U.S. Supreme Court Restricts EPA's Regulation of Greenhouse Gases under the Clean Air Act

In its third encounter with greenhouse gas emissions in the context of the Clean Air Act ("CAA"), the United States Supreme Court, in Utility Air Regulatory Group v. EPA, No. 12-1146, 573 U.S. ____ (June 23, 2014) ("UARG"), reinforced bedrock separation of powers principles—not to mention conventional canons and settled principles of administrative law—by emphatically rejecting the claim of authority of the Environmental Protection Agency ("EPA") to rewrite indisputably unambiguous statutory language that not only disregarded the text and context of the statute but that could have transformative economic, social, and systemic impacts (if unchecked).

In UARG , the Supreme Court determined "[w]hether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the CAA for stationary sources that emit greenhouse gases." In Justice Scalia's June 23, 2014 opinion, the Court first held that the general definition of "air pollutant" analyzed by the Court in Massachusetts v. EPA does not prevent EPA from applying narrower definitions in the operative provisions of the Act; thus, there was no "insuperable textual barrier" preventing EPA from interpreting the Prevention of Significant Deterioration ("PSD") and Title V provisions to exclude greenhouse gases. 

The Court also held that EPA's interpretation was not reasonable because it expands the programs beyond their statutory purposes and would place excessive demands on permitting authorities. On the other hand, the Court concluded that EPA's decision to require Best Available Control Technology ("BACT") for greenhouse gases ("GHGs") emitted by sources otherwise subject to PSD requirements is a permissible interpretation of the statute because the BACT provisions specifically apply to "each pollutant subject to regulation" under the Act. Justices Breyer and Alito authored separate opinions concurring in part and dissenting in part. 

The Supreme Court's decision in UARG could have the following implications for future claims or future regulation of GHGs:

  1. It seems future claims of deference by EPA in the context of greenhouse gas regulation will, at a minimum, be closely scrutinized. The UARG decision could effectively stop any future effort by EPA to arrogate to itself unlimited power and discretion as to what GHG sources to regulate and when—to the point of rewriting the CAA.

  2. The impact of the decision on the pending EPA rules under Section 111 of the CAA for greenhouse gas emissions from new and existing power plants will be a source of continuing debate and litigation. Although the Court recognized that its prior decision on the CAA's displacement of federal common law nuisance claims inAmerican Electric Power Co. v. Connecticut was based on the authorization in Section 111 to establish standards for greenhouse gas emissions from power plants, the decision reasonably contemplated the possibility that EPA might lawfully "decline to regulate [those sources] altogether at the conclusion of its pending rulemaking." Thus, industry members or a future presidential administration will have an opportunity to argue that nothing in Massachusetts v. EPA or UARG compels EPA to regulate greenhouse gas emissions, particularly where the regulations are arguably "incompatible" with "the substance of Congress' regulatory scheme."

  3. The Court's discussion of BACT in the PSD process for "anyway sources" has obvious relevance to EPA's determination of the best system of emission reduction for electric generating units under Section 111 of the CAA.

For greater detail on this subject, please see the Jones Day Commentary, " Utility Air Regulatory Group v. EPA: U.S. Supreme Court Stops EPA's Rewrite of the Clean Air Act."

— Daniella Einik (+1.202.879.3775, deinik@jonesday.com)

Murray Energy and Nine States Seek to Quash EPA's Proposed Power Plant Rule

On the very same day that EPA published its proposed power plant rule, Murray Energy Corp. ("Murray") filed a petition for extraordinary writ with the D.C. Circuit, seeking to block EPA's proposed standards. In re: Murray Energy Corp., No. 14-1112 (D.C. Cir.). Under the proposed rule, EPA established a 2030 deadline for cutting carbon dioxideemissions by 30 percent for existing coal-fired power plants. In its petition, Murray claims that the proposed rule constitutes unlawful "double regulation" by EPA in excess of its delegated powers by mandating state-by-state emission standards for power plants that are already subject to a national emission standard. A week after Murray filed its petition, nine states, led by the attorney general of West Virginia, filed an amicus brief with the D.C. Circuit in support of Murray.

