D.C. Circuit Validates Regulation of Global Warming

by Holland & Knight LLP


D.C. Circuit Validates Regulation of Global Warming

While the global warming debate may continue to rage in Congress and political circles, the D.C. Circuit probably has laid it to rest at present for purposes of the executive and judicial branches. In an unusual per curiam opinion issued June 26 following two days of oral argument, the court upheld three EPA actions designed to regulate emissions of greenhouse gases (GHGs) on the basis of global warming concerns:

  • the "endangerment finding" for GHGs
  • regulations limiting tailpipe GHG emissions from new cars and light trucks
  • regulations requiring GHG limits in permits for new or modified stationary sources

Coalition for Responsible Regulation v. EPA, D.C. Cir. No. 09-1322 (decided June 26, 2012).

The court's holdings on these issues are summarized below, followed by a few observations on the potential effects and future of this important decision.

The Endangerment Finding

In Massachusetts v. EPA, 549 U.S. 497 (2007), the Supreme Court forced EPA to decide whether GHGs should be regulated as air pollutants under the federal Clean Air Act, dismissing the agency's arguments for refusing to do so in response to a petition for rulemaking. Late in the Bush 43 administration, the agency responded by issuing an Advance Notice of Proposed Rulemaking soliciting public comment on the relevant science. See 73 Fed. Reg. 44354 (July 30, 2008). Following the 2008 election, the Obama administration moved quickly to respond to the Court's decision. See Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act ("endangerment finding"),74 Fed. Reg. 66496 (Dec. 15, 2009). Pursuant to the language of CAA Section 202(a)(1), the agency found that GHGs "may reasonably be anticipated to endanger public health or welfare." This finding is the statutory predicate for CAA regulation of tailpipe emissions and new or modified stationary sources. Rejecting a series of challenges raised by state and industry petitioners, the court upheld all aspects of EPA's 2009 endangerment finding.

The industry petitioners argued that CAA §202(a)(1) requires EPA to consider not only the scientific health and welfare impacts of GHG regulation but also the benefits of activities that require GHG emissions, the effectiveness of emissions regulation triggered by the endangerment finding, and the potential for societal adaptation to or mitigation of climate change. The court held that

these contentions are foreclosed by the language of the statute and the Supreme Court's decision in Massachusetts v. EPA ... The plain language of §202(a)(1) ... does not leave room for EPA to consider as part of the endangerment inquiry the stationary-source regulation triggered by an endangerment finding, even if the degree of regulation triggered might at a later stage be characterized as 'absurd' [slip op. at 23, 26].

The court also rejected industry arguments that the scientific evidence does not adequately support the endangerment finding. However, unlike prior cases in analogous areas, the opinion does not contain a detailed analysis of the evidence.1Rather, the court simply stated that the record contained substantial evidence to support EPA's findings that:

  • extreme weather events, changes in air quality, increases in food- and water-borne pathogens, and increases in temperatures are likely to have adverse health effects
  • climate change endangers human welfare by creating risk to food production and agriculture, forestry, energy, infrastructure, ecosystems and wildlife

The decision was justified primarily by a series of legal principles derived from the NAAQS cases. Citing the American Farm Bureau case, the court gave "an extreme degree of deference to the agency when it is evaluating scientific data within its technical expertise" (slip op. at 28). The court also found that "the existence of some uncertainty does not, without more, warrant invalidation of an endangerment finding" (slip op. at 31). Citing its prior decisions in Ethyl Corp. and Lead Industries Association, the court held that "if a statute is precautionary in nature and designed to protect the public health, and the relevant evidence is "difficult to come by, uncertain, or conflicting because it is on the frontiers of scientific knowledge," EPA need not provide "rigorous step-by-step proof of cause and effect" to support an endangerment finding" (id.). The court also noted that "in Massachusetts v. EPA the Supreme Court confirmed that EPA may make an endangerment finding despite lingering scientific uncertainty" (id.). Ultimately, the court reiterated that "when EPA evaluates scientific evidence in its bailiwick, we ask only that it take the scientific record into account in a rational manner. Industry petitioners have not shown that EPA failed to do so here" (slip op. at 32).

