On June 23 2014 the Supreme Court issued a significant decision in Utility Air Regulatory Group v EPA(1) that substantially restricts the authority of the US Environmental Protection Agency (EPA) to regulate greenhouse gas emissions from stationary sources under the Clean Air Act's Prevention of Significant Deterioration (PSD) and Title V permitting programmes. That decision, adopting one of the petitioners' principal arguments, holds that the EPA may not impose permitting requirements on facilities based solely on their greenhouse gas emissions, but may regulate those emissions under these programmes only if a facility is otherwise subject to permitting based on emissions of other air pollutants.
In the rules under review, the EPA adopted an interpretation of the Clean Air Act under which stationary sources would be required to obtain construction and operating permits under the PSD and Title V programmes whenever a facility emitted greenhouse gases above certain threshold levels as set forth in the Clean Air Act. The EPA recognised, however, that because the statutory thresholds were quite low when applied to greenhouse gases (compared to 'conventional' air pollutants), applying the programmes as written to greenhouse gas emissions would lead to "absurd results" by subjecting millions of small sources such as schools, hospitals and churches to permitting requirements. Despite that outcome, the EPA chose to include greenhouse gases among the pollutants that could trigger permitting requirements. At the same time, the EPA modified the statutory emission thresholds, in a rulemaking known as the Tailoring Rule, so that only large industrial sources would be subject to permitting requirements at the outset, although the EPA retained authority to lower the thresholds further over time to cover additional sources.
A wide range of commercial and industrial associations and advocacy organisations challenged those rules and the interpretation of the Clean Air Act on which they were based. The petitioners argued that the EPA's interpretation could not stand as an initial matter because, by the EPA's own admission, it produced "absurd results" through application of the PSD and Title V permitting programmes to millions of smaller sources of greenhouse gas emissions that Congress never intended to cover. To avoid these results, the petitioners argued, the EPA should have adopted a different interpretation of the Clean Air Act under which either:
- greenhouse gases cannot ever constitute an 'air pollutant' for purposes of these programmes and therefore cannot be regulated under them in any circumstances; or
- greenhouse gas emissions cannot trigger permitting obligations under PSD or Title V, but may be regulated under those programmes only if a facility is otherwise subject to permitting by virtue of conventional pollutant emissions.
Six petitions for certiorari by several different groups were granted by the court and consolidated for purposes of decision. Oral argument was heard on February 24 2014.
In a five-to-four decision the court agreed with the petitioners' alternative argument and held that the EPA's rulemakings were invalid. It reasoned that although the court in Massachusetts v EPA(2) had held that greenhouse gases qualify as an 'air pollutant' for the purposes of the term's general definition in the Clean Air Act, that broad definition does not compel the EPA to regulate greenhouse gas emissions as an air pollutant when doing so would be contrary to the statutory purpose and context. Given the "absurd results" that would admittedly be produced by applying the PSD and Title V programmes to facilities based solely on their greenhouse gas emissions, the court held that those emissions cannot reasonably be deemed an air pollutant for purposes of the triggering provisions of those programmes. The court specifically and unequivocally rejected the EPA's attempt to avoid those absurd results by modifying the statutory thresholds in the Tailoring Rule, stating that "[t]he power of executing the laws … does not include a power to revise clear statutory terms that turn out not to work in practice".
The court, however, stopped short of holding that greenhouse gases could not be regulated at all under the PSD and Title V programmes. In particular, it held that for those sources otherwise required to obtain a PSD permit absent greenhouse gas emissions, such sources must comply with "best available control technology" (BACT) standards for greenhouse gases. While the court acknowledged that the application of BACT to greenhouse gases could conceivably "lead to an unreasonable and unanticipated degree of regulation", by subjecting essentially every aspect of a facility's operation to oversight and control to limit overall greenhouse gas emissions, it concluded that these problems were not certain to result and might be addressed through appropriate EPA guidance. The court emphasised, however, that it was not approving of the EPA's current approach to BACT regulation of greenhouse gases or of any approach that may be adopted, and that it was holding only "that nothing in the statute categorically prohibits EPA from interpreting the BACT provision to apply to greenhouse gases".
