On Tuesday, the D.C. Circuit Court of Appeals denied by 7-1 a petition for a full-court re-hearing of its 2-1 decision last summer to dismiss litigation challenging EPA’s approval of the sale of E15 at retail motor fuel pumps. E15 is a blend of 85% gasoline and 15% ethanol.

In both decisions, Judge Brett Kavanaugh was the sole dissenter, and both times he trounces the majority on the facts and statutory logic.

In a previous post, I reviewed Kavanaugh’s dissent in the August 2012 decision. Herewith a brief recap:

• The 2-1 majority held that petitioners – refiners and livestock producers — would not be injured by the EPA’s grant of a waiver authorizing the sale of E15 and thus lack standing to challenge the agency. The majority somehow missed the obvious.
• There being no commercial substitute for ethanol to meet the ever-increasing production quota established by the Renewable Fuel Standard (RFS), EPA approval of E15 is a de facto mandate on refiners to increase the blend from E10 to E15 — a roughly 50% increase from about 14 billion gallons to 21 billion gallons annually. That will necessarily impose a cost on refiners. 
• In addition, because virtually all U.S. ethanol is made from corn, approving E15 will increase the demand for and price of corn, imposing a cost on livestock producers, who purchase billions of bushels annually to feed their hogs, cattle, and poultry.
• Clearly, EPA approval of E15 injures both petitioner groups, so the Court should have reviewed the petitions on the merits.
• Section 211(f) of the Clean Air Act (CAA) prohibits the EPA from approving the sale of any fuel additive that causes or contributes to the failure of emission control systems in any vehicle manufactured after 1974. 
• By the EPA’s own admission, E15 can contribute to emission control failures in vehicles manufactured during model years 1975 through 2000.
• Therefore, the EPA lacks authority to approve the sale of E15.

Kavanaugh’s dissent in Tuesday’s decision reiterates those points but also adds some illuminating refinements.

Although the EPA “did not raise a challenge to the standing of the food producers or the petroleum producers,” the 2-1 majority in August dismissed the case on standing grounds. “The panel determined that the food producers have Article III standing but lack prudential standing because, according to the panel, the food producers are not within the zone of interests under the relevant ethanol-related statute. The panel separately held that the petroleum producers lack Article III standing.” In Kavanaugh’s view, ”both groups plainly have standing.”

At this point you may be wondering, what is “prudential standing” and how does it differ from “Article III standing”? Article III of the U.S. Constitution extends (or limits) the judicial power to “cases” and “controversies.” As interpreted by the Supreme Court, this means plaintiffs have standing only if they can demonstrate an injury that is fairly traceable to the defendant’s challenged action. The doctrine of prudential standing is murkier, but basically means courts for prudential reasons may also refuse to adjudicate some claims. In the present case, the majority held that the food producers’ claimed injury does not fall within the “zone of interests” protected by the Clean Air Act provisions establishing the RFS program.

Kavanaugh finds the majority’s opinion incorrect for either of two alternative reasons. First, the “EPA chose not to challenge the food producers’ prudential standing – in other words, because EPA accepted that the food producers were within the zone of interests and therefore an aggrieved party – that issue has been forfeited and is no longer part of the case.”

Second, the “food producers’ case for being within the zone of interests is especially strong here because Congress expressly took account of the interests of food producers, among others, in this ethanol-related statute” [see Clean Air Act § 211(o)(7), which allows the EPA to waive the RFS blending requirements when those would severely harm the economy of a state, region, or the United States].

The 2-1 majority ruled that the petroleum refiners are not injured and hence lack Article III standing to challenge the EPA’s approval of E15. That is ridiculous. In Kavanaugh’s more polite words:

But the petroleum producers are directly regulated parties; and as the Supreme Court has said, when a party “is himself an object of the action” at issue, “there is ordinarily little question that the action” has “caused him injury, and that a judgment preventing” the action “will redress it.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 561-62 (1992). Indeed, EPA did not even challenge the petroleum producers’ Article III standing, recognizing at oral argument that the petroleum producers’ standing was “self-evident.” Tr. of Oral Arg. at 30. . . .EPA did not raise Article III standing no doubt because it fully understands how this program actually works, and EPA appreciates that the combination of the statutory renewable fuel mandate and EPA’s E15 waiver will obviously force petroleum producers to refine and sell E15. . . . In fact, the ethanol producers who sought the E15 waiver specifically argued to EPA that the E15 waiver was “necessary” for petroleum producers to meet the renewable fuel mandate. What better evidence do we need?

In short, plaintiffs have standing, the Court should review the case on the merits, the “evidence is undisputed” that approving E15 sales will “cause failure of emissions standards in cars manufactured through 2000,” and, thus, the “EPA’s action simply cannot be squared with the statutory text.”

In Coalition for Responsible Regulation v. EPA, petitioners — a coalition of industry groups, states, and non-profit organizations — sought to overturn the EPA’s endangerment, tailpipe, triggering, and tailoring rules for greenhouse gases (GHGs). In June of last year, a three-judge panel of the D.C. Circuit Court of Appeals ruled in favor of the EPA, upholding the four GHG rules. In August, coalition members petitioned for an en banc (full court) rehearing of the case. On Dec. 20, 2012 the D.C. Circuit Court of Appeals rejected the petitions by 5-2.

However, given the importance of the issues and the strength of the two dissenting opinions, the case may go to the Supreme Court. Last week, I reviewed Judge Janice Rogers Brown’s dissenting opinion. Today, I review Judge Brett Kavanaugh’s dissent.

