Supreme Court Could Undercut Biden's Climate Agenda

mandate and the c d c S eviction moratorium. Jones Is Elena Kagan gave an example which Justice any Coney Barrett then picked up on. The agency has stepped far outside of what we think of as its appropriate lane. Uh, you know the FDA regulating tobacco. That sort of thing, just like something that's like what the FDA regulates tobacco. You know, the FDA staying in its lane. What the

FDA can regulate tobacco. Or if you think about the eviction moratorium case from earlier, this term, you know, it was what the CDC can regulate the landlord tenant relationship. Here for thinking about ep A regulating greenhouse gases, Well, there's a match between the regulation and the agency's wheelhouse. Right,

How confusing was it all? Justice Stephen Bryer, known for his crazy hypotheticals, jumped into help Justice Samuel Alito with one of his hypotheticals for Attorney Beth Brinkman, something just as Kagan joked about, maybe it's sound a good hypothetical. I think he's saying, your mind. Yeah, in tobacco, I suppose they started off and saying, we are regulating the advertising of four foot cigars smoked through hocus. Okay, now the problem is can you regulate tobacco? And if you

can regulate tobacco, that's a very big deal. But they say, no, it isn't. It's just this I n you know, there aren't There are only three in the whole country. So it's a little deal. So it isn't the major question. Doctory you know that helped me, your honor and justice leader. I really don't mean to be not answering your question. Well I won't, I won't belabor it, and I can

never equal my my colleagues evocative hypotheticals. You know, it's not always the case, mis Brinkman, that a lawyer responds to one of Justice Prior's hypotheticals by saying, that's really helpful laughter from those who know Justice Briar's hypothetical as well. Joining me is Pat Parento, a professor of environmental law

at Vermont Law School. Pat, what's at stake in this case When you're talking about the electricity sector that represents about a third of our total greenhouse gas emissions, So it's incredibly important to regulate that sector and get those emissions down. And within that sector, you know, the single most important category, of course, is coal fired power plants.

So this case West Virginia versus e p A, no surprise West Virginia being a huge coal state still even though coal is dying there, it's all about whether e p A has authority to impose the kinds of controls well, a system of controls that will significantly bring those plants into compliance with the Clean Air Act and with President Biden's avowed pledge to make the electricity sector carbon free.

So there's a lot writing on this and beyond the greenhouse gas and the climate change implications of the case. Depending on what the court does, it may sweep even more broadly. It may affect all of environmental law. So Republican led states, and as you mentioned, coal companies are trying to head off an e p A rule that isn't even on the books yet. That's right. Originally, the Obama administration proposed something called the Clean Power Plant and

it had three different components. It was gonna make plants more efficient, it was going to require more reliance on natural gas plants, and it was going to require bringing on green energy, wind and solar more quickly. That plan never took effect. The Supreme Court put a stay on it before any court had even ruled on whether it was legal or not, and it never went into effect.

And then subsequently, of course, the Trump administration proposed something called the Affordable Clean Energy Rule, which it wasn't but that rule would have only achieved maybe maybe one reduction in these emissions, so it was a meaningless rule. The DC Circuit Court vacated the Trump rule and sort of reinstated, or at least gave e p A the option of reinstating the Clean Power Plan. Ep A quickly said, we

have no intention of reinstating the Clean Power Plan. We're certainly not going to keep the Affordable Clean Energy Rule on the books. We're going to start a new rulemaking, and that's where they are today. They promised the Court e p. A did that a new rule is forthcoming, right, you know, it's in the mail sort of government promise. But no, they did say they anticipate promulgating a new rule before the end of the year. So you're right. At the current time, there is no rule on the books.

