EPA’s first carbon regs nearly unscathed after years of litigation

Source: Jeremy P. Jacobs, E&E reporter • Posted: Wednesday, June 25, 2014

In announcing the majority opinion for the Supreme Court’s ruling on U.S. EPA’s permitting for greenhouse gases, Justice Antonin Scalia — no friend of EPA — gave the agency a pat on the back.

“EPA is getting almost everything it wanted in this case,” the conservative justice said from the bench.

And — Scalia could have added — that is pretty much how EPA has fared on every legal challenge so far to President Obama’s climate change agenda. The Supreme Court’s ruling closes the curtain on a string of lawsuits spanning several years that aimed to undermine EPA’s first attempts to restrict emissions that contribute to global warming.

With the exception of the Supreme Court trimming EPA’s permitting authority for greenhouse gas emissions, the agency emerged largely unscathed.

Amanda Leiter, an environmental law professor at American University’s Washington College of Law, said the results will likely bolster EPA’s confidence at it moves forward with its next greenhouse gas regulations, including its recent contentious proposal to set standards for new and existing power plants.

“They do have the leeway to figure out how to make the statute fit a problem that it didn’t easily fit,” Leiter said. “They just don’t have the scope to rewrite [the Clean Air Act].”

In yesterday’s 5-4 ruling, the court’s conservative wing ruled EPA couldn’t require stationary sources like power plants, chemical facilities or industrial boilers to obtain an air permit that requires pollution controls because they emit only greenhouse gases. The court also threw out EPA’s “tailoring” rule, which rewrote the tonnage thresholds that qualify a facility for a Prevention of Significant Deterioration, or PSD, permit for greenhouse gases.

But the court also held, with the backing of seven justices, that EPA could require facilities to curtail greenhouse gases if those facilities already qualify for its PSD permitting regime because of emissions of other conventional pollutants.

According to EPA, those “anyway” sources produce 83 percent of U.S. greenhouse gas emissions.

The agency’s original broader permitting requirement would have covered 86 percent of those emissions, a difference of only 3 percentage points (Greenwire, June 23).

The ruling was consequently narrow in scope, and it doesn’t look as if it will crimp EPA’s agenda. The agency, in fact, declared it a “win.”

It follows EPA court victories on a larger suite of regulations. Trade groups and several states challenged all of EPA’s first climate change regulations, including its finding that greenhouse gases endanger public health and auto tailpipe standards.

In June 2012, those rules were upheld by the U.S. Court of Appeals for the District of Columbia Circuit after two days of unusually long arguments.

Seventeen states and various trade associations, including the U.S. Chamber of Commerce, asked the Supreme Court to review nearly every aspect of that decision.

But EPA scored an early win when the high court limited its review to whether the tailpipe standards lawfully triggered inclusion of greenhouse gases in the PSD permitting program. By passing on those other issues, the high court effectively left in place the D.C. Circuit’s ruling validating them.

“You might say that EPA’s biggest win came not yesterday, but the day the court granted [certiorari] on a narrow question,” said Willy Jay, a former assistant solicitor general now with Goodwin Procter LLP.

Another former Department of Justice environmental specialist said that after all the litigation, the Supreme Court ultimately ruled out permitting requirements for a mere sliver of facilities.

“I’d say getting 83 percent of the pie is a pretty good result. Wouldn’t you?” said the attorney, who’s now in private practice and didn’t want to speak on the record for fear of alienating his clients. “You took 17 percent of the cake away for millions of millions of dollars in legal fees.”

But several attorneys cautioned there are some potentially dangerous warning signs for EPA lurking in Scalia’s opinion.

‘Shot across the bow’

A big question being asked in the ruling’s wake was whether it could affect EPA’s recent hot-button proposal to set greenhouse gas standards for power plants.

The opinion didn’t touch directly on the proposal because EPA is issuing those regulations under a different section of the Clean Air Act. Scalia said as much in a footnote saying that part of the Clean Air Act is “not at issue here.”

But parts of the opinion that were backed by the court’s five conservative justices clearly warn against EPA taking an expansive view of its authority.

“When an agency claims to discover in a long-extant statute an unheralded power to regulate ‘a significant portion of the American economy,’” Scalia wrote, referencing a previous decision, “we typically greet its announcement with a measure of skepticism.”

Jeff Holmstead, a former EPA air chief in the George W. Bush administration and now an industry advocate at Bracewell & Giuliani, said that section “almost seems to have been drafted” with the power plant standard proposal “in mind.”

Holmstead speculated that passage suggests there are “probably at least five votes to overturn the kind of rule that EPA proposed.”

Scalia was also skeptical of how EPA determines what are “best available control technologies,” or BACT, that it may require a stationary source to install as a term of its PSD permit.

The justice warned that BACT traditionally has applied to technologies directly attached to the pollution source — smokestacks in most cases. For greenhouse gases, EPA’s technologies include other aspects including energy efficiency for the entire facility.

In a guidance document for the PSD permitting program, Scalia found EPA asserted that “energy efficiency will be the ‘foundation’ of greenhouse gas BACT.”

Scalia went on to say that historically EPA “has long interpreted BACT as required only for pollutants that the source emits.” Further, he said BACT cannot be used to order a “fundamental redesign” of a facility.

He warned against EPA taking an overly aggressive view of what it can require as BACT.

Jay, the former assistant solicitor general, said the section is “basically taking a shot across the bow” to EPA.

He added that it’s unclear whether that section was crafted with the power plant proposal in mind. If the June 2 proposal is finalized in its current form, it would require states to make reductions that could only be achieved through demand-side energy efficiency upgrades or other measures that reach “beyond the fence” of a facility.

The section does, however, indicate that the court would be receptive to future challenges to EPA BACT determinations, Jay said.

“It suggests to me that the court, and five more conservative justices, saw this section as sending a strong warning to EPA about its future attempts to define BACT for anyway sources,” Jay said. “Those BACT determinations will inevitably be subject to their own challenge.”