Judge Brown chiefly addresses the “interpretative shortcomings” of the Mass. v. EPA Supreme Court decision, which authorized the EPA to regulate GHGs via the Clean Air Act (CAA). Kavanaugh directs his fire at the opinion, shared by the EPA and the five-judge majority, that the CAA’s Prevention of Significant Deterioration (PSD) preconstruction permitting program applies to GHGs, and at the agency’s attempt to “tailor” away the consequent “absurd results” by rewriting the statute.

According to the EPA’s longstanding opinion, reaffirmed in the agency’s April 2010 triggering rule, once any air pollutant is regulated under any part of the CAA, “major” sources become “subject to regulation” under the PSD program. Under this reading of the Act, a firm must obtain a PSD permit before it can build a major source of any regulated air pollutant, or modify a major source in such a way as to increase emissions of said pollutant. This is a complicated process in which the owner or operator must first conduct a best available control technology (BACT) analysis evaluating, selecting, and proposing a facility-specific emission control strategy. Carbon dioxide (CO2) became a regulated pollutant on Jan. 2, 2011, when the EPA’s tailpipe rule took effect.

The problem is that upwards of one million non-industrial facilities – office buildings, fast food restaurants, schools, hospitals, large houses of worship, heated agricultural facilities – have the potential to emit enough CO2 annually (250 tons) to qualify as “major” stationary sources. Apply PSD to CO2, and permitting agencies would have to process an estimated 81,000 PSD permits annually instead of about 280. Without massive expansions in agency budgets and staff, ever-growing bottlenecks and delays would obstruct environmental enforcement and freeze economic development, contravening congressional intent.

To avoid such “absurd results,” the EPA in July 2010 issued a “tailoring rule“ exempting GHG emitters from PSD unless they have a potential to emit 100,000 tons per year of CO2-equivalent emissions — a 400-fold increase over the statutory definition of “major” source. In effect, the EPA’s solution was to amend the statute. 

Judge Kavanaugh argues that rewriting the CAA not only exceeds the EPA’s statutory authority, it is also unnecessary because the PSD provisions can and should be read as applying only to pollutants regulated under the national ambient air quality standards (NAAQS) program. There are no NAAQS for GHGs.

Kavanaugh acknowledges that the EPA’s broad interpretation of PSD as applying to ”any” air pollutant is plausible. But, he contends, the EPA should have adopted the ”narrower and more sensible interpretation” limiting PSD to NAAQS air pollutants. By opting for the broader interpretation, the EPA then had to try to deal with the absurd ramifications and rewrite clear statutory language. “This is a very strange way to interpret a statute.” He explains:

When an agency is faced with two initially plausible readings of a statutory term, but it turns out that one reading would cause absurd results, I am aware of no precedent that suggests the agency can still choose the absurd reading and then start rewriting other perfectly clear portions of the statute to try to make it all work out. And just recently, the Supreme Court reminded the Executive Branch and the lower courts that this is not the proper way to interpret a statute: Instead of “reading new words into the statute” to avoid absurd results, as the Government had urged in that case, the Court said that the statute should be interpreted so that “no absurdity arises in the first place.” Kloeckner v. Solis, No. 11-184, slip op. at 13 (U.S. 2012).

If allowed to stand, Kavanaugh cautions, the tailoring rule could set a mischievous precedent:

Agencies presumably could adopt absurd or otherwise unreasonable interpretations of statutory provisions and then edit other statutory provisions to mitigate the unreasonableness. Allowing agencies to exercise that kind of statutory re-writing authority could significantly enhance the Executive Branch’s power at the expense of Congress’s and thereby alter the relative balance of powers in the administrative process. I would not go down that road.

The five-judge majority, however, deny that Judge Kavanaugh’s narrow reading of the PSD statute is a “plausible interpretation.” Congress said “any air pollutant, and it meant it.” The EPA’s broad interpretation “is the only plausible one.” Let us see.

Kavanaugh cites several provisions that clearly link PSD permitting to NAAQS pollutants:

The Prevention of Significant Deterioration program is codified in Sections 7470 to 7479 of Title 42 [CAA §§ 160-169] . Of relevance here, Section 7473 sets guidelines for areas designated as in attainment of the NAAQS and requires that the “concentration of any air pollutant” in those areas not exceed certain concentrations permitted by the NAAQS. 42 U.S.C. § 7473(b)(4). The term “air pollutant” in Section 7473(b)(4) necessarily refers to the NAAQS air pollutants. In addition, several other provisions in the Prevention of Significant Deterioration statute similarly refer to Section 7473(b)(4)’s maximum concentrations for NAAQS pollutants. Each of those references thus also necessarily employs a NAAQS-specific use of the term “air pollutant.” See, e.g., 42 U.S.C. § 7473(c)(1) (listing exclusions from “the maximum allowable increases in ambient concentrations of an air pollutant”); § 7474(a)(B) (redesignations cannot cause “concentrations of any air pollutant” to exceed the maximum); see also § 7475(a)(3)(A) (facility may not cause air pollution in excess of “maximum allowable concentration for any pollutant”).

The five-judge majority offer this rebuttal:

And although certain aspects of the program are specifically directed at NAAQS pollutants, see, e.g., id. § 7473(b)(4), the program as a whole plainly has a more expansive scope. For instance, covered sources are required to (1) install the best available control technology for “each pollutant subject to regulation under [the Act],” id. § 7475(a)(4) (emphasis added), and (2) demonstrate that they will not cause or contribute to “any . . . applicable emission standard” under the Act, id. § 7475(a)(3) (emphasis added).

This is unpersuasive. The majority base their interpretation on CAA § 165(a)(4) [§ 7475(a)(4)], which states that no major source may be constructed unless ”the proposed facility is subject to the best available control technology for each pollutant subject to regulation under this chapter.” They conveniently drop the qualifier that appears at the beginning of the quoted sentence. The full text reads:

No major emitting facility on which construction is commenced after August 7, 1977, may be constructed in any area to which this part applies . . . . unless the proposed facility is subject to the best available control technology for each pollutant subject to regulation under this chapter [emphasis added].

