Reply Brief — Nacco Natural Resources Corporation, Applicant v. Environmental Protection Agency, et al.

No. 24A98

In the Supreme Court of the United States

NACCO NATURAL RESOURCES CORPORATION,

Applicant,

v.

ENVIRONMENTAL PROTECTION AGENCY AND MICHAEL S. REGAN,

ADMINISTRATOR,

Respondents.

To the Honorable John G. Roberts, Jr.,

Chief Justice of the United States and

Circuit Justice for the District of Columbia Circuit

REPLY IN SUPPORT OF EMERGENCY APPLICATION

FOR IMMEDIATE STAY OF FINAL AGENCY ACTION

PENDING DISPOSITION OF A PETITION FOR REVIEW

Charles T. Wehland

JONES DAY

110 N. Wacker Dr., Ste 4800

Chicago, IL 60601

Jeffery D. Ubersax

KUSHNER & HAMED CO., LPA

1375 E. Ninth St., Ste 1930

Cleveland, OH 44114

Yaakov M. Roth

Counsel of Record

Brinton Lucas

S. Matthew Krsacok

JONES DAY

51 Louisiana Ave., N.W.

Washington, D.C. 20001

(202) 879-7658

yroth@jonesday.com

Counsel for Applicant NACCO Natural Resources Corporation

TABLE OF CONTENTS

Page

INTRODUCTION ......................................................................................................... 1

I.

EPA CANNOT RUN FROM THE RULE’S FORWARD-LOOKING

CONSTRUCTION. ................................................................................................... 2

II.

EPA CANNOT HIDE FROM ITS FAILURE TO CONSIDER THE RULE’S FULL

COST. ................................................................................................................... 7

III.

EPA CANNOT HAVE IT BOTH WAYS WHEN IT COMES TO THE EQUITIES. .......... 10

CONCLUSION............................................................................................................ 13

i

TABLE OF AUTHORITIES

Page(s)

CASES

Alabama Ass’n of Realtors v. HHS,

594 U.S. 758 (2021) ................................................................................................ 10

Labrador v. Poe,

144 S. Ct. 921 (2024) ........................................................................................ 10, 12

Lebron v. Nat’l R.R. Passenger Corp.,

513 U.S. 374 (1995) .................................................................................................. 9

Michigan v. EPA,

576 U.S. 743 (2015) .............................................................................................. 7, 8

Munaf v. Geren,

553 U.S. 674 (2008) ................................................................................................ 11

NFIB v. OSHA,

595 U.S. 109 (2022) ................................................................................................ 12

West Virginia v. EPA,

597 U.S. 697 (2022) .................................................................................... 5–6, 8–10

Youngstown Sheet & Tube Co. v. Sawyer,

343 U.S. 579 (1952) ................................................................................................ 11

STATUTES

42 U.S.C. § 7411 ............................................................................................. 1, 2, 4, 6, 8

OTHER AUTHORITIES

EPA, Electric Utility Steam Generating Units—Flue Gas

Desulfurization Capabilities as of October 1978 (Jan. 1979) .................................. 5

FERC, Letter from Comm’r Christie to Rep. Rodgers et al. (Aug. 13,

2024).......................................................................................................................... 6

89 Fed. Reg. 39,798 (May 9, 2024) ............................................................................ 3–9

ii

INTRODUCTION

EPA cannot keep its story straight. In successfully opposing a stay below, the

agency told the D.C. Circuit that its CO2 emission standards for power plants could

rest on a “projection of what can be achieved” rather than what “has regularly been.”

C.A. Stay Opp. 38. It had to take that position, for EPA conceded that “no commercial

power plant is consistently achieving 90% capture” of its CO2 emissions today. Id. at

44. But while that approach may have been good enough under 1970s-era D.C. Circuit

cases, it did violence to the statute, which requires the agency to set “achievable”

targets based on technology that “has been adequately demonstrated.” § 7411(a).

