A three-judge panel of the U.S. Court of Appeals for the District of Columbia, on June 26, 2012, dismissed challenges by various states and industry petitioners to the U.S. EPA's greenhouse gas regulations in a per curiam opinion, which reaffirmed each of the challenged rules in their entirety. Coalition for Responsible Regulation v. EPA, D.C. Cir., No. 09-1322, 6/26/12. At issue in these consolidated cases was a cascading series of rulemakings issued by EPA in response to the U.S. Supreme Court's decision in Massachusetts v. EPA, 549 U.S. 497 (2007), which held that greenhouse gases are an "air pollutant" subject to regulation under the Clean Air Act.
The challenged EPA actions were: (i) an "Endangerment Finding," in which EPA determined that greenhouse gases may "reasonably be anticipated to endanger public health or welfare"; (ii) the "Tailpipe Rule," which set emission standards for cars and light trucks; (iii) the "Timing Rule," which concluded that under its longstanding interpretation of the Act, once greenhouse gases became an "air pollutant" that is "subject to regulation" under Act via the Tailpipe Rule, major stationary source emitters of greenhouse gases would be subject to Prevention of Significant Deterioration ("PSD") and Title V programs on the date the Tailpipe Rule became effective (January 2, 2011); and (iv) the "Tailoring Rule," wherein EPA determined that because greenhouse gas emission from millions of industrial, residential, and commercial sources exceed the Act's 100/250 ton per year ("tpy") thresholds for permitting, which would place severe burdens and costs on both emitters and permitting authorities, EPA should depart from the statutory thresholds and initially apply alternative greenhouse gas thresholds (75,000 or 100,000 tpy) that only the largest emitters would trigger. As described below, the challengers contended that the Agency misconstrued the statute and otherwise acted arbitrarily and capriciously.
Endangerment Finding
The state and industry petitioners challenged several aspects of the Endangerment Finding, including (i) EPA's interpretation of § 202(a)(1) of the Clean Air Act, which sets out the endangerment finding standard; (ii) the adequacy of the scientific record supporting the Endangerment Finding; (iii) EPA's decision not to "quantify" the risk of endangerment to public health or welfare created by climate change; (iv) EPA's choice to aggregate six distinct greenhouse gases into a single defined "air pollutant"; (v) EPA's failure to consult its Science Advisory Board before issuing the Endangerment Finding; and (vi) EPA's denial of all petitions for reconsideration of the Endangerment Finding. The Court of Appeals rejected each of these arguments, ultimately concluding that the Endangerment Finding was consistent with Massachusetts v. EPA and the text and structure of the Act, and was adequately supported by the administrative record.
Tailpipe Rule
The state and industry petitioners did not challenge the substantive standards of the Tailpipe Rule, but instead contended that in promulgating the rule, EPA again relied on an improper interpretation of § 202(a)(1) of the Act and was arbitrary and capricious in failing to justify and consider the immense costs that would necessarily flow from the Agency's conclusion that adopting the Tailpipe Rule would also trigger stationary-source regulation under the Act's PSD and Title V provisions. The petitioners maintained that if EPA had considered these cost impacts, the Agency would have been required to either exclude carbon dioxide from the scope of the Tailpipe Rule, decline to issue the rule entirely, or apply an "avoidance of absurd results" approach "to interpret the statute so as not to automatically trigger stationary source regulation." The Court of Appeals concluded, however, that both the plain text of § 202(a) and legal precedent, including the decision in Massachusetts v. EPA, refuted the petitioners' contentions.
Timing Rule and Tailoring Rules
Once the Court of Appeals resolved the challenges to the
Endangerment Finding and the Tailpipe Rule, it then addressed the
heart of the petitioners' challenge: application of the Clean
Air Act's stationary source permitting requirements to major
greenhouse gas emitting facilities.
