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07.01.2022 Legal News

The U.S. Supreme Court Cut EPA’s Authority To Regulate Greenhouse Gases Using Clean Air Act Section 111(d)

On June 30, 2022, the United States Supreme Court (Court), in West Virginia v. EPA, found the United States Environmental Protection Agency (EPA) acted beyond its authority under the Clean Air Act (CAA) when it enacted the expansive Clean Power Plan (CPP).  While the case is limited to Section 111(d) of the CAA, it is a victory for fossil fuel generation and may curb some of EPA’s efforts to regulate by policy.

In 2015, EPA issued the CPP under CAA Section 111(d), which is part of the New Source Performance Standard (NSPS) program.  The CPP includes a provision requiring CO2 reductions from existing fossil fuel Electric Generating Units (EGUs) based on unit-based heat rate improvements, unit or system-wide generation shifting, and/or a system-wide cap-and-trade program.  The CPP never took effect because the Court stayed it, and the Trump EPA repealed it. 

In West Virginia, the Court evaluated how EPA can define “best system of emission reduction” (BSER), which is the key emission reduction metric that EPA develops in the NSPS Section 111(d) program.  The decision held that EPA does not have the authority to regulate existing sources under Section 111(d) outside the fence-line.  In other words, EPA cannot rely on generation shifting (outside the fence-line) to create emission caps that fossil-fuel-fired units cannot otherwise meet.  EGUs must have an opportunity to comply without reducing capacity factors or shutting down.  The Court rejected EPA’s expansion of its own power to include issues reserved for Congress, such as “how much coal-based generation there should be over the coming decades.”  The Court reversed and remanded the case to the D.C. Circuit. 

By March 2023, according to the Spring 2022 Unified Agenda, EPA plans to propose a new rule under Section 111(d) to regulate greenhouse gas emissions from existing fossil-fuel fired EGUs.  West Virginia creates a narrow path that EPA must follow to legally promulgate this future rule.  EPA cannot use generation shifting or cap-and-trade programs to define BSER for Section 111(d) rules.  EPA must look to measures that existing fossil-fuel-fired EGUs can implement at the source to reduce greenhouse gas emissions.