June 20 Decision Holds That the Clean Air Act Trumps Federal Common Law

There is no room for the federal courts in regulating greenhouse gas (GHG) emissions from fossil-fuel-fired power plants, the U.S. Supreme Court decided June 20, 2011. This decision closes the courthouse door on federal nuisance claims of a handful of states that sought a court-imposed remedy. American Electric Power Co. v. Connecticut (No. 10-174).

At issue in the case originally filed in July 2004 was whether the federal court should intervene to curtail GHG emissions from arguably the five largest emitters of carbon dioxide in the United States, which several states claimed constituted a public nuisance. The 8-0 decision by Justice Ginsburg (with Justice Sotomayor recused) reversed and remanded the lawsuit, holding that federal common law is displaced and no nuisance claim is cognizable because Congress authorized EPA to regulate GHG emissions under the federal Clean Air Act (CAA). The Court previously had found such authority in Massachusetts v. EPA, 549 U. S. 497 (2007).

The Court’s holding that the CAA trumps federal common law is not complex and comes as no surprise to observers. However, the Court was deadlocked on the standing issue, which survived on a 4-4 split. Accordingly, standing to bring this type of interstate or cross-border pollution case on the basis of GHG emissions remains an open issue with at least four of the Justices.

In discussing the background of the case, the Court highlighted EPA’s GHG endangerment finding, which was issued in response to the Massachusetts decision and is now winding its way through the courts separately. The Court observed that EPA is currently engaged in a rulemaking to set standards for GHG emissions from fossil-fuel power plants and “we see no room for a parallel track.” While the Court’s discussion of this issue essentially is dicta, it is likely to give EPA’s finding additional credence in the courts of appeal, as the Court is at least implying that EPA did a credible job and is resting this opinion in part on that.

Although the opinion states that the CAA authority precludes federal common law – even where the agency has not exercised its statutory authority – the Court emphasized EPA’s plans to regulate utility GHG emissions under Section 111 of the Act, which governs establishment of New Source Performance Standards (NSPS). With respect to emissions from existing sources, the Court noted that CAA Section 111(d) confers authority to set NSPS for existing sources as well as new sources. However, EPA has used its authority under Section 111(d) very infrequently. As the Court notes, Section 111(d) does not apply where an existing source is subject to regulation under a national ambient air quality standard (NAAQS) for the same pollutant. In almost all prior cases, EPA has chosen to regulate existing sources under the NAAQS provisions instead of Section 111(d).

EPA Has Interesting Choices for Future GHG Regulation

The Court’s reliance on Section 111(d) in this case creates an interesting choice for EPA with respect to future GHG regulation. As discussed in the Court’s opinion, Section 111(d) allows EPA to consider economic impacts and to strike a balance between environmental protection and energy needs. However, if EPA were to regulate GHGs as a NAAQS pollutant, Section 111(d) could no longer be used and EPA would be required to set NAAQS for GHGs. It is clear that costs cannot be considered in establishing NAAQS, as the Court held in Whitman v. American Trucking Associations, 531 U.S. 457 (2001). Absent a successful citizen suit, EPA can choose which way to regulate GHGs – under the NAAQS provisions, where costs cannot be considered, or under Section 111(d), where they must be considered. When faced with this choice in the past, the agency generally has opted for the NAAQS provisions, which result in much more stringent regulation because costs cannot be considered. Given the focus on Section 111(d) in today’s opinion, utilities and other independent power producers operating fossil-fuel facilities should be arguing strenuously for EPA to use Section 111(d) to regulate GHG emissions from existing sources instead of the NAAQS provisions.

Although the plaintiffs originally raised nuisance claims under state as well as federal law, the state claims were not briefed and the Court did not consider them. Accordingly, GHG nuisance claims under state law may still be available on remand.

The plaintiffs’ drive to pursue this case may be running out of gas, however, if the Connecticut Attorney General’s perspective represents the sentiment of the plaintiffs. In a statement issued on June 20, 2011, Attorney General George Jepsen (who inherited the litigation after his predecessor, Richard Blumenthal, became a U.S. Senator) said: “When the Office of the Attorney General began to litigate this issue in 2004, the federal government was entirely unwilling to take any responsibility for the regulation of greenhouse gases ... . We are disappointed that the Court acted before federal regulation is fully in place, but we are pleased that as a result of our work and that of many others, federal regulation of this critical issue is now in process ... .”