Recognizing that it cannot defend this interpretation as a matter of law, EPA

now insists the only dispute here is a matter of fact—which would not warrant this

Court’s review if the D.C. Circuit upholds the Rule. But the agency’s authority over

greenhouse gases does not extend to gaslighting the Judiciary. EPA’s concessions (to

say nothing of the record) leave no doubt that this case turns on whether the agency

has the power to order an entire industry to get with the future—and thus to dictate

the Nation’s electricity supply. There is nothing “routine” about that. Opp. 3.

EPA is no more persuasive in defending the Rule’s price tag. The Rule treated

a massive bill to taxpayers in the form of green subsidies as a reduction rather than

a redistribution of costs that the agency had previously determined were unduly high.

EPA now pretends it was deferring to a “legislative judgment” in doing so. Opp. 48.

But neither the Rule nor Congress said any such thing, and EPA cannot save its work

by replacing economic illiteracy with revisionist history.

1

EPA likewise cannot make up its mind on the equities. On the one hand, it

dismisses the possibility of irreparable harm during this litigation because the Rule’s

“deadlines do not commence until 2030 or 2032.” Opp. 50. Yet in the same breath, it

asserts that merely staying the Rule for “‘2 to 3 years’ … would cause serious harm”

to “the climate.” Opp. 58. EPA cannot have it both ways: Either the Rule will lead to

“substantial reductions” in CO2 emissions over the next several years—as coal plants

faced with its unachievable emission targets read the writing on the wall and begin

winding down—or it will not. Opp. 57. And if this Court is troubled by this supposed

equitable equipoise, it can simply proceed with briefing and argument on the merits,

providing everyone with a definitive answer in under a year. Apart from summoning

the specter of a jurisdictional “question” that is no more than a distraction, EPA never

explains why that approach would be inappropriate in the absence of a stay. Opp. 59.

I.

EPA CANNOT RUN FROM THE RULE’S FORWARD-LOOKING CONSTRUCTION.

To stave off this Court’s review, EPA tosses overboard the “future”-oriented

construction of § 7411(a) it used to both issue the Rule and defeat a stay request below.

Opp. 29-30. Understandably so, for that theory was at war with the Clean Air Act’s

text (the statute permits only “achievable” standards based on technology that “has

been adequately demontrated”), its structure (neighboring provisions show Congress

invited projection when it wanted to do so), and its history (early rulemakings were

grounded in reality rather than imagination). NACCO Appl. 18-24. EPA was only

able to get away with these interpretive shenanigans below by virtue of outdated D.C.

Circuit cases that this Court has never endorsed and would never follow.

2

So EPA now pretends that everyone agrees about the “fundamental statutoryinterpretation issue” and only disputes its “application.” Opp. 2. Nonsense. While the

agency’s “technical and scientific judgments” are deeply flawed in their own right,

there is no need to get into that today. Id. The record is clear that, until this point,

EPA saw its role under the statute as soothsayer rather than scientist—and that it

had to do so given the conceded facts that 90% capture, transportation, and storage

are all currently unproven. NACCO Appl. 10-11, 18. Once its rewrite of history falls

away, EPA is left with a rewrite of the statute it cannot bring itself to defend.

A. Start with EPA’s own words on the subject. The agency admits it “discussed

cases permitting ‘some amount of projection,’” but claims all of that was meaningless

throat clearing. Opp. 30. Hardly. EPA invoked those cases for a reason. For instance,

after noting that “[p]recedent” allowed it to “make projections based on existing data

to establish a more stringent standard than has been regularly shown,” EPA

“[f]ollow[ed] this legal standard” to conclude that “the available data regarding

performance and testing at Boundary Dam” was sufficient to justify its “adequate

demonstration finding for a 90 percent standard.” Rule 39889. Similarly, in defending

its decision to set targets that would “require the building of capture facilities and

pipelines to transport captured CO2 to sequestration sites,” plus “the development of

sequestration sites,” EPA contended that “D.C. Circuit caselaw supports this

approach,” as it allows the agency to “extrapolate based on its findings and project

technological improvements in a variety of ways.” Rule 39878 & nn.610-11.

3

EPA continued riding this horse before the D.C. Circuit. Confronted with the

fact that “no commercial power plant is consistently achieving 90% capture,” the

agency responded that § 7411 targets may be “‘set at a level that is higher than has

been actually demonstrated over the long term by currently operating’ sources.” C.A.

