This spring, the Environmental Protection Agency (EPA) is expected to release its final rule for regulating carbon dioxide emissions from existing power plants under the Clean Air Act (CAA), section 111(d). The proposed rule, released last year, is designed to comply with the limitation set forth by the Supreme Court in West Virginia v. EPA, 597 U.S. 697 (2022), whereby power plant emission reductions must be achieved on a plant-by-plant basis. The proposed rule contemplates the use of carbon capture and sequestration (CCS) and hydrogen co-firing, and further accounts for parameters like plants’ expected remaining operating horizons and capacity factors. At every turn, EPA has faced legal challenges in its efforts to mitigate climate change through its statutory mandate, and this particular rulemaking is certain to similarly attract litigation. Below, we offer some thoughts on what we anticipate being a central legal dispute: Does EPA’s new rule meet the legal standard for “best system of emission reduction” that is “adequately demonstrated”?
Section 111 of the CAA establishes a framework for regulating the emissions performance of stationary sources that distinguishes between new and existing sources of air pollutants. The provision also contemplates a cooperative federalism approach to regulation as between the federal government and the states. Under section 111(b), EPA has proposed new source performance standards (NSPS) for new gas-fired combustion turbines (CT). (EPA’s 2015 rules for new coal-fired plants remain on the books, with litigation over those rules held in abeyance for many years now.) And under section 111(d), EPA has established requirements for existing coal-, natural gas-, and oil-fired steam generating plants, plus some existing CT. Pursuant to section 111(d), states have eighteen months to develop plans to implement these requirements, and EPA has made clear that there is significant flexibility for compliance. For example, trading and averaging are approaches that EPA specifically contemplates that states might use.
To set the standards, EPA is guided by the following definition in section 111(a), which provides that a “standard of performance”:
reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.
This definition holds the key litigation issues: for a particular air pollutant and a particular category of stationary sources (e.g., certain types of power plants), what constitutes an “adequately demonstrated” “best system of emission reduction” (BSER), and has EPA reasonably balanced the factors of cost, health and the environment, and energy needs in determining what is that “best system”?
Some readers may wonder what standard of review a court will apply, especially given that the Supreme Court is considering whether to overrule or narrow Chevron, U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984). The short answer is that courts typically review the CAA’s performance standards language under the arbitrary-and-capricious or substantial-evidence standards, which are functionally the same. In other words, Chevron would not apply in this context because deciding BSER is not an interpretive matter as much as a question of how reasonably the agency has exercised its discretion under the statute. Specifically, the factors under “standards of performance” allow EPA to exercise its discretion, and EPA’s choice should be upheld unless the environmental or economic costs of using the technology are exorbitant. With new technology, EPA must provide a reasonable basis in the record to show that it is adequately demonstrated. See Natural Resources Defense Council v. EPA, 655 F.2d 318, 331 (D.C. Cir. 1981).
As the citations above suggest, however, the relevant law concerning BSER was established prior to several major developments in administrative law led by a conservative majority at the Supreme Court. While these developments—like the Major Questions Doctrine, an emphasis on the unitary executive, and substantially diminished deference to agency interpretations of their own regulations—do not technically implicate EPA’s weighing of the BSER factors, they suggest an overall skepticism of agencies’ substantive roles in the constitutional scheme. And although the Court in Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce is considering whether to overrule or significantly narrow Chevron, the opinion may have something to say about agency authority and the extent to which judicial deference to agency expertise remains a fundamental component of administrative law.
EPA’s expertise is at the heart of its analysis concluding that CCS and hydrogen co-firing are adequately demonstrated within the meaning of the statute. Challengers to the proposed rule have argued that EPA relies on technology that is simply too nascent. For example, the Electric Power Supply Association argues that CCS is merely an emerging technology, and similarly asserts that hydrogen co-firing is possible but requires increased production capacity, distribution networks, and at least some retrofitting of existing plants.
In its proposed rule, however, EPA explains that for CCS, process improvements derived from early uses of the technology have led to lowered costs and improved technology. And for both CCS and hydrogen co-firing, EPA explains that numerous utilities within the United States have already implemented, or are currently planning to implement, the technology. Regarding costs, EPA explains that the tax credits available through the Inflation Reduction Act for CCS and hydrogen co-firing significantly decrease the costs of the technologies, further supporting the technologies as BSER. EPA also explains that the use of hydrogen co-firing as BSER is possible, despite the need for additional infrastructure to support the use, because the timeline implemented by the proposed rule provides ample time for the infrastructure to be built. Courts have accepted these kinds of arguments in the past, but the jurisprudential shifts described above have injected some uncertainty into future litigation.
There are more issues to watch. First, in their partial concurrence in Utility Air Resources Group v. EPA, 573 U.S. 302, 244 (2014), Justices Alito and Thomas signaled that they would be open to revisiting the foundational 2007 decision, Massachusetts v. EPA, 549 U.S. 497 (2007), which established EPA’s regulatory authority over greenhouse gas emissions, including carbon dioxide, under the CAA. Short of overturning that decision, opponents of the rule may try to stretch the Major Questions Doctrine even further, perhaps arguing that EPA lacks any authority to regulate carbon dioxide emissions from power plants under section 111. Once again, the Supreme Court’s signals in Loper Bright about agency authority and expertise may flavor the debate to come.
