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Federal Appellate Court Gives U.S. EPA Greenhouse Gas Regulatory Victory

Sigel_Gabrielle_COLORBy Gabrielle Sigel


On June 26, 2012, the U.S. Court of Appeals for the District of Columbia Circuit handed the Obama Administration's Environmental Protection Agency a significant victory in its attempts to regulate greenhouse gases ("GHGs") under the Clean Air Act ("CAA"). Coalition for Responsible Regulation v. EPA, No. 09-1322, U.S. Ct. App. D.C. Cir. (6/26/12). Several States, led by Virginia and Texas, and industry groups had petitioned the Circuit Court in response to EPA's series of regulations, beginning in 2009, that implemented CAA provisions with respect to GHGs. Those regulations included control of GHG emissions from vehicles, as well as from stationary sources. EPA's regulatory approach is highly controversial, particularly because it used non-statutory reasons to justify its approach to regulating GHGs from stationary sources. The Circuit Court upheld all of EPA's regulations in a unanimous per curiam decision.

Beginning in December 2009, EPA issued several regulatory actions to control GHG emissions under the CAA. Those EPA regulatory actions had four interrelated components: (1) a formal finding that GHG emissions constituted a danger to public health and the environment (the "Endangerment Finding"); (2) issuing the first set of regulations controlling GHG emissions from mobile sources under the CAA (the "Tailpipe Rule"); (3) determining when EPA was required to begin regulating GHGs from stationary sources ("the Timing Rule") and (4) determining how to modify existing CAA permitting requirements for stationary sources so that only the largest sources of GHG emissions initially would be regulated ("the Tailoring Rule"). The legal impetus for the issuance of these regulations was the U.S. Supreme Court's decision in Massachusetts v. EPA, 549 U.S. 497 (2007). As reiterated by the Circuit Court, that Supreme Court decision stated that the CAA required EPA to consider whether GHG emissions from vehicles endangered public health and the environment because GHGs were a "pollutant" under the CAA. The rules were contested by Republican members of the House of Representatives, by industry groups such as the U.S. Chamber of Commerce, and States. EPA's position was supported by other States, such as New York and California, and environmental groups including Sierra Club and Natural Resources Defense Council.

Petitioners contested the Endangerment Finding on several procedural and substantive grounds, including the adequacy of the scientific record supporting the Endangerment Finding and EPA's failure to quantify the risk of endangerment to public health or welfare created by GHG emissions. The Circuit Court found that, "Relying again upon substantial scientific evidence, EPA determined that anthropogenically induced climate change threatens both public health and public welfare." Slip op. at 30. The Circuit Court rejected the argument that because some uncertainty exists in the science, EPA could not reach its endangerment decision, particularly because of the precautionary nature of the CAA. Moreover, the Circuit Court rejected Petitioners' criticism of EPA's reliance on other agencies' and scientific groups' assessments and compilation of scientific reports, saying, "This is how science works. EPA is not required to re-prove the existence of the atom every time it approaches a scientific question." Slip op. at 27. Similarly, the Circuit Court rejected the attack on EPA for its refusal to reconsider the Endangerment Finding in light of the Climategate debate on the accuracy of the scientific assessments of the anthropogenic cause or fact of climate change. The Circuit Court also rejected Texas's argument that the Endangerment Finding was flawed because it did not set a quantitative threshold for "unsafe" levels of GHG emissions, holding that EPA's non-quantitative assessment was a " function of the precautionary thrust of the CAA and the multivariate and sometimes uncertain nature of climate science, not a sign of arbitrary or capricious decision-making." Slip op. at 34. In sum, the Circuit Court upheld EPA's Endangerment Finding in all aspects.

Similarly, the Circuit Court upheld EPA's Tailpipe Rule. Petitioners argued that the rule violated CAA § 202(a)(1), and was the result of arbitrary and capricious decision-making. The Circuit Court found that, having issued the Endangerment Finding, the Tailpipe Rule was required to be issued. The Circuit Court noted that the Petitioners did not attack the substantive provisions of the Tailpipe Rule, such as the GHG emission limits themselves; rather, they attacked the Tailpipe Rule because of the costs that would eventually be imposed on stationary sources. (Due to agreements reached with the automobile industry at the time of the financial bailouts, that industry did not oppose the Tailpipe Rule's issuance.) The Circuit Court agreed with Petitioners that once the Tailpipe Rule was issued, EPA also would be required to regulate GHGs from stationary sources. However, because the CAA imposed on EPA a non-discretionary duty to issue the Tailpipe Rule in response to the Endangerment Finding, the fact that the Tailpipe Rule also would trigger stationary source regulation was not a factor that EPA could consider in deciding whether to issue the Tailpipe Rule. Thus, EPA's failure to consider stationary source compliance costs in its Tailpipe Rule decision-making was not arbitrary and capricious.

