On June 20, 2011, the US Supreme Court unanimously held in American Electric Power Co., Inc. et al. v. Connecticut et al., No. 10-174 (AEP), that the federal Clean Air Act displaces any federal common law right to seek abatement of carbon dioxide and other greenhouse gas (GHG) emissions from fossil fuel-fired power plants. In so doing, the Court clearly established limits on the scope of federal common law in areas in which Congress has authorized an expert agency to act, regardless of whether that agency has in fact exercised the authority. This opinion should close the door on attempts by litigants to establish liability for major emitters of GHGs—and conventional pollutants—under federal common law, but it does leave open the question of whether such claims can be successful under state tort law.

Background

The original complainants in AEP—several states, the City of New York and private land trusts—filed claims against four private utilities and the Tennessee Valley Authority (TVA), claimed to be the largest emitters of GHGs in the US and responsible for 2.5 percent of global human-caused emissions. The complainants alleged that these GHG emissions caused them harm by contributing to the risk of climate change. They sought an injunction under the federal common law of interstate nuisance or, in the alternative, state tort law directing each of the defendants to cap its emissions and reduce those emissions annually by a specified percentage for at least a decade. The defendants responded that the complainants lacked standing to bring the case; that federal common law was not applicable, was preempted or was displaced by the Clean Air Act; and that the claims were barred by the "political question" doctrine, which reserves these types of policy issues for the legislative and executive branches.

The district court dismissed the claims as presenting non-justiciable political questions, but the Second Circuit reversed. The appellate panel held that there was standing and that the claims were justiciable and not blocked by the federal question doctrine. The Second Circuit also found that there was cognizable federal common law relating to such interstate pollution claims and that the Clean Air Act did not displace the claims because, at the time, the Environmental Protection Agency (EPA) had not yet acted to regulate GHGs. The Second Circuit did not rule on the alternative state law claims because it found that federal common law applied.

Main Elements of Opinion

Once the matter reached the Supreme Court, only eight justices participated in the opinion because Justice Sotomayor, who was on the original Second Circuit panel that heard the AEP case (although she did not sign the opinion), recused herself from further consideration. All eight justices agreed that the Clean Air Act displaced federal common law of nuisance claims with regard to GHG regulation. They differed only on the justiciabilty of the claims.

Justiciability

The defendants had argued below that the complainants lacked standing to bring the actions because, among other things, the alleged harms were not fairly traceable to and caused by the defendants. The Second Circuit disagreed and found that the complainants had standing. At the Supreme Court, four justices (presumably Justices Ginsburg, Breyer, Kagan and Kennedy) found standing for at least some of the complainants, most likely the states, by virtue of the prior ruling in Massachusetts v. EPA, 549 US 497 (2007). Four other justices found no standing (presumably Justices Roberts, Scalia, Alito and Thomas). Since the vote was 4-4, the Second Circuit’s holding on standing was affirmed but holds no precedential value in other circuits. The same split occurred on the political question claim and jurisprudential standing, an argument presented by the United States in its amicus curiae brief, but neither was substantively discussed in the opinion.

Merits

There was no such split on the merits. The justices unanimously held that the Clean Air Act clearly displaced the complainants’ federal common law claims for nuisance arising from GHG emissions. In fact, the Court held that the threshold question of whether federal common law actually supported such a cause of action was merely "academic" given that "[a]ny such claim would be displaced by [the Clean Air Act] authorizing the EPA to regulate carbon-dioxide emissions." In its reasoning, the Court found that the Clean Air Act authorized the EPA to regulate GHGs under several different programs and, indeed, the EPA had taken action or proposed to take action under several of these programs. But it disagreed with the Second Circuit that the EPA first had to actually regulate GHGs in order to displace a federal common law claim. Rather, it was the fact that Congress delegated to the EPA the authority to regulate GHGs that was controlling, even if the EPA had not yet utilized that authority.

The Court further noted that the Clean Air Act offered "multiple avenues" by which the complainants could petition for GHG rulemaking or seek judicial review of the EPA’s decisions regarding GHG regulatory actions. The Court concluded that the Clean Air Act "provides a means to seek limits on emissions of carbon dioxide from domestic power plants -- the same relief the plaintiffs seek by invoking federal common law. We see no room for a parallel track."

Finally, the Court acknowledged that setting limits for GHGs was a task better left to an "expert administrative agency" such as the EPA, rather than by federal judges who lack the scientific, economic and technological resources to render such expert decisions.

Significantly, the Court expressly did not rule on whether complainants' claims could proceed under state tort law theories. It noted that this issue would depend, among other things, "on the preemptive effect of the [Clean Air] Act," which had not been briefed, and left the matter open for consideration on remand.

Other Cases

The AEP decision has been eagerly awaited, especially since the application of federal and state nuisance laws to GHG emissions and other pollutants has been pending or was recently decided in several other cases in lower courts.

