Earlier today, June 23, 2014, the United States Supreme Court dealt a blow to EPA’s current approach to regulating greenhouse gas emissions (GHGs) through its air permitting program for new or expanding stationary sources. Utility Air Regulatory Group v. Environmental Protection AgencyNo. 12-1146, ___ U.S. ___, June 23, 1014. The Court said it left intact EPA’s ability to regulate 83 percent of such GHG emissions, compared to the 86 percent EPA championed under its approach. Nevertheless, in its ruling the Court undercut key foundations of EPA’s current GHG regulatory approach. This ruling will require EPA to re-think many aspects of its approach to GHGs and will give opponents increased leverage in the upcoming discussions.

The Court held that under the Clean Air Act’s (CAA) stationary source permitting programs EPA may interpret the CAA as authorizing EPA to regulate GHG emissions under its Prevention of Significant Deterioration (PSD) permitting program when a permit already is required because of other conventional pollutant emissions. In those situations, EPA can require the GHG emissions meet case-by-case Best Available Control Technology requirements. The Court held, however, that EPA cannot impose GHG permit requirements at a facility on the basis of GHGs alone. In this respect, the Court held invalid many aspects of EPA’s 2010 GHG “Tailoring Rule.”  The Tailoring Rule was EPA’s GHG regulation for new stationary sources that held tens of thousands of new sources annually would cross the thresholds for PSD permits by virtue of their GHG emissions alone, including many buildings, structures, and other sources that historically have not been subject to federal air emissions permits. EPA said it would “tailor” these requirements to apply only to the largest GHG sources such as large factories and powerplants. In stern language, the Court held EPA’s interpretation of GHG requirements was too broad and impermissible under the CAA.

In what may turn out to be the most important aspect of today’s ruling, the Court rejected EPA’s contention that the CAA requires EPA to regulate GHGs from stationary sources. The Court held that the CAA allows EPA to regulate GHGs in certain respects if it chooses to, but the CAA does not compel such regulation. Indeed, the Court suggested EPA may be authorized to not regulate GHGs at all if it can ground such inaction in the text of the CAA.

This part of the ruling will place political pressure on EPA and supporters of GHG regulations. Until now, many have said EPA has no choice but to regulate GHGs in the manner EPA has, because such regulations are required under a statute long-passed by Congress. Now, the Supreme Court says that interpretation is wrong. Opponents of EPA’s GHG regulatory approach undoubtedly will put significant pressure on Congress in an election year and afterward to push EPA toward a different approach. The outcome of such efforts remains to be seen.