Supreme Court Setback in West Virginia v. EPA Doesn’t Mean the End of U.S. Climate Action

By Denny Franzkowiak

By Alex Guillot, Law and Policy Clerk

The Supreme Court’s decision in West Virginia v. EPA is a blow to the EPA’s ability to regulate greenhouse gas emissions from power plants. However, the EPA retains significant authority over the regulation of greenhouse gas emissions, and other efforts to tackle climate change across the country continue. 

What the Supreme Court said

In a 6-3 decision, the Supreme Court held that the EPA exceeded the authority granted by Congress under the Clean Air Act (CAA) in placing limits on greenhouse gas emissions from power plants using “generation shifting.” “Generation shifting” refers to the approach under which EPA required the power sector to shift electricity production from coal to natural gas, and then to even cleaner energy sources such as wind and solar. This process would have required operators to either reduce the plant’s own production of electricity, build or invest in lower-emitting electricity production, or purchase emission allowances or credits as part of a cap-and-trade regime. By focusing on the power sector generally, generation shifting would have been a stronger, more effective tool to reduce emissions and to reach national climate goals. 

To make the determination that the CAA did not authorize EPA to use “generation shifting,” the Court relied on the “major questions doctrine” (MQD). According to that doctrine, the conservative justices assert that in certain “extraordinary cases,” where an agency seeks to regulate in new ways on issues with major economic or political consequences, the agency “must point to a clear congressional authorization for the power it claims.” However, the Court’s majority opinion did not provide a specific test or standard for when the doctrine applies. Instead, the Court’s guidance on the doctrine’s application consisted of highly subjective criteria such as whether an agency’s action qualifies as “extraordinary,” whether the agency’s “expertise” matches the problem, or whether a statute is “long-extant” or not.

Finding that the MQD applied, the Supreme Court required EPA to point to a “clear congressional authorization” that allowed it to use generation shifting as a “best system of emission reduction” under Section 111(d). Concluding that there was no such clear statement, the Court held that EPA lacked the authority to use generation shifting to reduce emissions under the CAA. 

EPA’s Authority

The West Virginia decision is undoubtedly a setback to EPA’s ability to regulate greenhouse gas emissions from the energy sector. However, the ruling did not remove EPA’s authority to regulate greenhouse gas emissions at power plants altogether and the agency retains substantial authority to do so. EPA can still set standards for existing power plants under Section 111(d) of the CAA so long as the new “best system for emission reduction” does not require generation shifting from fossil fuel to clean energy. In other words, future EPA rules will likely stick if they are based on a more narrow interpretation of the agency’s authority. In terms of Section 111, the Court recognized EPA’s authority to regulate carbon emissions from existing coal plants based on a “technology-based approach” which the agency had previously used that “focuses on improving the emissions performance of individual sources.”

Moreover, EPA can set standards to regulate greenhouse gas emissions under other provisions of Section 111 of the CAA. For instance, EPA can regulate greenhouse gas emissions from new power plants under section 111(b). The agency can also set standards under other sections of the CAA, including from mobile sources under Title II. Additionally, public health rules related to conventional air pollutants were also left intact by the decision. Thus, EPA has ample authority to tackle air pollution and the climate crisis. 

EPA’s next moves on climate action 

Following the ruling, EPA is planning to enact tougher restrictions on coal plants to reduce pollutants like soot and nitrous oxides, and to force the cleanup of water contamination from coal plants. Those rules will have a side-benefit of also reducing greenhouse gas emissions and may make some coal plants too expensive to continue to operate, resulting in more of them closing down. EPA can and should also finalize rules addressing carbon pollution from existing power plants and new power plants under sections 111(d) and 111(b) respectively. 

These rules include strengthening the Mercury and Air Toxics Standards (MATS) rule that limits mercury, arsenic and other toxins from coal plants, as well as the  National Ambient Air Quality Standards (NAAQS) for small particulate matter and ozone. EPA should also finalize the “Good Neighbor Plan,” which addresses soot and smog emissions across state borders by seeking to require “upwind” states to achieve additional nitrogen oxide (NOx) emissions reductions to help “downwind” receptors to meet the 2015 Ozone NAAQS. With a stronger set of regulations and public health rules, EPA can continue its efforts to tackle climate change and air pollution that harms public health and that disproportionately impacts environmental justice communities. 

The role of Congress and the states

In addition to EPA action on climate change, Congress can pass laws addressing carbon emissions or to clearly give EPA the authority to use generation shifting. However, without congressional action, the ruling allows delaying the transition to clean energy. For example, states unwilling to act on climate change that would otherwise have been required to make plans to reduce carbon emissions through generation shifting can now also stall on climate action. 

