The D.C. Circuit on January 19, 2021, vacated the Trump administration’s Affordable Clean Energy (ACE) regulation (2019). Am. Lung Ass’n v. EPA, 2021 WL 162579 (D.C. Cir. Jan. 19, 2021). The ACE rule had replaced the Obama-era 2015 Clean Power Plan (CPP) rule. The two regulations reflected different plans for greenhouse gas (GHG) regulation under the Clean Air Act (CAA). Multiple petitions for review of the ACE rule were filed.

Under the CAA, specifically 42 U.S.C. § 7411, “standards of performance” for certain existing sources of air pollution must reflect emissions reductions that are achievable through the application of the “best system of emission reduction” (BSER) for the pollutant and source. The CPP defined the BSER for carbon dioxide emissions from existing power plants as (1) heat-rate improvements at coal-fired power plants, (2) increased utilization of natural gas combined-cycle units, and (3) increased use of renewable energy (referred to as generation switching). States were still free under the CPP to choose any method of achieving federal GHG emission reduction goals, including emission trading and carbon capture and sequestration.

Trump’s ACE rule, on the other hand, rejected any control option other than on-site, heat-rate efficiency improvements at coal-fired power plants. The Environmental Protection Agency (EPA) impermissibly substituted the word “at” for the word “for” in the BSER to support its ACE regulation. Limiting control options to those that are on-site — at a building, structure, facility, or installation — was based on EPA’s “plain reading” of section 7411 of the CAA. EPA argued that allowing off-site emission controls was contrary to the CAA.

In its 185-page opinion, the D.C. Circuit rejected EPA’s cramped reading of the CAA as the only possible interpretation, holding that EPA should have considered other emission controls on- or off-site. The court held EPA’s reading was not supported by the statute’s text, scope, or purpose, or by agency precedent. The court effectively rejected EPA’s appeal for deference under Chevron, finding that EPA erred in interpreting the CAA as clearly and unambiguously allowing on-site controls only, and that EPA‘s rejection of off-site controls in the ACE rule based on this erroneous interpretation was not a discretionary act by the agency that must be afforded deference. The “major question” doctrine further did not save EPA’s reading because, under the doctrine, agency deference does not apply to rules of “vast economic or political significance.” Thus, the ACE regulation was remanded to EPA for further consideration.

The court also found that “federalism” was not violated by the CPP, as states do not have a traditional role in all incidental controls of interstate air pollution. Thus, states would still have to adapt to any federally set emission guidelines EPA reasonably selects, whether the best system of controls exists at a plant or outside.

This rejection of the ACE rule undoubtedly assists the new Biden administration’s plans on GHG regulation without having to rescind the rule formally. Though not bound by the past litigation that beset the CPP, the new administration is free to consider a range of options in offsetting climate change. A new set of CAA rulemaking is anticipated.