West Virginia v. EPA: SCOTUS gives its imprimatur to the “major questions” doctrine, shaking up the “administrative state”

West Virginia v EPA, the next-to-final decision handed down by SCOTUS this term, is a significant decision regarding a rule that the EPA said was never even in effect, that it had no intention of enforcing and that it planned to later replace with a new still-to-be-developed rule.  As the NYT phrased it, “it’s a case about a regulation that doesn’t exist.” (Sort of like an episode of Seinfeld—the show about nothing—except that it’s not the least bit funny.) So SCOTUS could have stopped right there, but the Court forged ahead—an indicator by itself—with a decision that is nevertheless shaking up administrative law and the extent of rulemaking authority that federal agencies have—or thought they had.  Its impact will likely be felt, not just at the EPA, but also at many other agencies, including the SEC.  Of course, the  conservative members of the Court have long signaled their desire to rein in the dreaded “administrative state.” (See, for example, the dissent of Chief Justice John Roberts in City of Arlington v. FCC  back in 2013, where he worried that “the danger posed by the growing power of the administrative state cannot be dismissed.”) With this new decision by the Chief Justice (joined by five other justices), that desire has now been sated—for a while at least.  In the majority opinion, SCOTUS declared that this case “is a major questions case,” referring to a judicially created doctrine holding that courts must be “skeptical” of agency efforts to assert broad authority to regulate matters of “vast economic and political significance,” requiring, in those instances, that the agency “point to ‘clear congressional authorization’ to regulate.’” In addition to the blow that the decision deals to climate regulation—“Court  Decision Leaves Biden With Few Tools to Combat Climate Change,” is one of the headlines from the NYT—we can now expect the major questions doctrine to be brandished regularly against significant agency regulations across the board, and, with Congress perpetually at loggerheads and limited in its ability to authorize much of anything these days, it could well stymie much agency rulemaking. Does anyone question that, with SCOTUS’s new imprimatur, the doctrine will be raised in anticipated litigation against whatever version of the SEC’s climate disclosure regulation is adopted? As reported by Reuters, when asked by Bloomberg TV on Thursday about the impact of the decision on other agencies, Senator Patrick Toomey “singled out the SEC rule,” claiming that the SEC is “attempting to impose this whole climate change disclosure regime…with no authority from Congress to do that.” To better understand the major questions doctrine, it may be useful to take a closer look at the case.

Background

The case came to the Court as the attorney generals of West Virginia and other states and entities sued EPA, questioning its authority to issue broad systemic regulations governing GHG emissions from power plants under the 1970 Clean Air Act. According to the Court, under the Clean Air Act, EPA is authorized “to regulate power plants by setting a ‘standard of performance’ for their emission of certain pollutants into the air.” That standard “must reflect the ‘best system of emission reduction’ that the Agency has determined to be ‘adequately demonstrated’ for the particular category.”

In 2015, the Obama-era EPA issued regulations, called the “Clean Power Plan,” under Section 111(d) of the Clean Air Act. As described by the Court, the CPP required existing coal-fired power plants to “reduce their own production of electricity, or subsidize increased generation by natural gas, wind, or solar sources,” a practice referred to as “generation shifting.” The Court explained that some of the CPP requirements “would implement a sector-wide shift in electricity production from coal to natural gas and renewables….Based on these changes, EPA projected that by 2030, it would be feasible to have coal provide 27% of national electricity generation, down from 38% in 2014.”