Stay. Opp. 44; see id. at 45 (similar). Thus, in EPA’s telling, its lack of any “examples”

of real-world 90% CCS was neither here nor there, as “Section 7411 does not require

EPA to set performance standards that sources currently in operation can at all times

and under all circumstances meet.” Id. at 67 (cleaned up). In response to criticism

that it had relied “on ‘potential geologic sequestration sites,’” EPA again claimed “that

Section 7411(a) is forward-looking,” so there was no need to show that “potential

sequestration sites be already commercially utilized.” Id. at 64.

From start to finish, both the Rule and EPA’s defense of it below rested on the

agency’s “projection of what” technology “may be expected to achieve going forward.”

Rule 39831; see C.A. Stay. Opp. 38 (limits “may reflect EPA’s reasonable projection”).

That is why the agency’s allies concede “some extrapolation … is required” for EPA’s

system, and defend “EPA’s extrapolations” on the merits. Envt’l Org. Opp. 7-8.

B. These arguments were no accident. EPA had to engage in predictions to

adopt the Rule, since it is undisputed that “no commercial power plant is consistently

achieving 90% capture,” C.A. Stay Opp. 44; no relevant “commercial sequestration

facilities” are “currently operational in the United States,” Rule 39864; and “new

pipeline” to potential sequestration sites needed to be “projected,” C.A. Stay Opp. 58;

see NACCO Appl. 15-17. EPA does not disavow those factual concessions.

4

Instead, the agency denies it engaged in “projection” because CCS technology

“is already in existence.” Opp. 30. It emphasizes that “carbon capture writ large” has

been used since the 1930s and deployed in “coal and gas plants” since the late 1970s.

Opp. 26. That is too high a level of generality. By that reasoning, one could say a

manned mission to Mars was “adequately demonstrated” since the launch of Sputnik,

or the smartphone since Alexander Graham Bell—or, for that matter, that 100% CCS

clears the bar, which would shutter all coal plants overnight. That makes nonsense

of § 7411’s promise that EPA’s chosen system must have “a proven track record.” West

Virginia v. EPA, 597 U.S. 697, 759 (2022) (Kagan, J., dissenting). The “specific rate

of capture that the Rule requires” is thus no mere “technical” nicety. Opp. 4.

Turning to pipelines and sequestration facilities, EPA insists there is “nothing

unusual” about requiring construction of off-site infrastructure. Opp. 31. That misses

the point. Unlike EPA’s lone example, which describes a single plant that elected to

dispose of scrubber waste by pumping it into a nearby ravine, a new national system

of carbon pipelines and storage vaults cannot be constructed by any individual source

itself, particularly on the Rule’s aggressive timeline. EPA, Electric Utility Steam

Generating Units—Flue Gas Desulfurization Capabilities as of October 1978, at 2-10

(Jan. 1979); see Opp. 30. Rather, as EPA admits, coal plants—especially the 20% of

them far from any possible storage site—may need to overcome “permitting hurdles”

(exacerbated by EPA’s lengthy delays), “difficulties in obtaining the necessary rights

of way over such a distance,” as well as “other considerations”—assuming “potential

sequestration sites” ever become a reality in the first place. Rule 39855-56, 39860; see

5

NACCO Appl. 16-17. Relying on such a chain of contingencies involving third parties

belies EPA’s claim that, this time around, it has chosen a “system” that “operates at

the level of an individual facility.” Opp. 19 (quoting West Virginia, 597 U.S. at 715).

EPA therefore admits the Rule’s emission target will not “be ‘achievable’ for

every single source,” and suggests that the states may be able to propose “case-specific”

exceptions allowing them to survive. Opp. 40. But even by the agency’s lights, that

category consists of 20% of all long-term coal-plants, and the Rule is much less

sanguine about approval of state-proposed exceptions. Rule 39860; NACCO Appl. 17,

20. At best, it notes an exception “may be warranted” “if a state can demonstrate that

there is a fundamental difference” between a plant’s situation and “the information

the EPA considered.” Rule 39860. But Congress required EPA to “demonstrate[]” the

availability of its chosen system, § 7411(a), not the states to show why their resident

power plants should be exempted from a bureaucratic pipedream.

