May 01, 2016

The Clean Power Plan stay: Are states placing their pencils down?

Shannon S. Broome

On February 9, 2016, the U.S. Supreme Court issued a 5–4 order in which it stayed the U.S. Environmental Protection Agency’s (EPA’s) implementation of the Clean Power Plan (CPP) pending eventual consideration by the Supreme Court. EPA, Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units; Final Rule, 80 Fed. Reg. 64,662 (Oct. 23, 2015). The CPP establishes state-by-state targets for carbon emissions reductions, and EPA states that the rule will reduce national electricity sector emissions by an estimated 32 percent below 2005 levels by 2030. The CPP provides options to cut carbon emissions and determines state emissions reduction targets by estimating the extent to which states can take advantage of each of them. Targets differ from state to state because of each state’s unique mix of electricity-generation resources—and also because of technological feasibilities, costs, and emissions reduction potentials, all of which vary across the country. The CPP set a deadline of September 6, 2016, for states to submit final plans on how they will meet their CPP targets or, alternatively, an initial plan with a request for an extension until no later than September 6, 2018.

Does the stay mean the Supreme Court will overturn the CPP?

The first question is whether the Court’s decision to grant the stay definitively means that the justices who voted for it considered the CPP to be legally flawed. The stay was issued before Justice Scalia passed away. There are a range of views on this issue. For example, some believe that a majority of the Court may have considered the challengers of the CPP to have demonstrated a reasonable probability that they would succeed on the merits of their challenge to the CPP. The standards that the Court typically applies in reviewing stay applications lend support to this view. Others might argue that given that the Court did not offer any substantive explanation for granting the stay, it is possible that at least some justices who voted for the stay were most concerned with preserving the status quo pending judicial review and had not yet made up their minds on the merits. Whatever signal the stay’s issuance might have sent regarding the merits of the case, that signal is obscured by Justice Scalia’s death.

In short, issuance of a stay was not a positive sign for the CPP, but it is important not to overread the stay’s issuance. What the stay means for certain is that five justices at least wanted to preserve the status quo until the courts have had an opportunity to determine the rule’s validity. Indeed, the state applicants and the Utility Air Regulatory Group (UARG) invoked section 705 of the Administrative Procedure Act, which authorizes a stay to preserve the status quo “to the extent necessary to prevent irreparable injury.” 5 U.S.C. § 705.

The heightened uncertainty from Justice Scalia’s passing also creates renewed significance of the decision of the D.C. Circuit regarding the CPP’s fate. There is a strong possibility that President Obama’s nominee to replace Justice Scalia, D.C. Circuit Chief Judge Merrick Garland, or the next president’s nominee, whomever that may be, will not be confirmed before the case is decided. Thus, there could be a 4–4 split in any Supreme Court decision ruling. If that occurs, the lower court ruling (whether favorable or unfavorable to the CPP) would stand. This is because under a longstanding Supreme Court practice, where justices are evenly divided, the lower court’s decision is deemed affirmed. See, e.g., Ohio ex rel. Eaton v. Price, 364 U.S. 263, 264 (1960) (per curiam). Thus, if the current makeup of the Supreme Court remains, and if the D.C. Circuit affirms the CPP, the four living justices who voted to stay the CPP would not constitute a majority that could overturn the D.C. Circuit’s decision. To the extent that the four justices in the liberal wing of the Court who would have denied the stay did so because they believed the rule was a valid exercise of EPA’s authority, one of them would have to change his or her view regarding the validity of the rule for it to be invalidated. Adding to the uncertainty is the fact that Justice Kennedy, who voted for the stay, is considered a swing vote, and some argue that he could have supported staying the CPP for reasons other than having reached the conclusion that it is invalid, such as the number of states that applied for the stay (given his pro-states’ rights reputation), the desire to preserve the status quo, and EPA’s dismissal of the significance of the Court’s decision in the Michigan case last term, Michigan v. EPA, 135 S. Ct. 2699 (2015). The D.C. Circuit hears argument in the case the first week of June and a decision will likely be issued relatively quickly (compared with decisions issued in other cases rather than in absolute terms).

What are states doing in response to the stay?

Given the tight timelines for submitting state plans and compliance dates as early as 2022, states that may need to alter their energy mix to achieve their state targets face a dilemma. Should they stop state plan development altogether until the courts rule on the legality of the CPP, continue full steam ahead, or adopt an “in between” approach? Under D.C. Circuit precedent, it is reasonable to expect that if the CPP is upheld in significant part, the deadlines for state submittals and the compliance dates will be tolled for approximately the same period of time that the stay is in effect, basically pushing all of the deadlines an equivalent period into the future. At the same time, states may view the stay as offering them the gift of time to create a thoughtful plan.

While some commentators have claimed that the stay means “pencils down” and others have characterized states as either suspending, assessing, or continuing planning for compliance with the CPP, the fact is that even in states that say they are “suspending planning,” the actual status is more nuanced. Some activities that will be useful to CPP compliance may in fact be proceeding. States face a tension between being ready for compliance by assessing the best strategies for their mix of power and their CPP targets and the desire not to expend resources on implementing a rule that the courts could ultimately invalidate. Thus, we are seeing many states adopt a “no regrets” strategy under which they appear to be taking actions that would occur whether or not the CPP is upheld. For example, before the stay, Michigan, a litigant against the CPP, also announced that it would be submitting a plan to EPA in September. Following the stay, Michigan suspended the stakeholder process it had initiated, but reportedly has not canceled the contract for its modeling, so it will be ready to make key decisions (e.g., mass-based or rate-based) should the stay be lifted. Similarly, the PJM Interconnection, a regional transmission organization that covers nearly a quarter of a million square miles in eastern states, and which ensures cost-effective delivery of power over the bulk transmission system, is also reported to be continuing to “crunch numbers” and run modeling scenarios, as are other such organizations such as the Midwest Independent System Operator.

Another reason for continued planning by several states is the need to meet renewable portfolio standards or energy efficiency requirements adopted independently from the CPP. These standards, which are aids to CPP compliance, must be met regardless of the CPP’s status.

Reading the tea leaves on the CPP’s ultimate fate is difficult, especially without knowing whether the Supreme Court will have its full complement of justices when it hears the case, which president will make the appointment, what the D.C. Circuit’s decision will be, or the basis for that decision. What can be said is that many states are not putting their pencils down.

Shannon S. Broome

Shannon S. Broome is the co-chair of the ABA’s Climate Change, Sustainable Development, and Ecosystems Committee and is a vice chair of the Air Quality Committee. She practices extensively on air quality and climate change issues for a range of clients.