Investigating the Constitutionality of EPA’s Clean Power Plan

CEI Working Paper

Syllabus

I. Introduction: Prognosticating the Constitutionality of EPA’s Options in the Face of States That

“Just Say No” to the Clean Power Plan

II. SCOTUS Federalism Jurisprudence Primer

A. Commerce Clause

B. Spending Power Clause

C. 10th Amendment

III. Thought Experiment: What Can EPA Do in Face of a “Just Say No” State?

A. EPA Option 1: Incenting States To Act with Sanctions

1. Highway Sanctions Likely Unconstitutional

2. Offset Sanctions Likely Constitutional

B. EPA Option 2: Directly Imposing the Clean Power Plan on “Just Say No” States

1. What Would a Federal Implementation Plan Look Like?

2. Is a “beyond the Fence” Federal Implementation Plan Constitutional?

a. The $64,000 Question: Does Indirect Commandeering Exist?

b. Is the Clean Power Plan the Byproduct of a Defect in the Political Process?

IV. Three Concluding Thoughts

A. No Article III Court Is Likely To Consider the Clean Power Plan on Its Constitutional Merits

B. EPA Is Evidently Confused

C. This Is the Next President’s Problem

Contact information:

William Yeatman

Senior Fellow, Competitive Enterprise Institute

wyeatman@cei.org

I. Introduction: Prognosticating the Constitutionality of EPA’s Options in Face of a State That

Refuses to Comply with the Clean Power Plan

The generation and retail provision of electricity has been the exclusive prerogative of state

governments since the New Deal.1 In 1935, Congress passed the Federal Power Act, which established a

“bright line” between state and federal jurisdiction over the electricity sector that remains in force

1 Sen. Burton Wheeler of Montana aptly summed the progressive logic behind the Federal Power Act when he

declared of the statute (of which he was a primary sponsor) that electric utilities are a “local institution” that should be “locally controlled.” Richard Cudahy & William Henderson, From Insull to Enron: Corporate (Re)Regulation after the Rise and Fall of Two Energy Icons,26 Energy Law Journal, 35 (2005) at 77

today: It’s the Federal Energy Regulatory Commission’s2 duty to regulate interstate wholesale power

sales, while States are left to oversee retail electricity markets as they see fit. Federal Power Commission

v. Southern California Edison Co., 376 U.S. 205, 215-216 (1964).

The Environmental Protection Agency’s Clean Power Plan (79 FR 34830) threatens to swallow this

“bright line.” By its very terms, the rule would require system-wide compliance by the electricity

industry.3 As such, the regulation necessarily expands EPA’s regulatory purview into discrete spheres of

influence that heretofore had been the province of sister federal agencies4 and State governments.

To date, the agency’s source-specific emissions limitations have been bounded by actions that could be

taken by the source—i.e., measures that can be adopted “inside the fence line.” The unprecedented

Clean Power Plan, by contrast, requires the implementation of policies like increased renewable energy

generation and end-user energy efficiency mandates, over which the regulated entity possess little to no

control. Thus, the Clean Power Plan goes “beyond the fence line.”

It is incontrovertible that EPA’s Clean Power Plan would increase the federal government’s power over

the electricity sector at the expense of the States’ existing authority. As a result, EPA’s interpretation of

the Clean Air Act—as embodied in the Clean Power Plan—raises obvious 10th Amendment implications.

These federalism concerns, moreover, are heightened by the fact that a number of States are giving

serious thought to refusing to implement the rule altogether, a scenario that sets up a possible

showdown between non-compliant States and the EPA.5

Without a doubt, many States will seek judicial review of EPA’s Clean Power Plan on the grounds (inter

alia) that EPA’s interpretation of its own statutory authority contravenes affirmative constitutional

limitations on the Congress’s exercise of its delegated powers.

Alas, prognosticating federalism jurisprudence in Article III Courts is no easy task. The State-Federal

balance of power has shifted much during U.S. history; the courts have adapted accordingly. As a result,

the line dividing the co-sovereigns’ power has proven fluid, entailing “undoubte[d] . . . gray

areas.” Fry v. United States, 421 U. S. 542, 558 (1975) (dissenting opinion). Indeed, the Court has

conceded that its cases interpreting 10th Amendment limitations on federal authority have “traveled an

unsteady path.” New York v. U.S. 505 U.S. 144 at 160.