*

*

*

What EPA has done here is akin to identifying the world’s fastest sprinter and

then mandating that all marathon runners exceed that sprinter’s pace for 26 miles.

As EPA well knows, most participants will simply choose not to run the race. And

that is really the point. The agency does not expect sources to even try to implement

the undemonstrated 90% CCS target. But by setting that unrealistic goal, EPA will

induce coal plants to close, causing indirectly the “generation shifting” this Court

outlawed directly in West Virginia. 597 U.S. at 720. More duplicitous, but no more

lawful. The “adequately demonstrated” requirement is a “meaningful constraint[]” on

6

EPA’s authority, id. at 758-59 (Kagan, J., dissenting), yet the Rule replaces it with

an “adequately projected” standard that would give EPA free rein under the guise of

its “expert[]” judgments. Opp. 3. 1 That interpretation, from which the agency cannot

now run, presents a certworthy question on which applicants are likely to prevail.

II.

EPA CANNOT HIDE FROM ITS FAILURE TO CONSIDER THE RULE’S FULL COST.

EPA fares no better in its defense of the staggering “cost[s]” of the Rule.

§ 7411(a). The agency acknowledges that just five years ago, it “found that the high

costs of carbon capture prevented that technology from qualifying as the best system

of emission reduction.” Opp. 41 (cleaned up). It concedes that those astronomical

sums—which could surpass $100 billion by the early 2030s—have not vanished in the

intervening inflationary years, but merely been shunted onto taxpayers through a

“loss of revenue to the Treasury” in the form of IRA tax credits. Opp. 47; see NACCO

Appl. 27-28. And it never denies that instead of accounting for these costs, the Rule

deemed this transfer a “significant stream of revenue” amounting to “significant

reductions in the cost of implementing CCS.” Rule 39814, 39882 (emphasis added).

1 For what it’s worth, those who actually have “‘technical and policy expertise’” in

“electricity transmission, distribution, and storage,” West Virginia, 597 U.S. at 729,

have concluded that the “overwhelming weight of the expert evidence indicates that

a 90% carbon capture standard applied to generation units fueled by gas or coal is

neither technically nor commercially feasible,” FERC, Letter from Comm’r Christie

to Rep. Rodgers et al. 2 (Aug. 13, 2024), https://perma.cc/C83A-M9G3. Consistent

with EPA’s concessions, there appear to be no “generating units that are

commercially successful in energy or capacity markets today that have met such an

unrealistic standard.” Id.

7

Treating “billions of dollars in economic costs” as free money qualifies as a

textbook case of unreasoned decisionmaking. Michigan v. EPA, 576 U.S. 743, 752

(2015). EPA nevertheless mounts several defenses of this magical thinking.

First, EPA notes that § 7411 does not require it to consider “‘cost’ in general,”

but “only ‘the cost of achieving such reduction.’” Opp. 47. That does not help anything.

The point remains that Congress did not arbitrarily limit the analysis to costs borne

by certain parties. EPA thus must add words to the statute to get from “the cost of

achieving such reduction,” § 7411(a), to “the cost to the regulated source of ‘achieving’

the reduction,” Opp. 47 (emphasis added; brackets omitted). Nothing in the statutory

text excludes a $100-billion-plus addition to the national debt. § 7411(a).

Indeed, EPA’s “cost to the regulated source” construction would allow it to

bypass cost considerations entirely, on the theory that many power plants pass along

their costs to ratepayers in the form of higher electricity bills. See West Virginia, 597

U.S. at 714 (noting the CPP “would entail billions of dollars in compliance costs (to

be paid in the form of higher energy prices)”). That cannot be right, which is why EPA

has consistently treated “the costs to the regulated facility” as “relevant costs,” but

not the only ones. Rule 39801; see West Virginia, 597 U.S. at 729 (observing that

EPA’s view of the “statutory factor[] of ‘cost’” required it to consider “how high energy

prices can go … before they become unreasonably ‘exorbitant’”); NACCO Appl. 30.

