GHG Regulations and Big Preemption Questions Wait in the Wings for Supreme Court Review

The U.S. Supreme Court has the opportunity to address a number of major environmental issues this Term. Whether it will do so awaits its decision to grant—or not—several significant petitions for certiorari pending before it. It is not unusual for the Court to decide cert petitions just before its Term begins, or during it. This year, the Court has a lot to choose from, including an invitation to overrule its seminal greenhouse gas (“GHG”) decision in Massachusetts v. EPA.[1] Also pending are petitions seeking clarity around the tension between state duty to warn (pesticides) and anti-tampering (vehicle emissions control devices) laws and federal environmental statutes, and a potential effort to shoot the gap between the Trump Administration’s changes to NEPA regulations and the Biden Administration’s slow-moving rollback.

In this issue, we will first focus on the petitions, and then review two cases—concerning interstate groundwater rights and Chevron deference—that the Court already has agreed to hear and set for argument.

Affordable Clean Energy Rule Petitions

Four pending petitions ask the Court to reverse a January, 2021 decision by the D.C. Circuit that vacated the Affordable Clean Energy rule (the Trump Administration’s replacement for the Obama-era Clean Power Plan). The Clean Power Plan was enjoined by the Court in 2016, in one of the last decisions including Justice Scalia,[2] and the Biden EPA has indicated no plans to revive it in the prior form.

The petitions, led by two states and two coal mining companies—West Virginia, North Dakota, North American Coal Corp., and Westmoreland Mining LLC, respectively[3]—will be considered as the Biden Administration seeks to craft more aggressive rules to limit GHG emissions from the electric utility sector. They also mark the first chance for the Court’s now six Republican-appointed justices to express their views on the expansive regulatory agenda by the Biden Administration.

Some of the petitioners and amici in these cases argue that EPA’s use of Section 111(d) of the Clean Air Act infringes on states’ rights. That provision directs EPA to require States to submit plans establishing standards of performance for existing sources that would be subject to NSPS if they were new, unless the sources or the pollutants regulated by the NSPS are already subject to standards under other sections of the Act. Those parties contend EPA may interfere in this process only if a State fails to submit a plan, and even then, that EPA must consider the remaining useful lives of the sources. Other petitioners question whether the Act as written even allows the agency to regulate greenhouse gases, citing the Act’s historical use as a means to combat local air pollution, not global climate change. These last questions would require the Court to reconsider Massachusetts v. EPA.

In opposing the petition, EPA argues there is “no sound reason for this Court to grant review now to resolve the legality of a prior agency regulation that has no present operative effect and that EPA does not intend to revive.” Respondents aligned with EPA argue that the petitions are “premised … on what the agency might do in the future” rather than challenges to “agency authority in fact exercised, and in the context of the administrative record supporting that agency action.”

Preemption Petitions—Vehicle Emissions and Pesticide Labeling

The Court will also decide whether to hear cases addressing the tension between overlapping state and federal regulation in the environmental space. These petitions relate to the most common justification for preemption—the need to avoid an “anarchic patchwork” of federal, state, and local regulation that would sow confusion for and increase costs to consumers of highly regulated products, the use of which causes environmental impacts.

In January, automaker Volkswagen and parts manufacturer Bosch petitioned the Court for review of a Ninth Circuit ruling allowing two counties in Florida and Salt Lake City to seek to hold the companies liable under local laws and regulations barring tampering with vehicle emissions controls.[4]Volkswagen Group of America, Inc. v. Envtl. Prot. Comm’n of Hillsborough Cty., Fla., No. 20-994. The case follows on the settlement of EPA’s criminal and civil actions against Volkswagen for over $20 billion, which did not expressly release Volkswagen from the liability claims of state and local governments.

In this action, the counties sought to impose penalties for violation of their laws prohibiting tampering with emission control systems. The Ninth Circuit agreed with the district court that the Clean Air Act preempted state and local efforts to apply anti-tampering laws to pre-sale vehicles, but held that the counties’ claims targeting post-sale software updates were not preempted, twice citing the federal government’s decision not to file an amicus brief.

In their petition, Volkswagen and Bosch count nine courts that have addressed the issue, with the Ninth Circuit and three others finding no preemption and five courts finding such claims preempted. In addition, they point out that post-sale software updates of emissions control systems—squarely within EPA’s jurisdiction since the 1960s—have become increasingly common in the industry. Numerous industry groups have lined up as amici in support of Volkswagen’s petition, as have a group of former EPA, CARB, and DOJ officials who, at various points from 1997 to 2009, personally worked on development and enforcement of emission standards. The Court asked for the Solicitor General’s views on the petition in April, so further action will await filing of the invitation brief.