In the view of the majority, prior to the CPP, EPA had regulated at the level of specific power plants, but, with the CPP, EPA embraced a system-wide approach.  As described by the Court, until 2015, “EPA had always set emissions limits under Section 111 based on the application of measures that would reduce pollution by causing the regulated source to operate more cleanly…. It had never devised a cap by looking to a ‘system’ that would reduce pollution simply by ‘shifting’ polluting activity ‘from dirtier to cleaner sources.’” [Emphasis added] Indeed, according to the majority,  prior to 2015, the “consistent understanding of ‘system[s] of emission reduction’ tracked the seemingly universal view” that Congress intended use of a “technology-based standard,” that is, one that focuses on improving the emissions performance of individual sources.  In 2015, however, according to the majority, EPA determined that, instead of focusing on “improving the performance of individual sources, it would ‘improve the overall power system by lowering the carbon intensity of power generation.’… And it would do that by forcing a shift throughout the power grid from one type of energy source to another.”  The Court considered this “view of EPA’s authority [to be] not only unprecedented; it also effected a ‘fundamental revision of the statute, changing it from [one sort of] scheme of . . . regulation’ into an entirely different kind.” 

In the view of the Court, EPA’s contention that its regulatory authority was limited by factors of “cost,” “nonair quality health and environmental impact,” and “energy requirements” did “not so much limit the breadth of the Government’s claimed authority as reveal it”: to the Court, EPA’s view suggests that Congress tasked EPA with “balancing the many vital considerations of national policy implicated in deciding how Americans will get their energy,” but, the Court indicates, EPA did not have the necessary expertise in areas such as electricity transmission, distribution and storage. As a result, the Court concluded, “[t]here is little reason to think Congress assigned such decisions to the Agency.”  In addition, the Court found it “highly unlikely” that the Congress would leave to EPA “the decision of how much coal-based generation there should be over the coming decades.” In that conclusion, the Court rejected the contention of the dissent (by Justice Elena Kagan, joined by Justices Stephen Breyer and Sonia Sotomayor) that determining “the optimal mix of energy sources nationwide” to “reduce air pollution from power plants” is “EPA’s bread and butter.” Moreover, the Court said, Congress has since repeatedly rejected the type of carbon cap-and-trade system that the CPP would have created.

The CPP, however, “never went into effect.” That’s because litigation ensued and SCOTUS stayed the rule while the case was to be considered in the D.C. Circuit. When the next administration came into office in 2017, new EPA had a different perspective and repealed the CPP entirely, arguing that the rule “had been ‘in excess of its statutory authority’ under Section 111(d)”: the CPP, “rather than setting the standard ‘based on the application of equipment and practices at the level of an individual facility,’ had instead based it on ‘a shift in the energy generation mix at the grid level.’” This broader exercise of authority, new EPA argued, violated the “major questions” doctrine. In light of the repeal, the D.C. Circuit dismissed the case as moot, and new EPA adopted an entirely different rule that “would result in only small reductions in carbon dioxide emissions.”

That repeal and replacement by new EPA was then challenged by other states and groups, including even by a number of power companies.  In its decision on that challenge, the Circuit Court concluded that the statute was indeed broad enough to encompass the CPP, and thus, in its view, the major questions doctrine did not apply. The Circuit Court vacated new EPA’s repeal of the CPP—i.e., reinstated the CPP—and also vacated the replacement rule and remanded the whole thing back to new EPA for further consideration.

Immediately after that decision was issued, there was another change of administration in Washington, and a brand new EPA took charge in 2021. This newest (and current) EPA asked the Court to stay its action vacating the repeal of the CPP—with the result that the CPP would not be reinstated—because the newest EPA was not planning to enforce it and was considering formulation of an entirely new rule under Section 111(d). Moreover, as explained in the dissent, the CPP had become obsolete; even in the absence of any federal regulation, “[m]arket forces alone caused the power industry to meet the [CPP]’s nationwide emissions target—through exactly the kinds of generation shifting the [CPP] contemplated.” West Virginia and other states and entities petitioned for cert.

The tellingly-phrased question presented was whether the Clean Air Act authorized EPA “to issue significant rules including those capable of reshaping the nation’s electricity grids and unilaterally decarbonizing virtually any sector of the economy—without any limits on what the agency can require so long as it considers cost, nonair impacts, and energy requirements?”