The purpose of this working paper is to investigate the balance of power questions that will be raised by

EPA’s Clean Power Plan during judicial review. As I note above, the federalism tensions engendered by

2 Or its predecessor agency, the Federal Power Commission

3 See 79 FR 34881: “[I]n the U.S. electricity system, demand for electricity services is met…though integrated

consideration of a wide variety of possible options, coordinated by some combination of utilities, regulators, system operators, and market mechanisms. The EPA believes that the [Clean Power Plan targets] should reflect this integrated character.” 4 Primarily the Federal Energy Regulatory Commission, but also the Department of Energy

5 On March 19, Senate Majority Leader Mitch McConnell sent a letter to all fifty state governors, urging them to

refuse to comply with the Clean Power Plan because “the proposed plan is already on shaky legal ground, will be extremely burdensome and costly, and will not seriously address the global environmental concerns that are frequently raised to justify it.”

EPA’s Clean Power Plan are most taut in the incidence of States threatening to resist implementation of

the rule. It follows that the interaction between “just say no” States and EPA presents these difficult

constitutional matters in their starkest relief. And by extension, their most understandable light, it is

hoped.

Therefore, in order to investigate the crucial federalism concerns broached by EPA’s Clean Power Plan,

this paper performs a thought experiment regarding how the agency could address a noncompliant

State. In this manner, EPA’s range of options in the face of a “just say no” State provides the medium by

which I address the regulation’s constitutional consequences.

This brief proceeds thusly. First, I provide an introduction to the Supreme Court’s federalism

jurisprudence. Against this background, the paper then analyzes the constitutionality of EPA’s options in

response to States that refuse to comply with the Clean Power Plan. I conclude with three thoughts that

lend context to the analysis performed by this paper.

II. SCOTUS Federalism Jurisprudence Primer

Of course, those present at the Constitutional Convention would not recognize the modern federal

regulatory state and the power this leviathan wields over local decision-making. It is no less obvious that

the expansion of federal power at the expense of state authority has been made possible by the broad

language employed by the founding fathers in delegating powers to the Congress. Two such

enumerated powers concern us here: the commerce and spending power clauses. These delegations

and their constitutional bounds are described immediately below, after which the 10th amendment is

discussed.6

A. Commerce Clause

First, the Constitution authorizes Congress to “regulate Commerce…among the several States.”

Art. 1, §8, cl.3. “It is established beyond peradventure that the Commerce Clause of Art. 1 of the

Constitution is a grant of plenary authority to Congress.” National League of Cities et al., v.

Usery, Secretary of Labor, 26 U.S. 833, 840 (1976). While undoubtedly broad, the Congress’s

Commerce Clause authority is nonetheless subject to “limitations…prescribed in the

constitution” (ibid at 840, cit. omitted.) such as First Amendment protections for speech.

In Garcia v. San Antoinio Metropolitan Transit Authority, 469 U.S. 528 (1985), the Supreme Court

set forth the extent to which the Congress’s commerce clause authority is constitutionally

limited by either the 10th Amendment or principles of federalism inherent to American

government. “Garcia holds that the limits are structural, not substantive—i.e., that States must

find their protection from congressional regulation through the national political process, not

through judicially defined spheres of unregulable state activity.” South Carolina v. Baker, 485

6 To be sure, these are not the only constitutional provisions that structure the balance of power between State

and Federal Governments. For example, once federal power has been validly exercised, it is accorded primacy over state authority pursuant to the Supremacy Clause. Art. VI cl. 2. And “the court’s broad construction of Congress’s power under the Commerce and Spending Clauses has of course been guided…by the Constitution’s Necessary and Proposer Clause. Art. I, §8, cl. 18. New York v. U.S. at 159.

U.S. 505, 512. Therefore, Congress’s power to regulate interstate commerce runs afoul of the

States’ rightful authority only if the congressional action was marred by some extraordinary

defect in the “workings of the national government itself (Garcia at 552).”