No major source may be constructed unless subject to BACT in ”any area” to which the PSD program applies. The term “any area” can only refer to one thing: a NAAQS attainment area. The NAAQS program is clearly the context for the directive specified in CAA § 165(a)(4). The most sensible reading of the sentence is that each major facility built or modified in a NAAQS attainment area must comply with BACT standards for pollutants subject to regulation under the NAAQS program. Why? Because the distinction between attainment and non-attainment areas has relevance only to NAAQS-regulated air pollutants.  

CAA § 165(a)(3) [§ 7475(a)(3)], also cited by the majority, provides additional contextual evidence that BACT does not encompass GHGs. The provision stipulates that the owner or operator of a major source may not cause, or contribute to, air pollution in excess of any “(A) maximum allowable increase or maximum allowable concentration for any pollutant in any area to which this part applies more than one time per year, (B) national ambient air quality standard in any air quality control region, or (C) any other applicable emission standard or standard of performance under this chapter.” There are no area-specific allowable GHG increases or concentrations. There are no GHG air quality standards or control regions. The EPA’s GHG tailpipe standards are not “applicable” to stationary sources, which in turn cannot cause or contribute to exceedences of mobile emission standards.

Interpreting the PSD provisions to encompass GHGs makes no logical sense, Kavanaugh argues:

If the purpose of this statute were in part to address global warming by requiring preconstruction permits for facilities that emit greenhouse gases, as EPA’s reading suggests, why would the statute target the construction of facilities only in areas that are in compliance with the NAAQS – and not elsewhere in the United States?

Moreover, as its name indicates, the Prevention of Significant Deterioration statute is designed primarily to prevent “deterioration” of an attainment area’s air quality. The relevant air quality standards that define whether an area is in attainment are the NAAQS. In a statute expressly linked to the NAAQS and designed to ensure that air quality does not “deteriorate” with respect to the NAAQS, it is somewhat illogical to read the statute as requiring pre-construction permits simply because a facility may emit substances that will not affect attainment of the NAAQS. Under EPA’s approach, a facility could be covered by the permitting requirement even if it emits no NAAQS air pollutants at all. That, too, makes little sense and suggests that EPA has misread the statute.

The five-judge majority notes that 42 USC § 7479 [CAA § 169] defines major source as a facility with the potential to emit 250 tons per year of “any air pollutant” (emphasis added). But Congress did not employ that language in the provision at issue in the case, CAA § 165 — the provision specifying what facilities must do to obtain a PSD permit.*   

Massachusetts v. EPA held that the general term “air pollutant” includes greenhouse gases, but that doesn’t mean it can never be used in a narrower sense in specific statutory contexts. In a law as complex as the CAA, identical words can be employed differently in different programs. For example, Kavanaugh observes, in Environmental Defense v. Duke Energy Corp., 549 U.S. 561, 574 (2007), the Supreme Court ruled that the EPA could interpret the term “modification” differently for the New Source Review (NSR) and New Source Performance Standards (NSPS) programs, even though “the terms share a common statutory definition.”

Context clearly narrows the meaning of “pollutant” in the CAA regional haze and NAAQS non-attainment provisions:

For example, the visibility program applies to facilities based on their emissions of “any pollutant.” 42 U.S.C. § 7491(g)(7). In the context of that program, EPA has interpreted the term “any pollutant” to mean “any visibility-impairing pollutant,” which obviously does not include greenhouse gases. 40 C.F.R. pt. 51, App. Y, § II.A. Similarly, the nonattainment program applies to areas that have been designated as nonattainment “for any air pollutant.” 42 U.S.C. § 7501(2). In the context of that program, the term “air pollutant” is logically limited to the NAAQS air pollutants, which are the only pollutants for which an area can be designated as nonattainment. Id. § 7407(d)(1)(A).

Finally, even the EPA rejects the proposition that PSD/BACT automatically applies to “any” air pollutant emitted in quantities meeting the “major” source thresholds.

EPA understood that it would be absurd to require pre-construction permits because of emissions of any airborne compound, including emissions of airborne compounds that have not been deemed harmful and regulated under the Clean Air Act. To avoid rendering the Prevention of Significant Deterioration statute an absurdity, EPA construed “air pollutant” to mean certain air pollutants – in particular, “any regulated air pollutant.”

Similarly, to avoid making the PSD statute an absurdity, the EPA must construe “air pollutant” in CAA § 165(a)(4) to mean any NAAQS-regulated air pollutant.

Kavanaugh sums up his argument:

For all of those reasons – the statutory text, the absurdity principle, the statutory context as demonstrated by related statutory provisions, the overarching objectives of the statute, the major unintended consequences of a broader interpretation – the Prevention of Significant Deterioration statute as a whole overwhelmingly indicates that the permitting requirement is based on emissions of the NAAQS air pollutants.

A final observation. If Judge Kavanaugh is wrong and PSD applies to all regulated air pollutants, not just NAAQS-regulated pollutants, then absurd results arise not from the EPA’s misreading of the statute but from Massachusetts v. EPA, which authorized the EPA to regulate GHGs. If so, however, then the permitting nightmare that EPA seeks to “tailor” away by acting as a super legislature and rewriting clear statutory language is itself evidence that the Court misread the CAA.

As I argued in a rebuttal to former EPA Administrator Russell Train:

When a court decision leads to “absurd results,” there are only two possibilities. One is that the court brought to light a flaw previously hidden in the statute. The other is that the court misread the statute.