Majority opinion

Standing and mootness. The majority made quick work of EPA’s contention that none of the petitioners had standing to appeal; standing would require the petitioner to have “experienced an injury ‘fairly traceable to the judgment below’” that could be redressed by a favorable ruling on the appeal. Likewise fruitless was EPA’s contention that the matter was moot because its intervening action to make the CPP disappear, along with its representation that EPA had no intention of enforcing the CPP, were enough to extinguish the controversy. The Court found that the CPP did injure the States and that EPA’s action was, in the first instance, temporary, and in the last instance, voluntary, both of which were insufficient to carry the burden of establishing mootness. In addition, the majority observed, EPA “‘nowhere suggests that if this litigation is resolved in its favor it will not’ reimpose emissions limits predicated on generation shifting; indeed, it ‘vigorously defends’ the legality of such an approach.”

Major questions doctrine.  The Court defined the issue in the case as “whether restructuring the Nation’s overall mix of electricity generation, to transition from 38% coal to 27% coal by 2030, can be the ‘best system of emission reduction’ within the meaning of Section 111.” Ordinarily, the Court said, that’s just a question of basic statutory construction.  In this instance, however, as framed by the majority, there is a larger question: “whether Congress in fact meant to confer the power the agency has asserted.” In this context, the Court “‘typically greet[s]’ assertions of ‘extravagant statutory power over the national economy’ with ‘skepticism.’” Here, the Court maintained, “our precedent teaches that there are ‘extraordinary cases’ that call for a different approach—cases in which the ‘history and the breadth of the authority that [the agency] has asserted,’ and the ‘economic and political significance’ of that assertion, provide a ‘reason to hesitate before concluding that Congress’ meant to confer such authority.” Under our precedents, the Court concluded, “this is a major questions case.”

Although not strictly labelled “major questions” cases, precedents cited by the Court “have arisen from all corners of the administrative state.”  Among other cases,  the Court looked to its prior decision concluding that the FDA’s authority over “drugs” and “devices”  did not include authority to regulate tobacco: “We rejected that ‘expansive construction of the statute,’ concluding that ‘Congress could not have intended to delegate’ such a sweeping and consequential authority ‘in so cryptic a fashion.’” In addition, a recent case concluded that CDC did not have authority to institute a nationwide eviction moratorium in response to the pandemic: its authority to take actions “necessary to prevent the . . . spread of ” disease was “a ‘wafer-thin reed’ on which to rest” such a measure.”  Similarly, in another case, the Court disagreed that “EPA could construe the term ‘air pollutant,’ in a specific provision of the Clean Air Act, to cover greenhouse gases” in a manner that would have given it “permitting authority over millions of small sources…that had never before been subject to such requirements.” Despite “its textual plausibility,” the Court “declined to uphold EPA’s claim of ‘unheralded’ regulatory power over ‘a significant portion of the American economy.’”  According to the Court, all of these

“regulatory assertions had a colorable textual basis. And yet, in each case, given the various circumstances, ‘common sense as to the manner in which Congress [would have been] likely to delegate’ such power to the agency at issue,…made it very unlikely that Congress had actually done so. Extraordinary grants of regulatory authority are rarely accomplished through ‘modest words,’ ‘vague terms,’ or ‘subtle device[s].’… Nor does Congress typically use oblique or elliptical language to empower an agency to make a ‘radical or fundamental change’ to a statutory scheme….We presume that ‘Congress intends to make major policy decisions itself, not leave those decisions to agencies.’…Thus, in certain extraordinary cases, both separation of powers principles and a practical understanding of legislative intent make us ‘reluctant to read into ambiguous statutory text’ the delegation claimed to be lurking there….To convince us otherwise, something more than a merely plausible textual basis for the agency action is necessary. The agency instead must point to ‘clear congressional authorization’ for the power it claims.”

The Court rejected the charge by the dissent that the decision “announces the arrival” of the  major questions doctrine, instead asserting that the major questions doctrine “took hold because it refers to an identifiable body of law that has developed over a series of significant cases all addressing a particular and recurring problem: agencies asserting highly consequential power beyond what Congress could reasonably be understood to have granted. Scholars and jurists have recognized the common threads between those decisions. So have we.”

