West Virginia v. EPA: Was "Major Questions" Necessary?

A correct interpretation of the statute at issue—Section 111(d) of the Clean Air Act—does not give the EPA the authority to issue the sort of regulations at issue in the case.

The Supreme Court held in West Virginia v. EPA that the federal agency did not have authority to adopt what amounted to a cap-and-trade system for existing fossil-fueled power plants because this raised a "major question" of "economic and political significance" as to which Congress had not clearly delegated authority to the EPA. But a close reading of the relevant statute, Section 111 of the Clean Air Act, indicates that the EPA has no authority to issue legally binding emissions standards for existing stationary sources—period.

So the Court did not have to create a novel legal doctrine to limit the authority of the Biden Administration to adopt something like the Clean Power Plan. It could have reached the same result simply by paying close attention to the language of the statute that purportedly granted such authority. This second of five guest blog posts on the decision makes this case (here was the first one, suggesting that the decision was an advisory opinion).

We need to know a bit about the statute: When Congress adopted the modern form of the Clean Air Act in 1970, the central regulatory mechanism was a classic exercise in cooperative federalism. The Act required the EPA, in Section 109, to promulgate National Ambient Air Quality Standards (NAAQS), setting forth permissible limits on the ambient concentration of certain key air pollutants. Once these NAAQS were established, the states were required, under Section 110, to develop State Implementation Plans (SIPs), setting forth a strategy for achieving the federal standards.

The federal agency was directed to review the SIPs to make sure they were adequate, and if a state utterly failed to promulgate an adequate SIP, the EPA could step in and promulgate a plan for the state. But the core idea was that the federal government would set the air quality standards and the states would have substantial discretionary authority to develop a regulatory plan to meet these standards, taking into account the circumstances of each state.

The Act also gave the EPA authority to set direct control standards on sources in a number of situations, including emissions standards for hazardous air pollutants and for mobile sources like automobiles. And, of relevance to the issue in West Virginia, Congress gave the EPA authority, in Section 111, to establish direct controls on certain categories of new stationary sources discharging pollutants that can endanger public health and welfare.

Having instructed the EPA to establish the NAAQS and having authorized the EPA to create direct emissions standards for hazardous pollutants and mobile sources, why did Congress also give EPA authority to regulate new stationary sources? The answer is grounded in industrial policy rather than environmental policy.

Many members of Congress were concerned that states with relatively clean air would use the discretion they enjoyed in establishing SIPs to set relatively lax environmental standards, in an effort to induce industry to relocate to the state. To prevent this outflow of industry from dirty air states to clean air states, Congress directed the EPA to establish mandatory emissions standards for new stationary sources of air pollution that would apply everywhere in the Nation. Since new sources would have to comply with these standards anywhere, there would be no incentive to relocate for environmental reasons.

A glance at Section 111 confirms that the overwhelming focus is on new sources. The section is titled "Standards of Performance for New Stationary Sources," and most subsections deal exclusively with new and modified sources. Only one subsection—Section 111(d)—addresses existing stationary sources. Indeed, it is a bit of a puzzle as to why existing sources were mentioned at all in Section 111. Until the Obama Administration adopted the Clean Power Plan, subsection (d) rested in unremarked obscurity.

In any event, the key point for present purposes is that the EPA is given very different authority to regulate new stationary sources as opposed to existing sources. Under Section 111(b)(1)(B), which applies to new sources, EPA is instructed to "promulgate" (and periodically revise) "standards of performance" for new sources. The statute expressly requires that these EPA-promulgated standards be developed using notice-and-comment rulemaking, which is required under the Administrative Procedure Act when agencies issue legally binding legislative rules.

In contrast, under Section 111(d), EPA is instructed to "prescribe regulations which shall establish a procedure similar to that provided by [Section 110] under which each State shall submit to the Administrator a plan which . . . establishes standards of performance for any existing source for any air pollutant [subject to exceptions]." Note that, under subsection (d), it is the states, not the EPA, that "establis[h]" the "standards of performance." EPA's authority is to establish procedural regulations about the manner in which the states are to submit to the EPA the standards they are establishing.

