Justice Alito Recuses From the Supreme Court’s Big Climate Case

0:29This episode is brought to you by Charles Schwab. On the pages of The Wall Street Journal, this is Potomac Watch. The Supreme Court prepares to begin its new turn with a big case on whether cities and counties can sue oil companies for contributing to global climate change. But unexpectedly, Justice Samuel Alito has announced he will recuse from the case, raising the prospect of a potential 4-4 split that would frustrate the interests of justice. Welcome, I'm Kyle Peterson with The Wall Street Journal. We're joined today by my colleague on the WSJ's opinion pages, columnist Alicia Finley. Supreme Court doesn't always start its annual term with a bang, but this year it sure is.

1:09When the justices officially return from summer recess and gavel in the court at 10 a.m. on Monday, the first case on the docket is Suncor Energy v. Boulder County. Some reports, Alicia, say that dozens of states and local governments have now filed lawsuits against oil companies trying to use state law to punish the industry for the effects of worldwide greenhouse emissions. How do you size up this case and its importance to answering the question of whether these lawsuits are allowed to proceed in state court or whether they are maybe preempted by federal law or maybe the Constitution? So I think these cases kind of developed and they were an outgrowth of a particular case in 2011 called AEP versus Connecticut, in which the Supreme Court held that states could not sue utilities in that particular instance or any other companies for alleged damages caused by their greenhouse gases and climate change under federal common law.

2:18So that meant that that foreclosed one avenue to bring lawsuits against oil and gas companies. Now, states and localities are very innovative and entrepreneurial, so they started filing lawsuits in state courts instead, arguing various or variations of this argument that oil companies created a public nuisance with their production of fossil fuels, which released greenhouse gas emissions, which attributed to climate change, which resulted in sundry harms to these local communities and everything from wildfires to, you know, mitigating or the cost of local pest control that boulder size reduced farm output, employee productivity, you name it.

3:10And they want to hold oil and gas companies and particularly Mostly U.S. ones, though in some of the other cases they've sued BP and Shell as well, accountable for the alleged effects of climate change. So that really is the goal. One is to basically extract a huge payday from these companies. And two is to use lawsuits essentially to force these companies to stop producing fossil fuels because that's the only really way to avoid ruinous liability. The ruling from the lower court that's being reviewed here is from the Colorado Supreme Court. And what it said was that it wasn't taking a position for now on the merits of these claims by Boulder County and the city of Boulder against Suncor and ExxonMobil.

3:58But it was going to allow the case to proceed for now in state court because in the Colorado Supreme Court's view, these claims are not preempted by federal law. So that's one of the arguments. The petitioners, the energy companies are saying that we have a federal Clean Air Act, and the federal Clean Air Act means that states do not have the room, essentially, to do regulation of their own of these carbon emissions. The conservative justices over the years have had a range of views on preemption, and particularly preemption where it is not explicitly stated in the law passed by Congress. By the way, we are preempting the states.

4:41There's a second argument, though, Alicia, that's also interesting and kind of coming to the fore in some of the briefs. Here's what the energy companies, part of what they say, they say the audacious attempt to use state tort law to address the effects of global climate change is incompatible with the structure of the Constitution. They go on to say that states are co-equal sovereigns. They have competing claims. States lack the power to regulate conduct beyond their borders. And I wonder what you make of that argument, Alicia, and particularly the options facing the justices as they consider this case on preemption grounds, on a more kind of structural constitutional grounds, or maybe whether there's a jurisdictional issue here, too.

5:25One of the questions here is whether the case is right, whether it has proceeded enough in the state court to be reviewable by the Supreme Court. So potential there for maybe some kind of punt if the justices want it. Well, I don't think they're going to do a punt for the very reason that there have been a number of cert petitions from the lower courts or from state courts that have asked the Supreme Court to take up their cases. There was a Honolulu one a couple of years ago, and the Supreme Court declined ostensibly, I think, because of these jurisdictional reasons that that case wasn't ripe.

