Environmental, Natural Resources, & Energy Law Blog
New Source Performance Standards, Section 111(d), and Cooperative Federalism - Sean Pflugner
On February 28, 2022, the U.S. Supreme Court heard oral arguments in the case of West Virginia v. Environmental Protection Agency. If decided on the merits, the disposition of this case could determine whether the Environmental Protection Agency (EPA) has broad authority to regulate greenhouse gas emissions in the energy sector. The Petitioners, including 27 States led by West Virginia, brought suit against EPA challenging performance standards for existing fossil-fuel-fired power plants. The main substantive issue argued in this case is whether Congress limited EPA, via the Clean Air Act, to considering measures that can be applied to, and at the level of, an individual regulated source when promulgating the “best system of emission reduction” for existing sources. I contend that the principle parties to this case misapplied the statutory directives established by Congress. Specifically, I contend that the Clean Air Act requires the development of two standards of performance under the applicable program for a given air pollutant: one created by each State for its existing stationary sources and a second created by EPA for new stationary sources. A dual regulatory system, such as this, is consistent with “cooperative federalism,” which is the central concept in U.S. environmental law. Further, this division of regulatory burden expresses an understanding or belief that existing stationary sources vary wildly between the States. Thus, each State is better situated to tailor a performance standard for its existing sources than a generic national standard implemented by the federal government. Conversely, EPA is better situated to regulate new stationary sources, as it is able to collate the performance standards from across the country and implement them during less costly stages of development and/or permitting. In order to better understand this issue, it is helpful to briefly review the factual and statutory context from which it arises.
The Clean Air Act
Congress’ efforts to regulate air pollution date back to 1963, when it passed the Clean Air Act. Enactment of the Air Quality Act of 1967 and the Clean Air Act of 1970 soon followed. The Clean Air Act of 1970 was amended in 1977 and, most recently, in 1990. EPA’s current legal authority to administer federal programs regarding air pollution is predicated on the provisions of Clean Air Act as amended in 1990.
The Clean Air Act establishes several federal programs to regulate air pollution that are administered by EPA, including the Standards of Performance for New Stationary Sources (known as New Source Performance Standards or NSPS) program, the National Ambient Air Quality Standards (NAAQS) program, and the National Emission Standards for Hazardous Air Pollutants (NESHAP) program. In creating these programs, Congress found, among other things, that air pollution prevention and air pollution control at its source are the primary responsibilities of States and local governments, and that Federal financial assistance and leadership is essential for the development of cooperative Federal, State, regional, and local programs to prevent and control air pollution. 42 U.S.C. § 7401(a)(3), (4). To better understand the State-Federal relationship, known as “cooperative federalism,” we must address how the NSPS program operates to reduce or eliminate air pollution, as this is the Clean Air Act program that gave rise to the issue presented in West Virginia v. EPA.
Generally, EPA identifies a substance to regulate in order to ascertain whether it qualifies as an air pollutant. Relevant here, greenhouse gases, specifically carbon dioxide, qualify as an air pollutant. See Massachusetts v. EPA, 549 U.S. 497, 528-529 (2007). The statutory framework determines which federal program in the Clean Air Act EPA will use to regulate the identified air pollutant. For reasons unimportant to this paper, greenhouse gases and/or carbon dioxide do not qualify for regulation under NAAQS, NESHAP, or other Clean Air Act programs, as only certain air pollutants are subject to the associated provision. EPA determined that stationary sources of greenhouse gases and carbon dioxide are regulated under the NSPS program.
Section 111 of the Clean Air Act sets out the NSPS program. Under the NSPS program, EPA shall publish a list of categories of sources. A category of sources shall be included on this list if, in EPA’s judgment, it “causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare.” Section 111(b)(1)(A). Doing so is known as an “endangerment finding.” In the 1970s, pursuant to this section, EPA identified fossil-fuel-fired power plants as a qualifying category of stationary sources. 80 Fed. Reg. 64,510, 64,527 (Oct. 23, 2015). And, subsequent to Massachusetts v. EPA, EPA found that fossil-fuel-fired power plants are stationary sources of carbon dioxide, an air pollutant. Once EPA has included a category of stationary sources in the list, it shall publish proposed regulations, establishing Federal standards of performance for new sources within that category. Section 111(b)(1)(B). “Standard of performance” is defined as follows:
[A] standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.