Nobody is required to do anything, which of course raises the question why in the world the Court take the case. My question, there's no case or controversy is there not to my way of thinking. But the majority of the Court disagrees. They're clinging to the idea that because e p. A didn't officially repeal the Clean Power Plan, it could spring back to life. That was a term that was used at some point. So that's the slender thread that the Supreme Court is using to say this case is

still alive controversy. It really isn't. That's a fiction, but they're sticking to it. The majority, the conservative majority of the Court is saying, we think we still have jurisdiction and we're going to issue a ruling. Now, the question is what that ruling going to be. So the Bond Administration backing the e p A, and they have backing from environmental groups and power companies like Consolidated Edison, Exelon, and National Grid USA. Why is the power sector nervous

about this? Yeah, because the power sector likes the idea of having flexible options to achieve the reductions, including things like emissions trading. Of course, the power industry has been the subject of emissions trading ever since the acid rain control program from so the industry groups are savvy. They understand that with that kind of a program they can figure out how to achieve emission reductions at the lowest costs.

And they're afraid that the Supreme Court may go so far as to prohibit e p A from using emissions trading and averaging because West Virginia's argument is all that e p A can do is imposed controls at individual sources, one plant at a time, which is terribly inefficient and ineffective. It's not going to achieve the kind of reductions that are needed. But that's the whole point, right, I Mean, what West Virginia wants is a rule that's so weak

it won't do anything. But the power company parties that joined with e p A are saying, we don't agree with that. We would much rather have E p A give us options, including, by the way, bringing on more wind and solar when that makes sense. So don't take things off the table, you know, don't necessarily force us to go green right away, but give us some options. That's what the companies want. The arguments were really long. Was there one issue that the justices were kicking around most? Yes,

that's the major question doctrine. You know, the court has already used that twice this year. They struck down a rule putting a moratorium on evictions because of the CODE epidemic, and they said that the agency didn't have the authority because that was something the agency had never done before. And in another case, OSHA, the agency that regulates occupational exposure and health and safety concerns, also imposed a rule and the court struck that down, saying OSHA, you're not

the health agency. You can't be writing a rule that regulates people's exposure to COVID in the workplaces. You can regulate, you know, the strength of ladders that people climb in performance of their duties, but you can't regulate the fact that they might be exposed to a deadly disease. You know. So the Court has already shown that it wants to wield this major question doctrine in a way that strikes

down agency rules at the court. The conservative members of the Court believe are going too far, having major impacts on the nation's economy and so forth. But it's a rule they made up, you know, it doesn't come from the Constitution, and it's fairly recent. It's just within this era of the people that have joined the courts, Justice Roberts, Justice course, it's Justice Kavanaugh, now Justice Barrett, and formerly Justice A. Leado and Justice Thomas. They're all of the

same mind about limiting agency authority. The so called administrative state. Is that what this is about. That's what this is about. I mean, the Court would never use that term, but that's what it's about. It's a suspicion that agencies who are quote unelectric bureaucrats, you know, taking irrigating a lot of power, and they don't like that. The conservatives believe, I think that those are things that Congress should be doing.

And I suppose in a perfect world that's right. But what happens when Congress isn't doing that, which is exactly where we are today. So the major question doctrine is supposed to kick the issues back to Congress and forced Congress to be more explicit about the authority that they're granting. Well, that sounds good, but we know that in environmental law we have not seen updates. Who are major environmental laws like the Clean Air Act, like the Clean Water Act,

like the Endangered Species Act. We haven't seen updates in decades, and there's no likelihood that we will. So this notion of quote kicking it back to Congress is illusory. What it really means is there won't be any rule and there won't be any protection. Did you see enough votes there to head off the e p A rule? No? No. I was hopeful that all of the members of the Court, when they really focused on what they were being asked to do in light of the fact there is no

rule to review, might reconsider having taken the case. But there was no indication they were going to do that. So I'm convinced they are going to write a decision. The real question is what are they going to tell the e p A. I mean, the Court is not a rule making body. I mean the conservatives would be the first to say that's a violation of separation of powers. That's outside our lane. We're not supposed to write rules, we're supposed to review rules. So that's my question is

what is factuty? Are they gonna say? Are they going to tell the EPA you can do these things but not those things? And on what basis would they do that. They can't say e p A has no power to do anything because of Massachusetts versus e p A. They've already decided e p A has the authority, and they actually said e p A has the duty to regulate once e p A has found that these emissions pose a danger the public health and welfare, which e p

