On June 23, 2014, the Supreme Court issued a split decision in Utility Air Regulatory Group v. EPA, striking down part of an EPA rule requiring pre-construction permits for large sources of greenhouse gas (GHGs) emissions, while upholding EPA's authority to require inclusion of GHGs in pre-construction permits mandated for other pollutants. Specifically, the Court held that the Clean Air Act neither compelled nor required EPA to apply GHG regulations to stationary sources once it set GHG limits for cars and trucks. In so doing, the Court invalidated the "Tailoring Rule," whereby EPA rewrote statutory emissions thresholds to allow it to operate a pre-construction permit process for large sources of GHG emissions. At the same time, the Court concluded that EPA had the discretion to require sources to apply the "Best Available Control Technology" to GHG emissions when securing pre-construction permits based on emissions of conventional pollutants (so called "anyway" sources).
The mixed decision underscores the Court's view that EPA has authority to regulate GHG emissions under the Clean Air Act (CAA), including under other provisions, but that the scope of those regulations must be appropriate to the purpose and context of the specific provisions. Moreover, the Court strongly warns EPA that it should not establish broad-ranging programs to address climate change without clear congressional direction. Hence, the ruling does not directly impact EPA's recent proposals for GHG performance standards from new and existing power plants, but it certainly suggests that the Court may more strictly scrutinize such EPA actions purporting to impact the power sector at large and reduce energy demand.