The court also rejected the argument that EPA was required to quantify the health and welfare harm in making the endangerment finding. The court cited Ethyl Corp. for the proposition that "EPA need not establish a minimum threshold of risk or harm before determining whether an air pollutant endangers. It may base an endangerment finding on a lesser risk of greater harm ... or a greater risk of lesser harm or any combination in between" (slip op. at 33).2Arguments against inclusion of perfluorocarbons (PFCs), and sulfur hexafluoride (SF6) as regulated GHGs were rejected for lack of standing (slip op. at 35). An argument that EPA should have consulted its Science Advisory Board (SAB) was rejected because the duty to consult was unclear and "in any event, even if EPA violated its mandate by failing to submit the endangerment finding to the SAB, industry petitioners have not shown that this error was of such central relevance to the rule that there is a substantial likelihood that the rule would have been significantly changed if such errors had not been made" (slip op. at 36).

Finally, the court upheld EPA's denial of petitions for reconsideration of the endangerment finding based on the so-called "climategate" materials alleged to reveal research fraud. The court agreed with EPA that the claims were "exaggerated, contradicted by other evidence, and not a material or reliable basis for questioning the credibility of the body of science at issue," and further found that "the new scientific studies raised by some petitions were either already considered by EPA, misinterpreted or misrepresented by petitioners, or put forth without acknowledging other new studies" (slip op at 37).

Tailpipe Standards

The state and industry petitioners did not challenge the substance of the tailpipe standards, but alleged that EPA's action was arbitrary in failing to consider the cost impacts of its conclusion that the tailpipe rule triggers stationary-source regulation under the PSD and Title V provisions of the Act. They argued that if EPA had considered all of the relevant costs, the agency would have been forced to decline regulation of GHGs or tailor it to ameliorate "absurd" regulatory results in the stationary source arena. The court rejected this argument, holding that

by employing the verb 'shall,' Congress vested a non-discretionary duty in EPA ... The plain text of Section 202(a)(1) thus refutes Industry Petitioners contention that EPA had discretion to defer issuance of motor vehicle emission standards on the basis of stationary-source costs ... Having made the Endangerment Finding ... EPA lacked discretion to defer promulgation of the Tailpipe Rule on the basis of its trigger of stationary-source permitting requirements under the PSD program and Title V [slip op at 40].

The court also rejected an argument that EPA had discretion to defer the Tailpipe Rule on the basis of NHTSA's authority to regulate fuel economy (slip op at 41).

The petitioners also argued that EPA failed to justify the Tailpipe Rule by showing that it could provide a meaningful reduction of the risk identified in the endangerment finding. The court rejected this argument based on its earlier opinion in Ethyl Corp., which rejected the notion that EPA's regulations in this area must

be premised upon factual proof of actual harm ... and instead deferred to EPA's reasonable interpretation that regulations could be based on a 'significant risk of harm' ... Nothing in Ethyl implied that EPA's authority to regulate was conditioned on evidence of a particular level of mitigation; only a showing of significant contribution was required. EPA made such a determination in the Endangerment Finding, concluding that vehicle emissions are a significant contributor to domestic greenhouse gas emissions [slip op. at 43].

Stationary Source Regulations

Permitting Trigger. Under EPA's longstanding interpretation of the CAA, the Tailpipe Rule automatically triggered regulation of stationary GHG emitters under the PSD and Title V permitting provisions of the Act. As the court noted, "EPA has long interpreted the phrase 'any air pollutant' in both these provisions to mean any air pollutant that is regulated under the CAA ... once the Tailpipe Rule set motor-vehicle emission standards for greenhouse gases, they became a regulated pollutant under the Act, requiring PSD and Title V greenhouse permitting" (slip op at 19). The court first considered whether a challenge here to these longstanding EPA interpretations was timely, finding that two petitioners had "newly ripened" claims that were justiciable (slip op at 50).