The Timing Rule and the Tailoring Rule both pertain to stationary sources. Under the Timing Rule, EPA decided that GHG emissions from stationary sources become subject CAA regulation when the Tailpipe Rule took effect ‒ January 2, 2011. In particular, EPA decided in 2010, that by the beginning of 2011, those stationary sources would be subject to GHG emission regulation under two programs: (1) the Prevention of Significant Deterioration ("PSD") permit program for emission sources in attainment areas; and (2) the Title V operating permit program. However, as articulated in the Tailoring Rule, the immediate imposition of these CAA permitting requirements would result in an administrative nightmare both for federal and state environmental permitting agencies and for the regulated community who would need to respond. EPA determined that if the CAA's current statutory thresholds of 100/250 tpy applied to GHG emissions, the number of required CAA permits would increase by the millions, and the associated costs of issuing those permits would rise correspondingly. Moreover, commercial, light industrial, and even some residential GHG sources would require a permit. Therefore, EPA determined that increasing the threshold above 100/250 tpy for GHG emissions was an administrative necessity and issued the Tailoring Rule to address that necessity. The Tailoring Rule initially raises the thresholds amounts for GHG emissions that define when permits under the PSD and Title V programs are required and states that these threshold amounts will continue to be evaluated in the future in light of the CAA's mandated triggers. In general, under the Tailoring Rule, PSD permits would not be required unless a source emits 75,000 or 100,000 tpy of carbon dioxide equivalent ("CO2e"), depending upon the type of activity triggering the PSD permit. In addition, the triggering amount of GHG emissions for Title V operating permits would typically be 100,000 tpy CO2e. EPA justified its Tailoring Rule on three grounds: (1) implementing the CAA's triggers immediately would lead to "absurd results" not intended by Congress; (2) the administrative burden that would otherwise be imposed; and (3) the agency's ability to implement statutory requirements over time.

Rather than addressing the substance of EPA's bases for the Tailoring Rule, the Circuit Court held that neither industry nor State Petitioners had standing to address the Tailoring Rule. Basically, the Circuit Court found that Petitioners failed to show that the Tailoring Rule caused "injury in fact" or that vacating the rule would redress the injury. Petitioners admitted that vacating the Tailoring Rule would indeed cause the administrative nightmare predicted by EPA, but they claimed that this nightmare would force Congress to act. However, the Circuit Court rejected a chain of circumstances depending upon favorable Congressional action as highly speculative. Quoting from a Schoolhouse Rock video, the Circuit Court found that "'it's very unlikely that [a bill will] become a law. It's not easy to become a law.'" Slip op. at 79. Moreover, the Circuit Court rejected the State Petitioners argument that they are entitled to standing based on their special status, as recognized by the Supreme Court in Massachusetts v. EPA. Although initially taking a similar approach to standing as Industry, the Petitioner States argued in their reply brief that they , in fact, wanted the Tailoring Rule vacated because they wanted to regulate GHGs at the lower emission rates currently in the CAA. The Circuit Court found that the States could not change their standing argument in their reply brief. Moreover, the States' new standing argument conflicts with its previously articulated position challenging the scientific basis for the Endangerment Finding. Finally, the Circuit Court found that, in "stark contrast" to the record evidence of the impact of climate change upon which the that the Massachusetts v. EPA States relied, the "State Petitioners [here] fail to cite any record evidence to suggest that they are adversely affected by global climate change." Slip op. at 81. Thus, the Circuit Court dismissed all challenges to the Tailoring Rule, and its related Timing Rule, for lack of jurisdiction.

In all likelihood, the Circuit Court's June 26th decision will be appealed, including to the U.S. Supreme Court. Absent further appellate review, however, disputes regarding GHG regulation will focus on the technical application of CAA regulation to stationary sources of GHGs. In particular, even while EPA's GHG regulations were being litigated before the Circuit Court, industry, EPA, and environmental groups have been engaged in a vigorous debate about how and the extent to which individual sources and States require sources to quantify and control their GHG emissions.