‘Building Block 4’ cut seen as pre-emptive move for high court

Source: Jeremy P. Jacobs, E&E reporter • Posted: Tuesday, August 4, 2015

At least one change U.S. EPA made to its Clean Power Plan before finalizing it was clearly aimed at a specific audience: the Supreme Court’s nine justices.

The landmark climate change regulations to be formally unveiled today include a major revision from the draft version the agency released last year. In the final rule, EPA axed estimates about how much states could increase electric efficiency to reduce power consumption through consumer measures like energy-saving appliances and light bulbs.

Building Block 4, as it was referred to in the draft rule, was sharply criticized by the rule’s opponents as exceeding EPA’s authority under the Clean Air Act because it reached far beyond the power plant “fence line” to assume carbon reductions.

EPA’s decision to nix the provision was surely informed by the millions of public comments it received before finalizing the rule.

But it also got a clear indication from the Supreme Court after issuing the draft rule that such a reading likely would not pass legal muster.

The Supreme Court, in a 5-4 ruling the same month EPA released its draft rule, trimmed EPA’s ability to regulate greenhouse gases under a different section of the Clean Air Act.

Observers viewed the decision in Utility Air Regulatory Group v. EPA as largely a win for EPA, which emerged with a program that required more than 80 percent of the country’s large carbon emitters to obtain permits (Greenwire, June 23, 2014).

But the majority opinion, written by Justice Antonin Scalia and backed by the court’s conservative wing, sent a strong message that EPA will run into legal trouble if it seeks to require pollution control measures that are not directly connected to a source’s smokestack or extend beyond the facility itself.

Referring to EPA permit mandates that facilities install best available control technologies, or BACT, to slash emissions, Scalia wrote, “[i]t has long been held that BACT cannot be used to order a fundamental redesign of the facility.”

“EPA has long interpreted BACT as required only for pollutants that the source itself emits,” he said, adding, “EPA acknowledges that BACT may not be used to require ‘reductions in a facility’s demand for energy from the electric grid.'”

That passage was not entirely germane to the question presented in the case, leading many scholars to speculate it was a shot across EPA’s bow regarding the Clean Power Plan finalized today.

“Scalia certainly signaled he would find that illegal,” said Robert Percival, an environmental law professor at the University of Maryland Francis King Carey School of Law. “I think this is an example of EPA listening to the comments and recognizing that this is the most legally vulnerable part of the plan. This makes it much more legally defensible.”

‘A measure of skepticism’

Most legal observers expect the Clean Power Plan, which will cut carbon emissions 32 percent from 2005 levels by 2030, to eventually reach the Supreme Court.

And in addition to the UARG decision, there have been other signs that the conservative wing of the court — at least four justices — likely will not be willing to grant EPA usual agency deference under the 1984 Supreme Court Chevron v. Natural Resources Defense Council decision, which held a court must defer to an agency’s interpretation if the law is ambiguous.

Chief Justice John Roberts on two occasions has expressed a willingness to sidestep Chevron deference, including this year’s ruling on President Obama’s health care reform.

In that case, King v. Burwell, Roberts, penning the majority decision that upheld tax subsidies for those who purchase insurance on state or federal exchanges, said Chevron may not apply for regulations of deep “economic and political significance” (Greenwire, June 25).

A common thread running through both those decisions is the Supreme Court’s 2000 ruling in Food and Drug Administration v. Brown & Williamson Tobacco Corp.. The case struck down FDA’s attempt to regulate tobacco using a statute that didn’t explicitly authorize such a regime.

Conservatives on the court have frequently cited Brown & Williamson in recent Clean Air Act cases, including UARG, to condemn EPA for expanding its jurisdiction over large swaths of the economy.

“EPA’s interpretation is also unreasonable because it would bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization,” Scalia wrote in UARG. “When an agency claims to discover in a long-extant statute an unheralded power to regulate a ‘significant portion of the American economy’ … we typically greet its announcement with a measure of skepticism.”

Justin Pidot, a former Justice Department environmental attorney who is now a law professor at the University of Denver Sturm College of Law, said the early challenges to the Clean Power Plan will focus on that language and, in particular, the broad mandates in the regime as well as its hefty price tag.

Pidot also said he thinks Scalia has been laying the groundwork for how the court should address the new greenhouse gas regulations.

“I almost think Justice Scalia has been doing that with an eye toward the Clean Power Plan,” Pidot said.

Thomas Lorenzen, another former DOJ attorney now representing industry clients at Crowell & Moring, agreed that those cases will play a large role in upcoming litigation.

“All of these cases, from Brown & Williamson, to UARG, to even King v. Burwell[say] we’re not necessarily going to defer to agencies,” Lorenzen said. “So I think a lot of what you see in the final rule is at least in part in response to that.”

Focus on Kennedy

Legal challenges to the rule have already begun, with Ohio-based Murray Energy Corp. announcing the first lawsuit today. There are likely to be hundreds of parties that challenge the rule, including many states and power companies.

The cases will be filed and eventually consolidated in the U.S. Court of Appeals for the District of Columbia Circuit. They will include requests to stay the regulations from going into effect until the court rules on the merits of the challenges.

However, the court is unlikely to take any action until EPA publishes the rule in the Federal Register, which may not take place for weeks or, perhaps, months.

Should the case eventually reach the Supreme Court, William Jay, a former DOJ attorney now at Goodwin Procter, said EPA’s decision to cut the energy efficiency program may help, but it may not necessarily be enough to satisfy the court’s conservatives.

“If EPA has dealt with that objection,” he said, referring to Scalia’s UARG decision, “that presumably jumps over one hurdle. But that doesn’t mean the justices in the majority wouldn’t see more hurdles in EPA’s path.”

Jay also noted that such a case would likely hinge on the court’s usual swing vote: Justice Anthony Kennedy.

Kennedy has also signaled some skepticism of applying Chevron deference to major regulations, Jay said.

But he hasn’t written much on the Clean Air Act, and he joined the court’s liberal wing in 2007 when the court ruled that EPA could regulate greenhouse gases in Massachusetts v. EPA.

The “basic point that this ought to be done,” Jay said, comes from Justice Kennedy’s “willingness to take that position.”

Percival, the University of Maryland law professor, was even more optimistic about EPA’s chances of earning the backing of the Supreme Court’s four liberal justices and Kennedy.

“He was the deciding vote in Massachusetts v. EPA, and this is the centerpiece of the greenhouse gas regulations,” Percival said. “I am pretty confident that particularly with these changes and the flexibility built into the plan for the states — those factors should help Kennedy support EPA’s decisions.”

Reporter Emily Holden contributed.