5:58But here, I think the case is ripe in part because even if the Colorado Supreme Court hasn't ruled on the merits, it hasn't ruled, made the ruling that it does not believe that federal law preempts these state law claims. Now, I think there are a couple of complexities here, particularly for the conservative justices. In part, that AEP decision, I think that's a very clean way that the Supreme Court could go about, if they wanted to, to rule in favor of the oil and gas companies, would be just to say the AEP decision is controlling here in terms of the Clean Air Act does preempt states. This is a national issue.

6:39The Congress gave the EPA authority over emissions and controlling emissions. So states have really no authority to try to regulate or, for that matter, tax global or emissions outside of their borders. The reason why I think that this could pose a bit of a dilemma for the conservative justices is there were a number of conservative justices who dissented in the Massachusetts EPA case that preceded that case. And that was when the Supreme Court held that essentially, for all intents and purposes, the EPA had authority under the Clean Air Act to regulate greenhouse gas emissions. And I would, I'm inclined to agree with the conservatives that the law of the Clean Air Act does not confer express authority to regulate greenhouse gas emissions.

7:29And the Trump administration is essentially arguing as much in a couple of other cases. So that's why I think ruling purely based on the AEP precedent would open up a can of worms and would be a little problematic, especially if the Supreme Court takes up another case in a couple of years to revisit Massachusetts v. EPA. Now, you raise another avenue that they could go, and I think this is probably the more compelling argument, is that the framers of the Constitution devised it such that one state could not control or activity outside of its borders or that wholly occurs outside of its borders.

8:09And that is essentially what Boulder County and other states and localities that are suing these companies are trying to do. They are trying to regulate activity, in this case emissions or production, outside of their borders. They're trying to essentially hold companies liable for producing oil and gas in Texas or Alaska and other states. And this is really kind of what the Commerce Clause was intended in part to prevent. was to give Congress regulatory authority over interstate commerce to prevent states from enacting or pursuing kind of parochial and protectionist policies that harm their sister states.

8:45So I think that that's one avenue they could go. There's also a compelling argument that climate change and regulation of greenhouse gas emissions is really, it implicates foreign policy and the Constitution vests foreign policy or authority over foreign policy to the president Congress, not the states. And so states are really overstepping their authority in terms of trying to essentially regulate global greenhouse gas emissions. And so I think that what will be interesting to see is where how the conservatives split on this. As you mentioned earlier, that the conservative justices have a range of opinions on preemption.

9:24They have a range of opinions on the dormant commercial cause to. So I would expect to see many actually concurrences in this. I do think the oil and gas companies will probably end up prevailing, but how they get there is not assured or clear. Hang tight. We'll be right back in a moment. This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. Listen at schwab.com slash Washington Wise. This is Matthew Hennessey, the editor of Free Expression.

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10:43Sign up for free expression today. We'll see you in your inbox. Welcome back. If they decide on some kind of broad rule about not letting states regulate outside of their territory, that could have real significant effects even beyond the climate context in an era where you have very deeply blue states and very deeply red states that are each alternating in how much they're frustrated at what's happening in Washington, D.C. and looking for ways to push the boundaries of their own power, maybe export some of their values. I mean, you can think of examples on either side. You could have a blue state that says nothing sold in the state may be manufactured by workers making below a certain minimum wage that is higher than the minimum wage in the neighboring state next door.

11:32Or no retailer may operate in this state who anywhere worldwide sells any kind of firearm in its stores, even if those stores themselves, those individual stores have no connection to that state. Or you could have a red state say something about streaming services that are sending content into this state may not use certain DEI rules with their staff who may be totally across the country. I mean, Alicia, it does seem to me like there are starting to be efforts by red and blue states to exert their authority in those kinds of ways. And I don't know exactly how the Supreme Court would draw the line, some of those cases might end up being tricky and dependent on the intent of the states, the state lawmakers, and the specific variables about what industry we're talking about, what the actual law says.