Congress foresaw a problem with the NSPS program. As the title of the program suggests, the standard of performance EPA creates pursuant to Section 111(b)(1)(B) would only apply to new stationary sources, leaving existing stationary sources relatively unregulated for the same air pollutant. Thus, Congress included a provision under the NSPS program for existing sources. Specifically, under Section 111(d), titled “Standards of performance for existing sources; remaining useful life of source,” EPA
shall prescribe regulations which shall establish a procedure similar to that provided by section 7410 of this title under which each State shall submit to the Administrator a plan which (A) establishes standards of performance for any existing source for any air pollutant (i) for which air quality criteria have not been issued or which is not included on a list published under section 7408(a) of this title or emitted from a source category which is regulated under section 7412 of this title but (ii) to which a standard of performance under this section would apply if such existing source were a new source, and (B) provides for the implementation and enforcement of such standards of performance. Regulations of the Administrator under this paragraph shall permit the State in applying a standard of performance to any particular source under a plan submitted under this paragraph to take into consideration, among other factors, the remaining useful life of the existing source to which such standard applies.
Challenges to the Clean Power Plan
In 2015, under the Obama Administration, pursuant to the NSPS program, EPA promulgated two standards of performance: the New Source Rule and the Clean Power Plan (CPP). EPA created the New Source Rule to regulate carbon dioxide emissions by new fossil-fuel-fired power plants. The standard of performance set by the New Source Rule was not at issue in West Virginia v. EPA. EPA’s CPP, other the other hand, regulated carbon dioxide emission from existing fossil-fuel-fired power plants. The Petitioners in West Virginia v. EPA challenged CPP, specifically as to EPA’s formulation of the underlying “best system of emission reduction.”
As cited above, Congress defined “standard of performance” as a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the “best system of emission reduction” (BSER) that EPA determines has been adequately demonstrated. 42 U.S.C. § 7411(a)(1). To date, Congress has not defined BSER.
In developing CPP, EPA determined that the BSER for existing fossil-fuel-fired power plants included three types of measures: (1) improving heat rate (i.e., the amount of fuel that must be burned to generate a unit of electricity) at coal-fired steam plants; (2) substituting increased generation from lower-emitting natural-gas combined-cycle plants for generation from higher-emitting steam plants (which are primarily coal-fired); and (3) substituting increased generation from new zero-emitting renewable energy sources from fossil-fuel-fired plants. The latter two measures are referred to as “generation shifting,” because they involve shifting electricity generation from higher-emitting sources to lower-emitting sources.  Ultimately, these measures translated into the following “standard of performance” for existing sources: 1305 pounds of carbon dioxide per megawatt-hour for fossil-fuel-fired steam plants and 771 pounds of carbon dioxide per megawatt-hour for stationary combustion turbines.
Petitioners in West Virginia v. EPA challenged CPP based on three main arguments: (1) Congress did not authorize EPA via Section 111 to address “major questions” or to reorder the traditional division of responsibilities between the States and Federal government; (2) Congress limited the measures EPA could consider to those implementable at the source level (i.e., “inside-the-fenceline” measures); and (3) Congress did not intend to delegate vast legislative power to EPA, calling into question the Constitutional validity of Section 111 as used by EPA in promulgating CPP.
The Principle Parties Have Misapplied Section 111(d)
I contend that arguments proffered by both EPA and the Petitioners in West Virginia v. EPA misapply the statutory directives Section 111(d). Specifically, under NSPS program, Congress intended for two standards of performance to be established. First, according to Section 111(b)(1)(A) and (B), once EPA creates a category of sources (here, fossil-fuel-fired power plants), it must then “publish proposed regulations, establishing Federal standards of performance for new sources within such category.” (emphasis added). The standard of performance EPA creates for new sources must conform to the definition provided in Section 111(a)(1), as it expressly states that this definition applies to the entire section (i.e., all of Section 111). Thus, when establishing a Federal standard of performance for new sources, EPA must take into account the cost of achieving such reduction, any nonair quality health and environmental impact, and energy requirement for new stationary sources. As the 2015 New Source Rule went unchallenged, it is reasonable to assume that EPA properly formulated the Federal standard of performance for new stationary sources emitting carbon dioxide within the category of fossil-fuel-fired power plants.
