In a seminal decision, the US Supreme Court ruled 5-4 that US EPA lacked authority to impose PSD and Title V permitting requirements under the Clean Air Act (CAA) on facilities based solely on their emission of greenhouse gases (GHGs), striking down much of US EPA’s plan for regulating GHG emissions under the Tailoring Rule.  In the same opinion, but this time with 7 justices in agreement and only 2 dissenting, the Court ruled that sources already subject to PSD permitting requirements (so-called “anyway” sources because they are required to undergo PSD permitting “anyway”—regardless of their emission of GHGs) could be required to include GHGs in their best available control technology (BACT) analyses.  As detailed below, the implications of this decision are far reaching and leave significant questions to be resolved.

For those sources that are not “anyway” sources, this is a victory.  Not only did the Supreme Court rule that US EPA was not “compelled” to regulate GHGs under PSD and Title V,[1] it further held that even under Chevron’s deferential framework the CAA did not authorize US EPA’s expansive interpretation of its own authority.[2]  As a result, it is likely that those sources that are not already subject to PSD and Title V regulations will not be brought back into the GHG debate anytime soon.  These sources include sewage treatment facilities, landfills, and biogas combustion units for which GHGs are the primary air pollutant emitted.

There are questions that remain, however, with respect to what impact the Court’s opinion will have on “anyway” sources since the opinion provides that US EPA is allowed to proceed with requiring BACT for GHG at sources triggering PSD based on other air pollutants.  The Court highlighted several potential problems–reserving  for another day the question of whether US EPA can craft a BACT analysis for greenhouse gases that will comport with both the requirements of the CAA and its existing PSD regulations:  “We acknowledge the potential for greenhouse-gas BACT to lead to an unreaosnable and unanticipated degree of regulation, and our decision 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.  Our narrow holding is that nothing in the statute categorically prohibits EPA from interpreting the BACT provision to apply to greenhouse gases emitted by ‘anyway’ sources.”  Opinion at 28.

Unfortunately, this leaves “anyway” sources with pending PSD permits in a quandary.  When does a facility need to conduct a greenhouse gas BACT analysis?  How will BACT be determined?  How can a facility evaluate the regional impacts of global climate change under the PSD program?  The Court’s opinion does not answer these questions, but it provides several points of guidance. 

  • While the Court’s opinion rejects in strong terms US EPA’s attempt to “tailor” the statutory thresholds for PSD and Title V permitting, the Court’s opinion does not address, let alone reject, the 75,000 tpy CO2e PSD significance threshold established in the Tailoring Rule.  75 Fed. Reg. 31606-31607.  To the contrary, the Court emphasized that while it must justify its selection of a de minimis threshold on proper grounds, “EPA may require an ‘anyway’ source to comply with greenhouse-gas BACT only if the source emits more than a de minimis amount of greenhouse gases.”  Opinion at 28 (emphasis added).  As a result, at least pending further US EPA action on what it believes to be an appropriate de minimis value, the Agency’s significance determination in the Tailoring Rule appears to remain intact and serves as EPA’s most recent determination on the threshold below which GHG BACT is not required.
  • While the majority opinion did not address how BACT could reasonably apply to GHGs, it makes clear that the statutory requirements generally applicable to a BACT determination also continue to apply.  Thus, US EPA and state permitting authorities must “devise rational ways of complying with the statute’s directive to determine BACT for greenhouse gases ‘on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs.’”  Opinion at 29 (quoting 42 U.S.C. § 7479(3)).   Justice Alito’s dissent questions whether this can be done.  The CAA requires a “case-by-base” BACT determination, including a balance of the environmental benefit expected to result from the installation of an available control measure against adverse consequences, such as any negative impact on the environment, energy conservation, and the economy that may result. 42 U.S.C. § 7479(3).  Justice Alito’s concern is that US EPA’s own guidance acknowledges that quantifying the exact impacts attributable to specific GHG sources is not currently possible with climate change modeling.  Id.[3]  Therefore, Justice Alito’s dissent concludes that, because “it is simply not possible for a permitting authority to calculate in any meaningful way the degree to which any potential reduction in greenhouse gas emissions from any individual source might reduce” the risks associated with global climate change, in compliance with a BACT analysis, permitting authorities will not be able to do “what the Clean Air Act and the EPA’s framework demand.” Dissent at 7-8.  At a minimum, this will open future GHG BACT decisions made under the existing framework to challenge.  See id. at 8 (“without a comprehensible standard, what this will mean is arbitrary and inconsistent decision-making”).
  • While the focus of many environmental groups has been on carbon capture and sequestration, a technology that will seldom be justified as BACT, the petitioners were concerned that US EPA would attempt to use BACT to force reductions in energy consumption or “efficiency increases” that would place the Agency in control of a facility’s general operation.  Again, the Court does not draw a bright line, but offers a caution to the Agency if it is tempted to take the idea of energy efficiency as BACT too far.  As noted by the Court, “BACT is based on ‘control technology’ for the applicant’s ‘proposed facility,’ therefore it has long been held that BACT cannot be used to order a fundamental redesign of the facility.”  Opinion at 26 (internal citations omitted).  Further, the Court emphasized that “EPA has long interpreted BACT as required only for pollutants that the source itself emits; accordingly, EPA acknowledges that BACT may not be used to require ‘reductions in a facility’s demand for energy from the electric grid.”  Id. at 27 (internal citations omitted).  While this does not close the door on energy efficiency as BACT, it, at least, reaffirms that the question of what is BACT for GHG emissions must again be decided within the confines of the existing PSD program.
  • While both the majority opinion and Justice Alito’s dissent note that there are PSD requirements beyond BACT that arguably could apply to GHG emissions, such as the requirement for a pre-BACT ambient air quality analysis under 42 U.S.C. § 7475(e), the majority opinion does not take issue with US EPA’s finding that these provisions are inoperative with respect to GHG emissions, leaving the Agency’s decision to exempt GHG emissions from these requirements on firm ground.  See Opinion at 29, n. 9.

The Court’s opinion will be an important component of future PSD permitting decisions, but also past decisions as well.  As discussed in our previous blog post on the Tailoring Rule, the Court’s decision raises questions about the validity of sources that have been permitted under the thresholds established in Step 2 of the Tailoring Rule.   It will also be interesting to watch as states, including the State of Texas who was a party in this case and has only recently updated its PSD permitting program to include GHGs, react to this holding.  This opinion will also impact how EPA moves forward with determining how to address carbon dioxide emissions from biogenic sources after the biomass deferral rule was vacated in Center for Biological Diversity v. EPA, No. 11-1101 (D.C. Cir. 2013) and then stayed pending the outcome of the UARG case. (See Squire Patton Boggs’ frESH Blog Post about the case here.).  In sum, it will take a long time for the total impact of the Supreme Court’s decision to be resolved, but at a minimum, it will mean significant relief for those who were facing PSD and Title V obligations for the first time solely due to GHG emissions, and may mean new life for challenges to the application of BACT to GHG emissions in individual permits.  In the near term, the Court’s opinion will not significantly impact “anyway” source BACT determinations.  Up until now, EPA has only identified carbon capture and sequestration (CCS) as an available BACT technology, and CCS is generally not feasible.  As EPA continues to focus on energy efficiency and alternative means for imposing GHG reductions through BACT, however, the Court’s opinion will provide a framework for identifying what steps EPA can and cannot require a facility to take within the existing PSD program.