The U.S. Supreme Court has issued a significant decision in a controversial case involving climate change and the Federal regulation of greenhouse gas emissions. On June 20, in American Electric Power Co., Inc. v. Connecticut, (Case # 10-174) the Supreme Court ruled that Congress, via the Clean Air Act, has authorized the U.S. Environmental Protection Agency (EPA) to regulate greenhouse gas emissions. This authority means that the Federal government has “occupied the field” of greenhouse gas emission regulation, thus precluding suits by third parties under federal common law (such as public nuisance claims) as a means to compel companies that emit greenhouse gases in their operations to limit those emissions. More importantly, this decision marks the second time that the Supreme Court has affirmatively stated that Congress has granted EPA the authority to regulate the emission of greenhouse gases, such as carbon dioxide, which is believed by a majority of the scientific community to be causing or contributing to global climate change.

The case was brought by eight states (including New York), the City of New York and three private land trusts against four utility companies and the Tennessee Valley Authority in U.S. District Court for the Southern District of New York in 2004. At that time, the Bush Administration had taken the position that no existing law, including the Clean Air Act, authorized the federal government to regulate greenhouse gas emissions. Such regulation, according to the Bush Administration, could only be authorized by amendments to the Clean Air Act or by comprehensive climate change legislation. The plaintiffs therefore believed that a lawsuit under federal common law was the only legal mechanism available to compel the utility companies to reduce emissions. The District Court ruled against the plaintiffs and the plaintiffs appealed to the U.S. Circuit Court of Appeals for the 2d Circuit, in New York.

While the appeal to the 2d Circuit was pending, the Supreme Court decided Massachusetts v. EPA, 549 U.S. 497 (2007). In that case, a coalition of states (also including New York) sued EPA, claiming that EPA had the authority and the obligation to regulate greenhouse gas emissions under the Clean Air Act, and sought a Court order mandating that EPA do so. The Supreme Court ruled in favor of the plaintiff states and directed EPA to promulgate appropriate regulations. In 2010, EPA and the U.S. Department of Transportation issued a joint final regulation governing greenhouse gas emissions from motor vehicles. EPA also began a rulemaking procedure for regulations governing such emissions from fossil-fuel fired power plants. Under a settlement with the plaintiffs in the Massachusetts case, EPA has committed to issuing a proposed rule by July 2011 and a final rule by May 2012.

Despite the initiation of rulemaking by EPA, the 2d Circuit reversed the District Court and ruled that the Clean Air Act had not displaced federal common law with regard to greenhouse gas emissions. Connecticut v. American Electric Power Co., Inc., 582 F.3d 309 (2009). At the time of the 2d Circuit’s decision, the EPA had not yet actually promulgated regulations governing greenhouse gas emissions from fossil-fuel fired power plants (and of course they still have not done so). The 2d Circuit ruled that until EPA completed the rulemaking process, the Court could not speculate as to the effect of hypothetical regulations on the issues raised by the plaintiffs. Therefore, the 2d Circuit reversed the District Court and ruled that the plaintiffs could proceed with their lawsuit.

The Supreme Court, in a unanimous, 8-0 decision (Justice Sonia Sotomayor was recused because she had been part of the panel that heard the case at the 2d Circuit) reversed the 2d Circuit and held that “the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement of carbon dioxide emissions from fossil-fuel fired power plants. Massachusetts made plain that emissions of carbon dioxide qualify as air pollution subject to regulation under the Act.” (Slip opinion, at 10). The Court also said 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.” (Ibid., at 11).

Finally, the Court refuted the plaintiffs’ (and the 2d Circuit’s) position that federal common law could not be displaced until EPA actually issued regulations. The Court said that “the critical point is that Congress delegated to EPA the decision whether and how to regulate carbon dioxide emissions from power plants, the delegation is what displaces federal common law.” (Ibid., at 12). In other words, the displacement of federal common law was immediate upon Congress’ delegation of authority to EPA and is not deferred until EPA has completed the lengthy and arduous exercise of promulgating regulations.

It should be noted that the Supreme Court did not specifically rule on whether Congress’ delegation of authority to EPA pre-empts private lawsuits under state common law. The issue was not briefed by any of the parties and the Supreme Court left the matter open for reconsideration by the District Court. This issue is likely to be adjudicated in a case pending before the 9th Circuit Court of Appeals in San Francisco, Native Village of Kivalina v. ExxonMobil Corp. The plaintiff Village, an Inuit community in Alaska, claims that greenhouse gas emissions from twenty-four oil and utility companies have contributed to a reduction in the Arctic sea ice that protects the Village from coastal storms and waves . The Village is seeking monetary damages to pay the cost of relocation of the entire Village. We will, of course, follow the progress of this case.

More importantly, while the American Electric Power decision would appear, on the surface, to be a victory for the utility companies, it really is not. The federal common law claims have been dismissed. But the Supreme Court has reaffirmed its ruling in Massachusetts that the Clean Air Act authorizes EPA to regulate greenhouse gas emissions. This is very important, since Congress has not enacted comprehensive climate change legislation, including an independent legislative regime for greenhouse gas regulation, and the prospects for passage of such legislation appear to be slim. The significance of the Supreme Court rulings in Massachusetts and American Electric Power is that it appears that such legislation is not needed, and that EPA’s authority already exists under the Clean Air Act. This would likely preclude any efforts to challenge the EPA regulations, once they are released for public comment, on the grounds of lack of legislative authority.