12:20But interesting that we could start to have some moves here in this climate case to address that problem. Right. So I think it's funny that the first example you brought up was actually one of the examples that the plaintiffs brought up a couple a few years ago, I guess, maybe now, in the pork case involving California's regulations of pork and what they call the animal welfare regulations, sows would have to be able to stand up and move within their pens, which effectively banned much of or required out-of-state pork producers to adjust their operations to meet California's standards to sell into the market.

13:01And the Supreme Court, the conservatives, upheld that regulation and said, well, it's really regulating the sale of products in-state, which states may do, but it has an incidental effect on out-of-state operators, and they could technically choose not to comply. Or you did have some different views on that from Justice Roberts, Alito, and Kavanaugh, which just shows that the conservatives are a little mixed on to what extent the states have the authority to regulate beyond their bounds and how do you draw that line. I think this case is a little different in terms of the need. There's really no dispute that if Colorado wanted to regulate or impose some kind of carbon tax on producers or companies inside Colorado, that would be OK.

13:58What it's essentially trying to do is now tax companies for emissions that occurred anywhere around the world. And I think that that's a pretty hard argument to make that one state or one locality has that authority. Hang tight. We'll be right back after one more break. A t-shirt and jeans, mac and cheese, oceans and sunsets. Some things in life are an obvious match, like RIAs and Schwab Advisor Services, the number one choice for independent advisors looking for a custodian who can help them go further. With all the wealth services, technology, and support an RIA firm needs, the difference is so obvious, it's Schwabvious.

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14:59From the Opinion pages of The Wall Street Journal, this is Potomac Watch. Welcome back. Let's turn to the surprising recusal this week of Justice Samuel Alito from this case. The terse announcement here from the clerk of court issued on Monday to the parties. One sentence long, it says, I'm writing to inform the parties that Justice Alito has determined that he will not continue to participate in this case. So we don't know exactly why. We don't know exactly why now as opposed to earlier, because previously the court had said he was declining to recuse himself. There had been kind of a campaign to get Justice Alito to recuse complaints by all sorts of groups on the left, including an outfit called Earthworks, feminist majority, pointing to some of his individual investments disclosed on his financial forms.

15:55And as far as I know, they do not include any investments in the actual parties to this case. Those are Suncor, ExxonMobil. But he has some investments in other oil and gas companies, ConocoPhillips, for example. And then get this, the letter that these groups sent also complained that Justice Alito had some money in a Vanguard high dividend yield ETF in which Exxon is the third largest holding. And Alicia, if you'll look it up, according to Vanguard, Exxon is only about 2.7 % of that fund, not all that much more than it is in the S &P 500. And once you start to get demands to recuse on those kinds of bases, it becomes very hard for me to figure out how to draw the lines.

16:41I mean, everybody's got a 401k. If you are invested in any kind of tech company, does that mean that every judge or justice has to recuse from any sort of ruling about another tech company because that ruling might be good for the industry. Or think about patent cases. If the justices have some sort of case about the rules for patent cases and it strengthens them for patent holders, that's good for intellectual property. Once you start to get away from the pretty clear rules in the past of, you know, does a judge or justice have a direct investment in this company, a family member working for this company, something really tangible, then I have trouble figuring out how we're supposed to draw these lines.

17:23Right. So, I mean, I would give Justice Alito the benefit of the doubt here. He also recused himself in a 2021 case that went up to the Supreme Court involving it was actually a procedural prelude to these kinds of cases that involved BP in the city of Baltimore and whether the case should be heard or could be heard in federal court rather the state court, he actually recused himself from that case and ended up being a 7-1 decision. And so it could be he recused himself from this case for the very same reasons he recused himself from that case. And in 2021, that he just wanted to eliminate even the hint or shadow of doubt that somehow his investments in oil and gas companies were affecting his reasoning.