B. Spending Power Clause

Second, the Constitution authorizes Congress “to pay the Debts and provide for the . . . general

Welfare of the United States.” Art. I, § 8, cl. 1. Pursuant to this constitutional delegation, known

as the spending power clause, Congress may condition state behavior on the receipt of federal

grants. Due to the contractual nature of such conditional grants—States may refuse the money,

and thereby avoid the conditions—the spending power clause delegation is more expansive

than the Commerce Clause. “Objectives not thought to be within Article 1’s enumerated

legislative fields may nevertheless be attained through the use of conditional grants under the

spending power.” South Dakota v. Dole, 483 U.S. 203, 207 (1987)

While broader in scope than the Commerce Clause, the Congress’s authority to condition grants

to States is not limitless. In South Dakota v. Dole, the Supreme Court established four criteria for

constitutionally permissible Spending Power deals: (1) the exercise of the Spending Power must

be in the “general welfare”; (2) the terms of the conditional grant must be unambiguous; (3) the

spending at issue must be germane to the federal interest; and (4) the conditions do not induce

the States to engage in unconstitutional activities.

Since 1936, the Supreme Court repeatedly suggested that Congress is prohibited from using its

Spending Power to “coerce” States. See e.g., U.S. Butler et al., 297 U.S. 1, 87 (1936); Steward

Machine Co. v. Davis, 301 U.S. 548, 589-590 (1937). but it was not until 2012, in NFIB v. Sebelius,

132 S. Ct. 2566 (2012), that the Supreme Court explained under what circumstances “the

financial inducement offered by Congress was so coercive as to pass the point at which pressure

turns into compulsion.” [ibid at 2604]

“Sebelius effectively holds that Congress may not condition a state’s receipt of certain federal

funds within an entrenched spending power partnership on that state’s assent to an

independent program—at least when the funds at stake are so substantial that the threat of

losing them coercively undermines state consent.” Erin Ryan, The Spending Power and

Environmental Law after Sebelius, 85 U. Colo. L. Rev. 1003.

C. Tenth Amendment

The Tenth amendment “states but a truism that all [authority] is retained” by the States “which

has not been surrendered” to Congress via a constitutional delegation of power. U.S. v. Darby,

312 U.S. 100, 124 (1941). Because it “is essentially a tautology,” (New York v. U.S. at 157), the

10th amendment, per se, provides little guidance in identifying the states’ “residuary and

inviolable sovereignty” left by the Constitution. Federalist No. 39.

However, the text of the Tenth Amendment is not the only source from which may be discerned

the constitutional principles of federalism. Out of recognition of the fact that States occupy a

special position in our constitutional system, the Supreme Court has consulted ‘’historical

understanding and practice,” the “structure of the Constitution,” and “[its own] jurisprudence”

when determining the proper dividing line between State and Federal authority. Printz v. U.S.,

521 U.S. 898, 906 (1997). (See also the extensive historical discussion of constitutional

federalism in Part II of New York v. U.S.)

The court’s extra-textual constitutional analysis regarding federalism has birthed the “anti-

commandeering” principle of 10th Amendment jurisprudence, which serves to limit the extent to

which “Congress may use States as implements of regulation.” New York at 161. In two

influential rulings during the 1990s, 7 the Supreme Court “made clear that the Federal

government may not compel the States to implement, by legislation or executive action, federal

regulatory programs. Printz at 925.

Naturally, it is no simple matter to discern when the federal government crosses the line from

methods short of coercion into unconstitutional commandeering. This is so because permissible

federal regulatory regimes necessarily employ state regulatory machinery to some extent. As

the Court explained in South Carolina v. Baker, 485 U.S. 505, 514-515

Any federal regulation demands compliance. That a State wishing to engage in

certain activity must take administrative and sometimes legislative action to comply

with federal standards regulating that activity is a commonplace that presents no

constitutional defect.

Therefore, when it comes to the Supreme Court’s 10th amendment jurisprudence, there is an

evident continuum. On the one end, “the [Supreme] Court has recognized that valid federal

enactments may have an effect on state policy” such that “it cannot be constitutionally

determinative that the federal regulation is likely to move the States to act in a given way” FERC

v. Mississippi, 456 U.S. 742, 766 (1982); on the other end, there is impermissible

commandeering of state legislatures or impressments of state executive capacity. At some point

in between, the incidental application to the States of a federal law violates the “established

constitutional doctrine of inter-governmental immunity.” [National League of Cities at 837].

