Over the last several years, the State of Texas and the U.S. Environmental Protection Agency have engaged in a series of legal skirmishes relating to Clean Air Act permitting and greenhouse gas emission regulations. The latest dispute was argued on May 7, 2013 before the U.S. Court of Appeals for the District of Columbia Circuit (State of Texas v. the United States Environmental Protection Agency, No. 10-1425). The case arises from EPA’s so-called SIP Call Rule and EPA’s subsequent revocation of Texas’s state implementation plan (“SIP”) under its Prevention of Significant Deterioration (“PSD”) permitting program and replacement with EPA’s own “federal implementation plan” for Texas as it relates to permitting for greenhouse gas emissions.

EPA promulgated the SIP Call Rule on December 13, 2010 on the heels of the Agency’s adoption of a series of new rules to regulate greenhouse gas emissions as pollutants under the Clean Air Act, including the so-called “Tailoring Rule,” which governs permitting of major stationary sources of greenhouse gas emissions. The rule required states to update their previously approved SIPs to account for greenhouse gas emissions in their PSD permitting programs. EPA found 13 states’ SIPs were inadequate at that time to regulate greenhouse gases from stationary sources and directed those states to modify them or face federalization of their permitting programs.

On December 30, 2010, after Texas notified EPA that it was not going to revise its SIP to regulate greenhouse gas emissions, EPA issued an emergency interim rule revoking its prior approval of Texas’s SIP, first approved in 1992, and imposing a federal PSD permitting program in its place. Texas sought review and a stay in the D.C. Circuit Court of Appeals, arguing that the Tailoring Rule could result in a construction moratorium on new facilities and modifications of existing facilities. EPA maintained that it was acting to prevent such a construction moratorium, which would be brought on by the state’s refusal to issue permits addressing greenhouse gas emissions.

On May 3, 2011, EPA issued a final rule rendering permanent its interim revocation of Texas’s PSD SIP. Texas, in turn, petitioned for review of the May 3 final rule in the D.C. Circuit Court of Appeals. The cases have been consolidated by the D.C. Circuit and are currently pending.

EPA claims that its retroactive disapprovals of Texas’s PSD SIP submission were necessary to correct an “error” in its 1992 SIP approval decision (i.e., failing to anticipate the future regulation of greenhouse gas emissions) and to ensure that valid PSD permits would be issued in Texas.

Texas has raised both procedural and substantive challenges to EPA’s actions, arguing that EPA (i) exceeded its authority under the Clean Air Act to correct erroneous SIP approvals; (ii) relied on material from outside the administrative record and failed adequately to respond to comments; and (iii) improperly engaged in retroactive rulemaking to revise its decades-old approval of Texas’s SIP. In short, Texas asserts that EPA’s actions were unauthorized and unlawful because, rather than correcting a putative error, EPA imposed on Texas and its sources entirely new requirements for greenhouse gas regulation under PSD pursuant to the thresholds and other provisions of the 2010 Tailoring Rule—provisions that did not exist under the Act or EPA’s PSD rules in 1992.