Aegis Regulatory Alert- July 2022

West Virginia v. EPA

In a 6-3 decision, the Supreme Court ruled that the Environmental Protection Agency (EPA) does not have the authority to require “generation shifting” (essentially requiring the replacement of older units with natural gas units) for existing power plants under the Clean Power Plan. 

  • Beginning in 2015 under the Obama administration, the Clean Power Plan (CPP) sought to limit the carbon dioxide pollution from new and existing power plants by reducing the electricity generation from 38% coal to 27% coal by 2030.
  • The plan never went into effect and sat until 2019 when the Trump administration replaced it with the Affordable Clean Energy (“ACE”) Rule.
  • In a 2021 decision, the D.C. Circuit court vacated both the repeal of the CPP and the new ACE Rule.
  • West Virginia and several other states were unsatisfied with this ruling and wanted the U.S. Supreme Court to take the case, which they did.

To achieve industry-wide emission reductions goals, the EPA determined the applicable emissions performance rates. These performance rates were strict enough that many existing power plants could not have achieved them without introducing a “generation shift.” The multi-level shift would be involved at the grid level by shifting electricity production from higher-emitting to lower-emitting producers and by shifting from existing coal-fired power plants to natural gas-fired power plants.

Projected outcomes from the rule would impose billions in compliance costs, raise retail electricity rates, eliminate tens of thousands of jobs, and require the retirement of dozens of jobs. 

  • The Court found the “generation shifting” troubling and costly which lead to the Court overruling the EPA and their CPP.
  • EPA still retains the ability to regulate emissions using more standard approaches. These include carbon sequestering, controls or co-firing options.  It is also possible that the EPA can issue a CO2 NAAQS standard and regulate emissions in that manner, rather than under this section of the Clean Air Act, which requires emissions to be regulated by the “best system of emission reduction” that is “adequately demonstrated”.
  • This court ruling is limited to the power sector and will not impair the EPA’s authority to regulate greenhouse gas emissions from other sectors such as from transportation, oil and gas exploration, manufacturing, and other similar activities.

 The implications of this ruling may affect other programs, environmental and otherwise such as the FCC proposed requirement for ESG reporting, and is largely viewed as a reminder to agencies to “keep in their lane” and regulate only within their wheelhouse and with clear authority delegated by congress.  This is a departure from previous years where agencies were usually only required to show that their method was reasonable and plausible, and then given the benefit of the doubt.