EFFECT OF SUPREME COURT S STAY ON STATES OBLIGATIONS TO IMPLEMENT THE CLEAN POWER PLAN

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1 EFFECT OF SUPREME COURT S STAY ON STATES OBLIGATIONS TO IMPLEMENT THE CLEAN POWER PLAN On February 9, 2016, the United States Supreme Court took the extraordinary and unprecedented action of staying the Clean Power Plan ( Power Plan ). The Supreme Court s stay was issued in response to five separate stay applications that had been filed by almost all of the petitioners challenging the Power Plan in the U.S. Court of Appeals for the D.C. Circuit ( D.C. Circuit ). The stay took effect immediately and will remain in place until the D.C. Circuit and the Supreme Court complete their judicial review of the Power Plan. The purpose of this analysis is to examine the legal effect that the Supreme Court s stay will have on the Power Plan. As explained below, the immediate effect of the stay is to toll (i.e., suspend) all of the deadlines and requirements of the Power Plan during the entire judicial review process. This means that the Power Plan obligations are void and have no legal effect until the courts (including the Supreme Court) complete their review of the legal challenges to the Power Plan. EPA therefore cannot enforce any Power Plan requirement or deadline while the stay remains in place. Nor can states (or other regulated entities) be penalized for refusing to comply with any such applicable requirement or deadline. In addition, the analysis examines the effect that the stay will have on the suspended deadlines in the Power Plan if courts were to ultimately uphold the Power Plan. In particular, the analysis presents the many reasons why it will be necessary for EPA to reset the Power Plan deadlines once the stay is lifted in order to ensure that status quo is maintained. As described below, past court and EPA precedent clearly supports the extension of the suspended Power Plan deadlines by the same amount of time that the Supreme Court s stay remains in place. If, for example, the stay were to remain in place for two years, then EPA would have to establish new deadlines by adding two years to every suspended deadline in the Power Plan. For purposes of providing background, the analysis begins with a brief review of key details regarding the Supreme Court s decision to stay the Power Plan SUPREME COURT S STAY OF THE POWER PLAN The Supreme Court issued five identical orders granting five separate emergency applications seeking an immediate stay of the Power Plan. The first stay application was submitted by 29 states and state agencies on January 26, It was quickly followed by four additional stay applications filed by a wide range of petitioners involved in the D.C. Circuit litigation, including electric utilities, labor unions, various other industry groups, and the State of North Dakota. 1 The relief sought in the stay applications was an immediate stay of the Power Plan. In the case of the stay application filed by electric utilities and allied parties, the applicants also specifically requested that the stay extend[ ] all compliance dates by the number of days between the publication of the decision by the courts, including this Court, relating to the rule s validity. 2

2 Similarly, the coal industry s stay application requested that the Power Plan be suspended, and all deadlines in it suspended, pending the completion of all judicial review. 3 In response to each of the stay applications, the Supreme Court issued an order that granted the application for staying the Power Plan and directed that the stay remain in place for the duration of the litigation. 4 Although the Supreme Court s order does not contain further explanation, as discussed below, the Court s granting of the stay applications at minimum clearly reflects an intention to toll the deadlines in the Power Plan for the full period of judicial review, including any Supreme Court review. EFFECT OF THE STAY ON STATES OBLIGATIONS UNDER THE POWER PLAN The effect of the Supreme Court s stay is clear. It means that that the Power Plan has no legal effect unless and until the stay is lifted. Consequently, while the stay is in place, the Power Plan imposes no legal obligations on states (or other regulated entities) while courts review the pending legal challenges to the final rule. This effect of such a stay is explicitly confirmed by the Supreme Court s decision in Nken v. Holder, 5 where the Court stated that a stay simply suspend[s] judicial alteration of status quo 6 and that [t]he whole idea [of a stay] is to hold the matter under review in abeyance because the appellate court lacks sufficient time to decide the merits. 7 In the case of the Power Plan, the stay does so either by halting or postponing the Power Plan deadlines and requirements or temporarily divesting [them] of enforceability. 