III. Thought Experiment: What Can EPA Do in Face of a “Just Say No” State?

EPA is expected to publish a final Clean Power Plan this July. Under the terms of the proposed rule,

States would then be given a year to craft compliance plans.

So what happens if a State refuses to submit an implementation plan in July 2016?

In fact, the Clean Air Act gives EPA two options when faced with a State that refuses to play ball. First,

the Act affords the agency the power to incent States into action by imposing sanctions on them.

7 In addition to Printz (1997), the other seminal “anti-commandeering” ruling is New York v U.S., 505 U.S. 144

(1992). “Congress may not simply commandeer the legislative processes of the States by directly compelling them to enact and enforce a federal regulatory program.” at 161, citations and quotations omitted.

Second, the Act allows EPA to directly implement the Clean Power Plan on its own, independent of the

State. Below, I address both of these options—and their constitutionality—in turn.

A. EPA Option #1: Incenting States to Act through Sanctions

Clean Air Act §110(m) authorizes EPA to impose sanctions on a State whenever the agency

makes a finding that the State has failed to make “any submission…in relation to…any plan or

plan item required under [the Clean Air Act].” After determining that a state is non-compliant

with any part of the Clean Air Act, EPA may impose sanctions “at any time,” so long as EPA

provides an opportunity for notice and comment.

By statute, States must submit a “plan” to comply with the Clean Power Plan to EPA for

approval. It follows that EPA is empowered to impose sanctions at any time after the agency

formally determines that a State has failed to submit an implementation plan for the Clean

Power Plan.

In fact, it was precisely for instances such as “just say no” States that Congress granted to EPA

the power to issue discretionary sanctions. According to the agency’s implementing rules, EPA

expected to exercise its sanction authority only in cases where “the State has indicated an

explicit resistance to resolving a plan or program deficiency or to making a required plan or

program submittal” (59 FR 1472 at 1481). This is, of course, the exact circumstance at hand with

respect to the Clean Power Plan. 8

Clean Air Act §179 sets forth the sanctions that EPA is authorized to levy on recalcitrant States.

First, the agency may prohibit disbursement of highway funds. Second, the agency may

encourage a state’s compliance with the requirements of the Clean Air Act by ratcheting up the

stringency of existing regulatory programs for air quality.

1. Highway Sanctions Are Likely Unconstitutional

EPA’s authority to encourage a “just say no” State to change its mind using highway funding

restrictions is relatively straightforward. After the agency finds that a state has failed to

submit any plan required by the Clean Air Act, EPA may prohibit the Department of

8 Strangely, EPA Administrator Gina McCarthy said in an April interview that the agency did not have the authority

under the Clean Air Act to impose highway sanctions on States that “just say no” to the Clean Power Plan. Sad as I am to say it, Administrator McCarthy is wrong: The Clean Air Act undoubtedly authorizes EPA to impose sanctions under the broad terms of §110(m), as I explain in this section of the working paper. This raises the question: Why would she voluntarily disavow authority? I suspect that the answer lies in the highly uncertain constitutionality of EPA’s authority to impose highway sanctions for the Clean Power Plan (See III.A.1). While sanctions may be authorized by the Clean Air Act, they likely violate the Constitution. I believe that Administrator McCarthy disavowed the power to impose highway sanctions on “just say no” States because the agency didn’t intend to do so to begin with—due to NFIB v. Sebelius—and so she didn’t want to kick up a political firestorm. It’s also true that NFIB v. Sebelius opens up highway sanctions for other Clean Air Act programs into doubt. Perhaps Administrator McCarthy wanted to avoid scrutiny of its authority to impose discretionary sanctions.

Transportation from disbursing highway trust funding to the non-compliant State. (Clean Air

Act §179(b)(1)(A)).