On the other hand, states aiming to reach their climate goals, such as Oregon, will pursue their efforts to lower their carbon emissions. For instance, HB 2021, Oregon’s clean energy bill that limits greenhouse gas emissions from power plants, will be implemented through state regulation of utilities instead of by the EPA. Additionally, 21 states have now set 100% clean energy goals through the state legislature or governor’s office, in addition to D.C. and Puerto Rico.

While the ruling is a setback at a time when we cannot afford setbacks, it should not prevent us from pursuing ambitious climate action.  

 

The blogs posted on Charged Debate reflect the writers' opinions in their individual capacities, and do not necessarily reflect the perspective of the Green Energy Institute, Lewis & Clark Law School, Lewis & Clark College, or the writers’ past, present or future employers or other associations. Any information in any blog on Charged Debate is meant purely for general educational purposes, does not constitute legal advice and should not be relied upon for any purpose. No representations or warranties, express or implied, are made with respect to any content in any blog posted on Charged Debate.

 

The Path of Unprecedented and Unusual Occurrences: The Clean Power Plan Goes to Court

By Edward Jewell, Energy Fellow

Credit: Energy.gov

On Tuesday, September 27, the U.S. government will defend EPA’s Clean Power Plan (CPP) in front of an en banc panel of judges at the U.S. Court of Appeals for the District of Columbia. The CPP regulates the amount of carbon emissions that a state’s energy generation sector can emit into the atmosphere, and is considered the signature component of President Obama’s domestic efforts to mitigate climate change. It is under legal attack from 27 states and industry representatives (referred to herein as petitioners).

Tuesday will be the first time that a court will hear the merits of the petitioners’ case, West Virginia v. U.S. Envt’l Prot. Agency, but the CPP has already accumulated a lengthy and unique procedural history. This blog post will provide a brief primer on the legal drama thus far.

The first chapter in the CPP’s legal saga took place before EPA had even finalized the rule establishing the CPP. Despite clear statutory text in the Administrative Procedure Act stating that there must be a final agency action before a suit can be brought in federal court to challenge an agency action, 12 states and industry representatives sued on the proposed rule. Petitioners argued that due to the long planning time inherent in the electricity sector, states would have to start taking actions to comply with the proposed rule immediately. Therefore, they argued, they ought to be allowed to sue on the proposed rule. The D.C. Circuit readily denied this longshot (borderline superfluous) argument.

As soon as the final rule was released, petitioners again filed suit. Petitioners asked the D.C. Circuit to halt implementation of the CPP by granting a stay, but the D.C. Circuit denied the motion. However, as Staff Attorney Amelia Schlusser blogged about at the time, the U.S. Supreme Court (SCOTUS) itself stepped in to put a stay on the implementation of the CPP. Chief Justice Roberts and Justices Scalia, Thomas, Alito, and Kennedy voted to enjoin implementation of the rule pending disposition by the Supreme Court or denial of cert. This move was unprecedented and was also one of Justice Scalia’s last judicial actions before his death. His absence from the SCOTUS bench certainly alters the complexion of the case.

After SCOTUS issued the stay, the D.C. Circuit Court of Appeals decided to go straight to an en banc panel rather than the usual three judge panel, meaning that all judges on the D.C. Circuit would hear the case. Staff Attorney Amelia Schlusser covered this development here.

Until just this week (mere days before oral argument) it appeared that two of the twelve D.C. Circuit judges, including SCOTUS nominee Merrick Garland, were not going to hear the case, making the CPP’s en banc panel a nine-judge panel. However, continuing the theme of legal twists and turns that this case has taken before even reaching oral arguments on the merits, Judge Pillard, who did not participate in the court’s announcement of an en banc hearing and was therefore considered unlikely to sit for the case, was added to the panel. Thus, the panel (as it is currently constituted) sits at ten judges.

The three-judge panel initially scheduled to hear the case was considered by most observers to be an advantageous draw for the future of the CPP because two of the three judges were Democratic appointees. With the nine-judge panel, five judges were Democratic appointees and four were Republican appointees, more or less maintaining the ideological balance of the three-judge panel. Judge Pillard, however, is an Obama appointee, and thus the panel now sits at six Democratic and four Republican appointees. If you consider the party that appoints a judge to be a decent proxy for determining a judge’s ideology, then the panel appears favorable to the government.

Regardless of the makeup, the ten-judge en banc panel will certainly change the dynamics of the courtroom and how the case will be argued. With ten judges instead of three, advocates will be less able to target their arguments directly toward the sensibilities of particular judges.