18:05He didn't want to give his critics any ammunition. But I take your point that the left is looking for any kind of excuse or reason to try to bully the conservative justices into recusing themselves from cases so that they have better odds of getting the outcome that they want. And so if you get, you have eight justices instead of nine, there's a possibility you could get, you know, one, If you flip one of the conservative justices, you could get a deadlock, a 4-4, and without any kind of controlling precedent. And I think the tricky thing about this particular case, I do still think it will probably be a 5-3 or 6-2 decision for the oil and gas companies.

18:50But the tricky thing is if the reason why Justice Alito recused himself from this case was because he held investments in oil and gas companies that would be affected by it, well, then that basically gainsays would prevent him from hearing or ruling on any other similar case in the future. And so these cases are just going to continue to proliferate in the lower courts. Just to underline that point, I mean, to my mind, I don't think Earthworks and feminist majority are really concerned about judicial ethics here. This is an effort to force Justice Alito off a case because what they really want is to win that case.

19:28They want these lawsuits in state court against these oil companies to proceed and continue and to proliferate. And to the point about the lack of complete clarity here, one of the concerns I imagine from the justices' point of view is if they start to be very specific about why they're recusing from these cases, They're just going to create a directory for parties and activist groups to demand more recusals and try to figure out more ways to get them tossed off cases, which often I think is a loss to the court and the country and to justice. I mean, unlike in the lower courts, there are not backup justices who can pinch hit in these cases.

20:11That is something that Justice Rehnquist once said when he was denying a request to recuse from a case that he didn't think was merited. It's something that Justice Anton Scalia said in 2004 when there were demands that he sit out a case involving Vice President Dick Cheney because he had gone hunting with Vice President Dick Cheney. Part of what Justice Alito said is this, if it is reasonable to think that a Supreme Court justice can be bought so cheap, the nation is in deeper trouble than I had imagined. And I think there's something to that. The justices have deep ideological, jurisprudential views on these questions.

20:51They have oral arguments where they hash them out in public, in front of the parties, in front of the country, anybody who wants to tune in on a live stream. They defend their views then in rulings, in print, in writing. But a recusal does raise the prospect, at least, of a 4-4 case. And what do you think the outcome would be of that? I don't know if there is a second case, a backup case involving different parties that might be waiting in the wings. But often if you have a 4-4, what you just end up with is more litigation for more years until the next case can finally work its way up to the Supreme Court, which is not the goal here.

21:29The goal is to have the justices, the nine of them, settling these questions for the country in the interest of letting everybody know what the law is. Right. So I still think, as I said, I don't think it's going to be a 4-4. I think it's likely 5-3. It's possible Elena Kagan rules for the oil and gas companies and tries to get a narrow decision by joining the majority, maybe trying to keep it and apply the AEP precedent that I had mentioned earlier rather than a broader kind of constitutional argument. Now, again, like the issue would be is we don't know why Justice Alito recused himself. But theoretically, the reason why he recused himself from this case could prevent him from hearing any of the other climate cases that are percolating in the state courts.

22:19Some of them are going up and being appealed in appellate courts. And so they've gone every which way. I mean, the Second Circuit has actually squashed one of the challenges for New York City. You actually have had some state Supreme Courts that have tried to shut down some of these lawsuits, even in blue states. So I don't think all hope is lost, even if it doesn't go or even if it ends up being a 4-4 decision. I think you still have some even liberal judges who on the bench in the state courts and federal courts who are very suspicious of these lawsuits and what they're trying to achieve. And that's why you've actually seen, you know, even just the other day, a loss in a Michigan lawsuit against oil and gas companies by a Democratic judge rejected the argument from the Michigan AG.

23:12So I think it would be better if or would be preferable, obviously, if we had a full bench hearing this. But I think the justices are still capable of coming to a majority on this issue regardless. Thank you, Alicia. Thank you all for listening. You can email us at pwpodcast at wsj.com. If you like the show, please hit that subscribe button. And we'll be back tomorrow with another edition of Potomac Watch. Your financial life rarely fits between 9 and 5, and the questions shaping your future don't follow a schedule. That's why Citi created Citi Sky, a secure AI member of your Citi Wealth team, built with the Gemini platform on Google Cloud.

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