Also queued up is last month’s petition from Monsanto asking the Court to reverse the Ninth Circuit’s affirmance of a $25 million verdict in the respondent Edwin Hardeman’s personal injury suit against the pesticide manufacturer. Monsanto Co. v. Hardeman, No. 21-241. Hardeman alleged that Monsanto’s Roundup product caused his cancer and violated a state law duty to warn him of the cancer risks of Roundup exposure. In its petition (supported by several trade associations as amici), Monsanto contends the Ninth Circuit’s ruling contravenes the Court’s holding in Bates v. Dow Agrosciences LLC,[5] that any state labeling requirement not “genuinely equivalent” to a Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”) labeling requirement is preempted. Monsanto also claims the Ninth Circuit affirmed the admission of expert opinions that relied on “little more than subjective intuitions,” at odds with Daubert’s requirement that district courts take a more active role in screening expert testimony.[6] Finally, Monsanto notes that, as a practical matter, the case is a bellwether for thousands of other Roundup personal injury suits, and the Ninth Circuit’s preemption holding could affect numerous other useful products regulated under FIFRA.

NEPA Petition—Does a Decision Not to Prepare an EIS Deserve Deference?

An intriguing petition addressing NEPA was filed on September 20 by the proponent of the Dakota Access Pipeline project. Dakota Access, LLC v. Standing Rock Sioux Tribe et al., No. 21M31.[7] The Army Corps of Engineers issued an easement for the pipeline to pass over federal lands near Lake Oahe in North Dakota, a 1.73-mile segment of an 1,172-mile project. The Corps prepared an environmental assessment and issued a Finding of No Significant Impact (“FONSI”). The D.C. Circuit held the agency had not “convince[d]” the court that it had “materially addressed and resolved serious objections to its analysis,” and mandated an EIS under the “highly controversial” impacts factor in former 40 C.F.R. § 1508.27(b)(4) (2019).[8]

The D.C. Circuit essentially placed the burden on the agency to justify its FONSI, which conflicts with Supreme Court decisions as well as most other Circuits. Marshv. Oregon Natural Resources Council,[9] required a decision not to prepare an EIS to be subject to deferential “arbitrary and capricious” review.[10]Department of Transportation v. Public Citizen[11] removed any lingering doubt on the proper standard of review of a FONSI, holding “[a]n agency’s decision not to prepare an EIS can be set aside only upon a showing that it was ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’”[12]

Like the D.C. Circuit, the Ninth Circuit has effectively shifted the burden to the agency by requiring the agency to provide a “convincing statement of reasons” for its FONSI.[13] The Ninth Circuit has also turned the “controversy” prong into the equivalent of a heckler’s veto. In Bark v. U.S. Forest Service,[14] for example, the court held that forest thinning to reduce fire risk was controversial and required an EIS. Within days of the decision, the area was destroyed by fire.

The timing of this petition will put pressure on CEQ and the Administration to figure out where and how far to take their regulatory agenda. The revised NEPA regulations issued in 2020 eliminated the “controversy” factor, reasoning that the level of controversy is not determinative of whether environmental impacts will be significant. In the five cases challenging the 2020 regulations, CEQ has indicated its plan to issue revised regulations; in one, the court dismissed the challenge as not ripe, while in others CEQ’s continued stay requests are now being opposed by environmental groups. If CEQ fails to act quickly, the Supreme Court will have an excellent window in which to clarify NEPA’s reach.

Mississippi v. Tennessee, No. 143, Original

As Mark Twain famously (allegedly) said, whiskey is for drinking and water is for fighting. On the term’s first day, the justices will hear arguments from Mississippi and Tennessee—as well as the United States as amicus curiae—in the States’ dispute concerning interstate groundwater rights. If the Court sides with Mississippi’s novel theory, groundwater law as we have known it—on public and private property—will be almost totally upended.