To maintain the correctness of the Court’s decision in Mass. v. EPA, one must 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, causing programs that had worked reasonably well since their inception to go haywire, work at cross purposes with themselves and each other, undermine congressional intent, and jeopardize America’s economic future. And if the EPA Administrator, former or present, really believes that, then I have a bridge I’d like to sell him or her.

 = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =

* Kavavaugh seems to make this point but says that the language “each pollutant subject to regulation under this Chapter” does not occur in the section on PSD permitting [CAA § 165(a)(4)]. It does. Thus, I think he meant that the “any air pollutant” language of CAA § 169 does not occur in the PSD permitting section. 

Powerful dissenting opinions can sometimes persuade a higher court to review a lower court’s ruling. Massachusetts v. EPA (2007), the Supreme Court decision empowering the EPA to act as a super legislature and ‘enact’ climate policy, is a prime example.

In 2005, the D.C. Circuit Court of Appeals held that the Bush administration EPA properly exercised its discretion when it denied a petition by eco-litigation groups to regulate greenhouse gas (GHG) emissions from new motor vehicles under §202 of the Clean Air Act (CAA). I remember feeling relieved but disappointed. The 2-1 majority ducked the central issue, namely, whether the CAA authorizes the EPA to regulate GHGs as climate change agents. In contrast, Judge David Tatel’s dissent made a strong argument that the EPA does have the power to regulate GHGs and, consequently, has a duty to determine whether GHG emissions endanger public health or welfare. Tatel’s opinion was a key factor persuading the Supreme Court to hear the case.

The Court in Massachusetts ruled in favor of petitioners, setting the stage for the EPA’s ongoing, ever-expanding regulation of GHG emissions from both mobile and stationary sources.

The EPA’s greenhouse regulatory surge, however, is not yet ‘settled law.’ Recent strong dissenting opinions by two D.C. Circuit Court of Appeals judges may persuade the Supreme Court to review one or more of the agency’s GHG rules — or even reassess its ruling in Mass. v. EPA.

Mass. v. EPA and its Aftermath: A Refresher

In Mass. v. EPA, the Supreme Court ruled that: (1) GHGs are “air pollutants” for regulatory purposes under the CAA; (2) the EPA must determine whether GHG emissions endanger public health and welfare (unless the agency provides statutory reasons why it cannot or will not undertake such an analysis); and (3) the agency must regulate GHG emissions from new motor vehicles if it determines such emissions endanger public health or welfare.

The rest, as they say, is history. The EPA issued its endangerment determination in December 2009, compelling itself to regulate GHG emissions from new cars, and in May 2010, issued its GHG tailpipe rule. The EPA has long held that once any air pollutant from any source is regulated under any part of the CAA, major stationary sources become “subject to regulation” under the Act’s Title I Prevention of Significant Deterioration (PSD) pre-construction permitting program and Title V operating permits program. The EPA reaffirmed that interpretation in its April 2010 triggering rule.

Those rules, however, threatened to create a politically-explosive administrative quagmire. Literally millions of non-industrial facilities emit enough carbon dioxide (CO2) to qualify as “major” sources under the Act’s statutory definitions (250 tons per year for PSD, 100 tons per year for Title V). The EPA estimated that applying the Act’s permitting programs to GHGs under the statutory definitions of “major” source would require the EPA and its state counterparts to process an estimated 81,000 PSD permits annually (instead of 280) and 6.1 million Title V permits annually (instead of 15,000). To handle this workload, agencies would have to hire an additional 320,000 full-time employees at a cost of $21 billion per year. Otherwise, ever-growing bottlenecks and delays would paralyze environmental enforcement and economic development alike.

To avoid such “absurd results,” the EPA in July 2010 issued a tailoring rule exempting small CO2 emitters from the permitting programs. The rule decrees that for GHGs, a “major” source is one that emits 100,000 tons per year, not 100/250 tons per year, as specified for “air pollutants” in the statute. Although agencies should have some interpretative discretion when statutory language is ambiguous, there is nothing unclear about “100 tons” or “250 tons”. Tailoring is bureauspeak for amending. The irony, of which the EPA seems unaware, is that tailoring is itself an “absurd result,” because agencies have no power under the U.S. Constitution to amend statutes.

In 2011 a coalition of industry groups, states, and non-profits petitioned the D.C. Circuit Court of Appeals to overturn all four GHG rules: endangerment, tailpipe, triggering, and tailoring. In June 2012, a 3-judge panel decided the case, Coalition for Responsible Regulation v. EPA, in favor of the agency, upholding all four GHG rules. In August, coalition members petitioned for an en banc (full court) rehearing. On December 20, the court voted 5-2 to deny the petitions. However, the dissenting opinions of Judges Janice Rogers Brown and Brett Kavanaugh are so cogently argued that the Supreme Court may decide to review the case. The Court might even reassess its ruling in Mass. v. EPA.

In a future post, I will discuss Judge Kavanaugh’s dissent. For now, let’s look at Judge Brown’s opinion.

Judge Brown’s Opinion

Judge Brown begins her dissent by noting that, although bound by the Supreme Court’s ruling, she is skeptical of its reasoning:

Bound as I am by Massachusetts, I reluctantly concur with the Panel’s determination that EPA may regulate GHGs in tailpipe emissions. But I do not choose to go quietly. Because the most significant regulations of recent memory rest on the shakiest of foundations, Part I of this statement engages Massachusetts’s interpretive shortcomings in the hope that either Court or Congress will restore order to the CAA.

