Supreme Court to Review EPA Greenhouse Rule: What If Petitioners Win — or Lose?

The Supreme Court yesterday announced it will review the D.C. Circuit Court of Appeals June 2012 decision in Coalition for Responsible Regulation v. EPA, which upheld the agency’s four main greenhouse gas rulemakings.

In the new case, Utility Air Regulatory Group v. EPA, the Court will limit its review to one question: “Whether EPA permissibly determined that greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases.” In other words, the Court will review the agency’s April 2010 Timing Rule.

How significant is this turn of events?

The Court’s grant of certiorari could simply mean that some of Justices want to put an end to litigation attempting to roll back or limit the regulatory consequences of Massachusetts v. EPA. It could also mean that some Justices have serious concerns about the legality of the EPA’s regulation of greenhouse gas emissions from stationary sources. A mix of motivations may be in play.

Many skeptics and limited government advocates are disappointed that the Court will review neither the agency’s December 2009 Endangerment Rule, the fountainhead of all EPA greenhouse gas regulations, nor the Endangerment Rule’s immediate regulatory consequence, the May 2010 Tailpipe Rule, which established first-ever greenhouse gas emission standards for motor vehicles.

However, the case may provide many teaching moments for constitutionalists, free marketers, and other friends of limited government. The Court in Mass. v. EPA essentially decided that the 1970 Clean Air Act is the statutory scheme Congress intended to regulate greenhouse gases. That opinion is preposterous. If the EPA’s greenhouse gas regulations were introduced as legislation today, they would be dead on arrival. That’s after roughly 20 years of global warming advocacy. So how plausible is it that Congress authorized the EPA to regulate greenhouse gases in 1970, years before climate change emerged as a public policy issue, in a statute that does not even contain the terms “greenhouse gas” or “greenhouse effect”?

The simple point I want to make here is that Utility Air Regulatory Group v. EPA could be a big political and policy setback for the EPA. And even if the Court upholds the Timing Rule, the case could still help build public and policymaker support for legislative action to rein in the agency and contain the regulatory fallout from Mass. v. EPA.

In Mass. v. EPA, the Court opined that an endangerment finding under section 202 of the Clean Air Act would not lead to “extreme” or “counterintuitive” measures, only to a cost-constrained modification of motor vehicle emission standards. It’s not surprising the Court drew that conclusion. Petitioners assured the Court that the mobile source provisions of the Clean Air Act (Title II) are “separate from” the stationary source provisions (Title I). What they didn’t tell the Court is that, although “separate,” Title I and Title II are linked.

Under the EPA’s long-standing interpretation of the statute, reaffirmed in the Timing Rule, once any air pollutant is regulated under any part of the Act, “major” stationary sources are automatically “subject to regulation” under the Title I Prevention of Significant Deterioration (PSD) preconstruction permit program and Title V operating permit program. Thus, when the EPA’s Tailpipe Rule took effect on January 2, 2011, “major” greenhouse gas emitters became subject to PSD and Title V regulation. But that, in turn, obligated the EPA to undertake “extreme” and “counterintuitive” measures. Here’s why.

A source is defined as “major” under PSD if it has a potential to emit 250 tons per year of an air pollutant, and “major” under Title V if it has a potential to emit 100 tons per year. Whereas only large industrial facilities emit 100-250 tons per year of smog precursor chemicals or particulate matter, literally millions of small non-industrial facilities — office buildings, hospitals, schools, restaurants, heated agricultural facilities, etc. — emit enough carbon dioxide (CO2) to qualify as “major” sources. By the EPA’s own admission, applying the PSD and Title V provisions to CO2 leads to “absurd results” and “administrative impossibility.”

The EPA estimated that applying the permit programs to greenhouse gases would increase the number of PSD permit applications from 280 to 81,000 per year (a 300-fold increase) and Title V permit applications from 14,700 to 6.1 million per year (a 400-fold increase). To process those applications, permitting agencies would have to spend an estimated $21 billion annually to hire an additional 230,000 full-time employees. Otherwise, ever-growing bottlenecks would paralyze environmental enforcement and freeze economic development.