Furthermore, a ten-judge panel obviously creates a much greater potential for a tie at the D.C. Circuit than did the three or nine-judge panels. Normally when an en banc panel in the D.C. Circuit results in a tie, the opinion of the original three-judge panel is upheld. There is no original opinion of a three-judge panel in this case. What happens in the event of a tie in this situation is not altogether apparent. Perhaps the case would be scheduled for rehearing and there would be an eleventh judge eligible to hear the case by that time. Perhaps not.

While the CPP is almost certainly destined for review in front of the U.S. Supreme Court, the ruling of the ten-judge panel at the D.C. Circuit Court of Appeals is nonetheless an important step in the CPP’s tumultuous journey. For starters, the current eight member composition of the U.S. Supreme Court creates the potential for another tie, this time a 4-4 split. Depending on how long the D.C. Circuit takes to issue an opinion, the earliest SCOTUS could hear the case would be next February or March. But more likely, the case would not be scheduled until October. Therefore, it’s possible that there will be a ninth justice when and if SCOTUS hears the case.

In the case of a 4-4 split, the opinion from the D.C. Circuit would be upheld without an opinion from SCOTUS. However, many observers have cautioned that SCOTUS is unlikely to issue a split opinion with no majority on a case of such extensive nationwide consequence. Ideologically speaking, a 4-4 split is by no means out of the question. Justice Kennedy, the ever critical swing vote, and essential piece to the liberal wing of the court being able to gain a 5-3 majority, is known as being sympathetic to states’ rights arguments. If SCOTUS lands on a 4-4 draw, the Chief Justice could then reschedule arguments on a rehearing for a later date and hope that reason prevails on the Hill and Justice Scalia’s vacancy is filled.

The ramifications of the case for the national economy and the global atmosphere are significant (though prone to hyperbole as well as legitimate debate). The substantive legal questions at the heart of the case are likewise significant. The high stakes and tough questions combined with the perplexing political climate and unexpected passing of Justice Scalia have all combined to make quite the buildup.

Tune in Tuesday morning to see how the plot thickens.  

Clean Air Act Series: Regulatory Loophole Won't Save VW

On the Road to Cleaner Air: Jail Time for White-Collar Violators?

By Brandon Kline, Energy Law Fellow

This post is the final installment in a four-part series on the Clean Air Act, exploring the legal issues arising from the probe into a nitrogen-oxide trap (a "Defeat Device") alleged to have been installed in vehicles manufactured by Volkswagen of America. Part 1 described the manner in which a Defeat Device operates and why it matters for the Clean Air Act, while Part 2 reviewed the nature of regulatory failure, alternatives to regulatory enforcement and evidence that VW’s actions resulted in premature deaths. Part 3 explored VW’s potential criminal liability for its alleged actions under federal environmental law. This fourth post analyzes recent legal developments and focuses on civil recovery.

President Johnson signs the Clean Air Act into law.

More than half of Americans have no money in the stock market, so their most valuable asset is likely to be either a house or car. In the wake of the Volkswagen emissions scandal, owners of VW diesel cars have seen the value of their vehicles decline by 13%, according to Kelly Blue Book, the gold standard in vehicle valuation and automotive research. When President Lyndon B. Johnson signed the Clean Air Act on December 17, 1963, the stage was set for a number of injured parties to find relief; such as auto-dealers and consumers who can’t get rid of the defective cars, as well as the U.S. government. The Clean Air Act, as amended, created a dual recovery system, with its civil and criminal liability provisions, that is uniquely American.

Justice Department Brings Civil Complaint, Criminal Probe Ongoing

Earlier this month, the U.S. Department of Justice filed a civil complaint on behalf of the Environmental Protection Agency, accusing the German automaker of four counts of violating the Clean Air Act.

Under Sections 204 and 205 of the Clean Air Act, VW’s potential liability ranges between $48 billion to $90 billion, arising from fines of $37,500 per vehicle for each of two violations of the law, up to $3,750 per "defeat device" and another $37,500 for each day of violation.

“Car manufacturers that fail to properly certify their cars and that defeat emission control systems breach the public trust,endanger public health and disadvantage competitors,” said Assistant Attorney General John C. Cruden of the Justice Department’s Environment and Natural Resources Division.

It’s Raining Civil Lawsuits -- Except in Europe

The government’s civil action comes as a massive class-action lawsuit gets underway in California. Earlier this week, a federal judge in California named the lead plaintiff’s attorney in the massive multi-district suit.

The United States will now seek to transfer its case and fully participate in the pretrial proceedings now initiated in the related multi-district litigation in the Northern District of California, according to the Justice Department.

