Good news in environmental compliance: Looming new clouds of regulation have been dissipated by the U.S. Supreme Court.
The court’s decision in late June, Utility Air Regulatory Group v. EPA, trimmed the Environmental Protection Agency’s authority to enforce cuts in greenhouse gas emissions under the Clean Air Act. The EPA cannot necessarily impose such regulations on all facilities, the court said—although it added a crucial caveat that the EPA can do so for the heaviest emitting stationary sources: power plants, oil refineries, factories, and the like.
“It’s a win for industry, but not the home run that some folks had hoped for,” says Jeff Holmstead, a former EPA assistant administrator during the Bush Administration and now a partner with law firm Bracewell & Giuliani. Some industry advocates had hoped the court would rule that the EPA could not regulate greenhouse gases at all.
The court was asked to address an issue going back to the 1970s. The Clean Air Act of 1970 mandated that the EPA establish a permitting program where facilities that emit more than 100 to 250 tons of air pollutants annually must obtain permits from the EPA if they want to build new facilities, or make upgrades to existing ones. Obtaining those permits requires the implementation of so-called “best available control technology” to reduce greenhouse gas emissions, a costly undertaking for any company.
The 100 to 250 ton threshold established under the Clean Air Act, however, addressed only conventional air pollutants, such as sulfur, ozone, or lead. Congress has yet to revise the threshold to account for 21st century challenges posed by climate change, carbon dioxide being the prime example.
“The problem with carbon dioxide is that it’s emitted in vast quantities by even the smallest sources,” says Thomas Lorenzen, a partner at law firm Dorsey & Whitney. The EPA, thus, reasoned that regulating greenhouse gases under the plain language of the Clean Air Act would burden millions of facilities and small businesses.
All those facilities that were likely to be covered by the permitting program no longer need to worry about it at all.
Jeff Holmstead, Partner, Bracewell & Giuliani
To reduce the scope of businesses that might fall under that sort of regulation, the EPA created a “tailoring rule,” where only facilities that emit at least 100,000 tons of greenhouse gasses per year would fall under the permitting program. By tailoring the threshold, the EPA reasoned that the permitting program would be limited to the heaviest emitting stationary sources.
“They basically widened the holes in the net to allow the little fish to slip out, so that they could just catch the big fish,” says Scott Oostdyk, a partner at law firm McGuire Woods.
The tailoring rule also meant, however, that even stationary sources that didn’t emit other conventional air pollutants at all would now fall under the requirements of the permitting program. That struck an angry chord across several industries, which banded together to become the Utility Air Regulatory Group and filed suit.
Two-Part Ruling
The court’s 5-4 verdict supported and disappointed the trade associations in several ways. In the first part of its ruling, the court ruled that the EPA exceeded its authority by altering the emissions threshold set by Congress under the Clean Air Act.
The EPA’s tailoring rule would bring about “an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization,” Justice Antonin Scalia wrote for the majority. “We conclude that EPA’s rewriting of the statutory thresholds was impermissible. An agency has no power to ‘tailor’ legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.”
EPA RULING
Below are excerpts of the case Utility Air Regulatory Group v. EPA, in which the court explains its ruling.
The Act neither compels nor permits EPA to adopt an interpretation of the Act requiring a source to obtain a PSD or Title V permit on the sole basis of its potential greenhouse-gas emissions.
(a) The Act does not compel EPA’s interpretation. Massachusetts held that the Act-wide definition of “air pollutant” includes green-house gases, 549 U. S., at 529, but where the term “air pollutant” appears in the Act’s operative provisions, including the PSD and Title V permitting provisions, EPA has routinely given it a narrower, context-appropriate meaning. Massachusetts did not invalidate those longstanding constructions. The Act-wide definition is not a command to regulate, but a description of the universe of substances EPA may consider regulating under the Act’s operative provisions…
(b) Nor does the Act permit EPA’s interpretation. Agencies empowered to resolve statutory ambiguities must operate “within the bounds of reasonable interpretation.” EPA has repeatedly acknowledged that applying the PSD and Title V permitting requirements to greenhouse gases would be inconsistent with the Act’s structure and design. A review of the relevant statutory provisions leaves no doubt that the PSD program and Title V are designed to apply to, and cannot rationally be extended beyond, a relative handful of large sources capable of shouldering heavy substantive and procedural burdens. EPA’s interpretation would also bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization.