The decision was joined in different parts by different groups of justices. The principal opinion, authored by Justice Scalia, was joined in full by Chief Justice Roberts and Justice Kennedy. Justices Thomas and Alito joined in the holding that greenhouse gas emissions cannot trigger PSD or Title V permitting, but (as stated in a concurring and dissenting opinion) would have gone further and held that GHGs are not subject to BACT under any circumstance. Justice Breyer authored a separate opinion, with Justices Ginsburg, Sotomayor and Kagan, dissenting from the court's conclusion that greenhouse gas emissions cannot trigger permitting, but agreed with and joined the court's opinion holding that those emissions are subject to BACT.
The court's decision will have a significant and continuing impact on the EPA's authority to regulate greenhouse gas emissions and the interpretation of the Clean Air Act. In the near term, five key points are relevant.
Greenhouse gas emissions do not trigger permitting obligations
The principal legal holding of the decision is also the most significant from a practical perspective. Stationary sources cannot, under the court's ruling, be subject to permitting requirements - either the pre-construction requirements of the PSD programme or the operating requirements of the Title V programme - based on their greenhouse gas emissions. In the short term, facilities going through the permitting process or various administrative and judicial appeals of permits only because of greenhouse gas emissions should be relieved of their permitting obligations. In the longer term, this means that the millions of sources that might otherwise have been obliged to apply for and obtain permits under these programmes - including not only industrial plants, but also smaller commercial and agricultural operations - will not be required to do so.
Tailoring Rule is invalid
The Tailoring Rule was not directly under review in the case, but the court nevertheless considered it and unambiguously declared it to be invalid. That rule purported to modify the emissions thresholds set forth in the Clean Air Act - governing when PSD and Title V permitting would be triggered - to account for greenhouse gases, and made clear that the EPA intended to modify the thresholds in the future to cover additional sources whenever deemed appropriate. The court squarely rejected this proposition, reaffirming "the core administrative-law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate". With this decision, the Tailoring Rule - and subsequent related rulemakings - should be vacated.
Greenhouse gas emissions are 'air pollutant' subject to the act
While the decision holds that greenhouse gases are not an air pollutant for purposes of triggering PSD and Title V permitting requirements, it stops short of holding that they are not an air pollutant for other purposes. To the contrary, the court affirmed its prior holding in Massachusetts v EPA that the term 'air pollutant', as generally defined in the Clean Air Act, includes greenhouse gases. Notwithstanding this general definition, however, the scope of the term may be more limited when used in particular contexts.
EPA may regulate greenhouse gas emissions under BACT, but its authority is limited
The decision expressly holds that for facilities that are otherwise subject to PSD permitting obligations (by virtue of their emissions of conventional pollutants), the EPA may regulate greenhouse gases from those facilities through the PSD BACT standards. However, the decision emphasises that the EPA's authority in this regard is limited and must be exercised in accordance with the purpose of the Clean Air Act. In particular, the decision states that BACT regulation cannot be exercised in a manner that allows the EPA to require "every conceivable change that could result in minor improvements in energy efficiency", merely because those changes might result in some decrease in greenhouse gases. It also prohibits the EPA from imposing BACT requirements on sources of de minimis greenhouse gas emissions and directs the EPA to determine an appropriate threshold before proceeding with BACT regulation. The decision notes expressly that it "should not be taken as an endorsement of all aspects of EPA's current approach, nor as a free rein for any future regulatory application of BACT in this distinct context", and that future BACT rulemakings will be subject to review and potential challenge.
Shadow cast on EPA's authority to regulate greenhouse gas emissions under New Source Performance Standards
The decision notes that the EPA's authority to regulate greenhouse gas emissions under the New Source Performance Standards (NSPS) - rulemakings that are currently pending before the EPA - was "not at issue here" and need not be addressed. Several aspects of the decision, however, may cast a shadow as the EPA proceeds with those rulemakings. The decision warns, for instance, that "[w]hen an agency claims to discover in a long-extant statute an unheralded power to regulate 'a significant portion of the American economy,' we typically greet its announcement with a measure of skepticism". That statement, although relating here to the regulation of greenhouse gases under the PSD and Title V programmes, might apply with equal force to the regulation of those emissions under the NSPS programme under the EPA's current proposals that dramatically impact on coal and natural gas utilitsation by utilities. Similarly, the decision's admonition that the EPA's regulatory authority - even when conferred by the statute, as with the BACT standards - must be exercised with caution and is not entitled to boundless discretion would seemingly also apply to the EPA's attempts to regulate greenhouse gas emissions under NSPS.
Peter Keisler, Roger R Martella Jr, Quin M Sorenson
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