The D.C. Circuit Court of Appeals has rejected challenges filed by industry groups and several states to U.S. Environmental Protection Agency (EPA) greenhouse gas (GHG ) rules. Coal. for Responsible Regulation, Inc. v. EPA, No. 09-1322 (D.C. Cir. 6/26/2012). EPA issued the rules after the U.S. Supreme Court held that greenhouse gases are an “air pollutant” subject to regulation under the Clean Air Act (CAA). Massachusetts v. EPA, 549 U.S. 497 (2007).
In a direct response to the Supreme Court’s directive, EPA issued an endangerment finding for GHG . 74 Fed. Reg. 66,496 (12/15/2009). In that “finding,” EPA concluded that motor-vehicle emissions of six well-mixed gases “contribute to the total [GHG ] air pollution, and thus to the climate change problem, which is reasonably anticipated to endanger public health and welfare.” Next, the agency issued its tailpipe rule for GHG s. 75 Fed. Reg. 25,324 (5/7/2010). That rule set GHG emission standards for cars and light trucks as part of a joint rulemaking with the National Highway Traffic Safety Administration’s fuel economy standards. Once the tailpipe rule set motor-vehicle emission standards for GHG s, under EPA’s interpretation, they became a regulated pollutant under the CAA, requiring Prevention of Significant Deterioration (PSD) and Title V GHG permitting.
Next, acting according to its interpretation of the PSD and Title V programs, EPA issued two rules phasing in stationary source GHG regulation. First, in the timing rule, EPA concluded that an air pollutant becomes “subject to regulation” under the CAA only when a regulation requiring control of that pollutant takes effect. 75 Fed. Reg. 17,004 (4/2/2010). Thus, EPA concluded, major stationary emitters of GHG s would be subject to PSD and Title V permitting regulations on January 2, 2011, when the tailpipe rule took effect. Lastly, EPA issued the tailoring rule, noting that immediately adding these sources to the PSD and Title V programs would result in tremendous costs to industry and state permitting authorities. 75 Fed. Reg. 31,514 (6/3/2010). As a result, in the tailoring rule, EPA provided that only the largest sources would initially be subject to GHG permitting.
A number of groups, including states and regulated industries, filed petitions for review challenging the rules, arguing that EPA misconstrued the CAA and otherwise acted arbitrarily and capriciously. The court consolidated the petitions for review of the four EPA rules: the endangerment finding, the tailpipe rule, the timing rule, and the tailoring rule.
In rejecting petitioners’ arguments, the court first ruled that EPA’s endangerment finding was neither arbitrary nor capricious. The court concluded that EPA’s interpretation of the CAA, which sets out the endangerment finding standard, (i) was consistent with Massachusetts v. EPA, and the text and structure of the CAA; and (ii) is supported by the agency’s administrative record. Next, the court addressed petitioners’ arguments as to the tailpipe rule, finding that the rule does not fail because of alleged flaws in the endangerment finding, which the court rejected, and that EPA was not arbitrary and capricious by not considering stationary costs in its analysis, since the CAA does not require the agency to do so.
Third, the court rejected petitioners’ challenge to the agency’s stationary source regulations, ruling that the CAA compels EPA’s longstanding interpretation of “any air pollutant.” According to the court, Massachusetts v. EPA, held that “any air pollutant” includes GHG s. Based on its analysis, the court concluded that the CAA requires PSD and Title V permits for major emitters of GHG s. Lastly, the court turned to challenges to the tailoring and timing rules. Here the court held that petitioners lack Article III standing to challenge both rules. As to these rules, petitioners’ potential injuries are actually mitigated, and petitioners have failed to demonstrate “injury in fact,” a standing element. If anything, said the court, “vacature of the Tailoring Rule would significantly exacerbate petitioners’ injuries.” The court therefore dismissed all petitions for review of the timing and tailoring rule and denied the remainder of the petitions.