In February 2012, EPA promulgated a national emission standard for power plants pursuant to EPA's authority under Section 112 of the Clean Air Act. Challenges to that standard were rejected by the D.C. Circuit. See White Stallion Energy Ctr. LLC, No. 12-1100 (Apr. 15. 2014). Despite the existence of this national emission standard, on June 18, 2014, EPA published a proposed rule, under Section 111(d) of the Clean Air Act, requiring states to design and issue state-by-state emission standards for greenhouse gas emissions. According to Murray and the nine states, this second set of regulations is expressly prohibited by the Clean Air Act. Section 111(d)(1) of the Clean Air Act limits EPA's authority to mandate state-by-state emission standards for existing power plants to emissions that are not "from a source category which is regulated under section 112" of the Act. In other words, because existing power plants are already subject to a national emission standard promulgated under Section 112, EPA is prohibited from mandating state-by-state emission standards for those same power plants. 

To overcome this seemingly clear proscription, in its proposed rule, EPA asserts that Section 111(d) contains an ambiguity that allows the agency to subject the statute to its own reasonable interpretation. The EPA's claim turns on apparent inconsistencies in Section 111(d) between House and Senate versions of 1990 amendments to the Clean Air Act. The House version prohibited double regulation of source categories already regulated under Section 112, while the Senate version prohibited EPA double regulation ofemissions of pollutants regulated under Section 112. Both versions were inadvertently included in the final bill as published in the Statutes at Large. 

Murray and the nine states counter that the EPA's claim of an ambiguity is baseless and predicated on a clerical error that cannot alter the plain terms of Section 111(d) in the U.S. Code, which contains only the House version. The two versions of Section 111(d) retained in the Statutes at Large were simply a substantive amendment (the House version) and a clerical amendment (the Senate version). According to Murray and the states, an erroneous clerical entry that conflicts with a substantive provision of that statute cannot create an ambiguity. Without an ambiguity, they argue, EPA's regulatory action is illegal and should be struck down. 

— Shimshon Balanson (+1.216.586.7151, sbalanson@jonesday.com)

Iowa Tort Claims for Pollution Not Preempted by Federal or State Clean Air Acts

The Iowa Supreme Court has reversed and remanded a class action suit seeking to determine the rights of land owners against a corn processing facility allegedly causing "harmful pollutants and noxious odors to invade their land." Freeman v. Grain Processing Corp., No. 13-0723 (June 13, 2014). Plaintiffs asserted claims of common law and statutory nuisance as well as common law torts of trespass and negligence. The defendant, Grain Processing Corporation ("GPC"), was granted summary judgment by the state district court on several grounds, including preemption under the federal Clean Air Act and Iowa state law. On appeal, the Iowa Supreme Court unanimously disagreed.

The Iowa Supreme Court's opinion dispelled the notion that the United States Supreme Court's decision in American Electric Power Co. v. Connecticut ("AEP") compelled the trial court's result. In AEP, the U.S. Supreme Court held that the Clean Air Act displaced "any federal common law right to seek abatement of carbon dioxide emissions from fossil-fuel fired power plants." Several federal district courts have extended AEP's reasoning to state common law claims combating air pollution, and the Iowa trial court's ruling followed suit. Notwithstanding this precedent, the Iowa Supreme Court reached the opposite conclusion and emphasized that the differences between displacement of federal common law and preemption of state common law required a different result. 

Rather than relying on recent precedent trending toward the complete preemption of common law remedies for pollution, the Iowa Supreme Court turned to the U.S. Supreme Court's 1987 decision in International Paper Co. v. Ouellette. In Ouellette, the U.S. Supreme Court held that state common law claims could proceed against a polluter as long as the claims were brought under the law where the polluter emitted the offending substance. The Iowa Supreme Court also relied on the Third Circuit's recent decision inBell v. Cheswick Generating StationBell reaffirmed Ouellette's holding that the affected state's common law is preempted while the source state's common law is not. 

The Iowa Supreme Court also rejected GPC's argument that the issues raised by plaintiffs were political questions that should not be resolved through the judicial process. The court held that there was no textual commitment of the issues raised in the case to another branch of government and that the matter was not so complex that it ought to be entrusted to a branch of government with more expertise.

Whether GPC will petition the U.S. Supreme Court to decide the federal preemption issue remains an open question. The Iowa appeal generated several amicus briefs from out-of-state law professors as well as the National Association of Manufacturers, indicating that interest in the case extends well beyond Iowa's borders.

— Brigid DeCoursey (+1.202.879.3651, bdecoursey@jonesday.com)