Supreme Court Strikes Tailoring Rule But Affirms GHG Regulations Of “Anyway” Sources

On June 23, 2014, the U.S. Supreme Court issued its opinion for Utility Air Regulatory Group v. Environmental Protection Agency (UARG v. EPA).  In this ruling, the Court found that the potential of stationary sources to emit greenhouse gases (GHGs), on its own, may not act as a trigger for the permitting requirements under the Prevention of Significant Deterioration (PSD) and Title V provisions of the Clean Air Act (CAA).  However, the Court affirmed EPA’s ability to require “anyway” sources (i.e., sources which would need permits under the PSD and Title V programs anyway based on their emissions of conventional pollutants) to comply with Best Available Control Technology (BACT) for GHGs.

The PSD and Title V Program

The PSD program makes it unlawful to construct or modify a “major emitting facility” without a permit.  A “major emitting facility” is defined as a stationary source that has the potential to emit 250 (or 100 for certain types of sources) tons per year of “any air pollutant.”  This permitting requirement imposes significant costs and burdens, including the requirement to implement “best available control technology” to limit emissions from “each pollutant subject to regulation” under the CAA.  Whereas the PSD program makes it unlawful to construct or modify a “major emitting facility” without a permit, Title V makes it unlawful to operate any “major source” without a comprehensive operating permit.  Title V incorporates the standards of the PSD program and is designed to consolidate all of the CAA obligations for a stationary source into a single document.

EPA’s Tailoring Rule

Because GHG emissions are far more voluminous than conventional pollutants, if GHGs were considered “any air pollutant” then the statutory definition of “major emitting facility” as a facility emitting 250/100 tons per year of “any air pollutant” would trigger the permitting requirements under the PSD and Title V program for millions of facilities across the nation.  This would impose unreasonable costs and burdens upon millions of facility owners as well as upon the agencies administering the permitting programs.  To overcome this problem, the EPA passed regulations which, in effect, increased the GHG emission threshold to 100,000 tons per year for triggering permitting requirements under the PSD and Title V programs.

EPA had initially claimed that it was required to regulate GHGs under the PSD and Title V programs, given that in the 2007 case Massachusetts v. EPA, the Court had held that GHGs fall within the CAA definition of “air pollutant.”  Thus, EPA argued that its tailoring rule was necessary to comply with the requirement to regulate GHGs while not producing the administrative absurdity of issuing millions of permits.  The Court disagreed and found that the EPA did not need to read the definition of “air pollutant” so broadly for the specific PSD and Title V programs and that the EPA violated its statutory authority by “tailoring” the numeric thresholds established by statute.

BACT Requirements for “Anyway” Sources

The CAA defines BACT as “an emission limitation based on the maximum degree of reduction of each pollutant subject to regulation” that is “achievable . . . through application of production processes and available methods, systems, and techniques, including fuel cleaning, clean fuels, or treatment or innovative fuel combustion.”  In guidance documents, the EPA has stated that BACT applied to GHG will focus on compulsory improvements in energy efficiency and consider such options as carbon capture and storage.

The Court generally affirmed EPA’s authority to require BACT for GHGs emitted by “anyway” sources.  The Court found that BACT is neither an administrative impossibility if confined to “anyway” sources nor is it an unreasonable interpretation, given the phrasing describing “air pollutant” in the BACT provision.  The Court also held that EPA can only regulate “anyway” sources if they emit more than a de minimis amount of GHGs, which the EPA may establish.

Although the Court generally affirmed EPA’s authority, it also emphasized that it is not granting EPA free rein in applying BACT to GHGs and that there are important limitations on BACT.  As BACT is based on “control technology” and required only for pollutants that the source itself emits, BACT should not be used to order a fundamental redesign of the facility or require reductions in demand for energy from the electric grids.  The Court also points to guidance documents from EPA suggesting that BACT should not require every conceivable change that produces minor improvements in energy efficiency – such as dictating what light bulbs to use – and the permitting authority should instead focus on equipment that uses the largest amount of energy.


Practically, this opinion does not significantly impact EPA’s authority to regulate GHGs.  Under the tailoring rule, EPA would have been able to regulate about 86 percent of industrial GHG emissions, whereas now it will still be able to regulate around 83 percent of industrial GHG emissions.  Because most GHG emissions occur from “anyway” sources, EPA will require these sources to apply BACT to limit GHG emissions.  On the other hand, the sources that do not emit conventional pollutants at levels above the thresholds, although they may emit a significant amount of GHGs, will not become subject to EPA’s regulatory authority under these programs.  The main question remaining after this decision is whether and to what degree EPA is limited in its application of BACT to GHGs.

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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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