For existing stationary sources under the NSPS program, Congress directed EPA to “establish procedures…under which each State shall submit to the Administrator a plan which…establishes standards of performance for any existing source for any air pollutant…to which standard of performance under this section would apply if such existing source were a new source…” Section 111(d). Congress directs EPA that these State-submission procedures must be “similar” to the procedures contained in Section 110.
According to Section 110, EPA has the authority to promulgate “a national primary ambient air quality standard” for any air pollutant. Within three years of doing so, each State shall adopt and submit to EPA a plan which provides for implementation, maintenance, and enforcement of EPA’s primary standard, as well as a plan for a secondary standard, in each air quality region (or portion thereof) within such State. Section 110(a)(1). The submission procedures under Section 110 are extensive and, for purposes of this paper, need not be articulated in their entirety here. It is sufficient to emphasize that EPA did not receive plans from the States, with State-developed standards of performance. Instead, in 2015, EPA issued a standard of performance it developed (i.e., CPP) and required the States to submit plans detailing how each would come into compliance therewith. This stands the process on its head.
I contend that, in order for EPA and the States to comply with the NSPS program for existing sources, EPA must first establish procedures “similar” to those in Section 110. This will be no easy task. In Section 111(d), Congress provided no guidance on which submission procedures were necessary in order for it to be deemed sufficiently “similar” to those in Section 110. This lack of guidance appears to have contributed, at least in part, to CPP’s fatal flaw.
Pursuant to Section 110, EPA promulgates a national air ambient quality standard (NAAQS) for a given air pollutant. EPA establishes this standard and then directs States to develop plans to comply therewith. Did Congress intend for EPA to establish a “national standard” under NSPS program for existing sources, similar to one required in Section 110? How would the definition of “national standard” differ from a “standard of performance” as defined in the NSPS program, and how would it be formulated? Without explicit guidance from Congress, these appear to be open questions.
EPA appears to believe that Congress intended it to establish a national standard similar to the NAAQS in Section 110, which helps explain its formulation of CPP. Again, CPP is a standard of performance for existing sources that EPA developed and intended to apply nationally. After establishing it, EPA then directed States to develop plans on how each intended to comply with that standard. This mirrors the process in Section 110. However, in 42 U.S.C. § 7411(d), Congress did not direct EPA to establish similar substantive aspects of Section 110. Congress specifically directed EPA to “establish a [submission] procedure similar to that provided by section 7410.” (emphasis added). The national standard in Section 110 is substantive, not procedural. I contend that EPA conflated the substantive elements of the “national standard” in Section 110 with the standard of performance discussed in Section 111(d), resulting in the flawed CPP.
I further contend that Congress did not intend for EPA to establish a national or Federal standard pursuant to the NSPS program for existing sources. The plain text of the statute reveals that Congress provided the means by which existing sources would be regulated under the NSPS program. According to Section 111(d)(B), after a State has developed a standard of performance for existing sources, including its formulation of the BSER, the plan it submits to EPA must provide for the “implementation and enforcement of such standards of performance.” Thus, within each State, a determination will be made as to the BSER for its existing fossil-fuel-fired power plants. Predicated on that BSER, a State will promulgate a standard of performance. Each existing fossil-fuel-fired power plant will then either choose to adopt its State’s standard of performance or implement other measures, so long as they “reflect the degree of emission limitation achievable” by the State’s standard of performance.
Congress provided guidance to States when establishing a plan, including a standard of performance for “any” and “each” existing source in that State. Because these plans arise from the NSPS program, the standard of performance defined in that program is applicable. According to Section 111(a), States must take into account the cost of achieving reduction, any nonair quality health and environmental impact, and energy requirement. Moreover, in Section 111(d)(1), Congress added that EPA “shall permit” a State in applying a standard of performance to any particular source under a plan submitted under this paragraph to take into consideration “among other factors” (which are undefined), “the remaining useful life of the existing source to which such standard applies.”