8 This effect of the stay is also confirmed by well-established case law in the D.C. Circuit. In Washington Metro Area Transit Commission v. Holiday Tours, Inc., the D.C. Circuit ruled that the purpose of a stay is to maintain status quo pending a final determination of the merits of the suit. 9 The Supreme Court s authority to halt or suspend the Power Plan is not just an inherent power of the court, 10 but is firmly grounded in statute. The Administrative Procedure Act, for example, grants the Supreme Court authority to issue all necessary and appropriate process to postpone the effective date of an agency action or to preserve status or rights pending conclusion of the review proceedings. 11 Similar statutory authority to suspend the Power Plan is provided to the Supreme Court in the All Writs Act. 12 As a result of the Supreme Court s stay, EPA cannot now enforce any Power Plan requirement or deadline, and states (or other regulated entities) cannot now be penalized for refusing to comply with any such applicable requirement or deadline. For example, states have no legal obligation to submit initial implementation plans by the September 2016 deadline, as required under the Power Plan. Nor will states be required to submit their final implementation plans by the September 2018 deadline. Similarly, EPA cannot take any other action (such as the imposition of a federal plan on a state) to enforce these submittal requirements against states that do not develop approvable implementation plans while the stay remains in effect. Rather, these obligations are void unless and until the stay is lifted which would likely occur only after the Supreme Court reviews the Power Plan, and then only if the Power Plan is upheld by the Court. 13 TOLLING OF DEADLINES IF THE STAY IS LIFTED If the Power Plan is struck down at the end of all litigation, then the lifting of the stay is irrelevant. EPA would have no deadlines or requirements to enforce because the Power Plan no longer exists. If, however, the Power Plan is ultimately upheld on appeal, then as discussed below, it will be 2 P age

3 necessary for EPA to reset all of the suspended deadlines through a notice and comment rulemaking before there will be new, operative deadlines under the Power Plan. EPA Obligation to Reset the Power Plan Deadlines. There are several compelling reasons why it would be necessary for EPA to reset all of the suspended Power Plan deadlines. First, the Supreme Court has already made a decision to toll the Power Plan deadlines when it explicitly granted several of the stay applications that specifically sought a tolling of the Power Plan deadlines. As noted above, the stay application submitted by the electric utilities and allied parties requested an extension of the rule s compliance deadlines, 14 while coal industry s stay application also expressly asked that the Power Plan be stayed, and all deadlines in it suspended, pending the completion of all judicial review. 15 The Court granted both applications in separate orders issued at the same time that the other petitions were granted. Second, EPA would have a difficult time arguing that the stay did not toll the current deadlines in the Power Plan. In the brief filed in opposition to the stay applications, the Solicitor General (representing EPA) acknowledged that the applications sought the tolling of all relevant deadlines. Notable examples are the Solicitor General s statements that all of the stay applicants explicitly or implicitly ask this Court to toll all of the relevant deadlines set forth in the Rule, even those that would come due many years after the resolution of their challenge; 16 the granting of a stay would mean that implementation of each sequential step mandated by the Rule would be substantially delayed if the Power Plan were ultimately upheld; 17 and [a] request for such tolling is inherent even in the applications that do not explicitly address that subject, as all of them rest on the premise that a stay would forestall harms alleged to arise from future deadlines. 18 These statements further confirm the conclusion that the Power Plan deadlines were tolled when the Supreme Court granted the stay applicants explicit or implicit requests, as acknowledged by the Solicitor General, to extend the current deadlines in the Power Plan. Furthermore, a tolling of the deadlines is clearly authorized under the Administrative Procedure Act and the All Writs Act both of which provide the Court with general authority for the tolling of deadlines to preserve the status quo pending completion of judicial review. 19 Length of the Extension. Based on past precedent, it is likely that the Power Plan deadlines will be tolled by the same amount of time that the Supreme Court s stay remains in place. For example, if the stay remained in place for two years, then EPA would have to set new deadlines by adding two years to the existing Power Plan deadlines. Under this approach, for example, a two-year stay of the Power Plan would correspondingly extend by two years the existing 2018 deadline for the state submittals of final implementation plans to Similarly, the start date for the Power Plan s interim compliance period would be extended from 2022 to 2024, and its final compliance period from 2030 to The specific dates of new deadlines would be ultimately established by EPA to preserve status quo in accordance with the final rulings and orders issued by the Supreme Court and D.C. Circuit P age

