On Tuesday, the D.C. Circuit vacated and remanded the Trump administration’s 2019 Affordable Clean Energy (ACE) rule. The ACE rule was intended as a replacement for the Obama-era Clean Power Plan (CPP). ACE was viewed as a significant rollback, especially since the CPP was one of the first major initiatives to reduce greenhouse gas emissions. The Court’s decision will send the U.S. Environmental Protection Agency (EPA) back to the drawing board, opening the door for the Biden administration to pursue its own rule-making agenda.

Section 7411 of the CAA

The ACE rule repealed the CPP and severely limited the ways in which greenhouse gas emissions could be regulated based on a new interpretation of Section 7411 of the Clean Air Act (CAA). Under the ACE rule, EPA interpreted Section 7411 of the CAA as requiring the agency to consider only control methods that could be applied at and to a stationary source, such as heat rate improvement technologies, when determining the best system of emission reduction. This interpretation was directly at odds with the CPP, which utilized control methods that were not applied at or to a physical source such as generation shifting.

The primary group of petitioners sought review of EPA’s interpretation of Section 7411 and included state and municipal governments, power utilities, renewable energy trade associations, and public health and environmental advocacy groups. A second group of petitioners challenged the imposition of emission limits as unlawful, while a third group objected only to the ACE Rule’s determination that biomass co-firing was not an allowable compliance strategy. Although there were three groups of petitioners, the primary question before the Court was whether Section 7411 compelled EPA’s new interpretation. In holding that it did not, the Court found that the ACE Rule and its repeal of the CPP “rested critically on a mistaken reading of the Clean Air Act.” The Court found that Section 7411 does not limit the Agency to identifying only controls that can be applied at and to the source for at least three reasons: first, the Court held that the plain language reading of Section 7411(a)(1), which gives EPA authority to determine the best system, does not include a source-specific caveat. Second, there was no basis for EPA’s assertion that the source-specific language of Subsection (d)(1) should be read into (a)(1). Third, even if Subsections (d)(1) and (a)(1) were read together the language would still not support EPA’s interpretation.

The Court found no support for EPA’s new interpretation in the statutory text remarking that “[p]olicy priorities may change from one administration to the next, but statutory text changes only when it is amended.”

Moving Forward

The Court’s decision not only opens the door for the Biden administration to promulgate new rules regarding emission reductions but also restores the Agency’s flexibility in developing those rules. Once again, EPA can pursue the best system of emission reduction, including the utilization of generation shifting, to prioritize the cleanest sources of power, which is one of the most cost-effective methods of reducing emissions. Subsequently, this could create new opportunities for clean generators who may see an increased demand under the new rules.