Today, September 27, 2016, the U.S. Court of Appeals for the D.C. Circuit will hear arguments in the consolidated challenges to President Obama’s signature climate regulation -- the Clean Power Plan. The Clean Power Plan is the most far-reaching regulatory program ever promulgated by the U.S. EPA; the Agency itself often refers to the program as “transformative” for the power industry. The Clean Power Plan was developed through an arduous regulatory process involving a nationwide “listening tour” by EPA and the submission of more than 34,000 unique public comments.

Litigation regarding the rule was a certainty, with several states attempting to kill the rule before it was even finalized. States, litigants from all sectors of the economy, and diverse public interest groups have filed challenges to the Clean Power Plan or intervened to support EPA against these challenges. The challengers include 124 companies, industry groups, unions, organizations, and trade associations. These parties represent multiple sectors of the economy in addition to the electric generating industry, including the mining industry; chemical manufacturers; iron and steel producers; and brick, cement, and paper producers. They are joined by challenges from 28 states and local governments. On the other side, EPA is supported by 16 public interest groups, 5 electric generating companies, 2 renewable energy associations, and by 18 states, the District of Columbia, and 11 local governments.

The briefing on the Clean Power Plan has been extensive. Petitioners raised more than 33 arguments challenging the validity of the regulations. Despite the D.C. Circuit taking the unprecedented step of granting a full day of arguments before the entire panel of sitting judges (called “en banc review”), only a handful of these challenges will have their day in court. Among them are three that are particularly notable for their scope, novelty, and potential impact on the future of the Clean Power Plan, as well as their ramifications for future EPA regulation under the Clean Air Act (“CAA” or “Act”).

Whether EPA has the authority to regulate fossil fuel-fired power plants under 111(d). Section 111(d) of the CAA, under which EPA promulgated the Clean Power Plan, has been described as a “gap filling” provision because it permits EPA to regulate only in certain circumstances not covered by other CAA programs. The parties in the challenge to the Clean Power Plan disagree on the circumstances that trigger EPA’s regulatory authority under Section 111(d). Petitioners assert that Section 111(d) of the CAA authorizes EPA to establish emission standards only for a source category that is not subject to regulation under Section 112 of the Act; because fossil fuel-fired power plants already are subject to regulation under Section 112, the argument goes, they cannot be subject to the Clean Power Plan. EPA contends that the very same text of the CAA authorizes the Agency to establish emission standards for any air pollutant that is not subject to regulation under Section 112, which would include greenhouse gases, regardless of the source category from which they are emitted. This is the only argument that, if petitioners prevail, would strip EPA of its authority to regulate greenhouse gases from fossil fuel-fired power plants (and any other source already subject to regulation under Section 112). If Petitioners are successful on this argument, the Clean Power Plan would be vacated and EPA could not issue a replacement regulation to limit greenhouse gas emissions from fossil fuel-fired power plants.

Whether the Clean Power Plan is inconsistent with the plain text of the Clean Air Act. In promulgating the Clean Power Plan, EPA acknowledged that emission control measures implemented at fossil-fuel-fired power plants could achieve only limited greenhouse gas emission reductions. To achieve greater reductions, EPA set the final emission standards based on the shifting of generation from higher-emitting affected sources (e.g., fossil fuel-fired power plants) to lower- or non-emitting sources (e.g., renewable resources). Petitioners point to four provisions of Section 111 that they contend do not permit EPA to establish emission standards based on generating shifting. Petitioners argue that the plain text of the Act does not leave any interpretive space for EPA to redefine “source” under Section 111(d). In response, EPA contends that the word “system” is ambiguous and that, as such, EPA has authority to define generation shifting as a “system” of emission reduction for setting standards applicable to sources. The outcome of this argument hinges on whether the D.C. Circuit determines that it should defer to EPA's interpretations under Section 111. Traditionally, the Court will defer to EPA's interpretations where the statutory text is ambiguous and EPA's interpretation is reasonable. If Petitioners are successful on this argument, EPA would retain the authority to regulate power plants under Section 111(d), but its standard setting authority would be sharply curtailed. EPA would be required to set standards based on controls that could be implemented at an affected power plant.

Whether EPA circumvented the rulemaking process set forth in the Clean Air Act. The CAA requires EPA to give public notice of, and opportunity to comment on, any proposed rulemaking. These requirements are important because the Act limits judicial review to objections raised “with reasonable specificity during the period for public comment.” If EPA includes an entirely new requirement in a final rule, any party that objects to the requirement must go through a lengthy administrative procedure before it can seek judicial review of the merits of the new requirements. Here, the parties disagree on (1) whether EPA provided adequate notice of, and opportunity to comment on, certain aspects of the Clean Power Plan, and (2) whether the Court has the authority to vacate and remand the rule based on EPA’s failure to comply with notice and comment requirements. If Petitioners are successful on this argument, the Clean Power Plan would be vacated, but EPA would have the authority to re-promulgate the rule after going through the notice and comment rulemaking procedure set forth in the Act. The true significance of this issue transcends the Clean Power Plan; if EPA is successful in defeating this challenge, the Agency could be empowered to promulgate requirements that were never proposed for public comment.

The D.C. Circuit does not provide a live stream of oral arguments. However, for those interested in hearing the arguments first hand, a recording of the arguments will be available on the Court’s website on Wednesday, September 28 (here).