4 Courts have followed this exact same approach in the case of other major air regulations that were initially stayed but eventually reinstated upon completion of the judicial review process. One recent example is the Cross State Air Pollution Rule (CSAPR), an air regulatory program to remedy interstate transport of air pollution that the D.C. Circuit stayed just prior to the start of the CSAPR program on December 30, In this case, the stay remained in effect for almost three years, until October 23, 2014, when the D.C. Circuit granted EPA s motion to lift the stay and to toll by three years the CSAPR compliance deadlines. 22 In response to the court s order to lift the stay, EPA immediately adopted by rulemaking ministerial amendments to the CSAPR deadlines that extended the Phase 1 compliance deadlines from 2012 and 2013 to 2015 and 2016, and the Phase 2 compliance deadline from 2014 to The NOx SIP Call is another good example of a major air regulatory program for which the D.C. Circuit extended all compliance deadlines by the amount of time that the court-ordered stay remained in place. First, the D.C. Circuit issued a stay of the state plan submission deadline for implementing the NOx SIP Call reduction requirements on May 25, 1999 which was 128 days prior to the deadline for submitting such state plans. 24 Recognizing that [t]he purpose of a stay is to maintain the status quo pending a final determination of the merits of the suit, the court provided states with an additional 128 days to submit their implementation plans after the lifting of the stay. 25 The resetting of this deadline had the effect of extending the state submission deadline by just over a year, from September 30, 1999 to October 30, In a second order issued on August 30, 2000, the D.C. Circuit amended its prior May 25 order by ordering EPA also to reset the deadline for full implementation of the state plans for achieving the NOx SIP Call reduction requirements. In so doing, the court extended this compliance deadline for over a year from May 1, 2003 to May 31, and noted that [t]his extension accords with the status quo principle the court applied in extending the deadline for submitting state plans by providing states (and affected sources) with the exact same amount of time (1,309 days) for meeting their compliance obligations as provided in the original NOx SIP Call. 27 CONCLUSION The effect of the Supreme Court s stay is clear. EPA cannot enforce any Power Plan requirement or deadline while the stay remains in place. Nor can states (or other regulated entities) be penalized for refusing to comply with any such applicable requirement or deadline. Rather, all of the Power Plan obligations are void unless and until the stay is lifted which would likely occur only after the Supreme Court reviews the Power Plan, and then only if the Power Plan is upheld by the Court. If the Power Plan is struck down at the end of all litigation, then EPA would have no deadlines or requirements to enforce because the Power Plan no longer exists. If, however, the Power Plan is ultimately upheld on appeal, then it will be necessary for EPA to reset all of the suspended deadlines in the Power Plan. This resetting of the deadlines will most likely require the involvement of the D.C. Circuit and be guided by past court precedent, which generally requires the stay is to maintain status quo pending a final determination of the merits of the suit. 28 In light of this precedent, it is likely that the suspended Power Plan deadlines will be extended by the same amount of time that the Supreme Court s stay remains in place. 4 P age

5 1 Application by 29 States and State Agencies for Immediate Stay of Final Agency Action During Pendency of Petitions for Review, No. 15A793 (U.S. Jan. 29, 2016); Application of Utility and Allied Parties for Immediate Stay of Final Agency Action Pending Appellate Review, No. 15A776 (U.S. Jan. 27, 2016) (Utility Stay Application); Application of Business Associations for Immediate Stay of Final Agency Action Pending Appellate Review, No. 15A787 (U.S. Jan. 27, 2016); Coal Industry Application for Immediate Stay of Final Agency Action Pending Judicial Review, No. 15A778 (U.S. Jan. 26, 2016) (Coal Industry Stay Application); Application by the State of North Dakota for Immediate Stay of Final Agency Action Pending Appellate Review, No. 15A793 (U.S. Jan. 29, 2016). 2 Utility Stay Application at page 22. See also id. at page 5. 3 Coal Industry Stay Application at The Supreme Court s order requires the stay to remain in effect until one of the following occurs: (1) the D.C. Circuit decides the case and no petition for certiorari (i.e., appeal) to the Supreme Court is filed; (2) the D.C. Circuit decides the case, an petition for certiorari to the Supreme Court is filed, but the Supreme Court denies the petition (i.e., declines to hear the appeal); or (3) the D.C. Circuit decides the case, an petition for certiorari is granted by the Supreme Court (i.e., decides to hear the appeal), and the Supreme Court issues a decision on the merits of the case. Of these scenarios, the last is the most likely one to occur. 