EPA v. EME Homer City: Sign of Things To Come in the Greenhouse Gas Cases?

by Jonathan Keim

This past Tuesday, the Supreme Court released its opinion in EPA v. EME Homer City Generation, L.P., a lawsuit challenging EPA’s regulation covering emissions that drift between states. The central statutory question was whether the EPA is allowed to consider the costs of reducing emissions when drafting rules governing the amount of emissions that can flow to other states. With Justice Alito recused, the Court issued a 6-2 opinion, with Scalia and Thomas as the only dissenters. This alignment of the justices is unusual, with Chief Justice Roberts and Justice Kennedy joining the majority. There’s a lot to say about this case – the D.C. Circuit panel’s opinion alone was 104 pages long – but one statutory interpretation issue may hint at how the Justices are thinking about another set of EPA cases heard earlier this term, Utility Air Regulatory Group et al. v. EPA, also known as the greenhouse gas cases. In short, by joining the majority in this case, the Chief and Justice Kennedy gave up any principled basis for opposing EPA’s lawlessness in the greenhouse gas cases.

First, a bit of background about the structure of the Clean Air Act (CAA). The CAA incorporates states into the federal environmental regulation scheme through a process sometimes described as “cooperative federalism.” Each state is required to create a State Implementation Plan (or SIP) explaining how the state will achieve certain emissions standards set out by Congress in the CAA, then submits the SIP to the federal government for approval. The SIP is ultimately enforceable by the federal government, but if the federal government considers the SIP inadequate, it can impose its own Federal Implementation Plan (FIP).

Each state SIP must take account of the spillover effects on other states, such as when an upwind state causes additional downwind effects to another state. Specifically, the state must adequately take account of situations where they will cap emissions “in amounts which will—(I) contribute significantly to” other States’ ability to comply (42 U.S.C. § 7410(a)(2)(D)(i)). EPA issued a rule interpreting the term “significant” to include not only “amounts” of pollutants emitted by certain upwind sources, but also the costs of mitigation by each state. This effectively gave EPA the ability to create an individualized emissions “budget” for each upwind state based on its own statistical models that would kick in whenever the EPA thought the state SIP was inadequate. Then, in the same rule that imposed the cost-based evaluations in 2011, EPA issued its own FIP, giving the states no time to revise their SIPs. After that high-handed move, state and local governments joined with industry and labor groups to challenge the environmental regulations.

The majority opinion, written by Justice Ginsburg, upholds the rule as a reasonable interpretation of a statutory ambiguity under the Chevron doctrine. Justice Scalia’s dissent (joined by Justice Thomas) argues that the statute, although ambiguous about some things, clearly isn’t ambiguous about whether “significant” includes costs of compliance.

The majority construes § 7410(a)(2)(D)(i)(I) to mean that EPA could consider cost in determining what amount of emissions is “significant.” As Justice Scalia points out in his jazzy dissent, though, the majority (like EPA) never really explains where the statute links “significance” of the states’ ability to reach the numeric thresholds with cost-benefit analysis. The statutory grammar describes regulations that have as their object the sources of emissions within the State. But only a subset of these sources are the proper subject of regulation, namely, emissions “in amounts which will” contribute significantly. It’s very clear from the statute that “significantly” modifies the amountof contributed emissions. There’s plenty of wiggle room in “significant” for EPA to conclude that different amounts could be significant, but it’s unambiguous that cost is not mentioned, either explicitly or implicitly.

This brings us to Whitman v. American Trucking Assn’s, Inc., a 2001 case involving the trucking industry’s attempt to convince the Supreme Court that EPA should have made cost-benefit analysis a component of its regulatory analysis. As the court made clear in Whitman, agencies only get their authority through statutes, and when a statute is silent on a source of authority, no such authority has been delegated. Consequently, it’s hard to square Whitman, which construed the statute’s silence as a prohibition, with Justice Ginsburg’s opinion here, which effectively construes the statute’s silence as a grant of power by considering it an ambiguity giving rise to Chevron deference.

As a side note, several in the blogosphere have observed that the original version of Justice Scalia’s dissent (since corrected) erroneously described EPA’s position in Whitman. That’s true, but it doesn’t really affect the substance of his argument (not that you’d know it from the schadenfreude on display). More amusing than this minor error, however, is the fact that EPA has, under two successive Democratic administrations, fought both against and for cost-benefit analysis all the way to the Supreme Court. It would be interesting to know why the switch happened.

In any event, the Court’s decision in EME Homer now casts doubt on Whitman, raising the question of whether EPA will still be prohibited from engaging in cost-benefit analysis without explicit statutory authorization. The majority in this case, which included the Chief Justice and Justice Kennedy, apparently favors broad interpretive latitude for agencies that would allow deference to the agency’s judgment in nontextual considerations. If the Chief Justice didn’t intend to grease the slippery slope to EPA’s limitless position in the greenhouse gas cases, why else would he assign this opinion to Justice Ginsburg? In the greenhouse gas cases, EPA claims that it can rewrite explicit statutory thresholds because enforcing the law as written would be too costly or difficult. If EPA can consider marginal costs of compliance for states, as they did here, why can’t EPA also use broader economic effects of applying statutory thresholds in the greenhouse gas cases to undermine the remainder of Congress’s authority? With the Chief and Justice Kennedy giving up this much ground, what possible limiting principle remains?