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U.S. Supreme Court Issues Two-Part Ruling in Greenhouse Gas Permitting Case


By Jennifer K. Thompson, Attorney, Bingham Greenebaum Doll LLP

On June 23, 2014, the U.S. Supreme Court issued a decision addressing multiple challenges to EPA’s regulation of greenhouse gas (GHG) emissions from stationary sources. Util. Air Regulatory Group v. EPA, 134 S. Ct. 2427 (2014). The two-part ruling, affirming in part and reversing in part the Court of Appeals for the D.C. Circuit, evaluated the permitting requirements under the Prevention of Significant Deterioration (PSD) and Title V programs of the Clean Air Act. The Court held that EPA erred in treating GHGs as an air pollutant that would independently trigger PSD or Title V permitting. However, to the extent a source was otherwise subject to the PSD permitting program, EPA could require limitations on emission of GHGs based on Best Available Control Technology (BACT).

In general, the PSD and Title V permitting programs of the Clean Air Act apply to construction, reconstruction, modification, and operation of major stationary sources that emit air pollutants, such as factories and power plants. Historically, there were six criteria pollutants that triggered permitting under these provisions: sulfur dioxide, particulate matter, nitrogen dioxide, carbon monoxide, ozone, and lead. However, a change came after the Supreme Court held in Massachusetts v. EPA that the Clean Air Act permitted the regulation of GHG emissions from motor vehicles. 549 U.S. 497 (2007).

Once GHG emissions from motor vehicles became regulated, EPA also included GHGs as air pollutants under regulations for the PSD and Title V permitting programs. Recognizing the change could be far reaching, EPA attempted to tailor the GHG emission thresholds for permitting. Numerous parties, including several states, filed petitions in the Court of Appeals for the D.C. Circuit and challenged EPA’s actions. Upon review, the D.C. Circuit ruled in favor of EPA’s regulation and dismissed or denied all of the claims. Coalition for Responsible Regulation, Inc. v. EPA, 684 F.3d. 102 (D.C. Cir. 2012) (per curiam).

The U.S. Supreme Court granted certiorari to decide whether EPA’s regulation of GHG emissions under the PSD and Title V programs was a permissible interpretation of the Clean Air Act. Justice Antonin Scalia wrote the two-part majority opinion. In Part I, the Court held that EPA overstepped its authority by applying the PSD and Title V permitting programs to stationary sources based solely on their GHG emissions.

Scalia reasoned that the term “air pollutants” here referred narrowly to the six criteria pollutants, and further held that EPA did not have the authority to tailor the statute’s thresholds to accommodate regulating GHGs. On the other hand, in Part II, the Court held that EPA could impose requirements (i.e. Best Available Control Technology or BACT) on GHG emissions from stationary sources already subject to PSD permitting for other air pollutants (“anyway sources”). Scalia reasoned that the statutory BACT requirement was more specific in applicability to pollutants “subject to regulation” under the Title I of the Act.

The two other opinions from the Court arrived at other conclusions. Justice Stephen Breyer dissented and concurred in the ruling, opining that the language of the Clean Air Act allowed for the regulation of stationary source GHG emissions in both circumstances. Justice Samuel Alito concurred and dissented, claiming the EPA had misinterpreted Massachusetts and had no authority at all to regulate stationary sources for GHG emissions. Indeed, the mixed ruling from the majority has resulted in some confusion regarding the regulatory power of EPA moving forward. However, the decision sends a strong message to EPA that it cannot modify the language of the Clean Air Act to achieve its objectives.

EPA has tentatively responded to the decision in a July 24, 2014, memorandum from Janet McCabe, Acting Administrator Office of Air and Radiation, and Cynthia Giles, Assistant Administrator Office of Enforcement and Compliance Assurance, to the Regional Administrators entitled Next Steps and Preliminary Views on the Application of Clean Air Act Permitting Programs to Greenhouse Gases Following the Supreme Court’s Decisions in Utility Air Regulatory Group v. Environmental Protection Agency.  

The memorandum generally states:

  1. EPA expects that after the Supreme Court sends the decision back to the D.C. Circuit Court, the D.C. Circuit will issue an order which identifies the specific regulations which EPA must revise or strike.
  2. EPA anticipates the need to revise the PSD and Title V rules but will wait for the D.C. Circuit Court order.
  3. In the meantime, EPA will continue to apply Step 1 of the Tailoring Rule and will retain a 75,000 tpy CO2e threshold for triggering GHG BACT review for PSD permitting of Anyway Sources. Changes or refinements may follow as EPA examines these matters further.
  4. EPA will no longer apply or enforce federal regulatory provisions or the EPA-approved SIP provisions that require a stationary source to obtain a PSD permit based solely on GHG emissions.
  5. EPA will no longer apply or enforce federal regulatory provisions or provisions of the EPA-approved Title V Programs that require a stationary source to obtain a Title V Permit solely because GHG emissions.
  6. States may retain GHG-only requirements based on independent state authority (which could create different approaches to GHG permitting).
  7. EPA recognizes that some states may be precluded from having rules more stringent than the federal government.
  8. EPA warns that Step 2 sources likely have a continuing obligation to obtain minor source construction permits under the applicable SIP as a result of non-GHG pollutants.
  9. EPA anticipates many SIPs and approved Title V Programs will be revised; timing and content are expected to be formulated following the legal process before the D.C. Circuit.
  10. The Supreme Court’s decision has eliminated the need for a 5-year study; EPA does not intend to take further action on Step 4 of the Tailoring Rule.
  11. EPA will provide more guidance on this issue and will take other steps to respond to further court action.

(Special thanks to summer associate Brittany Mills for contributing to this article.)

To view a complete PDF of the Second Quarter 2014 Air Quality Letter, please click here.


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