Court Changes Rules Of Energy Regulation, Climate

In its just-released ruling West Virginia vs. EPA, the Supreme Court not only throws out the Obama-era Clean Power Plan for good, it permanently changes the rules for how federal agencies can address large policy issues like climate change. 

President Barack Obama’s Clean Power plan was never enacted. It was suspended by the Supreme Court in 2016, and replaced by President Donald Trump’s administration in 2019, but revived by an appeals court. 

Under the Clean Power Plan, the EPA had proposed three “building blocks” for power plants to achieve lower emissions. Citing a section of the Clean Air Act, Section 111(d), the Obama administration claimed broad authority not only to regulate coal-fired plants, but to set carbon emissions targets for states and encourage them to shift from fossil fuels to renewable energy sources. It did this by claiming these moves amounted to the “best system of emissions reduction” or BSER. 

The first “building block” involved cleaner ways to burn coal and was similar to the kinds of technical, on-the-ground regulations EPA had already been implementing. But the next two “building blocks” encouraged power plants to switch from coal to natural gas, and eventually away from natural gas or any fossil fuel to renewables only. Furthermore, the EPA had a detailed plan for regulating how much carbon emissions each state could emit, and suggested carbon markets as a way of managing their emissions. 

Both of the latter two “building blocks” addressed and regulated large energy policy questions that, in the court’s view, went beyond the EPA’s regulatory authority. The Supreme Court stayed the Clean Power Plan in 2016. It was later replaced (without ever having taken effect) by the Trump administration, whose EPA found that Section 111(d) limited the EPA to “those [physical] systems that can be put into operation at a building, structure, facility, or installation,” not energy policy changes. Trump’s EPA argued that Congress can only delegate any of its regulatory authority to agencies with a “clear statement” to that effect—which it did not find in Section 111(d). The Trump administration’s Affordable Clean Energy (ACE) rule limited the EPA to physical and technical improvements.

After other parties sued over the reversal, the Court of Appeals suspended Trump’s ACE and ruled that Trump’s EPA had misread the Clean Air Act too narrowly. Then Joe Biden was elected president, and his EPA declared its intention to repeal all Trump-era moves and issue its own new rule-making. 

West Virginia then sued, arguing that the new administration could still impose “generation-shifting”—that is, could still mandate switching away from fossil fuels—on the states, and that this could cause harm. That challenge led to last week’s ruling, with the court ruling that West Virginia and other plaintiffs still had standing to sue despite the rule’s temporary abeyance.

In the days to come, we can expect floods of analysis of West Virginia v. EPA as its implication sink in. Already, some climate advocacy groups are characterizing it as a “major blow” or “setback” to climate efforts. 

As we and others have noted, the Obama plan alone was not responsible for coal’s decline, though it may have hastened it. In fact, its emissions reduction goals were met 11 years ahead of schedule. The fracking revolution made natural gas cheaper and more widely available, and many coal plants were already nearing the end of their useful lives. More important, public opinion on climate and energy issues was shifting. 

We doubt that West Virginia v. EPA will reverse climate progress. A societal tipping point seems to have been passed. Emissions reduction efforts will likely continue, and probably even accelerate when fuel prices drop to more historically normal levels.  Large companies that have invested major sums in alternative energy projects or carbon reduction initiatives will not abandon course.

So, what does this mean for tonnage on our marine highways or the larger issue of energy production?  We suspect very little, certainly in the short term. Asking an important regulator like the EPA to pivot direction with each change of guard in the executive branch doesn’t seem to be good for energy companies or the supply chains serving them.  The resulting confusion and lack of direction gave energy companies further reason to pause on investment decisions. From what we can tell neither the environment nor the economy benefits from lack of direction.