Second, lacking a textual foothold in the Clean Air Act, EPA pivots to argue

that the Rule defers to a “legislative judgment” in the IRA that the “potential public

benefits” to the environment from the tax credits “outweighed the burdens on the

8

public fisc.” Opp. 48. But that argument “contradicts the foundational principle of

administrative law that a court may uphold agency action only on the grounds that

the agency invoked when it took the action.” Michigan, 576 U.S. at 758. In accounting

for the cost of its chosen system, EPA did not say it was respecting a considered costbenefit judgment by the 2022 Congress. Still less did EPA say it had made its own

determination that “the total costs of carbon capture”—harms to the federal fisc

included—were less than “the total benefits to the public.” Opp. 47. What it said was

that the IRA had “provide[d] a significant stream of revenue” that “offsets” the Rule’s

“costs.” Rule 39881-82 (emphasis added). “EPA’s action must be measured by what it

did, not by what it might have done.” Michigan, 576 U.S. at 759 (cleaned up).

Even if the agency could hurdle this Chenery obstacle, it would still come up

short, for nothing in the IRA reflects EPA’s imaginative reconstruction of Congress’s

cost-benefit analysis. That Congress wanted to “facilitate[] power plants’ use of [CCS]

technology” through voluntary behavior says nothing about whether it wanted EPA

to mandate adoption of that technology, let alone in an economically illiterate fashion.

Opp. 48 (emphasis added). There is nothing “evident” about that leap in logic. Id.

In all events, EPA ignores that the tax credits will “expire” after 12 years. Rule

39902. But wielding “the ‘exorbitant’ costs” of “carbon-capture” to “‘force the closure’

of all affected ‘coal-fired power plants’” is unlawful whether the bill comes due now or

in 12 years. West Virginia, 597 U.S. at 776 (Kagan, J., dissenting). By setting limits

that are not financially “achievable” in the long run, EPA is once again impermissibly

“direct[ing] existing sources to effectively cease to exist.” Id. at 728 n.3 (majority).

9

Finally, EPA argues forfeiture to try to sweep its financial chicanery under

the rug. Opp. 47. Yet this point was made both during the comment period (which is

why EPA addressed it), and in the D.C. Circuit, where applicants argued the agency

had “failed its separate duty to consider ‘cost’” and emphasized that “[t]he Rule relies

heavily on federal credits to potentially make costs bearable.” E.g., W. Va. C.A. Stay

Mot. 8; see NACCO C.A. Stay Joinder. In all events, parties “can make any argument

in support of” a “claim [that] is properly presented.” Lebron v. Nat’l R.R. Passenger

Corp., 513 U.S. 374, 379 (1995). Because no one disputes that applicants have

advanced the “consistent claim” that EPA’s cost analysis was deficient, that should

be the end of the matter. Id.; see C.A. Stay Opp. 78 (arguing that applicants’

“challenge [to] EPA’s cost assessment” is meritless).

III.

EPA CANNOT HAVE IT BOTH WAYS WHEN IT COMES TO THE EQUITIES.

On the equities, EPA waves away any threat of irreparable harm “during the

pendency” of this litigation on the premise that plants need not comply “until 2030 or

2032.” Opp. 5. At the same time, the agency claims staying the Rule for “2 to 3 years

while the courts decide its legality” will harm the public in the form of “irretrievable”

emissions. Opp. 57-58. Both of these things cannot be true at the same time. The only

way a stay will result in irreparable emissions “in the meantime,” Opp. 5, is if coal

plants would otherwise begin to wind down now in response to this unachievable

mandate—precisely what EPA is counting on. Put differently, “due to the need for

long-term planning,” the emissions EPA fears will continue if the Rule is stayed are

just the flipside of the “irreparable harm” applicants face if it is not. App. 2a.