In conclusion, I believe that EPA ran afoul of the Clean Air Act by issuing CPP, and that any subsequent plan issued by EPA that implements a standard of performance (including BSER) for existing stationary sources under Section 111(d) will exceed the Congressional authority delegated thereunder. Additionally, I contend that the Petitioners and Respondents wrongly focused on other issues raised in the case and not discussed in detail in this paper, such as “inside” versus “outside-the-fenceline” measures, as well as the doctrines of major questions, federalism, and non-delegation. These measures and doctrines are only relevant if it is conceded that EPA has been delegated the authority to issue standards of performance for existing stationary sources under the NSPS program. I contend that Congress did not delegate this authority under the Section 111 of the Clean Air Act.
Consistent with cooperative federalism, Congress created two systems to regulate air pollutants under the NSPS program. One system is administered by the federal government, via EPA, which regulates new stationary sources based on national performance standards with underlying BSER. The other system empowers each State to develop a performance standard for existing stationary sources within its borders, including its own BSER, and with the express authorization to consider the remaining useful life of its qualifying sources. Each State will produce a different standard of performance, taking into consideration its unique circumstances. Once formulated and submitted, EPA is authorized to ensure that each State abides by its own performance standards.
Finally, at present, CPP is moot because the performance standards it intended to establish were voluntary achieved by existing stationary sources. Moreover, the current EPA has explicitly stated that it is not interest in reviving CPP and, instead, it will formulate a new plan for regulating existing sources. Based on my analysis of the operative sections, I would advise EPA as follows: the plain text of Section 111(d) demonstrates that Congress intended each State to develop standards of performance for existing sources, not EPA. For existing sources under the NSPS program, EPA should establish non-substantive submission procedures “similar” to those under Section 110 and ensure that each State is implementing and enforcing the standards of performance (with underlying BSER) consistent with its submitted plan. EPA should focus on ensuring that, when the State is developing its performance standards, that it is properly accounting for the cost of achieving emission reduction, any nonair quality health and environmental impact, and energy requirement. Section 111(a).
 See “In EPA Supreme Court case, the agency’s power to combat climate change hangs in the balance,” The Washington Post, by Robert Barnes and Dino Grandoni, February 25, 2022.
 Petitioners include a variety of other entities in addition to the 27 States.
 Beyond this issue, the parties also raised arguments about standing; these will not be considered herein.
 West Virginia and EPA.
 42 U.S.C. §§ 7401 et seq. In 1955, Congress passed the Air Pollution Control Act, but it was limited to providing funds for research.
 42 U.S.C. § 7411.
 The term “new source” means any stationary source, the construction or modification of which is commenced after the publication of regulations (or, if earlier, proposed regulations) prescribing a standard of performance under this section which will be applicable to such source. 42 U.S.C. § 7411(a)(2).
 The term “existing source” means any stationary source other than a new source. 42. U.S.C. § 7411(a)(6).
 The basic concept of CPP was that EPA developed performance plan based on its formulation of the “best system of emission reduction” for existing sources. The States would then be required to submit plans to EPA in order to demonstrate how they would comply. CPP was never officially implemented and was eventually replaced under the Trump Administration by the Affordable Clean Energy Rule, which was similarly never implemented as the Biden Administration set it aside. This paper does not seek to track or analyze the political and legal machinations associated with these plans, but intends to address the questions raised by them as to EPA’s scope of authority in formulating BSER in a standard of performance for existing sources.
 EPA considered the statutory criteria and “the types of strategies that [S]tates and owners and operators of power plants are already employing to reduce [carbon dioxide] from affected sources.” Brief for the Federal Respondents, West Virginia v. EPA, pp. 5.
 Id. at 5-6.
 Brief for Petitioners, West Virginia v. EPA, pp. 12-14.
 42 U.S.C. § 7410.
 Under 42 U.S.C. § 7410, the plan developed is called the State Implementation Plan, or SIP.
 The definition of “standard of performance” applies to the entire section, i.e., all of Section 111, including (d).