In 2014, Mississippi sued Tennessee in an original action at the Supreme Court, alleging that pumping by the City of Memphis’s water utility amounted to theft of Mississippi’s groundwater in the Sparta-Memphis Aquifer that spans both states and several others.[15] In a departure from typical practice, where an aggrieved State would seek an equitable apportionment from the Court, Mississippi sought declaratory judgment and injunctive relief establishing its sovereign right, title, and exclusive interest in the groundwater, as well as monetary damages or restitution from Tennessee, arguing that the groundwater being pumped was trapped within its borders and “[u]nder natural conditions [i.e., without the utility’s pumping], this groundwater volume and pressure would have remained within Mississippi.” Following an evidentiary hearing, Special Master Eugene Siler,[16] a senior Sixth Circuit judge appointed by the Court for the case, ruled against Mississippi, finding last November that the aquifer at issue was, in fact, an interstate resource, and recommending to the Court that Mississippi’s complaint be dismissed with leave to amend to add a claim for equitable apportionment.

In early 2021, the parties and several amici filed briefs with the Court. Colorado led several States, who “have extensive experience with interstate compacts, equitable apportionment decrees, and other approaches,” in filing a brief opposing Mississippi’s requests for injunctive and monetary relief that would “turn [the current] system on its head” and “inject dangerous uncertainty into established systems of natural resource management.” In its brief, as it had in proceedings below, the United States voiced support for Tennessee’s position and the Special Master’s conclusions, arguing that “the very purpose of the doctrine of equitable apportionment is to resolve disputes like this one involving competing assertions of sovereign authority.” Finally, a group of water and property law professors filed a brief also in support of Tennessee, and the New York City Bar Association’s International Law Committee filed a neutral brief encouraging the court to “consider principles of international law” such as those in the UN’s 1997 Convention on the Law of the Non-Navigational Uses of International Watercourses as well as its International Law Commission’s 2006 Draft Articles on “The Law of Transboundary Aquifers.”

Although the Supreme Court has previously decided cases between States involving surface waters via equitable apportionment, Mississippi v. Tennessee is its first interstate groundwater dispute and could have broad ramifications throughout the country. The U.S. Geological Survey has identified over 60 “principal aquifers” from which 45% of the nation’s drinking water supply is pumped, and many of these cross state boundaries. In the absence of interstate compacts that explicitly cover groundwater (and Nevada and Utah’s failed Snake Valley Agreement shows such compacts can be difficult to negotiate and ratify), there are fertile grounds for dispute, though the Court has in some cases effectively extended compacts that are silent on the subject to include groundwater hydrologically related to the surface water addressed in the compact.

Three outcomes are plausible. First, the Court could accept Mississippi’s position and revive the state ownership theory the Court rejected in a line of cases culminating in Sporhase v. Nebraska,[17] thereby upending decades of water law jurisprudence, wreaking havoc on state budgets forced to pay conversion damages, and potentially triggering a ‘race to the bottom’ where states rush to outpump their neighbors. Second, the Court could simply apply its equitable apportionment doctrine to groundwater, to which it previously gestured in Nebraska v. Wyoming,[18] allowing Nebraska to pursue a claim for surface water shortage resulting from excessive groundwater withdrawal. Third, the Court could craft a new rule for interstate groundwater disputes using its interstate nuisance doctrine, where it weighs the benefits and harms of different uses of a shared interstate resource and determines which uses are reasonable, à la Wisconsin v. Illinois,[19] bypassing the extensive technical and legal process of equitable apportionment.

At least under Tennessee’s formulation, equitable apportionment would be most consistent with state “reasonable use” law on groundwater, which is the majority rule and now the law in both Tennessee and Mississippi.[20] The equitable-apportionment doctrine’s “guiding principle” is that the affected States have “an equal right to make a reasonable use’ of” a shared interstate resource.[21] Under traditional reasonable use doctrine, “use must be limited to purposes incident to the beneficial enjoyment of the land from which they are obtained, and if their diversion or sale to others away from the land impairs the supply of a spring or well on the property of another, such use is not for a ‘lawful purpose’ within the general rule concerning percolating waters, but constitutes an actionable wrong for which damages are recoverable.”[22] Modern reasonable-use doctrine permits use away from the overlying land.[23]

In effect, Mississippi is seeking to establish an interstate rule of ownership in place, the idea that a property extends from the center of the earth to the heavens, while denying adjacent owners similar rights. This absolute property-interest rule is not how groundwater is currently apportioned under any state’s law, though it has roots in the common law.[24]