First, the court analyzed the petitioners' challenge to
EPA's interpretation of the Act's § 165(a) stationary
source permitting requirements for major emitting facilities
located in areas in attainment for a particular National Ambient
Air Quality Standard (or in areas that are unclassifiable for such
a standard). "Major emitting facilities" are defined
under § 169(1) of the Act as "any...stationary sources of
air pollutants which emit, or have the potential to emit, one
hundred tons per year or more of any air pollutant." EPA has
interpreted "any air pollutant" to mean any air pollutant
regulated under the Clean Air Act. Thus, under this interpretation,
once greenhouse gases were defined as a pollutant and regulated
under the Tailpipe Rule, the Act's stationary source
requirements were also triggered for greenhouse gases.
Before reaching the merits of the challenge, the court addressed
its timeliness. Observing that EPA first interpreted the relevant
statutory provisions in a 1978 rule (and then reiterated its
position in subsequent 1980 and 2002 rules), the court noted that
under the Clean Air Act, a rule can be challenged only within 60
days of its promulgation unless new grounds arise after those 60
days. The petitioners argued that the Tailpipe Rule was just such a
new ground. The court agreed, because at least two of the
petitioners were not subject to the stationary source permitting
requirements prior to the Tailpipe Rule and thus only now had
ripened claims to challenge EPA's statutory
interpretation.
After determining that the challenges were timely, the Court of
Appeals turned to the merits of the petitioners' challenge. The
petitioners argued that the Act could have been interpreted to
avoid extending permitting to greenhouse gas emitters and provided
three alternative interpretations of the statute. The court was
unpersuaded by all three of the alternatives and held that, based
on the plain language of the statute, the use of the term "air
pollutant" in other sections of the Act, and the Supreme
Court's holding in Massachusetts v. EPA that the
greenhouse gases are pollutants under the Act, the term "any
air pollutant" appearing in the stationary source permitting
provisions must include any regulated air pollutant, including
greenhouse gases.
After upholding EPA's interpretation of the stationary source
permitting requirements, the court finally addressed the
petitioners' challenges to the Timing and Tailoring Rules. The
petitioners argued that EPA is not allowed to depart from statutory
requirements that require any major emitting facility with the
potential to emit more than 100 tons per year to obtain
construction and operating permits. EPA justified its departure
from the statutory thresholds by arguing that (i) applying the
permitting requirements to all greenhouse gas emitters would cause
"absurd results" not intended by Congress; (ii) a phased
approach was an administrative necessity to prevent overburdening
EPA and state regulators with greenhouse gas permit applications,
and (iii) the judicial doctrine of "one-step-at-a-time"
allows agencies to implement regulatory programs one piece at a
time.
The Court of Appeals, however, never reached the merits of this
argument because it found that the petitioners could not prove that
the Tailoring Rule had caused them any harm that could be redressed
by the court, and thus lacked standing to bring the claim. The
petitioners argued that, as a result of the Timing and Tailoring
Rules, they were now subject to regulation of their greenhouse gas
emissions and/or must obtain permits for new greenhouse gas
sources. The court rejected this argument, holding that this injury
was not a result of the Timing and Tailoring Rule, but instead
resulted from the automatic operation of the Act itself. In fact,
the court noted the Timing and Tailoring Rules actually mitigated
those damages by reducing the number of sources initially subject
to the requirements.
In an attempt to avoid the industry petitioners'
jurisdictional defect, the state petitioners presented two
alternative standing arguments, both of which were rejected by the
Court of Appeals. First, the state petitioners argued that they had
standing because vacating the rules—thereby causing EPA
to extend greenhouse gas permitting requirements to millions of
small emitters—would cause Congress to act and mitigate
their injuries. The court disagreed, stating that there was no
certainty that Congress would act to address their injuries.
Second, the state petitioners argued that they had standing under
Massachusetts v. EPA based on EPA's failure to
regulate greenhouse gas emissions sooner. The court rejected this
argument because the state petitioners raised it only in their
reply brief and failed to present any evidence that they are
adversely affected by climate change.
It seems relatively safe to predict that the petitioners are
likely to seek further review in the D.C. Circuit and/or the U.S.
Supreme Court. For now, however, EPA's greenhouse gas
regulatory program will be the legal framework with which states
and industry will be required to deal.
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