Congress never intended the CAA to be an “environmental cure-all.” The Act’s actual statutory purposes are much more limited:

It was targeted legislation designed to remedy a particular wrong: the harmful direct effects of poisoned air on human beings and their local environs. This is what Congress understood as “air pollution which may reasonably be anticipated to endanger public health” in the tailpipe emissions provision, 42 U.S.C. § 7521(a)(1). The Supreme Court in Massachusetts v. EPA, 549 U.S. 497 (2007), however, concluded otherwise.

Congress’s intent is visible in the very title of the statute:

It was no happy accident that congressional draftsmen titled the legislation the “Clean Air Act.” Ambient air quality was the point, purpose, and focus of the CAA. Congress had set its sights on the “dirty, visible ‘smokestack’ emissions” [citation omitted].

The CAA Amendments of 1990 “expanded the Act beyond its singular emphasis on urban air quality to address hazardous — i.e., toxic — air pollutants, acid rain, and stratospheric ozone,” Brown acknowledges. However, “the very particular way in which Congress handled these exceptions goes a long way toward proving the rule: Congress only expands the CAA through considered legislative acts.” Congressional intent is discernible in Congress’s consistent practice:

Simply put, when Congress became aware of new dangers, it acted judiciously in crafting workable remedies that, when they obtained the necessary political support, were worked into their own discrete provisions under the Act. Neither Congress nor the EPA attempted to force these distinct problems into existing, ill-suited regulatory schemes.

From which Judge Brown draws the common-sense conclusion:

Where our Representatives have acted with such caution, any suggestion that Congress has — through a single word — conferred upon EPA the authority to steamroll through Congressional gridlock, upend the Senate’s rejection of the Kyoto Protocol, and regulate GHGs for the whole of American industry must necessarily fail. The legislature, recall, does not “hide elephants in mouseholes.” Whitman v. Am. Trucking Assocs., 531 U.S. 457, 468 (2001).

Specific legislative history also argues against the cure-all interpretation of the CAA:

In drafting the 1990 Amendments, Congress considered — and expressly rejected — proposals authorizing EPA to regulate GHGs under the CAA. . . . The Executive’s critique noted that “unilateral action aimed at addressing a global problem” through a standard limiting tailpipe emissions would not be an effective means of safeguarding the global environment and would “necessarily punish national interests.”

Brown goes on to note that in all the years since the 1990 amendments, Congress has “never deviated from its decision not to regulate GHGs under the CAA” — and “not for lack of opportunity.” Indeed, “By one estimate, Congressmen have proposed more than 400 bills pertaining to GHGs between 1990 and 2009.”

None of this is to suggest, in the words of the Massachusetts Court, that “post-enactment congressional actions and deliberations” repeal powers previously delegated to the EPA by the CAA. The point, rather, is that more than a selective and dubious reading of the CAA definition of “air pollutant” is needed to establish that, in 1970, Congress did in fact delegate the truly awesome power to de-carbonize the U.S. economy to an administrative agency. Or, as Judge Brown more delicately puts it:

Congress’s inability to break this nearly quarter-century long deadlock is incredibly suggestive: this is not an area of policymaking where the legislature has acted rashly or unthinkingly in delegating authority to agencies.

Judge Brown also questions whether, per CAA §202, the EPA can actually show that “air pollution” from GHG emissions ”may reasonably be anticipated to endanger public health or welfare.” It is one thing to establish a nexus between traditional air pollutants and the harm done to people who inhale them. It is quite another to demonstrate endangerment from GHGs, because “any harm to human health and welfare flowing from climate change comes at the end of a long speculative chain.”

The EPA had to make assumptions about future emissions, future emission concentrations, climate sensitivity, the impact of warming on weather patterns, the impact of those on agriculture and other economic activities, and, finally, the impact of those on human health and welfare. Brown worries that if the EPA can find endangerment where ”there can be this much logical daylight between the pollutant and the anticipated harm, there is nothing EPA is not authorized to do.”

Next, Brown takes up the tailoring rule. She seems to suggest that the litany of absurd results arising under the PSD and Title V programs is itself reason to doubt that GHG regulation falls within “the literal meaning” of the CAA. In any event, she views the tailoring rule as a clear case of administrative overreach: ”Faced with the choice of reconsidering the legitimacy of an endangerment finding that sets in motion such a cluster of chaos or rewriting the statute, the agency has blithely done the latter. This is an abuse of the absurdity and administrative necessity doctrines as neither can be invoked to preempt legislative prerogatives.”

Determining climate policy, she suggests, is above any administrative agency’s pay grade: ”Congress should not be presumed to have deferred to agencies on questions of great significance more properly resolved by the legislature. If there was ever a regulation in recent memory more befitting [more guilty of?] such a presumption than the present, I confess I do not know of it.”

Next, Brown examines the relevance of FDA v. Brown & Williamson (1999), in which the Supreme Court struck down the FDA’s attempt to assert regulatory control beyond its statutory authority by classifying cigarettes as drug delivery devices. The Court distinguished the issues in Massachusetts from those in Brown & Williamson, but Brown shows how with “only slight modifications” one could rework the text of Brown & Williamson to apply to GHGs.

The Court argued that whereas FDA regulation of tobacco products under the Food, Drug, and Cosmetic Act (FDCA) logically entails an outright ban on the sale of cigarettes, an endangerment finding would “lead to no such extreme measures,” only a cost-constrained regulation of emissions from vehicles already regulated under §202 of the Act. “But,” observes Brown, “the Court spoke too soon.” The Court never considered whether or how motor vehicle GHG regulation would trigger regulation of stationary sources. It did not consider how regulation of GHGs as air pollutants would “radically expand the universe of covered entities far beyond Congress’s intentions.”

