The United States Environmental Protection Agency's ("EPA") attempts at regulating greenhouse gas emissions from stationary sources have been fraught with legal challenges. However, the U.S. Supreme Court may provide some clarity regarding EPA's authority to regulate stationary sources when it hears oral argument on February 24 in connection with challenges to EPA's regulation of greenhouse gas emissions from stationary sources under the Clean Air Act's ("CAA") Prevention of Significant Deterioration ("PSD") program.
EPA's regulation of greenhouse gases from stationary sources began with the Supreme Court's 2007 decision in Massachusetts v. EPA, 549 U.S. 497, in which the Supreme Court determined that greenhouse gases were "air pollutants" under the CAA and held that EPA must regulate emissions of greenhouse gases from new motor vehicles if it finds that these emissions may reasonably be anticipated to endanger public health or welfare. Following this decision, EPA determined, in the so-called Endangerment Finding, that greenhouse gases from new motor vehicles may "reasonably be anticipated to endanger public health or welfare" and subsequently issued the Tailpipe Rule limiting the amount of greenhouse gas emissions from new motor vehicles.
In promulgating the Tailpipe Rule, EPA took the position that the regulation of greenhouse gases from new motor vehicles automatically triggered certain permitting requirements for stationary sources that emit greenhouse gases under the CAA's PSD program. This automatic trigger meant that thousands of once-unregulated sources were now required to obtain a permit for their greenhouse gas emissions. As a result, EPA issued the Tailoring Rule to avoid the "absurd result" of requiring thousands of new commercial and residential sources of greenhouse gases to obtain permits. Under the Tailoring Rule, only stationary sources emitting 75,000 or 100,000 tons per year would be required to obtain permits—instead of the statutory threshold of 100 or 250 tons per year—until the EPA had time to study the possibility of implementing streamlined permitting requirements for smaller sources.
Industry representatives and several states quickly challenged these rules in the United States Court of Appeals for the District of Columbia. As reported in the Summer 2012 Climate Report, on June 26, 2012, a three-judge panel upheld EPA's interpretation of the CAA that the PSD program was automatically triggered by the new motor vehicle regulations. The court then dismissed petitioners' challenge to the Tailoring Rule because they could not prove that they had suffered any injury as a result of the Tailoring Rule itself. Rather, the court held, any injury suffered by petitioners would be as a result of the automatic trigger of the PSD Program. In this respect, the court noted that the Tailoring Rule mitigated petitioners' damages by reducing the number of sources subject to the PSD Program requirements.
On October 15, 2013, following a December 2012 denial of rehearing en banc, the United States Supreme Court granted six of nine petitions for certiorari, agreeing to review the single issue of whether the EPA acted within its authority under the Clean Air Act when it determined that its regulation of greenhouse gas emissions from motor vehicles triggered permitting requirements for stationary sources that emit greenhouse gases. Petitioners filed briefs in support of their petitions in December 2013. They argued that EPA's automatic trigger interpretation was impermissible because EPA could have avoided the absurd results by interpreting the PSD provisions as applying only to certain pollutants that do not include greenhouse gases, or by reading section 166 of the CAA as the only mechanism for adding pollutants to the PSD program. In addition, petitioners argued that EPA's tailored regulation of greenhouse gases under the PSD program would be an unconstitutional delegation of authority because the CAA provides no intelligible principle for such an exercise of discretionary power. They also requested that the Supreme Court revisit Massachusetts v. EPA and possibly overrule it if it requires coverage of greenhouse gases under the PSD program.
Respondents, EPA, and several other states filed response briefs on January 21. Respondents argued that EPA's position that greenhouse gas emissions are automatically covered by the PSD program as a result of their regulation under other parts of the CAA is consistent with the statute and EPA's longstanding interpretation of the statute. Respondents asserted, moreover, that EPA's interpretation is consistent with the Supreme Court's decisions in Massachusetts v. EPA that greenhouse gases are air pollutants under the CAA and its decision in AEP v. Connecticut, 131 S.Ct. 2527, 564 U.S. ____ (2011), that the CAA displaces federal common law with respect to greenhouse gas emissions from stationary sources.
The Supreme Court's eventual decision in the Tailoring Rule challenge will likely provide some finality as to whether EPA has authority to regulate greenhouse gases under the CAA. However, the Supreme Court's decision is not likely to forestall all further legal challenges to EPA regulation of greenhouse gas emissions from stationary sources. For example, on January 8, EPA proposed new source performance standards limiting greenhouse gas emissions from fossil fuel-fired electric utility generating units that will likely see challenges of its own. (For more on EPA's proposed standard, read our Jones Day Commentary, " EPA's Proposed New Source Clean Air Act Standards and Carbon Capture and Storage Technology: Can the Courts Find the Technology Has Been 'Adequately Demonstrated' Under the CAA and/or in Compliance with the Energy Policy Act?")
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