A has. The Supreme Court had a chance to review the endangerment finding some time ago and decided not to do that. And then yet in another case, the A e p versus Connecticut case, the Supreme Court specifically cited the provision that's that issue in the West Virginia case as the source of e p AS authority to regulate emissions from power plants. So I think the Court is sort of in a box. They've issued opinions saying e p A has a duty to regulate these emissions and

a specific provision from which to do that. And so now what are they going to say about it? They're going to say, well, now we're gonna put some significant boundaries. There was an argument from West Virginia and from the coal industry parties that the rule should be you can't regulate beyond the fence line. And a lot of my colleagues, a lot of lawyers out there, thought that might be

the rationale that the court might grab and use. But there was a lot of skepticism towards that, even from Justice Thomas right off the bat, saying that rule doesn't make any sense to me. So I don't think they're going to be able to use something simplistic like you can't regulate beyond the fence line. But again, what exactly are they going to say, and we won't know until June explain that you can't regulate beyond the fence line?

What that means on the ground, Yeah, what that would mean is you go to each individual plant and you try to determine what control you know, the the typical Clean Air Act controls are things like scrubbers, right, That's that's how we scrub out pollutants like mercury and other air pollutants, or baghouse filters, you know, another end of stack kind of control for greenhouse gases. That doesn't work.

Baghouses don't work. Scrubbers don't worry. That doesn't work. So the only thing you can do with carbon emissions is either capture them right and to question them. You know, that's carbon capture and sequestration that's incredibly expensive. I mean,

that's the irony actually of West Virginia's argument. If you take it to its logical extreme, it would mean every single coal fired power plant out there would have to install incredibly expensive carbon capture and sequestration systems, not just one technology and the entire system, and that probably alone

would put those plants out of business. So, you know, that kind of an argument of looking at the individual source and looking for sort of conventional technologies just really doesn't work for carbon um What the Trump administration said you could do is improve the heat rate efficiency of the individual plants. In fact, that's what Trump said is all you can do. But the problem with that is if you make plants run more efficiently, guess what, they're

going to run more. They're going to run longer and that's going to put more emissions into the air long term. So that's a nonsensical frankly, a strategy by itself. It might make sense in combination, right with some other strategies to actually reduce emissions, but by itself just improving the efficiency these plants is not going to move the needle on carbon pollution. A lot of people were looking at the three newest justices to see, you know what they said.

But Justice Neil i And only asked one question, and Justices Brett Kavanaugh and Amy Coney Barrett didn't ask that many questions in this long argument. But did Barrett seem to be considering sort of a middle ground position? I think.

I think if there's any hope here to retain some authority for e p A to write a meaningful rule, it lies with Chief Justice Roberts, and there's a good likelihood actually that he may write the opinion in this case, and with Justice Barrett, because yes, she was cautious, and she didn't tip her hand at all about which way she was leaning, and she asked the kinds of questions of the petitioners, questions that would suggest she wasn't buying

everything they were saying even Justice Kavanaugh, who when he was on the d C circuit, he heard arguments challenging the Clean Power Plan, and he made it pretty clear he had very little used for the Clean Power Plan and was prepared to use this major question doctrine to strike it down. But when he was asking questions, particularly of the lawyers arguing for the industry position, he was acknowledging that emissions trading and you know, some of these

more flexible approaches did make sense. And in some of his earlier opinions, you know, he's shown a keen interest in looking at the costs and benefits of various ways of regulating. So I think he's going to hesitate to join in an opinion that would take away that kind of authority for epated shape a more flexible rules. So there's enough, I think play among the justices here that maybe the e p A could come out of this case not with everything they would like to have, but

with at least enough to write a decent rule. That's what we're hoping. Those of us who want to see us make some progress towards controlling carbon pollution are hoping the Court will pause before it writes something that just strips p A of any meaningful authority to do that. Did it seem as if it was particularly just as Aldo was against the e p A. Here, Yes, Justice Aldo has been you know, he was the same way with the Maui and Clean Water Act case. He descended

a long, long distent. His descent was longer than the majority opinion that Justice Brier wrote, you know, um saying that yes, under certain circumstances, dp A can regulate discharges through groundwater that affect lakes and rivers and so forth. Alito said, no, they don't. They don't have that authority period. So so Alito's questions were as typically, um, you know, a little bit over the top because of what Alado

was saying. You know, if we if we grant e p A this broader authority that e p A wants, where does it lead? I mean, does it lead to e p A regulating everybody's house and telling everybody what kind of energy they could use? And that's ridiculous, right, But that is the way that Alito thinks about agency authority. He worries about the abuse of authority. That's where he always goes with his question. He sort of takes the extreme example of what a kind of renegade agency would do.

