Supreme Court Limits EPA’s Authority to Regulate Carbon Emissions from Stationary Sources

Since the Supreme Court’s 2007 decision in Massachusetts v. EPA, it has been clear that the U.S. Environmental Protection Agency (“EPA”) has the authority under the Clean Air Act (“CAA”) to regulate emissions of greenhouse gases (“GHGs”) from mobile sources because GHGs fall within the CAA’s definition of an “air pollutant.” When EPA sought to regulate GHG emissions from stationary sources (mainly power plants and factories), however, the Court sang a slightly different tune. In Utility Air Regulatory Group v. Environmental Protection Agency (“UARG”), the Court rejected EPA’s attempt to regulate GHG emissions from stationary sources under two regulatory programs based solely on those emissions, while affirming the agency’s ability to regulate such emissions from so-called “anyway” sources that are already undergoing regulatory review because of emissions of other pollutants.

EPA has set limits on allowable concentrations in the air, called National Ambient Air Quality Standards (“NAAQS”), for six “criteria” pollutants — sulfur dioxide, particulates, nitrogen dioxide, carbon monoxide, ozone and lead. Under several EPA programs, whether a given area is in compliance (or “attainment”) of the NAAQS can determine whether a given stationary source will have to undergo special review when it is built or modified. Under the Prevention of Significant Deterioration (“PSD”) preconstruction permit program, certain stationary sources must use the best available control technology (“BACT”). Under the Title V operating permit program, certain stationary sources must obtain a CAA-compliant operating permit. EPA has not established an NAAQS for carbon dioxide, methane, or any other GHG.

In a rule promulgated in 2010, EPA announced that it would (1) require BACT for GHGs under the PSD program, and set GHG limits in Title V operating permits, for “anyway” sources that were subject to PSD or Title V requirements because of other pollutants; (2) later extend these requirements to additional stationary sources based solely on their emissions of GHGs, and (3) “tailor” this second step by restricting its reach to sources that emitted over 100,000 tons of CO2 per year, despite statutory thresholds of 250 tons per year and 100 tons per year for PSD and Title V, respectively. This “Tailoring Rule” reflected EPA’s judgment that requiring permits for all sources with emissions of GHGs above 250 tons per year would result in an administrative nightmare.

In UARG, the Court invalidated the second and third steps of EPA’s plan, while leaving the first step undisturbed. It ruled that the CAA prohibits EPA from requiring PSD and Title V permits based solely on GHG emissions, even though GHGs are CAA “air pollutants,” because the scope of EPA’s regulatory authority to regulate, as set forth in the statute’s operative provisions, does not extend to every substance within the broad CAA-wide definition of “air pollutant.” The UARG Court also held that the EPA exceeded its authority when it promulgated the Tailoring Rule and ignored the unambiguous thresholds in the statute.

UARG suggests that further EPA regulations of GHGs are likely to be vulnerable to legal challenges if they are incompatible with the CAA’s text or regulatory scheme. However, while UARG held that the EPA overstepped its authority to regulate GHGs under the CAA, the Court also held that the EPA may continue to treat GHGs as a regulated pollutant for purposes of requiring BACT for “anyway” sources. Thus — and as noted by Justice Antonin Scalia from the bench — UARG has left EPA with authority to regulate 83% of the GHGs emitted from stationary sources nationwide, thereby confirming the EPA’s significant authority under the CAA to regulate the vast majority of air pollutants, including GHGs. And, while UARG suggests that EPA will not receive carte blanche CAA authority to curb GHGs, under Massachusetts v. EPA and similar cases, the Court will continue to respect the expertise of EPA and accord deference to decisions and actions that are based upon that expertise.

John H. Klock, a Director in the Gibbons Real Property & Environmental Department, co-authored this post.