Supreme Court and EPA Regulation Rulings

Sometime in the next few weeks, the Supreme Court will decide its third case on climate-changing carbon pollution in the last seven years.  The earlier cases clearly established the Environmental Protection Agency’s authority to set standards under the Clean Air Act to curb carbon pollution from both vehicles and factories.  This case, Utility Air Regulatory Group v. EPA, concerns a secondary question about the Act’s permitting provisions, which supplement EPA’s standard-setting authority. 

The Supreme Court’s permitting decision will come at an interesting time – just before or just after EPA exercises the standard-setting authority the Court recognized in its two prior decisions:  On June 2nd, EPA is expected to propose carbon pollution standards under President Obama’s Climate Action Plan to curb the two billion tons of dangerous carbon pollution coming each year from the nation’s electric power plants.

The Court’s decision, of course, is unpredictable.  The Justices may uphold EPA’s carbon permitting rules, overturn them, or split the difference, in ways I’ll describe below. 

One thing can be predicted with certainty, however.  If the Court curtails EPA’s permitting rules in any way, there’ll be a flurry of press releases claiming the decision casts doubt on EPA’s power plant standards.

And those press releases will be wrong.  Here’s why.

EPA’s Standard-Setting Authority Is Clearly Established

First, the Supreme Court has already definitively settled EPA’s authority to set Clean Air Act standards for climate-changing carbon pollution.  The Court has already upheld that authority twice.  In 2007 the Court decided in Massachusetts v. EPA that EPA can set carbon pollution standards for motor vehicles under Section 202 of the Act.  And in 2011 the Court held in American Electric Power v. Connecticut that EPA can do the same for power plants under Section 111(d) – this is the authority EPA will invoke on June 2nd. 

The high court effectively upheld EPA’s standard-setting authority a third time at an earlier stage of the UARG case before it now.   Last October, the Court rejected all pleas from industry trade groups, conservative states, and others to reconsider its two earlier decisions.  The Justices agreed to hear only the narrow question concerning Clean Air Act permits.  At oral argument in February, the industry groups’ lawyer tried again to call the earlier decisions into question, but Chief Justice Roberts stopped him short.  “Counsel,” the Chief Justice said, “you began that discussion by saying putting Massachusetts v. EPA to one side. But I was in the dissent in that case, but we still can’t do that.”  And Justice Kennedy added:  “Let’s assume, and it’s the case, that we're bound by both the result and the reasoning of Massachusetts [v.] EPA and the American Electric v. Connecticut case.” (Transcript, pp. 18-19.)

So on EPA’s authority to set carbon pollution standards, it’s three strikes and you’re out.

The Current Case Is About Permit Requirements, Not Standard-Setting

The UARG case involves just one issue: whether carbon-emitting industrial sources have to obtain certain kinds of permits under other parts of the Clean Air Act.  There are two relevant permitting requirements.  The first is called “new source review,” and it is found in the Prevention of Significant Deterioration (PSD) provisions of the Act.  Each “major” new industrial source must get a construction permit before starting to build, showing that it will use the “best available control technology” (BACT) for “each pollutant subject to regulation” under the Act.   The second is called the “operating permit program,” and it is found in Title V of the Act.  It requires each “major” industrial source (both new and existing) to have an operating permit that collects in one place all emission limits and monitoring obligations that apply to the source.   For both provisions, a source is “major” if it emits “any air pollutant” in amounts exceeding certain thresholds. 

I’ve explained the difference between standards and permits here.  The key points are that standards are fully enforceable on their own even if there are no permits, but permits provide important supplementary protections:  The BACT requirement assures that each big new plant is built with up-to-date pollution controls – an especially important obligation when there are no standards, or when they have fallen out of date.  Operating permits simplify compliance determinations and enforcement proceedings, even though the underlying standards are legally binding and enforceable on their own. 

What’s at Issue in UARG?

In UARG, the only thing the Supreme Court is considering is whether EPA correctly concluded that these permit requirements apply to carbon dioxide and other climate-changing pollutants. 