In this case, the Court concluded, Section 111(d) is just an “ancillary” provision that EPA has used “only a handful of times since the enactment of the statute in 1970”: “In arguing that Section 111(d) empowers it to substantially restructure the American energy market, EPA ‘claim[ed] to discover in a long-extant statute an unheralded power’ representing a ‘transformative expansion in [its] regulatory authority.’ … It located that newfound power in the vague language of an ‘ancillary provision[]’ of the Act,…one that was designed to function as a gap filler and had rarely been used in the preceding decades. And the Agency’s discovery allowed it to adopt a regulatory program that Congress had conspicuously and repeatedly declined to enact itself…. Given these circumstances, there is every reason to ‘hesitate before concluding that Congress’ meant to confer on EPA the authority it claims under Section 111(d).”

To overcome the Court’s “skepticism toward EPA’s claim that Section 111 empowers it to devise carbon emissions caps based on a generation shifting approach,” the Court concluded that EPA “must—under the major questions doctrine—point to ‘clear congressional authorization’ to regulate in that manner.”  In response, EPA pointed to its authority under the statute “to establish emissions caps at a level reflecting ‘the application of the best system of emission reduction . . . adequately demonstrated,’”  contending that the CPP was just that kind of system within the meaning of the statute. But, in the Court’s view, “almost anything could constitute such a ‘system’; shorn of all context, the word is an empty vessel. Such a vague statutory grant is not close to the sort of clear authorization required by our precedents.”  The Court also gave short shrift to other references in the statute, highlighted by the EPA, that the Court deemed inadequate to provide clear authorization. 

Accordingly, the Court held that, to the question of “whether the ‘best system of emission reduction’ identified by EPA in the Clean Power Plan was within the authority granted to the Agency in Section 111(d) of the Clean Air Act[,] the answer is no. Capping carbon dioxide emissions at a level that will force a nationwide transition away from the use of coal to generate electricity may be a sensible ‘solution to the crisis of the day.’…. But it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme in Section 111(d). A decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.”

Dissenting opinion

The dissent, in a way, seeks to remind the majority about their professed affection for textualism. To the dissent, the language in the Clean Air Act was pretty clear, and the decision of the majority serves to eliminate that authority granted.

According to the dissent, in the statute, Congress plainly gave EPA the authority “to respond to ‘the most pressing environmental challenge of our time.” In sum, Kagan contended, “Congress charged EPA with addressing those potentially catastrophic harms, including through regulation of fossil fuel-fired power plants. Section 111 of the Clean Air Act directs EPA to regulate stationary sources of any substance that ‘causes, or contributes significantly to, air pollution’ and that ‘may reasonably be anticipated to endanger public health or welfare.’…Carbon dioxide and other greenhouse gases fit that description…. EPA thus serves as the Nation’s ‘primary regulator of greenhouse gas emissions.’” To fulfill its responsibilities, EPA adopted the CPP, which reflected the conclusion that “operational improvements at the individual-plant level would either ‘lead to only small emission reductions’ or would cost far more than a readily available regulatory alternative.” That readily available alternative—generation shifting—was already in use by some power plants and became a core part of the CPP. 

The dissent asserts that the language in the statute authorizing EPA to adopt the CPP is quite evident; the effect of the Court’s action is to strip EPA of the authority that Congress granted:

