On June 23, 2014, the United States Supreme Court issued a decision, written by Justice Scalia, rejecting fundamental aspects of EPA’s “Tailoring Rule” and significantly curtailing the scope of the federal government’s power to regulate “greenhouse gases” (GHGs) from stationary sources. Utility Air Regulatory Group v. EPA, _____ U.S. _____, No. 12-1146 (June 23, 2014). However, the Court affirmed provisions of the Tailoring Rule regulating GHGs emissions from the nation’s largest stationary sources.

EPA's "tailoring" of statutory thresholds to facilitate regulation of Greenhouse gases was not a good fit with the plain language of the Clean Air Act, the High Court ruled. (Source: www.http://voices.clarionledger.com)

EPA’s “tailoring” of statutory thresholds to facilitate regulation of Greenhouse gases was not a good fit with the plain language of the Clean Air Act, the High Court ruled. (Source: www.http://voices.clarionledger.com)

Following the Court’s determination in 2007 that GHGs are an “air pollutant” subject to regulation under the Clean Air Act (CAA), Massachusetts v. EPA, 549 U.S. 497 (2007), EPA issued an “endangerment finding,” declaring that GHGs may “reasonably be anticipated to endanger public health or welfare,” and promulgated GHG emission standards for cars and light trucks. 75 Fed. Reg. 25,324 (May 7, 2010) (“Tailpipe Rule”). Once the Tailpipe Rule became effective, GHGs became a “regulated pollutant,” which, according to longstanding EPA interpretation, required EPA to regulate stationary sources such as factories and power plants under the CAA’s Prevention of Significant Deterioration (PSD) and Title V permitting programs.

The PSD program makes it unlawful to construct or modify a “major emitting facility” without a permit. 42 U.S.C. §§7475 (a)(1), 7479(2)(C). A “major emitting facility” is any stationary source with the potential to emit 250 tons per year (tpy) of “any air pollutant” (or 100 tpy for certain types of sources). § 7479(1). Sources seeking a PSD permit must comply with emissions limitations that reflect the best available control technology” (BACT) for “each pollutant subject to regulation” under the CAA. Similarly, the Title V program is applicable to any “major source,” which is a stationary source with the potential to emit 100 tpy of any air pollutant. §§ 7661(2)(B), 7602(j). While these thresholds may make sense for traditional pollutants, for GHGs, they would result, by EPA’s estimation, in tens of thousands of new PSD permits and millions of Title V permits. Thus, in the final Tailoring Rule, 75 fed. Reg. 31514 (June 3, 2010), EPA purported to “tailor” the statutory threshold to accommodate GHGs, providing that sources would not become newly subject to PSD or Title V permitting unless they had the potential to emit more than 100,000 tpy of GHGs.

On review the Court addressed a single question: “Whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases.” The Court held that the CAA neither compels nor permits EPA’s interpretation. Whereas Massachusetts held that the CAA-wide meaning of “air pollutant” included GHGs, “air pollutant” in the context of the PSD and Title V thresholds had a narrower meaning that did not require inclusion of GHGs.

Congress’s “profligate use of ‘air pollutant,’” the Court understated, “is not conducive to clarity.”

Furthermore, applying the PSD and Title V permitting requirements to GHGs would be inconsistent with the Act’s structure and design. The programs, the Court explained, were intended to apply to a limited number of large sources that could shoulder significant substantive and procedural burdens. Applying the statutory thresholds to GHGs would impose these burdens on thousands if not millions of much smaller sources—an administrative impossibility and a transformative expansion of EPA’s regulatory authority that is unwarranted without clear congressional authorization. In addition, the Court held that the numeric thresholds of 100 or 250 tpy for the PSD and Title V programs clearly expressed Congressional intent. EPA was thus bound to give effect to the thresholds and could not “tailor” them simply because implementation for GHGs presents logistical issues.

However, the Court concluded that EPA reasonably interpreted the CAA to require BACT for GHGs emitted by sources that are otherwise subject to PSD review. Once a source has met the 100/250-tpy statutory thresholds for “any pollutant,” the CAA requires the source to implement BACT for “for each pollutant subject to regulation” under the Act, §7475(a)(4). This phrase, the Court held, cannot “bear a narrowing construction.” In addition, the Court determined that applying BACT to GHGs for sources already subject to PSD review would not be “disastrously unworkable” and would not significantly expand EPA’s authority.

Justice Ginsburg dissented in part and would have upheld EPA’s “tailoring” interpretation. Conversely, Justice Alito, also dissenting in part, agreed with the Court’s rejection of EPA’s tailoring interpretation but disagreed that EPA reasonably interpreted the CAA to require BACT for GHGs for sources otherwise subject to PSD review.

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