Beyond the U.S. market, VW estimates about 11 million vehicles were sold with the defeat device worldwide. 

Indeed, prosecutors in France, Italy, South Korea and elsewhere have separately indicated that authorities have begun preliminary investigations following the German automaker’s admission of cheating on diesel-emissions tests, according to the New York Times. 

Meanwhile, earlier this week European Commission policymakers announced plans to seek authority to fine carmakers for anti-pollution cheating. (#Fear of Missing Out)

Under current European law, however, VW is set for an easier ride in Europe. According to Reuters, while the EU outlawed defeat devices in 2007, there are no defined penalties for using such software to mask emissions.

Differences Between a Criminal and a Civil Case
In contrast to the higher standard of proof for criminal cases (“beyond a reasonable doubt”), in civil matters, the government has a lower standard of proof to clear (“preponderance of evidence”). 

VW U.S. CEO Michael Horn testifies before a Congressional Committee.

Because the head of Volkswagen’s US division apologized for the software that rigged emissions tests in testimony before the U.S. Congress, the automaker has little room to fight these accusations in court. 

The real action is therefore likely to occur in settlement negotiations between DOJ and VW.

But the government can still elect to seek criminal charges against individual VW executives and others who knowingly placed defective cars in the U.S. economy and lied to the EPA about cheating on emissions standards.

Here, individuals could be pursued criminally under the statute’s criminal penalties for making materially false statements or omissions in connection with documentation of Clean Air Act compliance. See Section 113(c)(2). 

Again, criminal sanctions would require a higher burden of proof than the civil lawsuit. As noted earlier in this series, the civil matter against VW is proceeding along a separate track, as the Justice Department continues the criminal probe into the alleged emissions scandal. 

Deputy Attorney General Sally Yates (middle) is joined by others at a DOJ Summit.

Significantly, the DOJ investigation unfolds under new guidance from Deputy Attorney General Yates, reflecting six key steps the Justice Department is taking to strengthen the government’s pursuit of individual corporate wrongdoing. 

Under the new guidance, DOJ will not resolve VW’s multi-billion dollar civil matter “without a clear plan to resolve related individual cases.”

And apparently, absent “extraordinary circumstances,” culpable individuals will not be released from civil or criminal liability when resolving a matter with a corporation.In conclusion, the Clean Air Act provides a powerful tool for US consumers and regulators (which is more than Europeans can claim). See Yates memo, key steps No. 5 and 6.

Even in spite of the loophole, VW is vulnerable under multiple lawsuits in multiple jurisdictions, and will likely be required to pay civil penalties. 

At the same time, DOJ’s handling of the case has the potential to send a strong message to corporate wrongdoers that the U.S. government takes defeat devices very seriously and corporate wrongdoers should be weary of personal liability.

On the Road to Cleaner Air: Jail Time for White-Collar Violators?

Part II – Legal Expert: Prosecuting White-Collar Violators Incentivizes Regulatory Compliance

Prof. Rena Steinzor, recently authored, 
Why Not Jail: Industrial Catastrophes, 
Corporate Malfeasance, 
and Government Inaction

By Brandon Kline, Energy Law Fellow

This is the second in a four-part series on the legal issues arising from the probe into an alleged nitrogen oxide trap (a "Defeat Device" in the vernacular) installed in vehicles manufactured by Volkswagen of America (VW).  Part 1 described the manner in which a "Defeat Device" operates and why it matters in the context of the federal Clean Air Act.  In Part 2, we discuss regulatory failure, alternatives to regulatory enforcement and the evidence that VW’s actions resulted in premature deaths. 

In recent weeks, VW submitted a recall plan for 2-liter diesel cars to the California Air Resources Board, and the automaker must continue to cooperate with authorities in developing a recall plan to fix this problem in other affected models. Both the California Air Resources Board and the EPA will exercise cooperative jurisdiction to review the plan, ensuring that the proposed actions restore the vehicles so that they meet clean-air requirements. 

While it is encouraging to see that VW has begun paying attention to emissions standards and that the responsible authorities are now fully engaged, the ensuing fracas demonstrates a regrettable instance of regulatory failure. 

By its nature, a regulation restricts a firm like VW from doing what it otherwise would have done, according to Nobel-laureate economist Joseph Stiglitz. “The purpose of government intervention is to address potential consequences that go beyond the parties directly involved, in situations in which private profit is not a good measure of social impact.” Here, Congress enacted the Clean Air Act to authorize the EPA to regulate emissions from VW's diesel engines. Emissions standards ensure that the effects of pollution don’t fall on VW owners and other parties, including particularly vulnerable members of the general public. 

