Supreme Court Ruling Likely Impacts Other Key Energy Rules

The US Supreme Court’s ruling this week scrapping the never-implemented 2015 Clean Power Plan is expected to carry at least some significant implications for other key energy policies. In a 6-3 ruling, the court’s majority in West Virginia v. EPA [Environmental Protection Agency] held that federal agencies must be able to point to “clear congressional authorization” for the authority to move forward with specific policies.

So named the “major questions” doctrine, the fairly novel legal principle says that courts “expect Congress to speak clearly if it wishes to assign to an agency decisions of vast economic and political significance.” In the Clean Power Plan ruling, the court’s majority held that the issue of whether emissions controls under the federal air law can include generation switching measures fell under the major questions doctrine.

The court’s “full-throated endorsement” of the doctrine is “hugely significant,” says Robert Percival, director of the University of Maryland School of Law’s environmental law program. The ruling “seeks to deter EPA from acting boldly in the future even when a statute clearly gives it broad regulatory authority.”

Below, Energy Intelligence examines some of the possibilities for how the ruling could affect forthcoming energy policies under the Biden administration.

• Clean power rules: The most obvious implication is that the Supreme Court ruling effectively takes generation shifting off the table for EPA climate rules for the power sector. Although the 2015 Clean Power Plan never went into effect because it was stayed by the court, the Biden EPA is said to be crafting new clean power regulations. The ruling effectively limits how those will look. The court characterized the 2015 rule as a “cap on overall power sector carbon pollution designed with the express intent of shifting generation away from coal plants to cleaner plants,” said David Doniger, senior strategic director for the climate and clean energy program at the Natural Resources Defense Council.

  What the Jun. 30 ruling means is that the EPA has to steer clear of pollution targets so stringent they could only be met with fuel shifting. But the ruling stopped shy of saying the agency can only utilize narrow measures like heat rate improvements. That leaves the door open, experts say, for things like carbon capture and market-based mechanisms for cutting emissions.

• Methane standards: The EPA plans to finalize in October standards for curbing methane emissions from the oil and gas sector’s new and existing production and other facilities. The rules are expected to mandate emissions controls for “new and modified” hydraulic fracturing, liquids unloading, tanks, pneumatic controllers and other types of emissions sources across the value chain.

  Though the methane proposal is housed under the same Clean Air Act provisions as the 2015 Clean Power Plan, the types of controls used to curb methane are more closely tied to the facility, as opposed to fuel-switching which has broader implications for the energy mix. That means the West Virginia ruling may carry few impacts for the methane rules, legal sources say. If anything, the methane rules are “even more important” because they involve more “bread and butter” type emissions controls that are not novel, and therefore on firmer legal footing than other climate policies, said Jay Duffy, an attorney with the Clean Air Task Force.

• SEC climate disclosure rules: The Securities and Exchange Commission’s (SEC) proposed rules for mandating carbon emission disclosures is widely cited as among the rules that could be vulnerable under a major questions challenge. Legal experts say the policies most exposed are those in which an agency is acting in an avenue that is fairly novel for that agency — like the EPA exerting influence over the power grid mix.

  The doctrine has already been cited in comments filed by stakeholders with the SEC over the proposal. For example, Shell’s Jun. 17 comments filed with the SEC say, “Given the economic significance of this important major rulemaking, our attorneys are concerned that there may be an issue under the Supreme Court’s announced major questions doctrine.” In the comments, the company suggests that the SEC seek additional authority from Congress before moving forward with the rulemaking.

• Clean car standards: The Biden administration’s clean car standards for model years through 2026 may also be vulnerable. The rules require a fleet average of around 49 miles per gallon for light-duty vehicles by model year 2026, with smaller upticks required in 2024 and 2025.

  The issue of the major questions doctrine has already come up in the context of litigation over the standards, because of the implications for zero-emission vehicle sales. But those suits are ongoing.