I would put the point as follows. Expanding the PSD and Title V programs to affect millions of non-industrial facilities — at an estimated compliance cost of up to $60,000 per facility — is the very definition of an extreme measure. Fixing the problem by amending the statute via administrative action is another extreme measure. Brown concludes: “The Supreme Court in Massachusetts simply did not have occasion to consider this absurd and ‘counterintuitive’ outcome, but we do — and we must.”

Another extreme measure waiting in the wings (although not an issue in Coalition for Responsible Regulation and so fittingly not a topic of Judge Brown’s dissent) is GHG regulation via the national ambient air quality standards (NAAQS) program. As discussed previously on this blog, because the EPA finds endangerment in the “elevated concentrations” of GHGs in the atmosphere, the agency has implicitly committed itself to establish NAAQS for GHGs set below current atmospheric concentrations. Two eco-litigation groups, the Center for Biological Diversity and 350.0rg, petitioned the EPA more than three years ago to establish NAAQS for CO2 at 350 parts per million (~40 ppm below current concentrations) and for other GHGs at pre-industrial levels. Given the premises established by Massachusetts and the EPA’s endangerment rule, it is difficult to find fault with petitioners’ reasoning.

CAA §108 requires the EPA to initiate a NAAQS rulemaking for “air pollution” from “numerous or diverse mobile or stationary sources” if such pollution “may reasonably be anticipated to endanger public health and welfare.” Carbon dioxide obviously comes from numerous and diverse mobile and stationary sources, and the EPA has already determined that the associated “air pollution” – the “elevated concentrations” of atmospheric GHGs – endangers public health and welfare.

To my knowledge, the Obama administration has addressed the NAAQS issue only once — in a brief submitted to the Supreme Court in American Electric Power v. Connecticut (2010). The Obama Justice Department described §108 as one of the provisions making the CAA a “comprehensive regulatory framework” for climate change policy.

This is worrisome because not even a worldwide depression that permanently lowers global economic output and emissions to, say, 1970 levels, would stop CO2 concentrations from rising over the remainder of the century. Yet the CAA requires States to adopt implementation plans adequate to attain primary (health-based) NAAQS within five or at most 10 years. The level of economic sacrifice required to implement a CO2 NAAQS set at 350 parts per million would far exceed anything contemplated by the Waxman-Markey cap-and-trade bill or the Copenhagen climate treaty, which seek to stabilize CO2-equivalent GHG concentrations at 450 parts per million by 2050.

Congress did not pass the Waxman-Markey bill and the Senate did not ratify the Copenhagen treaty. They did not do so despite more than 20 years of global warming advocacy. So it would be the height of absurdity to suggest that when Congress enacted the CAA in 1970, years before global warming was even a gleam in Al Gore’s eye, Congress authorized the EPA to establish NAAQS for GHGs. Yet the ‘logic’ of Massachusetts and the EPA’s endangerment rule would appear to demand the agency do just that.

How could the Massachusetts Court overlook the possibility that its decision would tee up the Mother of All Extreme Measures? Perhaps because petitioners gave the Court a bum steer.

Petitioners argued that the EPA’s authority to regulate GHGs under Title II is “separate” from Title I and “entirely separate” from the EPA’s Title I authority to promulgate NAAQS. As is now evident to all, Title II regulation of GHG mobile sources triggered Title I PSD permitting requirements for major stationary sources. The EPA touts its Title II endangerment finding as the scientific basis for the proposed GHG new source performance standards (NSPS) for fossil-fuel power plants under §111, also a Title I authority. Finally, as argued above, the EPA’s Title II endangerment finding creates a precedent for a §108 NAAQS rulemaking. Title I and Title II may be “separate” but they are not “entirely separate”; they are linked.

Near the conclusion of her opinion Brown writes: ”Congress simply did not intend for EPA to convert the ‘Clean Air Act’ to the ‘Warm Air Act’ writ large. But that is exactly what the federal courts have done.” Yes, exactly. In both Mass. v. EPA and Coalition for Responsible Regulation v. EPA, federal judges facilitated and protected the EPA’s climate coup.

Is it reasonable then to seek redress from those very judges?

Perhaps so if the EPA’s many critics begin to hold courts responsible for agency’s greenhouse power grab and the associated damages to our economy and constitutional self-government.

Today, the D.C. Circuit Court of Appeals vacated the EPA’s Cross State Air Pollution Rule (CSAPR), also known as the Transport Rule. The Rule’s purpose is to implement the Clean Air Act’s ‘good neighbor policy,’ which prohibits upwind states from contributing significantly to downwind states’ non-attainment with National Ambient Air Quality Standards (NAAQS).

The Court vacated the CSAPR because . . . (drum roll, please) . . . the EPA regulated beyond its statutory authority. Dog bites man.

From the decision, filed for the Court by Judge Brett Kavanaugh:

Absent a claim of constitutional authority (and there is none here), executive agencies may exercise only the authority conferred by statute, and agencies may not transgress statutory limits on that authority.

Here, EPA’s Transport Rule exceeds the agency’s statutory authority in two independent respects. First, the statutory text grants EPA authority to require upwind States to reduce only their own significant contributions to a downwind State’s nonattainment. But under the Transport Rule, upwind States may be required to reduce emissions by more than their own significant contributions to a downwind State’s nonattainment. EPA has used the good neighbor provision to impose massive emissions reduction requirements on upwind States without regard to the limits imposed by the statutory text. Whatever its merits as a policy matter, EPA’s Transport Rule violates the statute. Second, the Clean Air Act affords States the initial opportunity to implement reductions required by EPA under the good neighbor provision. But here, when EPA quantified States’ good neighbor obligations, it did not allow the States the initial opportunity to implement the required reductions with respect to sources within their borders. Instead, EPA quantified States’ good neighbor obligations and simultaneously set forth EPA-designed Federal Implementation Plans, or FIPs, to implement those obligations at the State level. By doing so, EPA departed from its consistent prior approach to implementing the good neighbor provision and violated the Act.

