D.C. Circuit Hears Oral Argument on EPA’s Clean Power Plan

On September 27, 2016, the U.S. Court of Appeals for the D.C. Circuit held the much-anticipated oral argument regarding the U.S. Environmental Protection Agency’s Clean Power Plan. The controversial cornerstone of President Obama’s Climate Action Plan, the Clean Power Plan would require existing power plants to reduce carbon emissions by 32 percent by 2030 as compared to 2005 emission levels. The D.C. Circuit took the unusual step of holding the oral argument en banc before a panel of ten judges, including six Democratic appointees and four Republican appointees. While the decision by the D.C. Circuit to hear the case en banc demonstrates the court’s recognition of the importance of the case (the D.C. Circuit typically only hears one en banc case per year), that recognition is not expected to affect the timing of a decision, which may not come until the next President is sworn in. In the meantime, the Supreme Court’s stay of the rule is in place and is expected to remain so until such time as that court potentially grants certiorari, and issues its own decision possibly as late as Summer 2018.

Generally, the oral argument hued closely to the D.C. Circuit’s August 17th order, covering five overall segments, including (1) Statutory Issues (including Generation Shifting and State Authority); (2) Section 112 of the Clean Air Act; (3) Constitutional Issues; (4) Notice Issues; and (5) Record Based Issues. Having originally scheduled only 3 hours and 38 minutes in total for oral argument, the court demonstrated its interest in understanding the nuance of key issues, allowing parties to present their case for just shy of 7 hours.

The ten judge panel included six Democrat-appointed judges, Judge Judith Ann Wilson Rogers (Clinton); Judge David S. Tatel (Clinton); Judge Sri Srinivasan (Obama); Judge Patricia Ann Millett (Obama); Judge Robert L. Wilkins (Obama); and Judge Nina Pillard (Obama); and four Republican-appointed judges, Judge Karen L. Henderson (G.H.W. Bush); Judge Janice Rogers Brown (G.W. Bush); Judge Thomas B. Griffith (G.W. Bush); and Judge Brett M. Kavanaugh (G.W. Bush). Obama Supreme Court nominee Chief Judge Merrick B. Garland (Clinton) declined to participate.

In the first part of the day, industry and state petitioners focused on EPA’s lack of authority to mandate “beyond the fenceline” generation shifting, i.e., requiring an owner or operator to construct or subsidize generation at another source. The issues posed to the en banc panel of judges was whether EPA can essentially shut-down coal power generating facilities in order to replace them with natural gas, wind, or solar generation. Typically, with challenges to federal agency rulemakings, the standard of review requires the court to give deference to the agency.

However, in the case of rules that are “transformative” or of vast economic significance, courts require a “clear statement of authority” from Congress. In Utility Air Regulatory Group v. E.P.A, Justice Scalia delivered the opinion of the Supreme Court, opining on a similar expansion of agency power:

EPA's interpretation is also unreasonable because it would bring about an enormous and transformative expansion in EPA's regulatory authority without clear congressional authorization. When an agency claims to discover in a long-extant statute an unheralded power to regulate “a significant portion of the American economy,” Brown & Williamson, 529 U.S., at 159, 120 S.Ct. 1291, we typically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast “economic and political significance.”

U.A.R.G v. E.P.A., 134 S. Ct. 2427, 2444 (2014).

Industry and state petitioners argued that the Clean Power Plan, with its broad attempt to restructure the nation’s power industry, is such a transformative rule requiring clear congressional authorization. Petitioners contend that Section 111 lacks any clear language authorizing the Agency’s approach. Many of the judges on the panel appeared to agree that the rule was transformative, but offered little insight into their thoughts as to the existence of any clear congressional authority in Section 111.

Next up, petitioners focused on the Section 112 Exclusion argument, highlighting that the text of Section 111(d) expressly prohibits EPA from requiring states to regulate air pollutants from a source category that is already regulated under Section 112.

The second half of the day focused largely on Petitioners constitutional arguments, which had been dubbed the “commandeering” and “avoidance” issues. With respect to “commandeering,” Petitioners argued that the Clean Power Plan violates the sovereignty of the states by requiring them to implement EPA’s rule. EPA countered that the states do in fact have a choice and are not required to implement the Clean Power Plan. Petitioners countered that the Clean Power Plan gives states no choice but to participate and support EPA’s preferred power sources or to face the threat of blackouts and other threats to public safety if they decline to take the necessary legislative or regulatory action.

A smaller portion of the afternoon argument focused on potential violations of the Administrative Procedures Act. Specifically, Petitioners argued that the Final Clean Power Plan differed so substantially from the Proposed Rule that EPA should be required to start the rulemaking process over to allow for meaningful stakeholder feedback. Petitioner’s argued that the uniform national performance rate for power plants contained in the Final Clean Power Plan was never actually contemplated by the Proposed Rule. Finally, Petitioners wrapped up their arguments challenging the underlying technical feasibility of the rule.

While the mere fact that the D.C. Circuit decided to hear the case en banc demonstrates the importance of the rule, there is uncertainty as to whether a decision will come before the end of the year or after the next President takes office. Either way, any party seeking review by the Supreme Court would have to file the certiorari petition within 90 days of the decision. On the conservative end, the Supreme Court may not decide to hear the case until Fall 2017. If the Supreme Court decided to grant certiorari, a decision may not come until mid- to late-2018. In the meantime, the Supreme Court has issued a stay of the rule pending disposition of the case in the D.C. Circuit and disposition of a petition for a writ of certiorari, if such writ is sought.