The Supreme Court and EPA Carbon Rules

Thursday, March 6, 2014——The Environmental and Energy Study Institute (EESI) held a briefing on the Supreme Court case, Utility Air Regulatory Group v. Environmental Protection Agency (EPA), which is considering whether the EPA's authority to regulate the greenhouse gas emissions of new motor vehicles also extends to stationary sources, such as existing power plants. The case is the result of six separate challenges to EPA authority from industry groups and 12 states. On February 24, the Supreme Court heard oral arguments in the consolidated case.

This briefing examined the arguments brought forth on February 24 and what can be derived from the line of questioning by the Justices. What is and is not at stake in this case, and what are the potential outcomes of the Court’s decision? What does the relatively narrow focus of the case, despite a much broader challenge, mean for future judicial challenges to EPA's regulatory authority concerning greenhouse gases?

• Michael Gerrard, Professor at the Columbia Law School and Director of the Columbia Center for Climate Change Law, explained that the Supreme Court's landmark decision in Massachusetts vs. EPA in 2007 found that the Environmental Protection Agency (EPA) has the authority to regulate greenhouse gas emissions under the Clean Air Act's Title II, which regulates mobile sources.
• Following the Court's decision, EPA issued an endangerment finding on greenhouse gas emissions in 2009, concluding that greenhouse gases endanger public health and welfare. The Agency subsequently issued regulations for passenger car carbon emissions, which it said then triggered permitting requirements under the Clean Air Act for stationary sources (factories, power plants…) that emit greenhouse gas emissions.
• EPA then sought to regulate the carbon emissions of stationary sources using the Prevention of Significant Deterioration (PSD) program in the Clean Air Act. This program sets quantitative limits for air pollutants of 100 to 250 tons a year, depending on the facility. Facilities emitting more than their limit are subject to regulation.
• While these thresholds make sense for conventional air pollutants, they are not adapted to greenhouse gases, as they would require too many facilities (perhaps more than a million) to be regulated, including large apartment buildings, hospitals, and department stores. To address this problem, EPA adopted the "tailoring rule," which increased the thresholds for greenhouse gases (to 75,000 tons a year) and phased in lower ones over time. EPA said the intent of the law was to address the largest polluters.
• More than 100 lawsuits were brought by industry groups and states opposed to regulation. These cases were joined together and argued before the D.C. Circuit Court, which resoundingly upheld all of EPA's actions (i.e., the endangerment finding, the motor vehicle rule, and the applicability of the Prevention of Significant Deterioration program). The court also found the plaintiffs had no standing concerning the tailoring rule, since it was in effect leading to less regulation.
• The Supreme Court refused to reopen the endangerment and motor vehicle findings, but did agree to review the applicability of the Prevention of Significant Deterioration program for stationary sources.
• Amanda Leiter, Associate Professor at the American University Washington College of Law, analyzed the oral arguments heard by the Supreme Court on February 24, 2014, in the Utility Air Regulatory Group vs. EPA case. She noted that the fact that the Court had agreed to consider only a very narrow issue is already a big win for the EPA. In particular, she said it is very unlikely that the Court will revisit the regulation of vehicle emissions of greenhouse gases.
• However, the fact that EPA has reinterpreted statutory language that is extremely plain places the Agency at risk. The Court is unlikely to view such a reinterpretation favorably.
• Leiter identified three potential outcomes: (1) the stationary source provisions apply only to standard pollutants that EPA has been regulating for decades, and not to greenhouse gases – this is the outcome the industry plaintiffs are hoping for as it means EPA would not be able to regulate greenhouse gas emissions from stationary sources using the Prevention of Significant Deterioration program; (2) the regulation of tailpipe emissions does trigger the regulation of stationary sources, but not in the manner sought by EPA, with higher thresholds for greenhouse gases; (3) the Court defers to the Agency's greater expertise and lets the tailoring rule stand as it is currently written. Other outcomes, such as finding that EPA must regulate all sources that emit more than 100/250 tons of greenhouse gas a year, are highly unlikely.
• Leiter parsed some of the statements made by the Justices in order to determine what the likeliest outcome will be.
• Justice Kagan captured the heart of the issue when she noted that there are three clear and inconsistent Congressional intents: Congress only wanted to target the largest sources of air pollutants; it wanted EPA to regulate stationary sources once it regulated other sources; and it set very clear thresholds to trigger stationary source regulations. Because these goals are inconsistent, the law is ambiguous. In cases of ambiguity, Kagan noted that courts usually defer to the Agency's expertise.
• The industry plaintiffs argued that EPA could regulate stationary sources under a different statute, the New Source Performance Standards (NSPS), without having to reinterpret the Prevention of Significant Deterioration (PSD) thresholds. This is somewhat misleading, however. First of all, according to Leiter, industry plaintiffs have already challenged EPA's authority under NSPS. Secondly, the NSPS and PSD are designed to work together: the former sets a floor, and the latter sets ambitious, technology-forcing pollution reduction targets. Every eight years, the NSPS floor is raised to reflect progress meeting the PSD goals.
• The Supreme Court asked what the EPA's fallback position would be, should the Court rule against the tailoring rule. EPA would like the link between stationary and non-stationary sources to remain in place, allowing it to regulate all sources of air pollutants. Since the underlying issue is that the existing statute does not make sense for carbon dioxide because it is emitted in such large quantities, the Solicitor General suggested that perhaps carbon dioxide be considered apart, so as not to trigger any permitting requirements. However, if such requirements were triggered by other air pollutants, then the Agency would be able to regulate carbon emissions from the facility in question.
• According to Leiter, this is the likeliest outcome, even though the government made it clear that it does not endorse this solution. She believes EPA will not win outright, but that complete decoupling (in which regulations for vehicles no longer trigger regulations for stationary sources) is also unlikely.
• Professor Michael Gerrard concluded by saying that Obama's Climate Action Plan does not rely on the Prevention of Significant Deterioration (PSD) program and so does not seem at risk in this case. Instead it seeks to regulate greenhouse gas emissions from power plants using the Clean Air Act's New Source Performance Standards (NSPS), based on sections 111b (for new plants) and 111d (for existing plants).
• Nevertheless, the Supreme Court's decision in this case is important, as it will indicate how much leeway the Court is prepared to give EPA as it seeks to regulate greenhouse gases under the Clean Air Act, its principal tool for doing so in the continuing absence of specific greenhouse gas legislation. The Supreme Court's decision is expected by early July.

For more information about the court case, see the Legal Information Institute's brief.