Supreme Court Hears Oral Arguments for EPA’s Carbon Dioxide Regulation: An Uncertain Future for PSD Program.

By Joseph Lounsbury, 3rd year GGU Law

On Monday, February 24, 2014, the United States Supreme Court heard oral arguments for a group of consolidated cases coined Utility Air Regulatory Group v. The Environmental Protection  Agency, which will decide whether the United States Environmental Protection Agency’s (EPA) current structure for regulating stationary sources of greenhouse gases (GHG) under the Prevention of Significant Deterioration (PSD) permitting program is an acceptable use of agency deference. Specifically, the Court will rule on whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered PSD permitting requirements under the Clean Air Act (CAA) for stationary sources.

The case, beyond its crucial importance for future regulation of GHGs from large stationary sources, presents an unusual conflict between the deference normally afforded an expert administrative agency and explicit language in a statute. It puts environmentalists in a difficult position as to who to root for, as EPA is arguing that it has the right to ignore numbers in a statute because, if followed, these numbers produce absurd results. On the one hand, if EPA wins, greenhouse gases will be further reduced. On the other hand, allowing EPA to ignore specific statutory mandates might rebound against environmentalists in future litigation who challenge EPA’s statutory interpretation.

In getting to the bottom of this complex issue, the three parties to the case (the Private Party Petitioners, certain states led by Texas, and the government represented by the Solicitor General) argued over the extent of EPA’s authority to regulate GHG emissions under the PSD program. EPA argued that it had broad statutory and congressional authority to regulate GHG, while the Private and State petitioners maintained that EPA explicitly violated express statutory language by including carbon dioxide (CO2) within the PSD permitting scheme. As a backstop, the petitioners also insisted that GHGs are only applicable to PSD if a facility is brought into the program by emissions of six specific National Ambient Air Quality Standard (NAAQS) pollutants. Only then would the requirement for Best Available Control Technology be applicable to any GHGs that are emitted.

Within the first minutes of the oral argument, Justice Ruth Bader Ginsburg, at page 9 of the court’s transcript, alluded to this backstop position referenced by Judge Brett Kavanaugh, a D.C. Circuit Judge, in his dissent to the denial of a request for rehearing.[1]  As James Coleman, Energy Law Professor of U. of Alberta, discussed in his blog, a number of the justices hinted at a “compromise position, holding that 1) industrial sources cannot be required to obtain a PSD permit purely on the basis of their greenhouse gas emissions, but 2) can be required to adopt best available control technology for their greenhouse gas emissions if they need a PSD permit anyway due to their emissions of other pollutants.”[2]

In his dissent, Kavanaugh argued that “Congress designed the statute’s permitting requirement based on facilities’ NAAQS emissions, but once those facilities are subject to the permitting requirement, they must also meet a range of other minimum environmental standards.”[3] This approach seemed persuasive to a number of the justices[4] as it would mean that the major stationary sources of GHGs can be regulated under the PSD permitting program without having to find that the PSD permitting process can be triggered by GHG emissions alone. As most large power plants and refineries are subject to PSD requirements anyway, Justice Ginsburg noted at page 9 of the transcript that Texas agreed the difference is only 3% of stationary source GHG emissions.”

However, EPA argued at page 79 against the Kanavaugh compromise. EPA reasoned that changing the structure of the PSD program to apply only to facilities that are brought into the PSD program for emissions of the six specific NAAQS pollutants would deregulate other major emitting facilities that fall under the PSD permit for other non-NAAQS pollutants.  EPA contended that it would rather exclude CO2 [5] under the PSD program, than change the definition of “air pollutant” within the PSD program and risk deregulating other non-NAAQS pollutants such as sulfuric acid mist and ozone-depleting substances.

Under EPA’s PSD tailoring rule, any new major polluter of CO2 (anyone who emits more than 100,000 tons per year (tpy)) and is not already permitted under the PSD program is subject to the requirements of the PSD program. According to Ginsburg and Roberts, this expands EPA’s regulatory reach from 83% percent of stationary GHG to 86%. EPA explicitly rejected the 250 tpy threshold for Best Available Control Technology (BACT) which is expressly provided in the CAA. Otherwise, according to EPA, the regulation would produce absurd results by reaching into every furnace in every school, apartment building and restaurant.