(c) EPA lacked authority to “tailor” the Act’s unambiguous numerical thresholds of 100 or 250 tons per year to accommodate its greenhouse-gas-inclusive interpretation of the permitting triggers. Agencies must always “‘give effect to the unambiguously expressed intent of Congress.’” The power to execute the laws does not include a power to revise clear statutory terms that turn out not to work in practice.
2. EPA reasonably interpreted the Act to require sources that would need permits based on their emission of conventional pollutants to comply with [Best Available Control Technology] for greenhouse gases.
(a) Concerns that BACT, which has traditionally been about end-of-stack controls, is fundamentally unsuited to greenhouse-gas regulation, which is more about energy use, are not unfounded. But an EPA guidance document states that BACT analysis should consider options other than energy efficiency, including “carbon capture and storage,” which EPA contends is reasonably comparable to more traditional, end-of-stack BACT technologies. Moreover, assuming that BACT may be used to force improvements in energy efficiency, important limitations on BACT may work to mitigate concerns about “unbounded” regulatory authority.
Source: Utility Air Regulatory Group v. EPA.
Striking his usual originalist tone, Scalia wrote that the EPA must read the plain language of the permitting program under the Clean Air Act exactly as it was meant to be interpreted. Chief Justice John Roberts and Justice Anthony Kennedy joined that part of the ruling, with Justices Clarence Thomas and Samuel Alito concurring.
In the second part of the opinion, the court held that wherever the EPA already regulates stationary sources that emit conventional pollutants above the Clean Air Act thresholds, the agency can impose curbs on greenhouse gas emissions for those facilities as well. That part of the ruling was joined by Chief Justice Roberts and Justices Kennedy, Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan.
Not all the justices agreed with the two-part decision. In one dissent, Justice Breyer (joined by Justices Ginsburg, Sotomayor, and Kagan) argued that EPA’s tailoring rule was permissible. In a separate dissent, Justice Alito (joined by Justice Thomas) argued that the court should revisit a 2007 decision that greenhouse gasses can be regulated under the Clean Air Act.
Burdens Reduced
Several industry groups, including American Fuel & Petrochemical Manufacturers (AFPM), praised the court’s ruling. “We are pleased that the court has placed appropriate limits on EPA’s authority to regulate greenhouse gases under the Clean Air Act,” AFPM General Counsel Rich Moskowitz said in a statement. “This decision brings us closer to correcting a very costly regulation that would … impose burdensome permitting requirements on some businesses.”
The American Chemistry Council was another fan of the ruling. “We are glad the Court corrected EPA’s misreading of the Clean Air Act,” the ACC stated. The ruling “preserves EPA’s ability to regulate [greenhouse gasses] from mobile sources, but will prevent the agency from sweeping thousands of small businesses and factories into the permitting program.”
From a practical standpoint, at least under federal law, the ruling significantly reduces the permitting burden for industry, Holmstead says. The ruling means sources are no longer required to meet the requirements of the permitting program based on their greenhouse gas emissions alone, he says.
“All those facilities that were likely to be covered by the permitting program no longer need to worry about it at all,” Holmstead says. Even facilities that are considered “major sources” of conventional air pollutants now no longer need to get permits for a number of modifications that they would have needed under the tailoring rule, where they were planning on increasing their carbon dioxide emissions, he says.
“The [permitting] program ends up being targeted at the same facilities it was always targeted to,” Lorenzen says. “You can’t get dragged into the program simply by virtue of your greenhouse gas emissions.”
Had the court ruled the other way, several stationary sources immediately would have had to install costly measures designed to reduce their greenhouse gas emissions, Oostdyk says. “There would have been a lot of expensive overhauls required by facilities beyond power plants.”
No comments yet