Constitutional Law Committee Report

The “Major Questions” Doctrine: the U.S. Supreme Court’s Decision in West Virginia v. EPA

On June 30, 2022, the U.S. Supreme Court decided West Virginia v. EPA, which applied the “major questions” doctrine to overturn the Obama Administration’s Clean Power Plan (CPP). The decision is narrow in the sense that it decides only a single question about the Environmental Protection Agency’s (EPA) power under the Clean Air Act (CAA), concluding that EPA exceeded its authority under CAA section 111(d) by requiring coal-fired power plants to reduce their greenhouse gas emissions (GHGs) by shifting generation to less carbon-intensive plants. The decision is broad in the sense that it adopts a new “major questions doctrine” that applies broadly to all administrative agencies and provides litigants with powerful new administrative law precedent to challenge agency rules where agency action is not clearly authorized by Congress.

The narrow question addressed by the Court was whether section 111(d), which authorizes EPA to require emitters to adopt the “best system of emissions reduction” that is “reasonably achievable,” permitted EPA to require coal-fired generators to shift production of electricity to sources, such as natural gas plants, that emit fewer GHGs—the central provision of the CPP. The Court framed the question to be decided as whether “restructuring [of] the Nation’s overall mix of electricity generation” fits within Section 111(d)’s grant of authority. It concluded that EPA had overstepped its authority, finding that “[s]uch a vague statutory grant is not close to the sort of clear authorization required by our precedents.”

The Court reached this result by invoking the “major questions doctrine.” While not unprecedented, the Court in West Virginia recharacterized what had previously been a rarely-used rule of statutory construction as a “doctrine” with potentially far-reaching effects. As set forth in Chief Justice Roberts’s majority opinion, the “major questions doctrine” is to be applied in “certain extraordinary cases” to determine whether an administrative agency is acting without clear Congressional authorization. The doctrine applies if agency action has major economic or political consequences, although the Court was not particularly clear about what separates “major” from “minor” consequences. However, the Court cited estimates that the CPP would impose billions of dollars of costs on the economy and substantially reduce the nation’s GDP. This suggests that run-of-the-mill agency actions would not be subject to the same level of scrutiny as the major questions doctrine requires.

If the major economic consequences threshold is met, the doctrine requires that there be clear statutory authorization for the agency’s action. In determining whether the authorization is sufficiently clear, the Court suggested that several factors may be relevant.

First, if the agency is relying on “ancillary” statutory provisions rather than core provisions, this suggests that the agency is seeking to expand its authority beyond what Congress intended. The Court determined that Section 111(d) is such an “ancillary” provision because it was intended as a gap-filler, not a central provision of the CAA.

Second, if the agency is departing from established practice, that is an indication that the agency is stretching its authority beyond what Congress intended. The CPP marked a significant departure from standard EPA practice, in the Court’s view, because EPA has traditionally relied on technology-based pollution controls to be applied to specific emitters, whereas the CPP shifted to a system of allowances based on GHG reductions achieved by shifting generation to lower-emitting sources. This “beyond the fenceline” approach marked a significant departure from the way the agency had interpreted and enforced the statute since it was adopted in the 1970s.

Third, the Court asked whether the agency’s approach creates a “fundamental revision of the statute.” In adopting the CPP, the Court concluded, EPA was attempting to fundamentally rework the CAA by using section 111(d)’s general reference to the “best system of emissions reduction” to impose a system of emissions reductions trading that was not clearly authorized by Congress. On this score, the Court observed, when EPA has employed a cap-and-trade system for pollution reduction, as with, for example, its acid rain program aimed at reducing sulfur dioxide emissions, that program was adopted under clear Congressional authority.

Finally, the Court observed, the approach taken in the CPP was previously rejected by Congress, which has repeatedly rejected the cap-and-trade approach to GHG reductions, most notably when Congress refused to adopt the Waxman-Markey climate bill, which would have introduced a cap-and-trade program on GHGs. The fact that EPA adopted an approach previously rejected by Congress supports the inference that EPA acted beyond what Congress intended in adopting section 111(d).

The immediate impact of the decision is to restrict the scope of the Biden Administration’s approach to regulating GHG emissions from the power sector, likely to “inside the fenceline” measures that are similar to EPA’s traditional approach of employing technological pollution controls. It is important to note, however, that the Court limited its decision by stating: “We have no occasion to decide whether the statutory phrase ‘system of emissions reduction’ refers exclusively to measures that improve the pollution performance of individual sources, such that all other actions are ineligible to qualify as [the best system of emissions reduction].” Hence, despite rejecting the CPP’s emissions crediting/generation shifting approach, the Court at least ostensibly left open the possibility that other “beyond the fenceline” measures might qualify as the “best system of emissions reduction” under section 111(d).

EPA recently took comment on potential new rules that will regulate GHGs emitted from power plants. Despite the Court’s attempt to limit its decision as to EPA’s authority, it is difficult to imagine a “beyond the fenceline” solution that would not run afoul of the Court’s decision. Hence, West Virginia is probably best read as limiting EPA’s options to “inside the fenceline” measures when considering what constitutes the “best system of emission reduction” under section 111(d). Such options might include partial carbon capture and storage (CCS) or natural gas co-firing. The Obama EPA had declined to use those options for existing sources because it believed generation shifting was a less expensive way for industry to comply. But EPA had used partial carbon capture to set the limits for new sources, so it may review that issue now. Since the CPP’s issuance, the IRS Section 45Q tax credit for CCS and commercialization of CCS technologies that did not exist when the CPP was drafted may affect the EPA’s approach. At least for setting the stringency of Best System of Emission Reduction, EPA will not be able to rely on generation-shifting or other “outside the fenceline” measures.

Apart from its specific impacts on EPA’s authority to regulate under section 111(d), West Virginia creates a new “major questions” doctrine, based in both separation of powers and statutory construction principles, with the potential to fundamentally alter the landscape of administrative law. The doctrine may be used to challenge any regulation where the agency claims authority based on older statutes or statutes in which the grant of authority is not explicit. This includes not just EPA attempting to address modern environmental challenges using older statutes like the Clean Air Act, but any agency in a similar situation. For example, where agencies like the Occupational Safety and Health Administration or the Centers for Disease Control attempt to invoke long-extant legal authorities to address new challenges like COVID, or the Federal Communications Commission attempts to regulate internet service providers to impose net neutrality based on decades-old statutes that do not explicitly grant such authority, litigants will have a powerful new precedent to challenge those rules.