United States: D.C. Circuit Upholds Quartet Of EPA Greenhouse Gas Regulations

Last Updated: July 3 2012
Article by Kevin Poloncarz and Michael S. Balster

Today the U.S. Court of Appeals for the District of Columbia Circuit ("D.C. Circuit" or "Court") in Coalition for Responsible Regulation v. Environmental Protection Agency upheld a suite of U.S. Environmental Protection Agency ("EPA") greenhouse gas ("GHG") regulations in a sharp rebuke to industry and state petitioners attempting to overturn these rules. The Court's unsigned per curium opinion primarily addressed four controversial EPA rules promulgated pursuant to the federal Clean Air Act ("CAA"): (1) the Endangerment Finding, (2) the Tailpipe Rule, (3) The Timing Rule, and (4) the Tailoring Rule. The Court denied the petitions relating to the Endangerment Finding and the Tailpipe Rule on the merits, while dismissing the petitions for review of the Timing Rule and the Tailoring Rule on constitutional standing grounds.

As the D.C. Circuit states early in its decision in Coalition for Responsible Regulation, "Massachusetts v. EPA [the U.S. Supreme Court case holding that GHGs may be regulated as an air pollutant under the CAA] spurred a cascading series of greenhouse gas-related rules and regulations." See Coalition for Responsible Regulation, et al. v. Environmental Protection Agency, et al., D.C. Cir. No. 09-1322, at 17 (June 26, 2012). First, in direct response to Massachusetts, EPA issued an Endangerment Finding for GHGs. 74 Fed. Reg. 66,496 (Dec. 15, 2009). Pursuant to the CAA's requirement that EPA establish motor-vehicle emission standards for "any air pollutant . . . which may reasonably be anticipated to endanger public health or welfare," 42 U.S.C. § 7521(a)(1), EPA promulgated the Tailpipe Rule for GHGs, which set GHG emission standards for cars and light trucks as part of a joint rulemaking for fuel economy standards issued by the National Highway Traffic Safety Administration ("NHTSA"). 75 Fed. Reg. 25,324 (May 7, 2010).

The Court notes that under EPA's longstanding interpretation of the CAA, the Tailpipe Rule automatically triggered regulation of stationary GHG emitters under the Prevention of Significant Deterioration ("PSD") program (which requires state-issued construction permits for stationary sources that have the potential to emit over 100 or 250 tons per year ("tpy"), the applicable threshold depending on the type of source, of "any air pollutant," 42 U.S.C. §§ 7475, 7479(1)) and Title V (which requires state-issued operating permits for stationary sources that have the potential to emit at least 100 tpy of "any air pollutant," Id. § 7602(j)). Accordingly, EPA issued two rules phasing in stationary source GHG regulation. In the Timing Rule, EPA delayed when major stationary sources of GHGs would otherwise be subject to PSD and Title V permitting, concluding that these requirements would commence on January 2, 2011—the date on which the Tailpipe Rule became effective. 75 Fed. Reg. 17,004 (Apr. 2, 2010). In the Tailoring Rule, EPA departed from the CAA's 100/250 tpy emissions thresholds and provided that only the largest sources—those exceeding 75,000 or 100,000 tpy carbon dioxide equivalent ("CO2e"), depending on the program and project—would initially be subject to GHG permitting. 75 Fed. Reg. 31,514 (June 3, 2010).

More than sixty petitions for review of these EPA rules were filed by industry and states, which were subsequently consolidated in the Coalition for Responsible Regulation case. The D.C. Circuit dismissed the consolidated petitions and held as follows:

  • Endangerment Finding: The Court upheld the Endangerment Finding on the merits, finding it to be consistent with the CAA and adequately supported by the administrative record. See Coalition for Responsible Regulation at 22.
  • Tailpipe Rule: The Court upheld the Tailpipe Rule on the merits. In particular, the Court held that, "[h]aving made the Endangerment Finding . . .EPA lacked discretion to defer promulgation of the Tailpipe Rule . . ." (id. at 40) and that the rule was not arbitrary or capricious.
  • Timing Rule and Tailoring Rule: The Court dismissed the petitions for review of these rules because the Petitioners lacked the legal right to challenge the rules (i.e., they lacked standing). The Court stated, "[s]imply put, 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" as required by the doctrine of standing. Id. at 77.

After the February 28th and 29th, 2012 oral arguments in this case, independent legal observers noted that the Tailoring Rule seemed most susceptible to vacatur by the D.C. Circuit. This is because, although rooted in the legal doctrines of administrative necessity, absurd results and "one step at a time", the Tailoring Rule's thresholds depart from the plain language of the Clean Air Act. The Court side-stepped the difficult question of whether this represented a legitimate exercise of the agency's authority and dismissed for lack of standing, finding that all petitioners' alleged harms were caused, not by EPA's rule, but by the language of the Clean Air Act itself. The decision represents a significant victory for EPA at a time when it has come under attack for a suite of regulations developed under the Clean Air Act affecting electric generators.

An industry or state petitioner in Coalition for Responsible Regulation may seek a rehearing from the D.C. Circuit or petition for a writ of certiorari, specifically challenging the holding that Petitioners lack standing to raise their claims with respect to the Timing and Tailoring Rules. However, because the decision was unanimous and is rooted in the Supreme Court's decision in Massachusetts v. EPA, the possibility that either the D.C. Circuit would grant rehearing or the Supreme Court would grant certiorari may be low.

In short, while this fight could be far from over, today's decision strongly affirms EPA's approach to regulation of GHGs under the Clean Air Act.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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