As Stiglitz notes, “Regulation is necessary because social and private costs and benefits, and hence incentives, are misaligned.” To be sure, VW is motivated by profit. Meanwhile, car buyers are in search of an affordable automobile that will provide them the benefits for which they bargained. Here, VW customers were promised a clean-diesel engine that complies with applicable clean-air standards. At the same time, the pollution that results from untreated emissions goes beyond the parties directly involved (see below).  Absent regulatory intervention, some legal commentators have suggested alternative measures for incentivizing compliance.

1. Prosecuting white-collar criminals is a legal alternative when regulations fail to protect consumers. 

Last month, Rena Steinzor, a professor at the University of Maryland Francis King Carey School of Law and founder of the Center for Progressive Reform, published a paper titled Federal White Collar Crime: Six Case Studies Drawn from Ongoing Prosecutions to Protect Public Health, Worker and Consumer Safety, and the Environment.

In the days leading up to the VW disclosure, Lewis & Clark welcomed Steinzor as its 28th annual Natural Resources Law Institute Distinguished Visitor. Her lecture on “How White Collar Criminal Enforcement Can Save the Environment” argued for prosecution of individuals at corporations involved in criminal acts related to the environment, and addressed the related social justice issues. (See here for a link to the podcast.)

Before delivering the Distinguished Environmental Visitor lecture, Steinzor spent some time on our campus attending classes and sharing her scholarship with faculty and students. During our October conversation, we discussed a range of subjects, from fresh food deserts to the University of Maryland’s response to the difficulties facing Baltimore following the tragic murder of Freddie Gray.

In her recently published text, Why Not Jail, Industrial Catastrophes, Corporate Malfeasance, and Government Inaction, Steinzor recommends innovative interpretations of existing laws to elevate the prosecution of white-collar crime at the federal and state levels.

On our way back from attending the Climate Change law lecture, Steinzor explained how incidents of regulatory failure came to shape her current views about applying criminal law to white-collar crimes.

Prof. Steinzor advocates this approach for white-collar criminals where, as here, regulatory enforcement seems to fall short of serving its consumer protection function. This view is consistent with underlying theories of criminal law, sounding in efficiency and fairness, as well as deterrence and retribution. Criminal law is traditionally described as directing its injunctions exclusively to actual or potential criminals. 

Significantly, when the public learns about companies committing crimes in their community, they see a double standard. Therein lies the rub: it seems to be the typical case for white-collar criminals to escape the same type of personal consequences faced by other criminals. For instance, if a drug dealer gets convicted for operating a drug business, they go to jail; in contrast, the white-collar criminal who gets caught operating their company in an illegal way, typically pays a fine. “People are cynical and it’s not good for the country,” Steinzor said.

2. Harvard and MIT study: Volkswagen’s Defeat Device will directly contribute to 60 premature deaths across the country.

Beyond the economic malfeasance at VW, Steinzor reminds, “The results of the excess pollution sickened people and even triggered premature deaths.” The device that was installed triggered less thorough treatment of emissions when state and local authorities were not testing the car. Accordingly, "VW vehicles with the device routinely emitted unsafe levels of nitrogen oxide, a precursor gas that combines with volatile organic compounds to produce ozone or, as it is more commonly known, smog."

Steinzor’s conclusion is supported by an October 2015 study conducted by MIT and Harvard University, which quantified the U.S. health impacts of VW’s emissions defeat devices. Researchers based their calculations on measurements by researchers at West Virginia University, who found that the vehicles produced up to 40 times the emissions allowed by law. The study concludes, “VW’s cheat device, which resulted in pollution 10-40 times higher than applicable EPA standards, could result in as many as 59 deaths in the United States and impose ‘social costs’ (e.g., illness, days off work and school) of up to $450 million.”

Daniel Kammen, the editor-in-chief of Environmental Research Letters and a professor of energy at the University of California at Berkeley, says the group’s study provides a “rigorous evaluation of the scale of the impacts, which are potentially exceedingly serious.

“The analysis demonstrates the value of policy-inspired fundamental research where the air quality and health impacts of transgressions such as the VW issue can be calculated, and made available for public discussion,” says Kammen, who did not contribute to the research.

###

In Part 3 we highlight environmental crime prosecutions in general and the mens rea (or mental state) required for particular violations, focusing on the reasons VW is not likely to face criminal liability under the Clean Air Act in connection with the defeat device. In Part 4, we explore the scope of VW’s liability under other legal theories, in the context of recent guidance from the U.S. Department of Justice.