American Hospital Association v. Becerra, No. 20-1114

On November 30, the Court will hear arguments in American Hospital Association v. Becerra. On its face, the case concerns reductions in the rate the federal government pays under Medicare for drugs dispensed at certain hospitals. But the case may turn on whether the Department of Health and Human Services (“HHS”) regulations at issue warrant judicial deference under Chevron,[25] a bulwark of administrative law that some justices have suggested curtailing or rejecting in recent years.[26] The key issue here is likely to be where and how to ascertain ambiguity at “step one” of Chevron. In Kisor v. Wilkie,[27] the Court emphasized that “before concluding that a rule is genuinely ambiguous, a court must exhaust all the ‘traditional tools’ of construction.”[28]Becerra thus may be an opportunity to move the exhaustion rule out of a footnote, at least where agency interpretations of statutes are concerned.[29]

The case concerns HHS’s interpretation of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The law prescribes certain formulas for drug reimbursement rates and gives HHS authority to set rates based on drug acquisition costs if the agency conducts detailed cost surveys first. In 2018, HHS promulgated a rule that cut rates to hospitals that participate in what’s known as the 340B drug pricing program, substantially cutting reimbursement to those hospitals. Three hospitals and three hospital associations (the “Hospitals”) submitted payment claims under the new rule, which HHS rejected. The Hospitals filed a complaint in the D.C. District Court, which found that HHS had exceeded its statutory authority by reducing drug reimbursement rates for 340B hospitals. On appeal, the D.C. Circuit reversed, holding that HHS’s decision rested on a reasonable interpretation of the Medicare statute.

Now represented by former solicitor general Don Verrilli, the Hospitals successfully petitioned for certiorari, and argued to the Court that HHS’s action amounts to “an audacious administrative repeal of the express limitations Congress imposed on [the agency’s] authority.” They assert the statutory provision requiring data collection prior to rate-setting is unambiguous, HHS did not collect the required data, and Chevron deference cannot justify its approach. Though HHS’s merits brief is not due for several more weeks, we expect the agency will argue (1) the Hospitals’ suit is precluded by a statute—42 U.S.C. § 1395l(t)(12)—which limits judicial review of certain HHS actions; and (2) if not, the statute was unclear and HHS’s interpretation is reasonable and worthy of deference.

Numerous stakeholders filed amicus briefs in favor of the Hospitals. Two briefs, by other healthcare providers and hospital associations, made policy arguments in support of the Hospitals’ position. Several other briefs, including one by the US Chamber and another by a group of business associations led by the National Association of Home Builders, voiced support for the Hospitals by arguing for “curing” or “restating and reinforcing key limitations on” the Chevron doctrine.

It’s not clear how the Court will dispose of the case. In June, it directed the parties to also brief the question whether Section 1395l(t)(12) precludes the suit. If the Court finds the action is unreviewable, it avoids the Chevron question altogether. If it does reach the merits, the Court could address Chevron any number of ways, from finding the statute is unambiguous and rejecting HHS’s decision on these facts, to crafting a rule that agency actions around permanent congressional appropriations do not warrant deference, to revising the doctrine writ large, as urged by the several amici whose members would like to see agency power significantly curtailed.

In light of Kisor’s reaffirmance of deference to agency readings of their own regulations, it seems unlikely that the Court would go so far as to reconsider Chevron. Kisor and the Auer cases arguably present a larger threat to the separation of powers, where an agency could evade notice and comment by reinterpreting existing regulations. Chevron does not have the agency on both sides of the table, but rather in dialogue with Congress. If concerns about administrative agency power persist, the Court may decide instead to revisit Brand X’s holding that agencies can overrule judicial interpretations of statutes where Congress left ambiguity.[30]

Jack Lyman is an attorney with Marten Law in Washington, D.C. He can be reached at jlyman@martenlaw.com.

[1]Massachusetts v. E.P.A., 549 U.S. 497 (2007).

[2] Jonathan Adler, Supreme Court puts the brakes on the EPA’s Clean Power Plan, Washington Post, Feb. 9, 2016; https://www.washingtonpost.com/news/volokh-conspiracy/wp/2016/02/09/supreme-court-puts-the-brakes-on-the-epas-clean-power-plan/ .

[3]North Dakota v. E.P.A., No. 20-1780; Westmoreland Mining Holdings LLC v. E.P.A., No. 20-1778; North American Coal Corp. v. E.P.A., No. 20-1531; West Virginia v. E.P.A., No. 20-1530.

[4] An affiliated group of entities, including Volkswagen AG, the parent company of the three manufacturers, filed a separate petition last month for review of the Ohio Supreme Court’s holding that Ohio’s suit concerning post-sale conduct could proceed. Volkswagen AG v. Yost, No. 21-312. On September 23, the Ninth Circuit denied a petition for rehearing en banc in Puerto Rico Government Employees & Judiciary Retirement Systems Administration v. Volkswagen AG, et al., No. 20-15564, 2 F.4th 1199 (panel opinion), a securities-fraud class action where the main issue is when reliance can presumed, which is another way that the VW scandal could make it to the Court.