Again, the Federal Government’s power to condition receipt of federal highway funds upon

regulatory compliance is based on the spending power clause of the Constitution (Art. 1, § 8,

Cl. 1). As is explained above (see II.B), the Congress’s power to attach strings to federal

funding is not unlimited. In NFIB v. Sebelius, the Court stipulated criteria by which it can

adjudge whether an act of conditional spending crosses the line into impermissible

“economic dragooning.” NFIB v. Sebelius at 2605.

Chief Justice Roberts’s ruling in NFIB v. Sebelius stipulates three criteria for discerning an

unconstitutionally coercive exercise of the Congress’s spending power authority.

The grant itself must be substantial;

The new condition must be placed on an entrenched spending program; and,

The new condition must effectuate a regulatory program independent of the

entrenched spending program.

At face value, EPA’s attempt to condition the disbursement of federal highway money on

state compliance with the Clean Power Plan seemingly meets all three criteria:

Highway funding is substantial—it is the third largest federal grant to States (after

Medicaid and education spending), comprising 4 percent of State spending in 2010

and about half of an average state’s highway budget.

Highway funding is entrenched—it’s been around since the 1966 Highway Safety

Act.

EPA’s Clean Power Plan is independent of the highway funding grant program—

EPA’s Clean Power Plan regulates greenhouse gas emissions from stationary

sources, not cars and trucks.

The upshot is that NFIB v. Sebelius likely renders unconstitutional any effort by EPA to rely

solely on highway sanctions to achieve state compliance with the Clean Power Plan.

2. “Offset” Sanctions Are Likely Constitutional

EPA’s exercise of its “offset” sanction authority is far less intuitive than the agency’s

imposition of highway funding restrictions. Therefore, before we address the

constitutionality of EPA’s authority to use “offset” sanctions to incent States to comply with

the Clean Power Plan, I first explain what an “offset” sanction is.

The Clean Air Act’s foundational air quality control regime is known as the “National

Ambient Air Quality Standards” (NAAQS] program. Under the NAAQS program, it is EPA’s

responsibility to establish nation-wide NAAQS standards, and it is the states’ responsibility

to achieve them. If an area of a State fails to achieve a given NAAQS, then that region is in

“NAAQS nonattainment” for that pollutant.

In turn, all areas in “NAAQS Nonattainment” are subject to the “offset” requirement in

Clean Air Act §173(c). Before any new source is allowed to be built in a nonattainment area,

that source must achieve emission reductions from existing sources that are commensurate

with its projected emissions. That is, the new source must “offset” its projected emissions

with emissions reductions.

If a State refuses to comply with any requirement of the Clean Air Act, then EPA is

empowered to sanction that State by rendering the “offset” provision twice as stringent

(Clean Air Act §179(b)(2)). Instead of a 1:1 ratio, new sources would have to achieve

emissions reductions at a minimum 2:1 ratio.

In fact, EPA’s “offset” sanctions are on much sounder constitutional footing than the

agency’s authority to impose highway funding sanctions on non-compliant States. Unlike

highway funding sanctions, offset sanctions do not actually involve the withholding of a

federal disbursement of taxpayer money, so their legality isn’t directly implicated by NFIB v

Sebelius, whose relevant conditions pertained to the Congress’s spending clause power.

Instead, EPA’s “offset” sanctions likely represent an acceptable “conditional exercise of

Congress’s commerce clause power.” New York at 174.

As I explain above (see II.A), the 10th Amendment bounds of the Congress’s commerce

clause power are set forth in Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S.

528 (1985). Under Garcia, a Congress’s exercise of its commerce clause powers does not

infringe on a State’s rightful authority unless there was a defect in the political process.

Because the passage of the 1990 Clean Air Act Amendments—which established EPA’s

authority to impose “offset” sanctions—was not tarnished by political corruption or

otherwise defective, offset sanctions are not likely to run afoul of constitutional principles of

federalism as established by the Supreme Court.

So, EPA’s authority to incent “just say no” States with “offset” sanctions is seemingly

constitutional. While limited geographically (to areas in non-attainment with a NAAQS),

EPA’s “offset” sanction is nonetheless a powerful tool. In practice, it authorizes the agency

to effectively shut down economic development within the offending State. Moreover, the

agency’s pending ozone NAAQS is expected to put the preponderance of the U.S. in non-

attainment.9 As a consequence, the aforementioned geographic limitations on EPA’s

“offset” sanction authority will be accordingly diminished.

