Supreme Court Overturns EPA’s “Tailoring Rule,” Upholds GHG BACT for “Anyway” Sources

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On June 23, the U.S. Supreme Court issued its much anticipated opinion in Utility Air Regulatory Group v. EPA, involving whether the EPA properly decided it was required to regulate sources of greenhouse gases (“GHGs”) under the prevention of significant deterioration (“PSD”) and Title V permitting programs. The Court held that EPA’s regulation of GHGs under the PSD and Title V programs was not required under the text of the Clean Air Act (“the Act”). In so holding, the Court also struck down EPA’s “Tailoring Rule,” which modified the Act’s major source thresholds for inclusion in the PSD and Title V programs. Nevertheless, the Court held that EPA’s decision to require best available control technology (“BACT”) for GHGs emitted by sources otherwise subject to PSD review was permissible under the Act.

The EPA argued that it was required to regulate new or modified sources of GHGs under the PSD and Title V programs. After the Supreme Court’s landmark decision in Massachusetts v. EPA, 549 U.S. 497 (2007), where the Court held that Title II of the Act authorized EPA to regulate GHGs from new motor vehicles, the EPA first found that GHGs from new motor vehicles endangered public health. It thereafter issued GHG emission standards for passenger cars, light-duty trucks, and medium-duty passenger vehicles. The EPA had long held that “regulated air pollutants” were subject to the PSD program, so it ruled that GHG sources were subject to PSD once it set emissions standards for motor vehicles. Title V requires “major sources,” including major sources of GHGs, to obtain operating permits.

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