Supreme Court Upholds Greenhouse Gas Emmission Limits for Large Industries, but Implementation Questions Remain

On Monday, June 22, the U.S. Supreme Court issued a much anticipated decision in Utility Air Regulatory Group v. Environmental Protection Agency (slip opinion) where it  affirmed EPA’s authority to impose limits for greenhouse gas (GHG) emissions by major emissions sources that are otherwise required to have a Clean Air Act permit for conventional pollutants.  At the same time, the Court rejected the Agency’s assertion that it has the authority to impose GHG emission limits on facilities independent of any other obligation those facilities may have to obtain permits.  Thus, EPA (and the States) may impose GHG limits in permits required by rules intended to Prevent Significant Deterioration (PSD) of air quality, but the Agency cannot require permits based solely on GHG emissions or for facilities that do not have other emissions above threshold levels.

Several years ago, the Supreme Court provided a method for regulating greenhouse gases  under the Clean Air Act (CAA). Massachusetts v. Environmental Protection Agency. (2007) (slip opinion). That decision provided that the Agency can classify greenhouse gases as air pollutants and regulate them if it made a determination that they constitute a danger to human health or the environment.  EPA subsequently made such an endangerment finding and then proceeded with the rulemaking challenged by the Utility Air Regulatory Group and others.  The basic issue in the recent case centered on the fact that the CAA contains very specific thresholds that trigger permitting obligations for air pollutants, those being either one hundred (100) tons per year or two hundred fifty (250) tons per year depending on the type of industry.  Since greenhouse gases are emitted in volumes much larger than the criteria pollutants regulated under the CAA (commonly: carbon monoxide, sulfur dioxide, oxides of nitrogen, ozone, lead and particulate matter), the use of such comparatively low statutory numbers would impose regulatory obligations on millions of sources that are not currently required to have permits.  Thus, EPA sought to impose much higher permit trigger thresholds for GHG in a process it called tailoring.  The Court rejected the tailoring concept outright.  However, it held that the Agency could accomplish essentially the same purpose by limiting the regulation of greenhouse gases to facilities that would be required to obtain a permit under the PSD program anyway.  Thus, EPA effectively ended up with a comparable regulatory field, but with the Court using a much different method.

A number of questions remain with respect to this approach, and EPA will have to provide some guidance or instruction about its interpretation of the decision and its authorities going forward.  Perhaps the most significant of these questions is the thresholds at which greenhouse gases will be regulated under the PSD program.  Currently, there is disagreement about whether the thresholds established in EPA’s disapproved tailoring rule remain effective for application to PSD permits, or whether EPA must repromulgate those or new thresholds.  While EPA is expected to provide guidance on this in the near future, the contention surrounding greenhouse gas regulation would indicate that this aspect of the requirements is also likely to face significant challenges.

Regulatory Utility Commissioners Seek Role in Development of EPA Climate Rules

In June, President Obama directed the U.S. Environmental Protection Agency to propose standards regulating greenhouse gas emissions (“GHG”) from existing power plants. The requirements would be imposed under Section 111(d) of the Federal Clean Air Act. Under the directive, the EPA is to propose such standards no later than June 2014 using a process that would require individual states to submit plans no later than June 30, 2016, explaining to the EPA how the states will implement those standards. The prospect of these regulations is expected to focus directly on the use of coal as a fuel for electric power generation.

The President’s June directive to EPA included an instruction that EPA work closely with the states, which “will play a central role” in the process of implementation of GHG regulations. Drawing on this late last month, the National Association of Regulatory Utility Commissioners adopted a resolution stating that EPA should “rely on both state utility and environmental regulators to lead the creation of emission performance systems that reflect the policies, energy needs, resource mix, [and] economic conditions of each state and region.” A copy of the Resolution is available, along with a short summary of the proceeding, at The Hill website here.

The fundamental issue at play is the long-term cost of alternative fuels that might replace coal, and the potential for retiring or reducing the use of existing coal-fired plants before they would otherwise become obsolete. These prospects have the potential for direct impacts on rate payers who may be required to share the cost of replacement plants or systems while also completing payoff of the construction costs of the existing coal-fired plants. There are also direct concerns associated with the production of coal in areas where that activity is a major component of the local economy.

For more information on environmental law topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.

EPA Issues Final Step 3 Tailoring Rule

On July 12, EPA issued its Final Step 3 Tailoring Rule, announcing that EPA has decided not to lower the greenhouse gas (GHG) permitting levels and therefore will not be including additional, smaller sources in the PSD/Title V permitting programs at this time.  77 Fed. Reg. 41,300 (2012).

For more information on environmental law topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.

D. C. Circuit Upholds EPA GHG Emissions Rules

On June 26, the D.C. Circuit Court of Appeals rejected industry petitions challenging the Environmental Protection Agency’s (EPA) rules limiting greenhouse gas emissions, finding that none of the challengers had standing to bring suit. Coalition for Responsible Regulation, Inc. v. EPA, 684 F.3d 102 (D.C. Cir. 2012).

The petitions targeted EPA’s “tailoring” rule, which requires major polluters to obtain permits for their greenhouse gas emissions; the “tailpipe” rule, which sets standards for greenhouse gas emissions from cars and light-duty trucks beginning in the 2012 model year; and the “timing” rule, which limits greenhouse gas emissions from stationary sources. The three judge panel dismissed the petitions, upholding each of these rules.

For more information on environmental law topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.