The court then addressed the merits of the petitioners' challenges, holding that "EPA's 34-year-old interpretation of the PSD permitting triggers is statutorily compelled: a source must obtain a permit if it emits major amounts of any regulated pollutant and is located in an area that is in attainment or unclassifiable for any NAAQS pollutant" (slip op. at 72). Citing the Massachusetts opinion, the court found itself

faced with a statutory term - 'any air pollutant' - that the Supreme Court has determined is 'expansive,' and 'unambiguous[ly]' includes greenhouse gases ... Moreover, the PSD program requires covered sources to install control technology for 'each pollutant' regulated under the CAA ... and to establish that they 'will not cause, or contribute to, air pollution in excess of any' ... emission standard ... Finally, Congress' 'Declaration of Purpose' expressly states that the PSD program was meant, in part, to protect against adverse effects on 'weather' and 'climate' - precisely the types of harm caused by greenhouse gases [slip op at 59].

The court also noted that "none of Petitioners' alternative interpretations applies to Title V ... Indeed, industry petitioners never argue that their proposed alternative interpretations are relevant to Title V. Petitioners have thus forfeited any challenges to EPA's greenhouse gas-inclusive interpretation of Title V" (id.).

Tailoring Rule. In the Tailoring Rule, EPA noted that greenhouse gases are emitted in far greater volumes than other pollutants. Instead of immediately requiring permits for all sources exceeding the 100/250 tons per year (tpy) emissions thresholds for "major sources" in the Act, EPA decided to "phas[e] in the applicability of these programs to [greenhouse gas] sources, starting with the largest [greenhouse gas] emitters" (slip op at 75). The Tailoring Rule established the first two steps in this phased-in process. During step one, only sources that were already subject to PSD permitting requirements for conventional pollutants were required to install controls for their GHG emissions. Step two extended the permit requirements to new sources with the potential to emit over 100,000 tpy of GHGs and modified sources with the potential to emit 75,000 tpy of GHGs. Step two also requires Title V permits for sources with the potential to emit over 100,000 tpy GHGs. At the time of the opinion, EPA was considering step three, which would maintain the current thresholds while the agency evaluates the possibility of regulating smaller sources.

The rule was challenged only by state and industry petitioners, whom the rule was intended to protect by phasing in the GHG control requirements and establishing much higher "major source" emission thresholds than those provided in the Act. The court dismissed their challenges for lack of standing, holding that

Petitioners have failed to establish that the Timing and Tailoring Rules caused them 'injury in fact,' much less injury that could be redressed by the Rules' vacatur ... Industry Petitioners were regulated and State Petitioners required to issue permits not because of anything EPA did in the Timing and Tailoring Rules, but by automatic operation of the statute. Given this, neither the Timing nor Tailoring Rules caused the injury Petitioners allege: having to comply with PSD and Title V for greenhouse gases. Indeed, the Timing and Tailoring Rules actually mitigate Petitioners' purported injuries [slip op at 77].

Looking Forward

Will the Supreme Court review the D.C. Circuit's GHG decision? Many believe this is not likely. The decision is well grounded in the Massachusetts opinion and the D.C. Circuit NAAQS cases on which the Court relied in Massachusetts. In addition, the Court is unlikely to wade further into the factual basis for the endangerment finding or the relatively mundane legal analyses underlying the other aspects of the decision. The issuance of this decision most likely means that GHG regulation is here to stay absent further congressional action.

On the other hand, supporters of GHG regulation will be hard pressed to claim that this opinion validates the scientific basis. Unlike prior similar cases, the court did not give strict scrutiny to the scientific basis for the endangerment finding, but merely held that EPA's findings appeared to be supported by substantial evidence in the record and were "not arbitrary" under the applicable standard of review, which gives great deference to EPA's factual findings "on the frontiers of scientific knowledge." This may give additional impetus to current efforts to replace that standard with a more rigorous standard for judicial review of some types of EPA actions. In addition, the decision not to review the Tailoring Rule may give rise to future litigation, as it would have been difficult for EPA to defend the phase-in given the precise statutory definitions of "major source."

In the wake of this decision, EPA recently announced that it will proceed with step three of the Tailoring Rule. The larger question is whether EPA will be compelled to drop the final shoe of GHG regulation - regulation of existing sources - by adopting a NAAQS for GHGs. We know of no current EPA plans to do so, but the agency's hand could be forced through a petition to adopt a GHG NAAQS. Regardless of whether EPA proceeds with a NAAQS for GHGs, the resurrection of the Ethyl Corp. decision and its concept of "significant risk" may have implications for future NAAQS cases.

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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