10

That is why EPA retreats to the observation that “a stay would not eliminate

uncertainty” because the Rule could “eventually” be held lawful. Opp. 53. But that

risk is always present in this area, and is addressed through the “tried-and-true”

method of asking “which party is most likely to prevail in the end.” Labrador v. Poe,

144 S. Ct. 921, 929-30 (2024) (Kavanaugh, J., concurring in the grant of stay).

To the extent EPA is concerned only with “irretrievable additional carbon

dioxide emissions” in the early 2030s from “tolling the Rule’s deadlines” by two to

three years to account for the period of the stay, Opp. 57, that is not a basis for

denying relief now. If this Court both grants a stay and then rules for applicants on

the merits, those harms will drop out of the analysis, for there is no “public interest”

in having “agencies … act unlawfully even in pursuit of desirable ends.” Alabama

Ass’n of Realtors v. HHS, 594 U.S. 758, 766 (2021). And if this Court grants a stay

but then rules for EPA down the road, the intervening years “will not necessarily be

wasted,” as new evidence (including the stay) could cause the agency to ultimately

adopt a new rule “setting a different capture rate or a different compliance timetable.”

Opp. 52-53; see West Virginia, 597 U.S. at 715 (noting that EPA “reconsider[ed]” and

eventually “repealed” the CPP in the wake of this Court’s 2016 stay). But if this Court

denies a stay and then rules for applicants years from now, there will be no way to

recoup the “costs [they] will incur during” this case, Opp. 52, much less unwind any

closures of power plants, losses of businesses (and jobs), or dangerous grid failures

that occur in the interim.

11

In all events, this Court can cut through any equitable thicket by treating this

application as a petition for a writ of certiorari before judgment, granting review, and

setting the case for briefing and argument during the upcoming Term. Doing so would

permit a definitive decision by June 2025 that would both protect applicants from a

regulatory whipsaw and shield EPA from any (imagined) harms associated with

“tolling the Rule’s deadlines.” Opp. 5; see NACCO Appl. 35. It would also avoid the

need to litigate this challenge in the shadow of outdated D.C. Circuit precedents that

even EPA now realizes must be shucked aside. NACCO Appl. 35; see supra at 2-4.

While not denying these upsides, EPA “question[s]” whether this Court would

have “appellate jurisdiction” under Article III to take this sensible approach. Opp. 59.

But this is a sideshow. As EPA concedes, this Court unquestionably has jurisdiction

to review the D.C. Circuit’s stay order. Opp. 60. The only question is whether, in

exercising that jurisdiction, this Court can “rule on the merits.” Id. Yet it “has long

been the rule” that “a reviewing court has the power on appeal from an interlocutory

order ‘to examine the merits of the case,’” such as when this Court held the steelseizure order unlawful on the “merits” while reviewing an appellate court’s “stay of

[a] preliminary injunction.” Munaf v. Geren, 553 U.S. 674, 691-92 (2008) (citing

Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 584-85 (1952)). EPA identifies

no obstacle to following that path here. But to the extent this Court has any concerns,

it can order merits-length “briefing” and/or “oral argument” on the stay applications

to reach the same destination in practice. Labrador, 144 S. Ct. at 933 (Kavanaugh,

J., concurring in grant of stay); see, e.g., NFIB v. OSHA, 595 U.S. 109, 120 (2022).

12

CONCLUSION

This Court should grant an immediate stay of the Rule. In the alternative, it

should treat this application as a petition for a writ of a certiorari before judgment

and grant review, or order briefing and argument on the stay applications to occur

during the upcoming Term.

August 23, 2024

Charles T. Wehland

JONES DAY

110 N. Wacker Dr., Ste 4800

Chicago, IL 60601

(312) 269-4388

ctwehland@jonesday.com

Jeffery D. Ubersax

KUSHNER & HAMED CO., LPA

1375 E. Ninth St., Ste 1930

Cleveland, OH 44114

(216) 696-6700

jdubersax@kushnerhamed.com

Respectfully submitted,

/s/ Yaakov M. Roth

Yaakov M. Roth

Counsel of Record

Brinton Lucas

S. Matthew Krsacok

JONES DAY

51 Louisiana Ave., N.W.

Washington, DC 20001

(202) 879-7658

yroth@jonesday.com

blucas@jonesday.com

mkrsacok@jonesday.com

Counsel for Applicant NACCO Natural Resources Corporation

13