As a legal matter, the only reason this question is interesting or difficult is that an unanticipated practical problem arises in trying to apply the specific terms of the permit provisions to CO2.  Congress specified that major sources of “any air pollutant” need a construction permit, and that BACT applies to “each pollutant subject to regulation” – these are sweepingly inclusive terms.  Congress also specified the level of pollution that makes a source “major” – 100 tons per year for sources in certain industrial categories, and 250 tons per year for “any other source.” 

These terms work smoothly together for nearly all pollutants.  But a practical problem arises when the 100/250 ton thresholds are applied to sources of CO2, because this pollutant is emitted in far larger amounts than any other.  Skipping some of the detail, EPA concluded it had three choices:  First, it could enforce all of the statutory terms literally.  That would respect Congress’s intention to require permits and BACT for all large industrial sources, but given the high volume of CO2, it would also sweep in large numbers of small sources, which Congress did not want.

Second, it could entirely exclude CO2 sources from permitting.  That would avoid small source burdens and avoid permit gridlock, but it would also ignore the statute’s clear direction to require permits and BACT for all large industrial sources of all pollutants.

Third, it could include CO2 and implement permitting in phases starting with big emitters only.  That would preserve permitting and BACT for all large pollution sources, while avoiding burdens on small sources and the permitting system.

EPA chose the third option because it most fully respected all of Congress’s objectives with the least violence to the statute’s literal terms.

What Might the Supreme Court Decide?

For its part, the Supreme Court also could resolve this case in three ways.  First, it could uphold EPA, finding that the agency had reasonably interpreted the statutory terms and reasonably resolved the unanticipated problem introduced solely by the extraordinary volume of CO2.  Justice Kagan suggested this result, saying: 

I mean, obviously, this is the apex of Chevron deference.  There’s nothing that gets more deference than this Agency with respect to this complicated a statute. And given that this whole thing arises because there’s this new kind of emission which the numbers don’t work for, so which essentially makes these two terms in the statute irreconcilable, why isn’t that a classic case for deference to the Agency, that the Agency gets to choose how to make the thing work as best it can, when a changed circumstance makes it not work entirely the way Congress had foretold?  (Transcript, pp. 43-44)

The Court’s strongly-worded decision in EPA v. EME Homer City Generation, in April, suggests Kagan’s view may well prevail.  Writing for a six-member majority in Homer City,Justice Ginsburg emphasized EPA’s authority to solve “a thorny causation problem” that the words of the statute do not precisely resolve – there, how to allocate the burden of reducing downwind pollution among multiple contributing upwind states.

Second, the Court could hold against EPA, deciding that CO2 – even though still subject to emission standards under Section 111 and other parts of the law – is entirely exempt from the permit provisions.  This is hard to square with inclusive terms like “any air pollutant,” but it is a possible outcome.  The Court would have to find that in the permit provisions Congress intended the terms “any air pollutant” to mean some narrower set of pollutants than they mean when the same words are used elsewhere in the Act.  The dissenting judge below suggested the terms include only the six pollutants subject to national ambient air quality standards (NAAQS).  This is a challenging conclusion to support, however, since Congress in 1977 specifically rejected language that would have narrowed permitting to only the NAAQS pollutants.

Third, the Court could “split the difference,” holding that BACT is required for CO2 whenever a source needs a permit because of its other pollutants (because BACT applies to “each pollutant subject to regulation”), but that permits (and BACT) are not required when CO2 is the only pollutant emitted in “major” amounts.  This also would be hard to square with the inclusive term “any air pollutant.”  Justice Roberts nonetheless seemed intrigued with this compromise.

The UARG Decision Won’t Affect the Power Plant Standards

The first outcome would be a victory for EPA and for climate protection.  In practical terms, the third outcome actually would also be quite favorable, as it would preserve the BACT requirement for CO2 emissions from the vast majority of large new industrial sources, including new power plants. 

The second outcome would be a significant setback, since it would leave carbon pollution entirely outside the Clean Air Act’s permitting provisions. 

But none of these potential outcomes casts any doubt on EPA’s upcoming proposal to issue standards for carbon pollution from the nation’s fleet of power plants under Section 111(d).

President Obama deserves enormous credit for the steps in his Climate Action Plan to protect our children and grandchildren from a world turned upside down by climate change.   Those actions are not at issue in UARG v. EPA, and they will not be hampered no matter how the Court decides that case.

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