For each of those two independent reasons, EPA’s Transport Rule violates federal law. Therefore, the Rule must be vacated.

Today, the D.C. Circuit Court of Appeals found in a 2-1 decision that automakers, petroleum refiners, and food producers lack standing to challenge the Environmental Protection Agency’s (EPA’s) approval of E15 — a blend of gasoline and 15% ethanol — for motor vehicles manufactured after 2000.

Petitioners argued that the EPA acted illegally. Section 211(f) of the Clean Air Act (CAA) prohibits the introduction of new fuels and additives into the U.S. motor fuel supply unless the manufacturer demonstrates that such fuels or additives “will not cause or contribute to a failure of any emission control device or system” of any motor vehicle, motor vehicle engine, nonroad vehicle, or nonroad engine manufactured after model year 1974. By the EPA’s own admission, E15 can contribute to emission failures in vehicles manufactured between 1975 and 2000. Petitioners argued that CAA 211(f) gives the EPA no authority to grant a “partial waiver” for the sale of new fuels or additives to a subset of vehicles (e.g., model years 2001 and later).

Chief Justice David Sentelle and Judge David Tatel held that petitioners lack standing to sue. According to Sentelle and Tatel, petitioners could not show that the EPA’s approval of E15 would likely cause a ‘concrete’ and ‘imminent’ injury to any automaker, refiner, or food producer.

I’ll grant that the automakers’ asserted injury may be ‘speculative’ or ‘conjectural.’ However, it is hard to fathom how the EPA’s approval of E15 would not impose substantial costs on both petroleum refiners and food producers. The switch from E10 to E15 means a 50% increase in the quantity of ethanol blended into the nation’s motor fuel supply, potentially increasing ethanol sales from 14 billion gallons a year to 21 billion gallons. Since nearly all U.S. ethanol today comes from corn, the switch to E15 could substantially increase demand for corn, corn prices, and the quantity of corn diverted from feed and food production to motor fuel production.

Sentelle and Tatal argued that refiners and food producers are not injured because the EPA is merely giving refiners the ‘option’ to blend and sell E15, not forcing them to do so. But this is a distinction without a difference. As the justices acknowledge, the Renewable Fuel Standard (RFS) will soon require refiners to sell more ethanol than can be blended as E10. Thus, if the EPA waiver is upheld, refiners will have no real choice but to blend and sell E15, and this will impose substantial, predictable costs on both refiners and food producers. Their injury is concrete and imminent. The Court, therefore, should have reviewed the case on the merits and struck down the waiver as exceeding the EPA’s authority under CAA Section 211.

Judge Brett Kavanaugh’s dissent is so powerful and convincing that I will be surprised if the case is not appealed and overturned. Excerpts from Kavanaugh’s dissent follow.  

KAVANAUGH, Circuit Judge, dissenting:

In order to issue the waiver under the statute, EPA had to find that E15 would not cause any car models made after 1974 to fail to meet emissions standards. EPA found that E15 could cause emissions failures in some cars made after 1974 (namely, in cars made between 1975 and 2000). Nonetheless, EPA still granted the waiver. For the first time ever, EPA granted what it termed a “partial waiver,” meaning that the waiver allowed E15 use only in cars made after 2000.

In this suit, members of the food industry and the petroleum industry contend that EPA’s E15 waiver is illegal. The food group is suing because, as a result of EPA’s E15 waiver, ethanol production will increase and demand for corn (a necessary raw material for ethanol) will rise significantly. In turn, corn prices will rise. Therefore, food producers, which compete directly with ethanol producers in the upstream market for purchasing corn, will have to pay more for corn. The petroleum group is suing because, as a result of EPA’s E15 waiver and the statutory renewable fuel mandate, those in the petroleum industry now must refine, sell, transport, and store E15, incurring significant costs to do so. 

Despite the fact that two enormous American industries will be palpably and negatively affected by EPA’s allegedly illegal E15 waiver, the majority opinion tosses the case for lack of standing.

The food group includes producers of processed food made with corn and those who raise livestock fed with corn. It is hard to overestimate the significance of corn to the American food industry. And petitioners’ submissions to EPA and this Court reveal the following about the effects of EPA’s E15 waiver on the food industry: In E10, up to 10% of gasoline is made up of ethanol. In E15, up to 15% of gasoline is made up of ethanol. That’s a 50% increase in the amount of ethanol used. In hard numbers, with only E10 on the trade market, 14 billion gallons of ethanol could be produced each year for the Nation’s gasoline supply. With E15 on the market, 21 billion gallons of ethanol can be produced each year. That’s an additional 7 billion gallons of ethanol annually produced for use in the U.S. gasoline supply. As a result of the E15 waiver, there is likely – indeed, nearly certain in the current market – to be a significant increase in demand for corn to produce ethanol. The extra demand means that corn producers can charge a higher price. Therefore, the E15 waiver will likely cause higher corn prices, and members of the food group that depend on corn will be injured.

This is Economics 101 and requires no elaborate chain of reasoning. It is no surprise that EPA – which is typically quite aggressive in asserting standing objections in lawsuits against it – has not contested the food group’s standing in this case.

When an agency illegally regulates an entity’s competitor in a way that harms the entity – for example, by loosening regulation of the competitor – we have said that the entity has Article III standing to challenge the allegedly illegal regulation. . . .Here, EPA’s E15 waiver loosens a prohibition on gasoline and ethanol producers and thereby harms entities such as the food group that directly compete with gasoline and ethanol producers in the upstream market for purchase of corn.

