Supreme Court Criticizes EPA for Exceeding Authority, Upholds Ability to Regulate Greenhouse Gas Emissions

On Monday, June 23, the U.S. Supreme Court issued a much anticipated decision (Utility Air Regulatory Group v. Environmental Protection Agency, 573 U.S. ___ (2014)) deciding whether it was permissible for the Environmental Protection Agency to determine whether its motor-vehicle greenhouse-gas (GHG) regulations automatically triggered permitting requirements under the Clean Air Act for stationary sources that emit GHG. Justice Scalia delivered the opinion with the other Justices concurring and dissenting with the various parts of the decision.

The court ultimately held that the EPA did not have the authority to effectively amend the Clean Air Act by “tailoring” the numerical thresholds of 100 or 250 tons per year to accommodate greenhouse gases to prevent smaller sources from being subject to the act’s permitting requirements. However, the court went on to hold that even though the  EPA did not have authority to rewrite those portions of the Clean Air Act, the EPA nonetheless could treat greenhouse gases as a “pollutant subject to regulation” under the Clean Air Act for purposes of requiring “best available control technology” for other sources. 

Background

In 2007, the Supreme Court in a 5-4 decision (Massachusetts v. EPA) held that the Clean Air Act authorized the EPA to regulate greenhouse gas emissions from new motor vehicles if the agency determined that such emissions contribute to “climate change.” Next, the EPA issued a “final decision” that motor-vehicle greenhouse gas standards would trigger stationary-source permitting requirements.

The Clean Air Act imposes permitting requirements on stationary sources (factories and power plants). Specifically, the Clean Air Act’s “Prevention of Significant Deterioration” (PSD) makes it unlawful to construct or modify a “major emitting facility” in any area where the PSD program applies without a permit. There are two thresholds under the Act for such a facility: 250 tons per year of any air pollutant, or 100 tons per year for certain types of sources. Facilities that seek to qualify for a PSD permit must comply with emissions limitations that reflect the “best available control technology” for “each pollutant subject to regulation” under the Act.

In addition, Title V of the Act makes it unlawful to operate any “major source” without a permit. A major source is a stationary source with the potential to emit 100 tons per year of any air pollutant.

After setting standards for motor vehicles, the EPA then targeted stationary sources subject to the PSD program and Title V on their basis to emit greenhouse gases. However, the EPA conceded that requiring permits for all sources with greenhouse gas emissions above the statutory thresholds (100 tons/250 tons) would “radically expand those programs” and make them “unrecognizable to the Congress that designed them.”

Therefore, instead of requiring permits for all sources, e.g. office buildings, hospitals, schools, etc., the EPA “tailored” the rule. Specifically, the EPA increased the thresholds so that sources would not become subject to PSD or Title V permitting based on their potential to emit greenhouse gases in amounts less than 100,000 tons per year (rather than the 100/250 tons specified in the Act).

A number of parties, including businesses and the State of Wisconsin, challenged the EPA’s actions in court.

U.S. Supreme Court Decision – EPA Loses the Battle, But Wins the War

In a 5-4 decision authored by Justice Scalia, the court held that the EPA “exceeded its statutory authority when it interpreted the Clean Air Act to require PSD and Title V permitting for stationary sources based on their greenhouse-gas emission.”

In reaching this portion of its decision, the majority had harsh words for the EPA, saying the EPA’s “interpretation” is “unreasonable” and would cause “enormous and transformative expansion” in the EPA’s authority without Congress’ approval. In addition, the court stated that “since…the statute does not compel EPA’s interpretation, it would be patently unreasonable – not to say outrageous – for EPA to insist on seizing expansive power that it admits the statute is not  designed to grant.”

The court went further, heavily criticizing EPA for overstepping its authority:

In the Tailoring Rule, EPA asserts newfound authority to regulate millions of small sources—including retail stores, offices, apartment buildings, shopping centers, schools, and churches—and to decide, on an ongoing basis and without regard for the thresholds prescribed by Congress, how many of those sources to regulate. We are not willing to stand on the dock and wave goodbye as EPA embarks on this multiyear voyage of discovery. We reaffirm the core administrative-law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.

Despite this harsh language, the EPA for the most part prevailed, because the court determined that the EPA properly interpreted the Act to require sources that would need permits based on their emission of conventional pollutants to comply with “best achievable technology control” (referred to by the court as “anyway sources”) for greenhouse gas emissions. The court held that concerns that BACT, which involves “end-of-stack” controls, is unsuited for greenhouse gas regulation were unfounded.

In addition, the court held that the EPA’s decision to require BACT for greenhouse gases emitted by sources otherwise subject to PSD review was a permissible interpretation of the statute.  

Therefore, although the court sharply criticized the EPA for rewriting the Clean Air Act through the Tailoring Rule, the EPA ultimately prevailed because the court held that greenhouse gas emissions are subject to PSD and Title V permitting and must install “best available control technology.”

Dissent

Justice Alito, joined by Justice Thomas, disagreed with the portion of the decision allowing EPA to apply BACT to greenhouse gas emissions. According to the dissent, “As is the case with the PSD and Title V thresholds, trying to fit greenhouse gases into the BACT analysis badly distorts the scheme that Congress adopted.”

The dissent further argues:

Under the Court’s interpretation, a source can emit an unlimited quantity of greenhouse gases without triggering the need for a PSD permit. Why might Congress have wanted to allow this? The most likely explanation is that the PSD permitting process is simply not suited for use in regulating this particular pollutant. And if that is so, it makes little sense to require the installation of BACT for greenhouse gases in those instances in which a source happens to be required to obtain a permit due to the emission of a qualifying quantity of some other pollutants that is regulated under the Act.

Conclusion

While the court sharply criticized the EPA for exceeding its regulatory authority, in the end it was another victory for the EPA. As a result of this decision, the EPA will still have the authority to regulate greenhouses gases.

This case does not, however, directly affect the EPA’s recent proposed rule for existing power plants under § 111(d) of the Clean Air Act. That rule will certainly be challenged in court, and will most likely come before the U.S. Supreme Court. It remains to be seen whether the EPA continues its winning streak, or whether the court will finally rein in the EPA.

For further analysis of this decision, click here, here, and here.