[5] 544 U.S. 431, 454 (2005).

[6]Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 597 (1993).

[7] The case is presently on a motion for leave to file the supplemental appendix under seal, so the petition itself is not yet docketed.

[8]Standing Rock Sioux Tribe v. U.S. Army Corps of Eng’rs, 985 F.3d 1032, 1043 (D.C. Cir. 2021).

[9] 490 U.S. 360 (1989).

[10]Id. at 374–76.

[11] 541 U.S. 752 (2004).

[12]Id. at 763 (emphasis added; citation omitted).

[13]Barnes v. U.S. Dep’t of Transp., 655 F.3d 1124, 1132 (9th Cir. 2011).

[14] 958 F.3d 865 (9th Cir. 2020).

[15] The original action followed after Mississippi’s claim against the water authority in federal court was dismissed due to the inability to join Tennessee, a necessary party. Hood ex rel. Mississippi v. City of Memphis, Tenn., 570 F.3d 625, 627 (5th Cir. 2009), cert den. 130 S. Ct. 1319 (2010).

[16] Documents from the Special Master proceeding are available at http://www.ca6.uscourts.gov/internet/special_master/special.htm.

[17] 458 U.S. 941 (1982).

[18] 515 U.S. 1, 14 (1995).

[19] 278 U.S. 367 (1929).

[20]Nashville, C. & St. L. Ry. v. Rickert, 19 Tenn. App. 446, 89 S.W.2d 889, 896 (1935); Miss. Code. Ann. § 51-3-1. Both states apply modern versions of reasonable use, which aligns with the “correlative use” doctrine pioneered by California. Restatement (2d) of Torts § 858 (1979), Associate Reporter’s Notes to cmt. g; Katz v. Walkinshaw, 141 Cal. 116, 74 P. 766 (1903).

[21] Tenn. Reply to Miss. Exceptions 19 (quoting Florida v. Georgia, 141 S. Ct. 1175, 1180 (2021)).

[22]Rothrauff v. Sinking Spring Water Co., 339 Pa. 129, 134, 14 A.2d 87, 90 (1940).

[23] Restatement (2d) of Torts § 858 (1979).

[24]Acton v. Blundell, 12 Mees. & W. 324, 152 Eng. Rep. 1223 (Ex.1843). Mississippi’s prior capture regime for groundwater did not operate to bar pumping by adjacent land owners, holding “based on the maxim, ‘Cujus est solum ejus est usque ad cœlum,’ it seems to be quite universally held that such waters belong to the realty, to be used at will by its owner for any purpose of his own, whether it be for machinery, mining, milling, or ‘a reservoir on his own land.’” Bd. of Sup’rs of Clarke Cty. v. Miss. Lumber Co., 80 Miss. 535, 31 So. 905, 906 (1902).

[25]Chevron USA, Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

[26]See, e.g., Pereira v. Sessions, 138 S. Ct. 2105, 2120 (2018) (Kennedy, J., concurring) (expressing concern about courts’ “cursory” analyses of statutory ambiguity and resulting “reflexive deference,” which “suggests an abdication of the Judiciary’s proper role in interpreting federal statutes”); Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1149 (10th Cir. 2016) (Gorsuch, J., concurring) (“Chevron and Brand X permit executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design.”); Michigan v. E.P.A., 576 U.S. 743, 763–64 (2015) (Thomas, J., concurring) (“we seem to be straying further and further from the Constitution without so much as pausing to ask why. We should stop to consider that document before blithely giving the force of law to any other agency ‘interpretations’ of federal statutes”); Perez v. Mortg. Bankers Ass'n, 575 U.S. 92, 114 (2015) (Thomas, J., concurring) (protesting “doctrine of deference that has taken on a life of its own”).

[27] 139 S. Ct. 2400 (2019).

[28]Id. at 2415 (quoting Chevron, 467 U.S. at 843 n.9).

[29] Also pending before the court is a petition to review the D.C. Circuit’s application of Chevron deference to agency decisions in non-binding administrative adjudications, in Lewis v. Pension Benefit Guaranty Corp, No. 21-2. The Court may hold Lewis pending the decision in Becerra.

[30]Nat’l Cable & Telecommunications Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005).