B. EPA Option #2: Directly Imposing a Clean Power Plan on “Just Say No” States

In addition to incenting States to comply with the Clean Power Plan by imposing sanctions, the

Clean Air Act also authorizes EPA to directly implement the regulation in the non-compliant

9 For a map of areas that would be rendered “NAAQS nonattainment” by EPA’s pending ozone NAAQS, see

“Picturing the Impact of EPA’s Ozone Regulations,” American Chemistry Matters, 2 December 2014

State. In fact, EPA’s authority to impose a “federal implementation plan” on non-compliant

States is fundamental to the regulatory structure created by the Clean Air Act.

The Clean Air Amendments of 1970 (“the Act”) establish a regulatory regime known as

“cooperative federalism,” whereby a state’s “compliance with federal standards [is] a

precondition to continued state regulation in an otherwise pre-empted field.” Printz at 926.

Therefore, in a cooperative federalism arrangement, States are given a choice. On the one hand,

states can choose to regulate in accordance with the federal standards. However, “if a state

does not wish to submit a proposed permanent program that complies with the Act and

implementing regulations, the full regulatory burden will be borne by the Federal Government.”

Hodel v. Virginia Surface Mining & Reclamation Association, et al., 452 U.S. 264,288 (1981).

In this manner, States retain the freedom to allocate their limited resources to policy purposes

other than those dictated by the federal regulatory regime at hand. And when a State declines

to act, the federal government is empowered to step in and execute its own regulations on the

private sector within that State.

Accordingly, Clean Air Act §110(c) requires EPA to promulgate a federal implementation plan at

any time within 2 years after making a finding that a State has failed to make a required

submission pursuant to the statute.

1. What Would a Clean Power Plan FIP Look Like?

Due to the “anti-commandeering principle” of 10th amendment jurisprudence discussed

above (see II.C), any federal implementation plan would have to apply to fossil fuel power

plants, rather than state governments.

In fact, EPA has experience with two types of source-specific federal implementation plans.

The first is a direct emissions limitation. EPA’s proposed Clean Power Plan sets forth a fleet-

wide average emissions limit applicable to all coal-fired and all combined cycle natural gas

power plants. With an emissions limitation federal plan, EPA would simply apply this fleet-

wide average to all fossil fuel power plants.

EPA also has experience managing interstate “cap-and-trade” programs.10 These regulatory

regimes work by according power plants an annual emissions quota (usually in tonnage). If

an individual power plant achieves efficiencies, and thereby reduces its emissions of the

regulated pollutant, it is allowed to sell its “saved” emissions on an open market

administered by the EPA.

In either case, EPA would enforce these plant-specific targets through the threat of civil or

criminal penalty. If a power plant refused to comply with a federal plan (be it an emissions

10

e.g. the Title IV sulfur dioxide trading program and the Clean Air Interstate Rule

limitation or participation in a cap and trade), then the agency is required to commence a

civil action to assess and recover a penalty of up to $37,500 per day. Clean Air Act section

113(b). Environmental liability is strict, so it is virtually impossible for regulated entities to

escape these fines. EPA also is empowered to bring criminal charges pursuant to Clean Air

Act § 113(c).

Early in 2015, a high ranking EPA official announced that the agency would start work on a

model federal implementation plan for the Clean Power Plan. Office of Air and Radiation

chief Janet McCabe said that the model federal implementation plan will be proposed

contemporaneously with the promulgation this July of the final Clean Power Plan, sometime

this summer.

2. Are Clean Power Plan FIPs Unconstitutional?

There are two possible Constitutional arguments against EPA’s execution of a federal

implementation plan on a State that refuses to comply with the Clean Power Plan. Both are

based on Clean Power Plan targets that incorporate “beyond the fence” policies.

a. The 64,000 Question: Does Indirect Commandeering Exist?

At face value, a federal implementation plan for the Clean Power Plan seemingly

presents no threat of running afoul of the Supreme Court’s anti-commandeering

principle. This is because a federal plan does not directly implicate the machinery of

State government. Instead of regulating “States as States” (New York at 176) a federal

plan would regulate individual business.