You know, if we're not really careful in controlling their authority, they're likely to go overboard. That's where he was coming from. And the liberal justices were supportive of the e P a sort of, but I think they knew that, they knew what the writing on the wall was. They didn't fight on what we call the justiciability question there. There's all kinds of reasons why the court shouldn't take this case,

for example standing. You know, how many times do environmental groups groups get thrown out of court because they can't adequately prove standing. They can't prove how they're hurt by what the agency is doing or not doing. There's no hurt here at all. Okay, so nobody's being required to do anything, right, So you would have thought the liberal members of the court would have been hammering on the

standing question. Nothing almost nothing on that. In fact, Corsage was the only one to raise the standing question and he didn't press it at all, Like he said, one question and he was done. So no, you know, Justice Brier actually surprising, well maybe not surprisingly. He's an administrative law professor, so he he was quibbling over why e p A hadn't actually repealed the clean Power Plan. They you know, the e p A probably in hindsight, should have done that right uh, and taking it off the

board completely. But because by leaving it sort of out there, even though there they have no intention of proceeding with it, it gave it gave the majority of the court, the conservatives on the court a handle on the case. And Briar was was was quizzing the Solicitor General on why didn't e p A just take that rule off the books? That was about all you got from the liberal a side. Talk about the possibilities of a ruling here. You could have them dismiss the case. You could have them issue

a narrow ruling a broad ruling. What are the possibilities they won't dismiss the case. That's pretty clear now. It does come down to a narrow or broad ruling, and it does come down to will they call out some

things that would be permissible. For example, could they say, you know, e e p A can consider a regulation that extends beyond the fence line, but not one that tries to restructure the country's energy system, you know, not one that that requires use of renewable energy, not one that tries to regulate the way the grid system of the country works and dispatch you know, gas power or clean power something like that. Those were things that the

Clean Power Plan included as options. They weren't necessarily man the eights, but they were options. And it may be that the opinion in this case kind of goes through what the Clean Power Plan was considering and knocks individual pieces of it out and then leaves it to e p A to decide what can it do once the court has said what it can't do. I still have trouble imagining how an opinion like that reads and how

you would write it. But that's maybe what we'll see is is kind of an opinion that limits e p as authority at the boundary, at the sort of the outer edge of its its potential authority, but leaves enough that e p A can figure out a rule that will make do some good. Thanks for those insights, Pat. That's Professor Pat Parento of the Vermont Law School. Our interests are maintained the strongest unified economic impact campaign that on food and in all history, and I think we're

well on the way to doing that. President Joe Biden says they is determined to continue its economic assault on Russian President Vladimir Putin over his war in Ukraine. The latest round targets Russia's wealthy as oligarchs and their families with direct sanctions, adding to the ever growing list of sanctions against Russia, all in the hope that financial pain

will force Putin to end his war. The rush of sanctions means that lawyer's phones are ringing off the hook with calls from clients struggling to figure out how to deal with them. Joining me as someone who's been taking those calls, Chase Knicki, a partner, Cleary Gottlieb start by telling us how significant the sanctions are in size and scope.

So the sanctions that we've seen to date are somewhat unprecedented from a sanctions perspective, in the sense of, you know, a country with such economic ties, with countries like the United States, in the UK and the European Union being subject to the level in this amount of sanctions, largely targeting in many ways the Russian financial sector, including major Russian financial and institutions, as well as most recently the Central Bank of Russia and those sanctions, from what we're

hearing from clients and otherwise hearing in the market, are having the intended effect of really isolating Russia from an economic perspective. Chase, would you say this situation is different in that usually you have a slower ramp up of sanctions over time, but here you have several stages in a compressed period of time, and more escalations are possible. Exactly, That's right, and it used to be the case. You know, look at the programs that apply to countries like Iran

and even North Korea and Cuba. Those countries are just completely off limits for US persons. The US government, at least in recent years, hasn't really been taking that kind of broader, comprehensive approach, but instead is imposing at least what I call all sort of smart sanctions, narrowly tailored sanctions.

