In a unanimous opinion, Coalition for Responsible Regulation, Inc. v. Environmental Protection Agency, No. 09-1322 (D.C. Cir. June 26, 2012), a three judge panel of the U.S. Court of Appeals for the District of Columbia Circuit denied challenges to four regulations promulgated by the Environmental Protection Agency (“EPA”) that address greenhouse gas emissions. The three judge panel included Chief Judge Sentelle, and Judges Rogers and Tatel. (Judge Rogers also is on a panel that is reviewing challenges to the Cross State Air Pollution Rule).
EPA issued the rules reviewed by the court of appeals as the result of the Supreme Court’s ruling in Massachusetts v. EPA, 549 U.S. 497 (2007). Massachusetts v. EPA overturned EPA’s decision not to regulate greenhouse gases (“GHGs”) as “air pollutants” under the Clean Air Act ("CAA"). The Supreme Court left EPA little latitude to avoid addressing GHGs under the statute. Accordingly, in 2009 EPA issued an Endangerment Finding, the predicate to promulgating standards for sources and in 2010 the Tailpipe Rule (regulating GHG emissions from cars and light duty trucks), the Timing Rule (establishing a time table for regulation of stationary sources of GHGs), and the Tailoring Rule (which focused stationary source GHG regulations on the largest sources of emissions). Coalition for Responsible Regulation considered petitions for review of the Endangerment Finding, the Tailpipe Rule, the Timing Rule, and the Tailoring Rule filed by a number of states, as well as manufacturing, oil and gas, and other industry groups.
The court of appeals held that the Endangerment Finding and Tailpipe rules were not arbitrary or capricious and that the EPA's interpretation of how the regulatory programs for stationary sources — the prevention of significant deterioration ("PSD") and Title V provisions of the CAA — apply to GHG sources was "unambiguously correct." The court also held that the petitioners lacked standing to challenge the Timing or Tailoring Rule.
Endangerment Finding and Tailpipe Rule
EPA’s Endangerment Finding under section 202(a) of the CAA's mobile source provisions found that GHGs "endanger both the public health and public welfare of current and future generations" and that GHGs from new motor vehicles cause or contribute to the endangerment. Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act, 74 Fed. Reg. 66,495 (Dec. 15, 2009). The statute requires EPA to take steps to control emissions of a pollutant that is the subject of an endangerment finding. Accordingly, the 2009 Endangerment Finding, as a practical matter, dictated adoption by EPA and the National Highway Traffic Safety Administration of the Tailpipe Rule. That rule controls GHG emissions from new motor vehicles by setting more stringent fuel economy standards and limiting certain tailpipe emissions. Light Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards, 75 Fed. Reg. 25,324 (May 7, 2010).
Petitioners in Coalition for Responsible Regulation challenged the Endangerment Finding on several theories. They alleged, for example, that EPA had promulgated the finding without taking important policy concerns into account, such as the social, economic, and environmental benefits of activities that generate GHGs. They also argued that the EPA made its finding despite significant scientific uncertainty and without the ability to quantify the concentration in the atmosphere at which GHGs endanger public health.
The court held that CAA section 202(a) requires EPA to make a "scientific judgment" about the potential risk of GHGs, not a policy decision, and that EPA is not required to eliminate all uncertainty or to establish a "minimum threshold of risk or harm" before determining that an air pollutant endangers public health and welfare.
Petitioners challenged the Tailpipe Rule directly by arguing that EPA's approach was arbitrary and capricious because, among other things, EPA failed to consider the impacts on stationary sources (for example, power plants) of issuing a rule addressed to mobile sources like cars and trucks. Under prior EPA interpretations of the CAA, once the agency subjects a pollutant to regulation under any part of the CAA, the statute requires regulation of large stationary sources of that pollutant. The court held that under section 202 EPA lacked the discretion to defer promulgation of the Tailpipe Rule based on stationary source permitting issues.
Timing and Tailoring Rules
As mentioned above, the Endangerment Finding and Tailpipe Rule dictated that that GHGs are regulated air pollutants subject to the PSD and Title V permitting requirements of the CAA. The PSD and Title V permitting provisions generally apply thresholds of 100 or 250 tons per year ("tpy") before imposing permitting requirements on sources. EPA knew, however, that application of those thresholds to sources of GHGs would trigger permitting requirements for commercial and residential sources that normally escape PSD and Title V regulation due to their size. When one burns a fuel — coal, oil, or natural gas, for example — the weight of the carbon dioxide (“CO2”) emissions from the combustion are on the same order of magnitude as the weight of fuel just as a matter of chemistry. Relatively small boilers or furnaces burn enough coal, fuel oil, or natural gas to emit 250 tons per year of CO2. EPA expected that were it to apply the 100/250 tpy thresholds to CO2, PSD permit applications would jump from approximately 280 per year to over 81,000 per year. Title V applications would increase from approximately 14,000 per year to over 6 million per year. The burden of reviewing those applications would fall in many cases on state agencies, and neither EPA nor the states has remotely sufficient resources to handle millions of applications for air pollution permits each year.
To avoid this outcome, EPA issued the Timing and Tailoring Rules. The Timing Rule chose a date-certain on which permitting requirements became effective, and that date was relatively delayed. Reconsideration of Interpretation of Regulations That Determine Pollutants Covered by Clean Air Act Programs, 75 Fed. Reg. 17,004 (Apr. 2, 2010). The Tailoring Rule raised the emissions thresholds that trigger permitting, lifting them from levels such as the 100/250 tpy specified in the CAA to levels ranging from 75,000 to 100,000 tpy instead. The Tailoring Rule also phased in the permitting requirement so that not all sources had to apply on the first day. Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, 75 Fed. Reg. 31,514 (June 3, 2010).