The petitioners argued that the better way to avoid such a broad reach is to avoid the regulation of GHG. Justice Kennedy at page 80 directly commented that EPA did not cite a case directly on point that gave an agency such authority. Then Alito at pages 70 and 71 asked whether any case allowed the court to ignore a number in a statute. EPA offered one supporting case at oral argument, Martin v. Ruiz, 415 U.S. 199 (1974), about assistance to Native Americans, which as the Solicitor General admitted, was not “exactly on point”. In Martin the Court allowed the Bureau of Indian affairs to limit assistance to Native Americans on or near a reservation to maximize funding, but there was no conflict with an explicit number as there is in this case.

There is also a possibility that the majority may grant EPA deference in this situation, and thus allow the current regulation for CO2 to stand. For example, Justice Kagan at page 44 points out that, as decided in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the agency is given the most deference in this situation, where there are two terms in the statute that are irreconcilable. Also arguing for EPA’s deference, Breyer at page 64 states that exceptions are implicitly written in laws all the time for things that do not make sense to regulate. Furthermore, Justice Roberts suggests that he is not willing to forget about precedent in Massachusetts v. EPA, when interpreting what “any air pollutant” within the statutory scheme for PSD permitting means.[6] Massachusetts v. EPA determined that CO2 is an “air pollutant” based on section 302(g) of the CAA.[7]

However, even though it is unlikely the majority will find that EPA has complete deference, it is even less likely that the court will hold that EPA has no authority to regulate GHGs within the PSD permitting statute at all. Both Breyer at 40 and Kagan at 34 point out that not regulating major facilities emitting CO2 would directly violate the intent of Congress.

We are betting in this blog that the Supreme Court will find that the EPA has authority to regulate CO2 within the PSD permitting program, but may restrict EPA’s regulation of CO2 to major stationary sources already regulated under the PSD program. By doing so, the Court will vindicate the explicit words in the statute while allowing EPA to move forward with substantial GHG regulation. The downside is that EPA will lose its control over other harmful, non-NAAQS, pollutants it has regulated for 30 years under the PSD permitting program.

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1.  Utility Air Regulatory Group v. EPA, Case No. 12­1146, Justice Ginsburg in Oral Argument Transcript at pg 9, ln 1-5, Available at, Supremecourt.gov; See also, Coal. For Responsible Regulation, Inc. v. EPA, 684 F.3d 102, Denial of Request for Rehearing(Kavanaugh at 7-8)(D.C. Cir. 2012), Available at, http://www.cadc.uscourts.gov/internet/opinions.nsf/7F9EC0498823671D85257ADA00540B48/$file/09-1322-1411145.pdf.

2.  Coleman, James, Oral Argument Hints that Supreme Court May Trim Back U.S. Industrial Source Greenhouse Gas Regulations, Energy Law Professor, Energy Markets and Environmental Regulation, see http://energylawprof.wordpress.com/2014/02/25/oral-argument-hints-that-supreme-court-may-trim-back-u-s-industrial-source-greenhouse-gas-regulations/.

3.  Coal. for Responsible Regulation v. EPA, Nos. 09- 1322, et al. (Kavanaugh, J., dissenting from denial of rehearing en banc).

4.  Utility Air Regulatory Group v. EPA, Case No. 12­1146, Oral Argument Transcript (Justices Roberts, Sotomayor, Breyer, Ginsburg, Kennedy, and Kagan all mention Kavanaugh’s compromise at Oral Arguments).

5.  Utility Air Regulatory Group v. EPA, Case No. 12­1146, Verrilli in Oral Argument Transcript at pg 61, ln 8-12(CO2 is the only pollutant that creates an absurd result when use for triggering purposes of the PSD permits).

6.  Utility Air Regulatory Group v. EPA, Case No. 12­1146, Chief Justice Roberts in Oral Argument Transcript,at pages18-19.

7.  See Massachusetts v. EPA, 549 U.S. 497, 528-529.

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