You typically do see those in a more piecemeal way, where you know a sanction will be imposed, the US government will see whether that sanction is having the impact that they wanted to, and then if it's not, an additional sanction might be imposed. But you're absolutely right here. In the last week or so with the Russia stanctions program, it's just been a deluge of individual sanctions but all kind of at the same time, and having to wrap your arms around exactly what all those mean and what's

the landscape looked like from various perspectives. It's not just U S sanctions, it's e U S sanctions, its UK sanctions. Countries around the world are imposing sanctions on Russia, and so it really is a multinational effort that you need to be thinking about when you're thinking about multinational companies

engaging in transactions with Russia. Have the Treasury and Commerce Departments made it clear what the new restrictions are in many ways, Yet there was a period of chaos, you know, last week when the sanctions started to come out, primarily because they were coming out in a fast and unpredictable way. And I think it wasn't necessarily that the types of

sanctions that were being imposed were difficult to understand. It was just the number and the sheer volume of them, and making sure that folks were wrapping their arms around everything that applies. And I think, now, you know, here we are a number of days after the first sanctions came into place, I think we're starting to get a

better sense of what the landscape looks like. The landscapes starting to become much clearer with respect to the rules of the road, at least as they are today, And I think as new sanctions continue to be imposed, it's much easier to wrap your arms around how that particular sanctions bolts onto, if you will, the existing sanctions programs and becomes quite frankly, just the piece of the sanctions pie.

So clients I think are getting a little bit more comfortable with understanding exactly what the contours of the sanctions are. Of course, all subjects to change if new sanctions are imposed. Can you broadly describe the sanctions US companies are dealing with? They sort of fall into two primary buckets, if you will, And one is there are a number of parties in Russia that have been subjects to blocking sanctions, a number

of Russian financial institutions, a number of Russian individuals. Those entities and individuals are off limits for US companies as a general matter, and so US companies need to understand the extent to which they have relationships or other exposure to those entities and individuals in take appropriate action. The second bucket are entities that are not subject to these so called comprehensive blocking SDN sanctions, but more limited perhaps

debt and equity related restrictions. And so US companies are not prohibited from engaging in transactions with those entities, but they are prohibited from engaging in certain types of activities with those entities, and making sure that what the U. S company is doing doesn't cross over the line of, for example, providing new debt or equities to those entities. So what are your clients calling you about or what are they most confused about? We do get questions all

over the map. You know, some are easier than others. Some require judgment calls because there's just, you know, lack of clarity. There's potentially some uncertainty with respect to whether a particular activity is covered by sanctions. But we usually start with the basics. In the basics are along the lines of, well, what jurisdiction does this particular activity or

this transaction fall under. If it falls under U S jurisdiction, for example, it involves a US company, or the transaction is going to be processed in US dollars, here's the set of rules that apply as of today. If the transaction doesn't involve US jurisdiction, but it involves UK jurisdiction or EU jurisdiction. It's helping companies understand exactly what set of rules apply to them on a case by case basis.

And then once we kind of have an understanding of what those particular rules that apply are, does this transaction or some party that's involved in the trans actions trip any of these sanctions and if so, what do we do about it? Is it a nonstarter? Can we just not complete the transaction or their ways the transaction can be completed that are undertaken in compliance with, you know,

the applicable sanctions regime. So a US company that was in the process of making an acquisition in Russia or a joint venture with a company in Russia, does that have to stop or does it depend? It depends if if those transactions don't involve any sanctioned parties um or if it does involve a stanction party, if the particular sanctions that apply to that party are not implicated by the transaction, there's no legal prohibition on continuing and pushing