To show causation, the petroleum group must demonstrate a “substantial probability” that the E15 will cause at least one of its members to incur higher costs. Sierra Club v. EPA, 292 F.3d 895, 899 (D.C. Cir. 2002). To be sure, the E15 waiver alone does not require the petroleum group to use E15, make changes, and incur costs. But we cannot consider the E15 waiver in some kind of isolation chamber. The Energy Independence and Security Act imposes a renewable fuel mandate that requires a certain amount of renewable fuel to be introduced into the market every year. Pursuant to that law, an increasing amount of renewable fuel such as ethanol – rising to 36 billion gallons in 2022 – must be introduced into the market. 42 U.S.C. § 7545(o)(2)(B)(i)(I). EPA regulations identify petroleum refiners and importers who produce gasoline as “obligated” parties – they are responsible for introducing a percentage of the required amount into the market each year. 40 C.F.R. § 80.1406; see also 40 C.F.R. §§ 80.1407, 80.1427.

Before the E15 waiver, however, petroleum producers likely could not meet the requirement set by the statutory renewable fuel mandate. Now that EPA has allowed E15 onto the market, producers likely can meet the renewable fuel mandate – but they must produce E15 in order to do so. So the combination of the renewable fuel mandate and the E15 waiver will force gasoline producers to produce E15. In tort law, when two acts combine to create an injury, both acts are considered causes of the injury. So it is here. In the current market, there is at least a “substantial probability” that, in the wake of the E15 waiver, gasoline producers will have to use E15 in order to meet the renewable fuel mandate. And that’s all that the petroleum group needs to show to carry its burden on the causation issue. . . .On those facts, the petroleum group’s injury is not self-imposed, but is directly caused by the agency action under review in this case. For those reasons, the petroleum group has Article III standing to challenge the E15 waiver provision.

The majority opinion concludes otherwise. But the fundamental flaw in the majority opinion’s reasoning is its belief that petroleum producers could meet the renewable fuel mandate without using E15. In the current market, the majority opinion’s assumption is simply incorrect as a matter of fact. One way to answer the causation question in this case is to ask the following: In the real world, does the petroleum industry have a realistic choice not to use E15 and still meet the statutory renewable fuel mandate? The answer is no, and  intervenor Growth Energy’s claim to the contrary seems rooted in fantasy.

Having found that there is standing, I turn to the merits of this case. The merits are not close. In granting the E15 partial waiver, EPA ran roughshod over the relevant statutory limits.

Section 211(f)(1) of the Clean Air Act prohibits manufacturers of fuel or fuel additives from introducing new fuels or fuel additives into commerce for use in car models made after 1974, unless the new fuel or fuel additive is “substantially similar” to certain fuels or fuel additives already in use. 42 U.S.C. § 7545(f)(1)(B). All agree that E15 is not substantially similar to fuels already in use. But Section 211(f)(4) allows EPA to waive that prohibition if EPA “determines that the applicant has established that such fuel or fuel additive or a specified concentration thereof, and the emission products of such fuel or fuel additive or specified concentration thereof, will not cause or contribute to a failure of any emission control device or system (over the useful life of the motor vehicle, motor vehicle engine, nonroad engine or nonroad vehicle in which such device or system is used) to achieve compliance by the vehicle or engine with the emission standards with respect to which it has been certified.” 42 U.S.C. § 7545(f)(4) (emphasis added). Put in plain English, in order to approve a waiver, EPA must find that the proposed new fuel will not cause any car model made after 1974 to fail emissions standards.

Here, EPA issued a waiver for E15 even though it acknowledged that E15 likely would contribute to the failure of some cars made after 1974 (namely, those made between 1975 and 2000) to achieve compliance with emissions standards. EPA maintains that E15 will not contribute to the failure of emissions control systems in cars built in 2001 and later. But EPA concedes that E15 likely will contribute to the failure of emissions control systems in some cars built before 2001. EPA’s E15 waiver thus plainly runs afoul of the statutory text. EPA’s disregard of the statutory text is open and notorious – and not much more needs to be said.

EPA does throw out a few arguments to try to get around the text of the statute. None is persuasive.

First, EPA tries to weave ambiguity out of clarity in the statutory text. EPA contends that the statute does not expressly address partial waivers. But as petitioners aptly  respond in their brief, to suggest “‘that Chevron step two is implicated any time a statute does not expressly negate the existence of a claimed administrative power (i.e., when the statute is not written in ‘thou shalt not’ terms), is both flatly unfaithful to the principles of administrative law, and refuted by precedent.’” Petitioners’ Reply Br. 8-9 (quoting API v. EPA, 52 F.3d 1113, 1120 (D.C. Cir. 1995)). There is no plausible way to read this statute as allowing partial waivers of the kind granted by EPA here.

EPA also suggests that a plain text reading of the statute would be absurd – “[c]learly Congress did not mean to require testing of every vehicle or engine.” EPA Br. 23. But that argument confuses methods with standards. As to methods, the statute may allow EPA to test a reasonable sample of vehicles and extrapolate from those results to conclude that a new fuel will not cause any vehicles to fail their emissions tests. But the standard remains that a new fuel cannot cause any vehicles to fail their emissions tests. Just because EPA can restrict its testing to a reasonable sample does not mean that EPA can restrict its waivers to a subset.

If Congress wanted to authorize this kind of partial waiver, it could easily have said so (and going forward, could still easily do so). After all, the statute elsewhere allows EPA to partially waive other statutory requirements.

The food group petitioners and the petroleum group petitioners each independently have standing to challenge EPA’s E15 waiver. On the merits, EPA’s E15 waiver is flatly contrary to the plain text of the statute. I would grant the petition for review and vacate EPA’s E15 waiver decision. I respectfully dissent.