CPP, further use of Section 111(d) to regulate GHG emissions from power plants will proceed under the shadow of eventual judicial reversal, creating profound commercial and political uncertainty that would distract from broader initiatives and will be resisted by unwilling states. Accordingly, it would seem that all stakeholders would want to follow the shortest path to Supreme Court review of the Section 111(d) rules.

The Biden EPA could reconsider the CPP. If the CPP springs back to life after the ACE mandate issues, or if the D.C. Circuit remands the ACE rule without vacating it, the Biden EPA could reconsider the CPP with an eye toward adjusting its deadlines and hardening it against judicial review. A reconsidered new rule might go beyond the fence line, but perhaps not as far as reordering the dispatch of generation to favor GHG-free power. A GHG cap-and-trade model for power plants may be seen as a defensible middle ground, and would be consistent with the Bush administration’s interpretation in the Clean Air Mercury Rule that Section 111(d) authorizes a multi-facility cap-and-trade program. However, a cap-and-trade program would present practical difficulties, not the least of which would be the level at which overall GHG emissions from the sector should be capped. One argument would be that the overall cap must be set at the level that represents implementation of inside the fence controls, which would not reduce GHG emissions significantly more than the ACE rule.

The Biden EPA could start over with a new CPP. The Biden EPA could start afresh with a new rule with the idea of proposing an application of Section 111(d) that could pass Supreme Court muster. This would be the cleanest way to impose GHG restrictions on power plants, though by far the most time-consuming. The EPA would most likely proceed with the assumption that the Supreme Court would impose only one limit on authority under Section 111(d) — that the rule cannot expressly direct or rely on a reordering of a state’s generation portfolio. Then the task would be to develop an approach that requires emission reductions outside the fence line but that does not require wholesale changes to generation. A cap-and-trade model might be proposed. However, this approach — like any approach based on Section 111(d) — could run into heavy seas at the Supreme Court, which might be willing to overturn a rule based on the major question doctrine, the Section 112 pre-emption argument, or new arguments based on the particulars of the new rule. By the time a new rule is ready to be proposed, it is possible that these issues will have been resolved one way or the other through the ACE appeal, giving further guidance to the EPA’s options for a new rule.

The Biden EPA could reconsider the ACE rule and replace it with a new CPP. If the ACE rule is ultimately upheld on appeal or remanded without vacatur, the Biden EPA could reconsider the rule and replace it with a new rule, just as the Trump EPA reconsidered the CPP and replaced it with the ACE rule. And the Biden EPA need not wait until a final mandate in the ACE appeal is issued to begin reconsideration. That’s because until the mandate actually issues (and unless the ACE rule is itself stayed), the ACE rule remains effective. The states will no doubt want to understand their obligations under whatever new rule the Biden EPA puts into place sooner rather than after spending significant resources on implementation plans.

The Biden Administration could seek a legislative solution. If there is one thing that more than a decade of EPA GHG rules and subsequent litigation have shown, it is that the Act is ill-equipped to compel significant reductions in GHG emissions. At the very least, getting anything close to even the CPP out of the Act will take many of the years available to the Biden administration, even if goes two terms, and—based on at least the current composition of the Supreme Court—the effort is ultimately unlikely to succeed. Taking the president at his word of a “climate in crisis,” more than a legally controversial and Sisyphean retread of the CPP will be required to achieve the aspirational goals of the Paris Agreement. To meet these goals, the Biden campaign pledged to achieve net-zero GHG emissions and a “100% clean energy economy” by 2050. There is almost certainly no combination of rules under the Act that could drive that level of GHG emission reduction. The Biden administration could press the Congress for either “rifle shot” or comprehensive amendments to the Act that would generate unambiguous statutory authorities to regulate GHGs from the power sector (and others). With a closely divided House and Senate, the prospects of legislation in this Congress appear dim. Which leaves the Biden EPA to pursue largely symbolic — but economically inefficient and environmentally ineffective — GHG emission reduction rule options under the Act.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.