forward on those types of transactions. But what we've seen by and large with our experience with clients that were in those situations for you know, perhaps non legal reasons, waiting to see how the situation unfold, to make sure that no additional sanctions could impact the transaction. We've seen a lot of pullback, people pressing pause on those transactions to wait to see how things shake out so that

they can feel comfortable. But if they do proceed forward with the transaction that one's allowed under the current rules into there won't be some drastic change in the rules a week from now, two weeks from now that could significantly change the ability to complete that transaction. What government agency, if ANNIE is looking at the compliance with sanctions, So from a US perspective, it's the U. S. Department of

the Treasury, Office of Foreign Assets Control. That's the agency within the US Treasury Department that's charged with implementing and enforcing these sanctions UM. And so that's the entity that you would go before. For example, if you believe you may have violated sanctions, there's a possibility to disclose those sanctions to the U. S. Government and you get credit

for doing so. Um. Other times, O fact will otherwise become aware of potential activities that could potentially result in violations of sanctions and reach out to the parties to develop additional information. The interesting piece from a US perspective is it is it's just not thinking about am I

violating U S. Sanctions. The US also has so called secondary sanctions that it can impose, and these are sanctions that provide the US government with the authority to impose sanctions on non US parties for engaging in activities wholly outside of US jurisdiction if those activities are targeted under secondary sanctions, and there are a number of secondary sanctions

authorities that apply to Russia. And so when we're advising non US companies, it's not just a matter of making sure that what they're doing is outside US jurisdiction, but it's also advising on the extent to which there's secondary sanctions risk. For example, if there's a U S sanctioned party involved, that creates potential risk of secondary sanctions for engaging in transactions with that particular party, even if it's

undertaken wholly outside of US jurisdiction. If a company or a person violates sanctions, does the Justice Department ever go after them? Yes, there are potential civil penalties for sanctions violations. Typically civil related penalties are handled at the OH fact at the Treasury agency level, but there also are potential criminal penalties for violations of sanctions for you know, willful conduct. In those circumstances, you would see the Department of Justice

intervene when you're talking about potential criminal penalties. But it sounds like what's happening now is a lot of confusion rather than willful exactly. And these are you know, unfortunately the U S. Sanctions are strict liability laws, and so from a civil liability perspective, there's no intent required to violate sanctions. If you violate sanctions, you violate sanctions whether you intend to who are not. And you know, what we see oftentimes from o FAX perspective is that you know,

they use their enforcement discretion in those cases. So if it really is a situation where you know, the party was really trying to just understand the sanctions was an inadvertent violation, but it's still nonetheless a violation, you may not see o FAX pursue a penalty action in that case. Um, but may you know, decide to issue what we call a warning letter for example, recognizing and acknowledging that a violation occurred, but not pursuing any sort of civil enforcement.

All these questions mean a lot of legal work and lawyers like you being inundated with calls. It means that my calendar is full of thirty to sixty minute calls, back to back to back, starting early in the morning, going until late at night. If there are no more sanctions imposed, how long do you think before this becomes just a simple process for you and people start to understand and what's going on? Or is that not going to happen for quite some time. Yeah, it's a good question.

I was actually thinking about that earlier today, and how long my life is going to be like this? And I think, you know, if no more sanctions are imposed, you know, it's tough to you know, definitely say for sure, but I would say within a matter of weeks, maybe a month, I think folks will you know, I think

the initial chaos will die down. Folks will have a good sense of at least how the sanctions apply to them UM and can move forward, and they will have done all their contingency planning UM and implemented the various measures that they've you know, they thought about implementing the mitigate or eliminate their risks. So I don't think three months from now, my my schedule is going to be

as full on Russia's sanctions questions is today. But you know, I think there's certainly going to be a number of additional weeks from here where companies are still trying to wrap their arms around the extent to which these apply to them. Well, thanks for taking our call, Chase. That's Chase Kinnicky of Cleary Guttlieb, And that's it for this edition of The Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law Podcast.

You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com, slash podcast Slash Law, and remember to tune into The Bloomberg Law Show every week night at ten pm Wall Street Time. I'm June Grosso, and you're listening to Bloomberg