However, it’s not that simple. As EPA itself concedes, the Clean Power Plan would

regulate the entire electricity “system.”11 In this fashion, the regulation is

unprecedented. Historically, the agency has limited its existing source standards (like

the Clean Power Plan) to measures that can be adopted by the source in question. Yet

the Clean Power Plan goes “beyond the fence.” It would require power plants to achieve

emissions reductions based on policymaking over which state governments, rather than

the owners of the power plant, have ultimate control. Therefore, to go beyond the

fence is to necessarily compel state lawmakers and regulators to legislate and

administer an entirely new regulatory regime.

For example, under the Clean Power Plan, a power plant’s emissions target is based in

significant part on increased energy efficiency by the end user (i.e., electricity

consumers). But a power plant doesn’t have the authority to empower itself to use

ratepayer money to encourage ratepayers to use less energy. Such a decision can be

made only by state energy regulators, usually comprising a regulatory agency known as

the Public Utilities Commission. State PUCs, in turn, can order increases in energy

11

See FN3

efficiency by the end user only pursuant to a statutory delegation of authority from the

State legislature. Currently, 18 States have thus enacted end-user energy efficiency

programs.12

This same dynamic holds true for increased renewable energy generation, which is

another “building block” that significantly factors into EPA’s Clean Power Plan targets.

Such a green energy mandate can come only from the State legislature, by way of state

energy regulators at the Public Utilities Commission. Currently 29 States thus have

enacted renewable energy programs.13

EPA plainly would violate the “anti commandeering” principle (see II.C) if it directly

ordered a state legislature to pass a green energy mandate. It would be similarly

unconstitutional for EPA to order a state’s Public Utilities Commission to devise and

implement an energy efficiency program for end-users. But can the agency indirectly

require these actions of States? That’s the $64,000 question: Does indirect

commandeering exist? Or is the Clean Power Plan instead a permissible “federal

statutory structure that in effect directed state decision makers to take or to refrain

from taking certain actions.” FERC at 762.

Upon closely examining the Supreme Court’s case history on “anti-commandeering,” I

suspect that an EPA-imposed federal plan for the Clean Power Plan would be struck

down if judicial review were to be settled on constitutional grounds.14

As I explain above, there’s a continuum of commandeering (see II.C). On the one end,

there are permissible federal actions that require some degree of state governmental

action in order to be implemented.15 On the other, there are direct orders issued by the

federal government to state executive or legislative branches of government. These are

instances of impermissible “commandeering.”

Unfortunately, the court has failed to establish a hard rule to distinguish where along

this continuum lays the line separating constitutional cooption from unconstitutional

coercion.

12

Database of State Incentives for Renewables & Efficiency, Summary Map, Renewable Portfolio Standards, http://www.dsireusa.org/resources/detailed-summary-maps/ 13

Ibid, Energy Efficiency Standards 14

Which is an unlikely event—see IV.A below 15

For example, consider an “inside the fence” emissions standard. EPA’s Mercury and Air Toxics Rule would require all existing coal-fired power plants to install a capital-intensive retrofit technology to control sulfur dioxide, known as “scrubbers.” Implementing the MATS rule undoubtedly would implicate the machinery of state government. First, the MATS emission limit would have to be incorporated into a “state implementation plan”—a state law that incorporates all Clean Air Act rules and requirements applicable in that State—by the state legislature. And before the utility began to install the scrubbers on coal-fired power plants, it would have to win approval from state energy regulators on the Public Utilities Commission (or equivalent agency).

Using nothing more sophisticated than a “you know it when you see it” intuition, I

suspect the Clean Power Plan simply would require too much to not trigger

constitutional protections for States. After all, it is no overstatement to say that the

Clean Power Plan would fundamentally overhaul the way States have overseen their

electric industry since the New Deal. More to the point, the rule would severely diminish

the states’ long-held, exclusive prerogative to oversee the retail provision of electricity.

