Supreme Court Strikes Down Part of EPA Greenhouse Gas Permit Rule but Leaves the Rule Mostly Intact

In 2011, the Environmental Protection Agency, acting under the Clean Air Act, required all new sources that would emit more than threshold quantities of “greenhouse gases” to get a preconstruction “prevention of significant deterioration” permit and commit to install “best available control technology” before beginning construction. On June 23, 2014, the Supreme Court, in Utility Air Regulatory Group v. Environmental Protection Agency, 2014 WL 2807314 (U.S. June 23, 2014), struck down this requirement for a small number of sources while leaving it in place for all others.

GHGs became “regulated pollutants” under the Clean Air Act in 2011 when EPA established GHG emissions standards for new motor vehicles. EPA claimed that this automatically required all new “major stationary sources” of GHGs to get a PSD permit.

The Clean Air Act says that all new stationary sources that will emit more than 250 tons per year (tpy) of any air pollutant are “major.” Since sources typically emit GHGs in far greater quantities than other pollutants, applying this threshold to GHG sources would have increased the scope of the PSD program roughly 100-fold, causing economic and regulatory chaos.

Accordingly, EPA “tailored” the applicability criteria, despite the express statutory language, so that PSD permits would be required for new sources that emitted more than 100,000 tons per year of GHGs (if subject to PSD requirements solely because of their GHG emissions) or 75,000 tons per year of GHGs (if subject to PSD requirements anyway due to other emissions).

A five-justice majority of the Supreme Court disagreed with this approach. In an opinion by Justice Scalia, the Court held that EPA erred both in finding that the PSD provisions automatically applied to all sources of “air pollutants,” broadly defined by EPA to include GHGs, and in assuming the power to amend the specific applicability thresholds in the statute. Instead, the majority ruled, EPA had the power to restrict the definition of “air pollutant” to air pollutants suitable to regulation under the PSD program only in its untailored form. Therefore, EPA’s own justification for “tailoring” showed that GHGs were not such a pollutant.

The decision exempts from the PSD permit requirements all new sources that would be subject to the requirements solely on account of their GHG emissions. The Court applied this same logic to exempt such sources from permitting under Title V of the Clean Air Act as well.

However, over 90% of all GHG sources subject to PSD permitting, including almost any energy project, would also be subject to the PSD permit program because of their emissions of other pollutants.

Here, the Court held that if a source was under the PSD rules anyway, EPA could properly require it to install “best available control technology” for GHGs if it emitted GHGs in “significant” amounts. The Court found that the relevant statutory language was not ambiguous and that applying it in this fashion would not lead to clearly “absurd results.”

The majority did express some concern about the potential burden that the BACT requirement could impose but noted EPA’s long-standing policy that BACT cannot be used to force a redesign of the project (for example, by requiring an applicant for a coal plant to build a gas plant instead) or to take measures to reduce emissions outside the project boundaries.

Justice Breyer and the other three liberal justices would have upheld EPA completely.

Justices Alito and Thomas would have struck down the PSD rules for sources of GHG emissions entirely.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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