Potential Outcomes Following Oral Argument in the Court Challenge to USEPA's Greenhouse Gas Rulemakings

This post was written by Jennifer Smokelin

The U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) heard arguments in late February on judicial review of the U.S. Environmental Protection Agency’s (USEPA) greenhouse gas (GHG) regulatory program. In the case Coalition for Responsible Regulation v. EPA, the petitioners – a coalition of oil and gas, manufacturing, construction and other industry groups and states – are challenging USEPA’s authority under the Clean Air Act to regulate GHG emissions under four rules: (1) the Endangerment Finding; (2) the Tailpipe Rule; (3) the application of GHG permitting requirements to the existing federal Prevention of Significant Deterioration (PSD) program (referred to as the "Grounds Arising After" case); and (4) "Tailoring" and "Timing" rules.

Oral argument was heard over two days before a very hot bench. Although tea leaves are very hard to read in any case, especially in this particular case where the judges seemed to leave all avenues open, here is a brief synopsis of the issues and potential outcomes:

 

Challenge to the Endangerment Finding

The endangerment finding in December 2009 established that GHGs contribute to climate change and threaten the public health and welfare of the American people. USEPA is likely to prevail that its determination was proper.

The petitioners’ challenges can be grouped loosely into two arguments (1) USEPA did not have the scientific basis to make its endangerment finding and (2) USEPA should have considered policy issues other than pure scientific basis in making the determination. With regard to former issue, it is likely the D.C. Circuit will hold that its place is not to second guess the scientific basis for USEPA’s determination. On the latter issue, looking at the express language of the statute and to the U.S. Supreme Court’s decision in Massachusetts v EPA, policy considerations are not properly part of an Endangerment Finding under Section 202(a) of the Clean Air Act.

Challenge to the Tailpipe Rule

The Tailpipe Rule allows USEPA to establish carbon standards for light-duty vehicles. In this challenge, USEPA is likely to prevail, at least with respect to the four GHGs that are actually emitted from light duty vehicles. After USEPA makes an endangerment finding, Clean Air Act 202(a) provides, “Administrator shall by regulation prescribe…, standards applicable to the emission of any air pollutant from… new motor vehicle engines…” Petitioners argued that the Tailpipe Rule was not necessary even after US EPA issued its endangerment finding. To hold for the petitioners, the D.C. Circuit would effectively be holding that the “shall” language under Clean Air Act § 202(a) does not mean “shall”. Further, it is interesting to note that the auto industry itself (the regulated entities under the Tailpipe Rule) supported USEPA’s position. The industry petitioners who challenged the Tailpipe Rule were doing so not because they were affected by the Tailpipe Rule from a regulation standpoint – they challenged them to preserve industry’s arguments on the issues discussed below.

Challenge to “Grounds Arising After” Case

It appears that USEPA will probably prevail here. Under the Clean Air Act Section 307 and the Administrative Procedure Act (APA) , there is a 60-day window to challenge a regulation – after which the window closes and there is rarely subsequent right to assert a challenge . Under Massachusetts v. EPA, GHGs are an “air pollutant” under the Clean Air Act. Here, the petitioners challenged the inclusion of GHGs under the PSD regulations (the “GHG PSD Rule”) more than 60 days after USEPA expressly confirmed the applicability of PSD to any pollutant regulated under the Clean Air Act, including specifically all non-NAAQS pollutants. (USEPA confirmed this in regulations issued in 1978, 1980 and 2002 (collectively, the “PSD Applicability Rules”))

Petitioners argued that that the GHG PSD Rule, specifically the inclusion of GHGs in the PSD scheme, raised “unexpected difficulties” that could not have been foreseen at the time of the original PSD Applicability Rules and/or that the GHG PSD challenges raised now were not “ripe” at the time the PSD Applicability Rules were finalized. USEPA countered that these arguments could have been raised at the time of the PSD Applicability Rules’ finalization. The Court seemed relatively unsympathetic to Petitioners view on this point.

Challenge to “Tailoring” and “Timing” Rules

The ‘Timing Rule” is EPA’s ruling regarding when regulations of GHGs would begin (in this case, concomitant with regulation of tailpipe emissions) and the “Tailoring Rule” establishes what sources are subject to regulation. Petitioners’ strongest case would appear to be the challenge to the Tailoring Rule. The Tailoring Rule has always been considered the “weakest link” in USEPA’s GHG regulations. The reason for this is that the Tailoring Rule “tailors” applicability for GHG PSD regulation to sources that emit 75,000 or 100,000 tons per year (tpy) of carbon dioxide equivalent (CO2E). The problem is the express language of the Clean Air Act regulates sources that emit either 100 tpy or 250 tpy of a given pollutant. USEPA raised policy arguments to justify its rejection of this express language under the Clean Air Act (among them, the “absurd results” doctrine), but ignoring express statutory language is always a tricky business.

Assuming petitioners prevail on this issue and the Tailoring Rule is vacated (as opposed to remanded with Tailoring Rule left in place during reconsideration), what is the possible outcome? Ironically for the industry petitioners, the effect of reversing the Tailoring Rule means that many more sources would be subject to GHG regulation under the Clean Air Act. In fact, if the Tailoring Rule is completely abrogated, every source that emits more than 100 or 250 tpy of CO2E would be potentially subject to regulation under the Clean Air Act. This would be expensive to industry and potentially overwhelming to USEPA, at least from a paperwork standpoint.

But industry beware: a decision vacating the Tailoring Rule (or the GHG PSD Rule or the Timing Rule) would not affect USEPA’s authority to regulate GHGs under the New Source Performance Standards (NSPS) under Clean Air Act § 111. This is because the Tailoring Rule and the Timing Rule are linked to the PSD Rule but USEPA’s NSPS authority exists independent of any PSD authority. NSPS for GHGs have not been finalized yet but are expected in 2012. NSPS are promulgated sector by sector and USEPA is slated to finalize NSPS that include GHGs for the utility and refinery sectors this year. In fact, USEPA is under a court ordered settlement to do so. Thus, even a complete victory by petitioners under the GHG PSD Rule does not abrogate USEPA’s authority to regulate GHG emissions from stationary sources under the Clean Air Act

A decision by the D.C. Circuit panel is expected as soon as June of this year. 

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