“The limits the majority now puts on EPA’s authority fly in the face of the statute Congress wrote. The majority says it is simply ‘not plausible’ that Congress enabled EPA to regulate power plants’ emissions through generation shifting. …But that is just what Congress did when it broadly authorized EPA in Section 111 to select the ‘best system of emission reduction’ for power plants….The ‘best system’ full stop—no ifs, ands, or buts of any kind relevant here. The parties do not dispute that generation shifting is indeed the ‘best system’—the most effective and efficient way to reduce power plants’ carbon dioxide emissions. And no other provision in the Clean Air Act suggests that Congress meant to foreclose EPA from selecting that system; to the contrary, the Plan’s regulatory approach fits hand-in-glove with the rest of the statute. The majority’s decision rests on one claim alone: that generation shifting is just too new and too big a deal for Congress to have authorized it in Section 111’s general terms. But that is wrong. A key reason Congress makes broad delegations like Section 111 is so an agency can respond, appropriately and commensurately, to new and big problems. Congress knows what it doesn’t and can’t know when it drafts a statute; and Congress therefore gives an expert agency the power to address issues—even significant ones—as and when they arise. That is what Congress did in enacting Section 111. The majority today overrides that legislative choice. In so doing, it deprives EPA of the power needed—and the power granted—to curb the emission of greenhouse gases.”

In Kagan’s view, the Court has had it in for the CPP from the get-go. As soon as the CPP was issued, the “Court stayed its implementation. That action was unprecedented: Never before had the Court stayed a regulation then under review in the lower courts.” As a result, with the change in administrations, it never went into effect. But, Kagan suggests, the fact that the goals of the CPP were met using generation shifting—even without regulation—validates just how reasonable and “moderate” the CPP really was. Because the goals were already met, the CPP had become obsolete and the intent was not to implement it, but rather to develop new rules.  So what explains the “oddity of the Court’s declaring a defunct regulation unlawful”?  Why did the Court even take this case? The dissent acknowledges that, because the mootness rules are “notoriously strict,” the Court could actually “be right that doing so does not violate” them.  But that doesn’t explain why the Court took the case: “the Court’s docket is discretionary, and because no one is now subject to the Clean Power Plan’s terms, there was no reason to reach out to decide this case. The Court today issues what is really an advisory opinion on the proper scope of the new rule EPA is considering. That new rule will be subject anyway to immediate, pre-enforcement judicial review. But this Court could not wait—even to see what the new rule says—to constrain EPA’s efforts to address climate change.”

Section 111, the dissent contends, was expressly designed to provide regulatory flexibility and discretion, within specified constraints; that does not mean that the statute was not clear. To the majority’s contention that word “system” as used in the statute was just an “empty vessel” capable of applying to just about anything—“just too darn broad” in Kagan’s terms—Kagan retorts:

“But that is rather the point. Congress used an obviously broad word (though surrounding it with constraints…) to give EPA lots of latitude in deciding how to set emissions limits. And contra the majority, a broad term is not the same thing as a ‘vague’ one….. A broad term is comprehensive, extensive, wide-ranging; a ‘vague’ term is unclear, ambiguous, hazy. (Once again, dictionaries would tell the tale.) So EPA was quite right in stating in the Clean Power Plan that the ‘[p]lain meaning’ of the term ‘system’ in Section 111 refers to ‘a set of measures that work together to reduce emissions.’…Another of this Court’s opinions, involving a matter other than the bogeyman of environmental regulation, might have stopped there. For generation shifting fits comfortably within the conventional meaning of a ‘system of emission reduction.’”

In perhaps a little dig at the usually “textualist” majority, Kagan quotes the late Justice Scalia, pointing out that omissions have significance under the rules of statutory interpretation. In that regard, she identifies a number of provisions that were included in other sections of the Clean Air Act that would have prevented EPA from imposing generation shifting, but those provisions were not included in Section 111. And, at several points, Congress had a choice to limit the EPA to facility-specific measures, but declined to do so.

While Kagan suggests that judicial modesty would require that the Court not impose limits on agency discretion when “Congress uses ‘expansive language’ to authorize agency action,” the majority, she writes “thinks not, contending that in ‘certain extraordinary cases’—of which this is one—courts should start off with ‘skepticism’ that a broad delegation authorizes agency action….The majority labels that view the ‘major questions doctrine,’ and claims to find support for it in our caselaw.”  According to the dissent, the “Court has never even used the term ‘major questions doctrine’ before.”