  • Comer v. Murphy Oil USA, 585 F.3d 855 (5th Cir. 2009) (Comer):This case was originally filed in Mississippi following Hurricane Katrina, where property owners sued a large number of oil companies, coal companies and chemical manufactures, alleging that defendants’ GHG emissions contributed to climate change, which in turn contributed to more extensive damage from Hurricane Katrina. The trial court dismissed the case on standing and political question grounds, but the Fifth Circuit reversed these rulings. The Fifth Circuit opinion was later vacated by a vote for en banc review, but was ultimately dismissed when en banc review could not proceed due to a lack of quorum, and the Supreme Court denied a petition for writ of mandamus review. The case, however, may not be over, as the original plaintiffs have refiled the action based on state tort claims.
  • Kivalina v. ExxonMobil Corp., 663 F. Supp. 2d 863 (N.D. Cal. 2009) (Kivalina): In this case, the plaintiff Alaskan villagers alleged that oil, coal and electric utility companies’ GHG emissions threatened their village and property by melting Arctic sea ice that had protected their village from winter storms. Among other things, the plaintiffs sought money damages for this alleged nuisance under federal and state law. The district court dismissed the state nuisance claims without prejudice based on its holding that the federal nuisance claims presented non-justiciable political questions and that there was no standing. That ruling is currently on appeal to the Ninth Circuit, which stayed the case pending the Supreme Court’s ruling in AEP.
  • North Carolina v. TVA, 615 F.3d 291 (4th Cir. 2010) (TVA): In this case, North Carolina alleged that TVA’s emissions of sulfur dioxide, nitrogen oxides, fine particulates and ozone in upwind states created a public nuisance in North Carolina, based on a state tort theory, and sought injunctive relief limiting those emissions. The district court declared some of these emissions to be a public nuisance and imposed an injunction requiring use of pollution control technology. The Fourth Circuit reversed, holding that the district court applied the wrong standard of state law, and that the proper law of the source states precluded such nuisance actions for specifically permitted activities. The court also held that the nuisance suit was preempted by the Clean Air Act, since North Carolina was attempting to replace a comprehensive federal emissions regulatory scheme, and that the Clean Air Act did not allow such challenges to actions permitted in a source state. A petition for certiorari is still pending as the parties seek to resolve this and related cases through settlement.

Potential Implications of Opinion

Money Damages

It is hard to see how the Supreme Court ruling will leave any opportunity for parties to seek GHG controls on emitters outside the Clean Air Act through federal common law. Some commentators have suggested that the opinion can be limited to those instances where parties are only seeking injunctive relief, and may be distinguishable where parties are seeking monetary damages, such as in Kivalina. But defendants will certainly argue, and courts will likely reason, that damage claims under a federal nuisance cause of action are similarly displaced by the Clean Air Act since allowing damage claims would raise the same types of concerns that led the Court to conclude GHG regulation was better left to the EPA (e.g., lack of scientific, technical or economic expertise in the court to determine and value the impact of climate change and the actions needed to reduce that impact).

Conventional Pollutants

The Court’s ruling would also likely apply to federal nuisance claims regarding other types of air pollutants regulated under the Clean Air Act, beyond GHGs. In TVA, the Fourth Circuit reversed a district court injunction under state law, finding, among other things, that the Clean Air Act preempted state tort law in that instance. Given the Court’s ruling in AEP, it is fairly unlikely that the Court would entertain a federal common law nuisance claim for interstate transport of conventional pollutants and would likely find displacement of federal common law for those pollutants as well.

State Law Claims

The Court expressly did not determine whether the complainants’ state law nuisance claims would be cognizable for GHG emissions. Commentators have argued that this will likely be the next battleground for climate change litigation, with the Court remanding the issue in AEP, and plaintiffs in the dismissed Comer case seeking to add state law claims. Moreover, the district court in Kivalina dismissed the state nuisance claims without prejudice based on its holding that the federal nuisance claims presented non-justiciable political questions and did not support standing. That ruling is currently on appeal to the Ninth Circuit, which stayed the case pending the Court’s ruling in AEP. The Ninth Circuit will now have an opportunity to determine how AEP should apply to the Kivalina case, but the Court offered no roadmap for handling state law claims, other than to note that it would hinge on a question of preemption, which requires clearer and more manifest evidence of congressional intent than displacement.

EPA Authority

The Court’s ruling in AEP was also notable for stressing the continued validity of its prior ruling in Massachusetts v. EPA that the EPA has the authority to regulate GHGs under the Clean Air Act (though at least two justices still appear to disagree with that case as indicated in the AEP concurrence). Moreover, the Court showed a high degree of deference to the EPA’s ability to determine how to regulate pollutants such as GHGs under the Clean Air Act, which bodes well for future cases regarding EPA regulation. In this manner, the ruling would appear to give the EPA a vote of confidence as it continues to promulgate GHG regulations. The Court’s displacement holding focused on the EPA’s authority under the Clean Air Act to regulate GHGs, even if it had not yet done so. There have been efforts in Congress to rein in the EPA’s authority to regulate GHGs, at least under certain programs. An interesting issue would arise in future litigation if indeed Congress were able to remove the EPA’s authority to regulate GHGs. It seems unlikely that such an action would occur during the Obama administration or while the Senate is still controlled by Democrats, but it is a possibility to consider if the political situation changes.

Standing

The AEP case also may have interesting implications for standing since four justices (and perhaps Justice Sotomayor, had she heard the case) would have agreed there was standing for at least some of the complainants (most likely the states) in the case based on the Court’s holding in Massachusetts v. EPA. This suggests that at least half the Court, and even a five-justice majority, may be becoming a bit more lenient in its standing requirements in environmental cases, at least in cases brought by states.

Next Steps

In any event, it is likely for the foreseeable future that the real action on GHG emission reductions will be at the federal and state regulatory levels. The EPA has stated it will issue new source performance standards for large electrical generators by May 2012, and is reportedly working on similar standards for refineries and Portland cement plants. The EPA’s GHG Tailoring Rule also began to apply to new construction of major sources that will emit over 100,000 tons of carbon dioxide equivalent per year (CO2e/year) and major modifications of such sources that will emit over 75,000 tons of CO2e/year. This rule is now under challenge in the DC Circuit. Meanwhile, California is set to impose its own regulatory program in 2012.