There is no mention of notice-and-comment rulemaking in Section 111(d). Procedural regulations are exempt from notice-and-comment under the APA. But substantive regulations having the force of law generally are not. All of this confirms that the EPA was not given authority to issue binding nationwide standards in this context.

Note, too, that subsection (d) expressly analogizes the state standards for existing sources to the SIPs that the states establish under Section 110. As with the SIPs, the EPA is instructed to review the state standards to see if they are "satisfactory," and if a state utterly defaults, EPA is given authority to prescribe a federal standard in the state for existing stationary sources. But EPA's authority is limited to reviewing the specific plans developed by each state, and it can override these plans only on a finding that a specific state plan is unsatisfactory.

The conclusion is inescapable that EPA has no delegated authority to establish legally binding rules that establish, on a nationwide basis, standards of performance for existing stationary sources. This straightforward reading of the statute provides an ample basis for concluding that the Obama EPA had no authority to issue the Clean Power Plan. For that matter, the Trump EPA had no authority to issue the Affordable Clean Energy rule either.

In the regulatory proceedings developing the CPP the Obama EPA offered only one statutory argument in support of its authority to impose a binding standard of performance on all existing power plants. The Act, in its current incarnation, defines "standard of performance" to mean the "best system of emission reduction" (BSER) which "the Administrator [of the EPA] determines has been adequately demonstrated." 42 U.S.C. 7411(a)(1). The same term – "standard of performance"—appears in both section 111(b)(1)(B), delegating authority to EPA to "promulgate" standards for new sources, and in section 111(d), directing the states to submit plans establishing standards of performance for existing sources. But the determination by the EPA that a standard has been "adequately demonstrated" can be made ex post, when the EPA reviews the standards set by each state, as well as ex ante, in promulgating national standards for new sources. There is no language in the statute suggesting that EPA must determine which standards of performance have been adequately demonstrated in advance of the states exercising their authority to establish standards of performance for existing sources, let alone making such standards legally binding.

Although the EPA has no authority to issue binding regulations setting emissions standards for existing sources, presumably it has the authority to issue guidance documents ("general statements of policy") setting forth its advice to the states about how to regulate existing sources. But if EPA followed a practice of disapproving state plans for failure to conform to EPA's advice, the agency would be vulnerable to having a court characterize its advice as a binding rule that it has no statutory authority to make.

There is no mention in West Virginia of EPA's delegation deficit under Section 111(d). Quite to the contrary, Chief Justice Roberts, in setting forth the statutory and regulatory background of the case, completely endorsed EPA's view of its authority under section 111(d):

"Although the States set the actual rules governing existing power plants, EPA itself still retains the primary regulatory role in Section 111(d). The Agency, not the States, decides the amount of pollution reduction that must ultimately be achieved. It does so by again determining, as when setting the new source rules, "the best system of emission reduction…that has been adequately demonstrated for [existing covered] facilities." The States then submit plans containing the emissions reductions that they intend to adopt and enforce in order not to exceed the permissible level of pollution established by EPA." West Virginia, 142 S.Ct. 2587, 2601-02 (citations to regulations omitted).

This passage will be quoted with glee by EPA in any future controversy over its authority to issue binding nationwide regulations on existing sources of pollution. This is highly ironic. In its eagerness to adopt the "major questions" doctrine designed to limit the type of regulation agencies can adopt without clear congressional approval, the Court ratifies a conception of EPA's authority over existing sources that is not supported by a careful reading of the statute.

All of which suggests the desirability, to which I will return in the last entry (after the forthcoming third and fourth posts), of courts carefully considering the actual authority delegated to agencies, as opposed to ruminating about "major questions."