As is apparent from the quote above, Kagan does not have much use for the major questions doctrine.  In that prior supportive caselaw, she argues, it really all came down to plain old ordinary statutory interpretation: in those earlier cases, “the Court simply insisted that the text of a broad delegation, like any other statute, should be read in context, and with a modicum of common sense.” Using ordinary statutory interpretation, the decisions struck down an agency action that was considered to be “operating far outside its traditional lane, so that it had no viable claim of expertise or experience. And second, the action, if allowed, would have conflicted with, or even wreaked havoc on, Congress’s broader design. In short, the assertion of delegated power was a misfit for both the agency and the statutory scheme.” In contrast, she asserts, “the Clean Power Plan falls within EPA’s wheelhouse, and it fits perfectly—as I’ve just shown—with all the Clean Air Act’s provisions. That the Plan addresses major issues of public policy does not upend the analysis. Congress wanted EPA to do just that.”

In this instance, she contends, the majority fails to analyze the meaning of the statute in its context.  Instead, the Court “announces the arrival of the ‘major questions doctrine,’ which replaces normal text-in-context statutory interpretation with some tougher-to-satisfy set of rules.” And Kagan seems to think it’s not entirely clear exactly what those rules are:  “Apparently, there is now a two-step inquiry. First, a court must decide, by looking at some panoply of factors, whether agency action presents an ‘extraordinary case[].’… If it does, the agency ‘must point to clear congressional authorization for the power it claims,’ someplace over and above the normal statutory basis we require…The result is statutory interpretation of an unusual kind.” The majority, she contends, does not devote much attention to seriously discussing the meaning of Section 111. “And even then, it does not address straight-up what should be the question: Does the text of that provision, when read in context and with a commonsense awareness of how Congress delegates, authorize the agency action here?” 

In this case, she points out, “nothing in the Clean Air Act (or, for that matter, any other statute) conflicts with EPA’s reading of Section 111.”  And the majority is plain “wrong” in claiming that “EPA has no ‘comparative expertise’ in ‘balancing the many vital considerations of national policy’ implicated in regulating electricity sources.” Rather, the Court had explained in another case “11 short years ago, citing Congress, that it was smack in the middle of EPA’s wheelhouse.” The majority’s complaints “come down in the end to this: The Clean Power Plan is a big new thing, issued under a minor statutory provision.” But there was “nothing insignificant about Section 111(d),” and the CPP turned out to not be big at all—the industry exceeded the target all on its own. “It is small wonder, then,” observes, “that the power industry overwhelmingly supports EPA in this case.”

Kagan reminds us of her 2015 remark that “[w]e’re all textualists now.” But looking at the majority opinion, she says, “[i]t seems I was wrong. The current Court is textualist only when being so suits it. When that method would frustrate broader goals, special canons like the ‘major questions doctrine’ magically appear as get-out-of-text-free cards. Today, one of those broader goals makes itself clear: Prevent agencies from doing important work, even though that is what Congress directed. That anti-administrative-state stance shows up in the majority opinion, and it suffuses the concurrence.”

Agency delegations like those in this case “go all the way back to this Nation’s founding” and “have helped to build a modern Nation” with fewer industrial accidents and plane crashes, and safer food and medicine.  Why are these broad delegations from Congress necessary? “A key reason Congress makes broad delegations like Section 111 is so an agency can respond, appropriately and commensurately, to new and big problems. Congress knows what it doesn’t and can’t know when it drafts a statute; and Congress therefore gives an expert agency the power to address issues—even significant ones—as and when they arise. That is what Congress did in enacting Section 111. The majority today overrides that legislative choice. In so doing, it deprives EPA of the power needed—and the power granted—to curb the emission of greenhouse gases.”

Kagan concludes that, given the subject matter of the regulation, “the Court’s intervention [is] all the more troubling. Whatever else this Court may know about, it does not have a clue about how to address climate change. And let’s say the obvious: The stakes here are high. Yet the Court today prevents congressionally authorized agency action to curb power plants’ carbon dioxide emissions. The Court appoints itself—instead of Congress or the expert agency—the decisionmaker on climate policy. I cannot think of many things more frightening.”