On June 29, 2015, the U.S. Supreme Court issued its opinion in Michigan v. EPA, which may have serious implications for legal challenges to the Clean Power Plan ("CPP"), which seeks to cut carbon emissions by 30 percent from 2005 levels by 2030. In a 5-4 decision, the Court invalidated U.S Environmental Protection Agency ("EPA") regulations setting limits on mercury, arsenic, and acid gas emissions from coal-fired power plants ("MATS Rule" or "Rule") by determining that EPA should have considered the compliance costs imposed on utilities at the first stage of the Agency's regulatory analysis.
The Court's opinion is a solid endorsement of the need for
agencies to engage in a cost–benefit analysis in deciding
whether to regulate. The opinion is also another example of the
Court's gradual shift away from paying broad deference to EPA
decisions. See , e.g., Utility Air Regulatory Group v. Environmental
Protection Agency (rejecting EPA's request for deference to
its interpretation of the Clean Air Act to require certain air
permits for greenhouse gas emissions from stationary
sources) and King v. Burwell (expressly refusing to apply
Chevron deference to an agency's interpretation of the
Affordable Care Act).
Given that the Court remanded the case to the D.C. Circuit, the
MATS Rule will technically remain in effect while that court
determines EPA's next steps. The form of the final D.C. Circuit
mandate will make a difference for whether and when compliance with
the Rule is ultimately required. For example, if the D.C. Circuit
remands to EPA, the Rule may remain in effect while the Agency is
considering the required costs and benefits. If the court vacates
the Rule, however, EPA must begin the regulatory process again, and
power companies may not have to comply with upcoming deadlines
imposed by the Rule.
The Supreme Court's decision and the D.C. Circuit's
ultimate resolution of the case also will have implications for
electric and coal companies' legal challenges to the CPP. The
CPP is promulgated by EPA under §111(d) of the Clean Air Act.
Two versions of §111(d) of the Clean Air Act were signed into
law—one from the Senate and one from the House—and
critics of the CPP argue that one version forbids EPA from issuing
carbon emissions standards under §111(d) for sources already
covered by other regulations like the MATS Rule.
If the MATS Rule is ultimately vacated and fossil-fuel-fired power plants are not subject
to regulation under the hazardous air pollutant provisions of the
Clean Air Act, critics of the CPP may lose one of their legal
arguments against the new greenhouse gas regulations.
Alternatively, if the D.C. Circuit remands to EPA and the MATS Rule
remains in effect, the court's decision will preserve power
companies' §111(d) argument in their challenge of the
Plan. Given the significant implications of the D.C. Circuit's
upcoming decision, power companies and other challengers of the CPP
are likely to press for a speedy resolution. Nevertheless,
resolution may not occur before the challenges to the CPP
unfold.
Additional information on the Court's decision in Michigan v.
EPA can be found in our Jones Day Commentary, "Supreme Court Rejects EPA Mercury Rule for Power
Plants and Raises Questions about Judicial Deference to Future EPA
Rules."
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