Figuratively speaking, that’s a big lift. I doubt whether it can be achieved by leveraging

State government action with the threat of penalizing electricity providers out of

business.16

In light of the importance of reliable electricity to any State and its economy, a “beyond

the fence” federal implementation plan of the sort proposed in EPA’s Clean Power Plan

would seem to be a “gun to the head” to state governments that the Supreme Court

prohibited on federalism grounds in NFIB v. Sebelius (at 2604).

b. Is Clean Power Plan Politically Defective?

There is a second possible constitutional objection to the Clean Power Plan, and it rests

on 10th amendment limitations to the Congress’s Commerce Clause power established

by Garca v. San Antonio Metropolitan Transit Authority, et al., 469 U.S. 528 (1985]. As

described above [See II.A], the only substantive restraint on the exercise of Commerce

Clause powers” invoked by the States “must be tailored to compensate for possible

failings in the national political process.” Garcia at 554.

Again, the Clean Power Plan would transform the electricity sector in a systemic

manner, as EPA itself concedes. States could argue that there was no way they could

have foreseen that the Clean Air Act or any of its amendments would be used in this

manner. States could argue that it was “politically defective” for EPA to impose such a

consequential policy—i.e., climate change mitigation—one that Congress repeatedly has

considered and rejected.17

IV. Three Concluding Thoughts That Lend Context to This Paper

A. No Article III Court is likely to consider the Clean Power Plan on its constitutional merits. The

Clean Power Plan suffers from a number of legal infirmities. It arguably violates the Clean Air Act

16

EPA officials regularly extol the Clean Power Plan’s “flexibility,” but whether the rule actually affords compliance options other than the four “building blocks” (on which the targets were based) is very much open to debate. See: FERC Commissioner Puts the Lie to EPA’s Rote Claim Regarding Clean Power Plan Flexibility, William Yeatman, GlobalWarming.org, February 24, 2015. However, whether or not there exists actual “flexibility” in compliance options with the Clean Power Plan is immaterial for the purposes of this analysis, due to the simple fact that the non-“building block” options are also “outside the fence.”] 17

See Marlo Lewis, “EPA Permitting of Greenhouse Gases: What Does Legislative History Reveal about Congressional Intent?,” GlobalWarming.org, 3 December 2013

in a multiple ways,18 the Administrative Procedures Act,19 the Federal Power Act,20 and a canon

of statutory interpretation.21 Of course, federal courts will endeavor to avoid a constitutional

interpretation when other permissible conclusions are at hand. “If a case can be decided on

either of two grounds, one involving a constitutional question and the other, a question of

statutory construction or general law, the court should decide on the basis of the latter.”

Maryland v. EPA, 530 F.2d 215, 227 (4th Cir. 1975) (citations omitted). I strongly suspect the rule

will be struck down on non-constitutional grounds.

B. EPA is evidently confused. The agency has no experience overseeing the electricity industry,

and it shows. For starters, the proposed rule doesn’t actually instruct States how to implement

the plan. Instead, it quite literally provides more questions than answers. EPA in the proposal

requests comment on more than 500 different aspects of the rule. Section VIII of the proposal

deals with state implementation plans, and it provides virtually no insight. There are more tea

leaves suggesting that EPA is lost. When the rule was proposed last summer, EPA promised that

implementation guidance would be forthcoming, but the agency has yet to do so. Finally, EPA

officials have demonstrated an inability to answer basic questions about the plan.

C. This is the next President’s problem. If all goes to according to expectations, then state

compliance plans for the Clean Power Plan would be due in July 2016 at the earliest. By statute,

the agency must subject a federal implementation plan to notice and comment. And EPA’s

implementing rules for discretionary sanctions also require public notice and comment.

Realistically, such a notice and comment procedure would require five months at a minimum.

The upshot is that EPA could not impose a FIP earlier than December 2016. It’s unlikely that the

Obama administration would press the limits of federalism during his lame duck session.

18

See Marlo Lewis, CEI Comments on EPA’s Clean Power Plan, 1 December 2014 19

See William Yeatman, CEI Comments on EPA’s Clean Power Plan, 1 December 2014 20

See Oklahoma Attorney General Scott Pruitt comments on EPA’s Clean Power Plan, 1 December 2014 21

See William Yeatman, “On Elephants, Mouseholes, and EPA’s Climate Plan for Existing Power Plants,” GlobalWarming.org, 4 June 2014