The petitioners challenged EPA's statutory interpretations and the rules, asserting, among other things, that the problems addressed by the Tailoring Rule demonstrated that Congress did not design the CAA to address substances such as GHGs that mix and disperse in the global atmosphere and do not have local or regional impacts. Petitioners argued that Congress intended the CAA to address only pollutants with local impacts, and that applying that approach to GHGs required EPA to re-write the CAA, unilaterally departing from the permitting thresholds included in the CAA and replacing them with numbers of its own. Petitioners also argued that the very fact that EPA had to contort itself to avoid an unmanageable outcome indicates that GHGs cannot be a pollutant subject to PSD regulation under the CAA.
In addressing the petitioners’ statutory arguments about the applicability of the CAA to GHGs, the court admitted that "the CAA is a regulatory scheme less-than-perfectly tailored to dealing with greenhouse gases[.]" But, under Massachusetts v. EPA, GHGs have been held to be an "air pollutant" and under EPA's longstanding interpretations of the CAA, they are subject to the PSD and Title V provisions. As for the petitioners' direct challenges to the Timing and Tailoring Rules, the court held that the petitioners did not have standing to challenge the rules because none of the petitioners had suffered any actual or imminent injury in fact. The industrial sources challenging the rules would have been regulated by the EPA's approach whether the Tailoring Rule was adopted or not, and the state challengers, if anything, benefited from the Tailoring Rule by virtue of the reduced permitting burdens imposed on them.
This opinion firmly supports EPA's approach to PSD and Title V permitting for sources of GHGs. Large sources should continue to focus on their levels of GHG emissions and whether they are subject to permitting requirements, which have been in existence since 2011. They also should review available determinations of what constitutes Best Available Control Technology ("BACT") for GHG sources under the PSD program. Recognize that, unlike some conventional pollutants, BACT may not call for controls put onto the end of the stack. Instead, reducing emissions (or emissions that count) by changing fuels or reducing the rate of combustion through greater efficiency may be BACT.
EPA issued an updated GHG permitting guidance document in March 2011 that, among other things, provides guidance on GHG permitting requirements and on how BACT determinations will be made. PSD and Title V Permitting Guidance for Greenhouse Gases, March 2011. Under EPA guidance issued to date, depending on the source, approaches to determining BACT can include consideration of various options, such as energy efficiency improvements, use of biofuels, and carbon capture and sequestration. In addition, EPA has issued white papers on available and emerging BACT technologies for electric generating units, large industrial/commercial/institutional boilers, pulp and paper sources, cement manufacturers, the iron and steel industry, refineries, and nitric acid plants. There also have been several GHG BACT decisions made for GHG permits for certain sources, including natural gas combustion turbines, industrial boilers, and oil refineries.
Notice also that the court of appeals did not specifically endorse the Tailoring Rule because it held that these states and industrial groups did not have standing. The court has not held that EPA properly crafted a way to regulate GHGs without swamping the regulatory system. Prudent operators of GHG sources close to, but below, the Tailoring Rule thresholds should remain alive to the possibility that those thresholds will be lowered, sweeping additional sources into the regulatory programs including small boilers and furnaces, construction projects, or even agricultural operations . That could occur either because EPA becomes persuaded that it ought to lower the thresholds or because a petitioner with standing successfully challenges a PSD or Title V permit on the ground that the permit ought to have included a GHG condition omitted because of the Tailoring Rule.
For now, lowered thresholds are not immediately imminent. EPA proposed in March 2012 not to change the emissions thresholds that currently trigger applicability of the PSD permitting requirements for GHG sources. Having crafted a successful argument to avoid strict application of the much lower CAA PSD thresholds, EPA has shown no inclination to expand its approach to include smaller sources. Indeed, in a struggling economy, targeting smaller commercial operators would not be expected.
Finally, because the court rejected the petitioners’ challenges to EPA's interpretations of the CAA, the opinion could lead to the further consequence of EPA having to develop a National Ambient Air Quality Standard ("NAAQS") for GHGs. Section 108 of the CAA requires EPA to publish a list of air pollutants that “cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare.” EPA made the 2009 Endangerment Finding under section 202, which applies only to pollutants emitted from mobile sources. Some argue, however, that the section 202 Endangerment Finding has, in essence, already made the section 108 finding, and that the EPA, under NRDC v. Train, 545 F.2d 320 (2d Cir.1976), has a mandatory duty to promulgate a NAAQS for GHGs under section 109 of the act. See Petition to Establish National Pollution Limits For Greenhouse Gases Pursuant to the Clean Air Act, filed December 2, 2009, by the Center for Biological Diversity and 350.org (asking EPA to establish a NAAQS for CO2 at 350 parts per million ("ppm")).
The current global concentration of CO2 is estimated to be 390 ppm or more. If a NAAQS were set at 350 ppm, it would seem necessary to conclude that all air quality regions in the U.S. would be in nonattainment and that the more stringent permitting and other requirements of nonattainment new source review would apply. If so, given the global nature of the emissions, there might be little the U.S. could do on its own to reach the standard.
When the EPA’s 2009 Endangerment Finding was issued, the EPA Administrator stated that setting a NAAQS for GHGs was not “advisable.” But the Coalition for Responsible Regulation opinion demonstrates what seem to be the inevitable consequences of the Supreme Court’s determination in Massachusetts v. EPA that GHGs are pollutants under the CAA. The court of appeals’ support of EPA’s statutory interpretations of the PSD and Title V programs as applied to GHGs is another step toward the possible promulgation of a NAAQS for GHGs.