To avert administrative disaster, the EPA adopted its June 2010 Tailoring Rule, which exempts all but the largest greenhouse gas emitters from PSD and Title V permitting. It does so by revising the “major” source applicability thresholds from 100-250 tons per year to 75,000-100,000 tons per year. To avoid a debacle of its own making, the agency effectively re-wrote the statute.

So, contrary to the Court’s expectation, the Endangerment Rule teed up several “extreme measures”: (1) an orders-of-magnitude increase in the number of firms subject to Clean Air Act permitting programs; (2) the application of complex and costly permitting requirements to small non-industrial facilities, contrary to congressional intent; (3) an overloaded permitting system that blocks construction activity throughout the land; (4) a multi-billion dollar expansion of environmental agencies that State governments can ill-afford; or, alternatively, (5) EPA amendment (“tailoring”) of unambiguous statutory language — a flagrant breach of the separation of powers.

Petitioners in Utility Air Regulatory Group v. EPA (Cert petition, p. 25) argue that the PSD and Title V programs apply only to pollutants that affect public health and welfare by virtue of their local concentration, toxicity, or air quality impact. Since the harm allegedly posed by greenhouse gas emissions has nothing to do with local concentration or exposure, the permitting programs do not apply to them. Thus, petitioners conclude, the Court should overturn the Timing Rule. The EPA’s greenhouse gas regulations would then be limited chiefly to mobile sources. And with the threat of an administrative meltdown gone, the agency would no longer have an excuse to “tailor” the statute.

A victory for petitioners would have significant political, regulatory, and economic benefits. Overturning the Rule would give the EPA a black eye. It would validate criticism that the agency is bent on expanding its power regardless of the law.

Overturning the Rule would set back the EPA’s climate agenda. The agency would have to mothball its big plans to impose greenhouse gas permitting requirements on new and modified power plants, refineries, steel mills, cement production facilities, paper and pulp factories, and other large industrial installations.*

Overturning the Rule would avert regulatory burdens that hinder job creation and make U.S. firms less competitive.

Overturning the Rule could be a first step in rolling back the EPA’s takeover of State environmental programs. Several EPA rules compelling States to incorporate PSD and Title V permitting for greenhouse gases into their Clean Air Act implementation plans would become unenforceable or vulnerable to legal challenge.

What if the Court upholds the Timing Rule? Even then, petitioners and their allies could extract some political value from the case.

If the Court rules in favor of EPA, it will have to explain how the Clean Air Act can be the statutory scheme Congress intended to regulate greenhouse gases and yet lead inexorably to “extreme” measures and “absurd results” when used for that purpose.

To maintain that both Mass. v. EPA and the Timing Rule are valid law, the Court would have to suppose that when Congress enacted the Clean Air Act in 1970, it somehow inserted the statutory equivalent of malicious code into the text, the bug lay dormant for 40 years, and then suddenly the malware became active, forcing the EPA to play lawmaker and amend the statute or else programs that had worked reasonably well since their inception would go haywire, implode, and block shovel-ready projects in communities across the land.

And if any of the Justices actually believe that, I have a bridge I’d like to sell them.

Do the Justices really want to take ownership of the bizarre theory that the Clean Air Act was wired from the start to self-destruct four decades later? The Court must choose between the Timing Rule and Mass. v. EPA, because both cannot be right.**

Whether petitioners win or lose, Utility Air Regulatory Group v. EPA should occasion debate not only about the specific legal issues in the case but also about the larger constitutional issue of whether an administrative agency should be dictating national policy on a legislatively-unsettled issue like climate change.

In short, constitutionalists have a significant new opportunity to make the case in the court of public opinion for an accountable regulatory system in which the people’s representatives, not non-elected bureaucrats or activist judges appointed for life, make the big policy decisions.

* One might argue that EPA adoption of GHG new source performance standards (NSPS) — such as the “carbon pollution” rule — would trigger PSD and Title V permitting requirements, since NSPS are the category-wide “floor” or legal minimum for determining an individual source’s PSD obligations, and Title V permits require sources to report all their Clean Air Act requirements. Even so, PSD and Title V requirements would not apply to all large GHG emitters across the economy in one fell swoop but only to sources for which the EPA adopts NSPS for greenhouse gases — a time-consuming, litigious process.  

** Both of course could be very wrong. For my take on Mass. v. EPA, see EPA’s End Run Around Democracy.