5 Nken v. Holder, 556 U.S. 418 (2009) U.S. at 429 (quoting Ohio Citizens for Responsible Energy, Inc. v. NRC, 479 U.S. 1312, 1313 (1986)) U.S. at U.S. at F.2d 841, 844 (D.C. Cir. 1977). See also Natural Resources Defense Council v. EPA, 22 F.3d 1125, 1137 (D.C. Cir.) (stating that: It would be unfair to penalize states that reasonably relied on the stay s extended deadlines by accelerating the [compliance] scheme. ) U.S. at U.S.C In particular, the All Writs Act provides broad authority to preserve status quo by holding the matter in abeyance during judicial review by authorizing the Supreme Court to issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law. 28 U.S.C. 1651(a). 13 By contrast, it may be possible for EPA to move forward with its plan to develop several existing regulatory initiatives in support of the Power Plan so long as those new regulations take no legal effect until the litigation over the Power Plan concludes. These initiatives include the development of final rules for establishing the Clean Energy Incentive Program to encourage early emission reductions, a federal plan that would apply to states failing to adopt approvable state plans, and model trading rules that states may incorporate into their plans. To put in other words, the Supreme Court s stay does not appear to preclude EPA from finalizing these rules so long as they have no effect while the stay remains in effect. This conclusion is based on past instances where EPA has developed implementing regulations for an air regulatory program for which a court had stayed during the pendency of litigation. One notable example is the Cross-State Air Pollution Rule (CSAPR) for which EPA issued revisions to the CSAPR regulations in 2012, after the D.C. Circuit had issued an order staying the CSAPR program on December 30, See e.g., 77 Fed. Reg. 34,830 (February 21, 2012) (making first set of revisions to CSAPR regulations while stay remained in place); 77 Fed. Reg. 34,830 (June 12, 2012) (making second set of revisions to CSAPR regulations while stay remained in place). 14 Utility Stay Application at page 5. See also id. at page Coal Industry Stay Application at Memorandum for Federal Respondents in Opposition at 2 (U.S. February 4, 2016) (Federal Respondents Memorandum). 17 Federal Respondents Memorandum at Federal Respondents Memorandum at 3. See also id. at (discussing that a stay would substantially delay all of the Power Plan deadlines). 19 See 5 U.S.C. 705 (Administrative Procedure Act); 28 U.S.C. 1651(a) (All Writs Act). 20 The process of resetting the Power Plan deadlines may include the involvement by the D.C. Circuit. In so doing, the court will have some discretion in determining the amount of time that the deadlines should be tolled to preserve status quo. However, any attempt to avoid tolling the deadlines will be difficult to justify due to judicial precedent and past tolling decisions by the D.C. Circuit that are discussed in this paper. Moreover, it would be fundamentally inconsistent with specific findings in the final Power Plan rule on the amount of time that EPA determined was necessary for states to develop implementation plans and regulated entities to comply with the reduction requirements of the Power Plan. See e.g., Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Generating Units, 80 Fed. Reg. 64,662, 64,669 (October 23, 20015) (EPA noting that a time extension to 2022 was necessary to reflect the period of time required for state plan development and submittal by states ); id. at 64,669 (EPA conceding that a compelling record for extending 5 P age

6 the start of the program from 2020 to 2022 given that the required CO 2 emission reductions could not be achieved as early as 2020 without compromising electric systems reliability, imposing unnecessary costs on ratepayers, and requiring investments in more intensive generation ). 21 Order, No , EME Homer City Generation, L.P. v. EPA, ECF (D.C. Circuit December 30, 2011). 22 Order, Document No , EME Homer City Generation, L.P. v. EPA, ECF (D.C. Circuit October 23, 2014). See also 79 Fed. Reg. 71,663, 71,665 (rulemaking to amend the compliance deadlines tolled by D.C. Circuit s stay of the CSAPR program) Fed. Reg. at 71,665. In addition to extending compliance deadlines for the NOx and SO 2 control requirements imposed under Phase 1 and 2 of the CSAPR program, EPA also reset the deadlines for complying with emission monitoring and other CSAPR requirements affected by the stay. See 79 Fed. Reg. at 71, Order, No , Michigan v. EPA, ECF (D.C. Circuit June 22, 2000). 25 Id. (quoting Washington Metro. Area Transit Commission, 559 F.2d at 844). 26 Order, No , Michigan v. EPA, ECF (D.C. Circuit June 22, 2000). Although the Homer City and Michigan tolling orders provide strong indication on how D.C. Circuit and EPA should reset the Power Plan deadlines, it should be noted that the tolling orders are unpublished decisions of the D.C. Circuit that cannot be cited as controlling precedent in other litigation. 27 Id. See also 67 Fed. Reg. 21,522, (April 30, 2002) (EPA noting in subsequent rulemaking to revise the NOx SIP Call deadlines, this extension provided affected sources the exact same amount of time (1,309 days) for meeting their compliance obligations as provided in the original NOx SIP Call) F.2d at P age