More greenhouse gas regulation is on the horizon as a result of the Massachusetts’ top court’s decision in Kain v. MassDEP. The Massachusetts Supreme Judicial Court ordered the Massachusetts Department of Environmental Protection (“MassDEP”) to expand its regulation of greenhouse gas (“GHG”) emissions in May and the full impact of this decision is unlikely to play out overnight. The case has broad implications for MassDEP’s future interpretation and application of environmental laws in Massachusetts.

The case involved a challenge to MassDEP’s compliance with the Commonwealth’s Global Warming Solutions Act (the “GWS Act”). Among other things, the GWS Act required MassDEP to promulgate regulations that establish declining annual aggregate limits for GHG emissions. M.G.L. c. 21N, § 3(d). MassDEP was to issue those regulations no later than January 1, 2012, to take effect on January 1, 2013, and expire on December 31, 2020. MassDEP did not issue these regulations and in August, 2014, several citizens advocacy groups and individuals sued MassDEP in Superior Court, alleging that MassDEP had failed to carry out a clear statutory obligation to promulgate regulations by the date specified in the GWS Act (Suffolk Superior Court Civ. Action No. 14-02551).

The Superior Court that first heard the case sided with MassDEP, which argued that other greenhouse gas rulemakings the agency had completed fulfilled its statutory obligation under the GWS Act. The Massachusetts Attorney General somewhat incredibly argued that the mandate in Section 3(d) of the GWS Act should be interpreted as only requiring MassDEP to set “aspirational target levels” that would “help the secretary and the Department keep the state on track to meet the required 2020 reduction level.” While this novel argument did not carry the day, the Superior Court did grant an extreme degree of deference to MassDEP, ruling that the agency “has fulfilled the essential mandate of §3(d).” In reaching this conclusion, the Superior Court departed from the traditional two-step deference analysis that is applied to statutory interpretation by agencies, which first requires ambiguity in a statute before a court will assess whether an agency has reasonably interpreted that statute. The Superior Court never assessed the ambiguity of the GWS Act, instead simply deferred to MassDEP while observing that “[t]his court should be extremely wary of entering into controversies where we would find ourselves telling a coequal branch of government how to conduct its business.”

On appeal, the Supreme Judicial Court sharply disagreed and reversed the Superior Court decision. The Supreme Judicial Court applied the traditional statutory analytical framework, finding that when “the words in a statute are clear and unambiguous,” no deference is afforded to an agency interpretation that conflicts with the legislative intent expressed in the statute. Where the trial court had been “extremely wary of … telling a coequal branch of government how to conduct its business,” the Supreme Judicial Court asserted that “this court will not hesitate to overrule agency interpretations of statutes or rules when those interpretations are arbitrary or unreasonable.” The court went on to find that the GWS Act unambiguously imposes an obligation on MassDEP to promulgate firm GHG emissions limits (as opposed to the soft “targets” the agency advocated). After considering additional language in Section 3(d) of the GWS Act, the Court held that the statute requires MassDEP to:

  • Issue regulations that address “multiple sources” of GHG emissions;
  • Limit GHG emissions “that may be released” by these sources;
  • Limit aggregate GHG emissions from each group or category of regulated sources; and
  • Set GHG emissions limits for each year that decline on an annual basis.

While this case commands headlines because the Court ordered MassDEP to issue greenhouse gas regulations, an equally compelling legal impact of Kain v. MassDEP is the clear instruction from the state’s highest court to state administrative agencies that they must implement statutory directives as enacted. The Supreme Judicial Court indicated that it simply will not grant deference to administrative agencies when the Legislature’s intent is clear. In conducting its analysis, the Court also stated a willingness to look beyond the language of the statute by considering its “development, progression through the legislative body, the history of the times, prior legislation, contemporary customs and conditions and the system of positive law of which they are a part.” This broad set of factors may lend support to litigants who challenge agency interpretations of Massachusetts statutes. Time will tell how far Kain v. MassDEP tips the deference scale, but the case is a good reminder that when the legislature speaks clearly, an agency cannot simply call the Legislature’s mandate “aspirational” and adopt its own interpretation instead.

Kain requires MassDEP to undertake a round of rulemaking to set GHG emissions limits for yet-to-be-determined source categories. Importantly, the GWS Act does not identify (i) specific GHG reduction targets or (ii) which sectors or source categories are subject to those limits. As a result, MassDEP still retains some flexibility in crafting its GHG regulations under the GWS Act. But as Kain v. MassDEP clearly indicates, “the plain language of the statute requires the department set actual limits for sources or categories of sources that emit greenhouse gases through the promulgation of regulations.” Advocacy organizations are watching those efforts closely, as is the Massachusetts legislature, whose Senate Committee on Global Warming and Climate Change has already held an oversight hearing to consider the impact of Kain and how the state should proceed. Marty Suuberg, the Commissioner of MassDEP, testified at that hearing and indicated he intended to fully comply with the Kain decision and that all options were on the table, including the imposition of a carbon tax.

Whether MassDEP will limit its rulemaking to a few industry sectors or pursue a more economy-wide approach is unclear at this stage. On the one hand, MassDEP may choose to target a few “high emitting” sectors, as the state did when it joined the Regional Greenhouse Gas Initiative (“RGGI”), with its focus on GHG emissions from power plants, and as the Legislature did when it mandated GHG reductions under RGGI pursuant to G.L. c. 21A, § 22. On the other hand, MassDEP may choose to follow the state of California, which is currently engaged in its own efforts to implement economy-wide GHG reductions through a variety of programs, including a multi-sector cap-and-trade program. Market-based regulatory approaches have been created both in the Northeast and California, mandating reductions in GHG emissions while attempting to offer alternatives that reduce compliance costs by leveraging private markets, carbon offsets, allowance buffer pools, and a variety of other mechanisms, and it is distinctly possible that MassDEP will seek to follow this strategy. Should MassDEP wish to pursue a carbon tax, it would certainly require additional statutory authority. At least one bill is currently pending in the Legislature to accomplish this.

Many industries across Massachusetts will undoubtedly watch closely both the statutory and regulatory development processes and will want to participate in opportunities to comment and shape the proposals as they proceed.