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. 

Pretty darn near the height of absurdity. That’s not just my opinion. It’s a key premise of EPA’s “Tailoring Rule,” which exempts small greenhouse gas (GHG) emitters from regulation under the Clean Air Act’s (CAA) Prevention of Significant Deterioration (PSD) pre-construction permitting program and Title V operating permits program.

As EPA explains in a brief filed last week with the D.C. Circuit Court of Appeals, once the agency’s GHG emission standards for new motor vehicles took effect on January 2, 2011, “major stationary sources” of GHG emissions became “automatically subject” to PSD and Title V permitting requirements. A facility with a potential to emit 250 tons per year (tpy) of a regulated air pollutant is a “major source” under PSD. A facility with a potential to emit 100 tpy is a “major source” under Title V. Whereas only large industrial facilities emit 100-250 tpy of smog- and soot-forming air pollutants, literally millions of small entities — big box stores, apartment and office buildings, hospitals, schools, large houses of worship, Dunkin’ Donut shops – use enough natural gas or oil for heating or cooking to emit 100-250 tpy of carbon dioxide (CO2).

EPA and its state counterparts lack the administrative resources to process millions of PSD and Title V permit applications. Thus, applying the CAA as written to GHGs leads to “absurd results” — an ever-growing backlog of permit applications that would cripple both environmental enforcement and economic development. Massive increases in the budgets and staff of environmental agencies would be required to handle the mountains of paperwork. From EPA’s brief:

EPA studied and considered the breadth and depth of the projected administrative burdens in the Tailoring Rule. There, EPA explained that immediately applying the literal PSD statutory threshold of 100/250 tpy [tons per year] to greenhouse gas emissions, when coupled with the “any increase” trigger for modifications under 42 U.S.C. §§7479, 7411(a)(4), would result in annual PSD permit applications submitted to State and local permitting agencies to increase nationwide from 280 to over 81,000 per year, a 300-fold increase. 75 Fed. Reg. at 31,535-40, 31,554. Following a comprehensive analysis, EPA estimated that these additional PSD permit applications would require State permitting authorities to add 10,000 full-time employees and incur additional costs of $1.5 billion per year just to process these applications, a 130-fold increase in the costs to States of administering the PSD program. Id. at 31,539/3. Sources needing operating permits would jump from 14,700 to 6.1 million as a result of application of Title V to greenhouse gases, a 400-fold increase. When EPA [in an earlier asssessment] assumed a mere 40-fold increase in applications – one-tenth of the actual increase – and no increase in employees to process them, the processing time for Title V permits would jump from 6-10 months to ten years. Hiring the 230,000 full-time employees necessary to produce the 1.4 billion work hours required to address the actual increase in permitting functions would result in an increase in Title V administration costs of $21 billion per year. Id. at 31,535-40, 31,577 [emphasis added].

For perspective, EPA’s budget request for FY 2012 is $8.973 billion. Hiring the 230,000 bureaucrats needed to process Title V applications from GHG emitters under the statutory definition of “major source” would cost more than twice as much as EPA’s total budget.

As expected, EPA fails to draw the obvious conclusion from its own analysis, namely: Regulating GHGs via the CAA leads to absurd results because Congress never designed or intended for the Act to regulate GHGs.

EPA seeks to avoid absurd results — and an angry, political backlash — by “tailoring” the CAA’s clear, unambiguous, numerical definitions of “major source” to exempt all but the largest GHG emitters from PSD and Title V. But “tailoring” is just bureaucrat-speak for amending. Under the U.S. Constitution, an administrative agency has no power to amend statutes. Certainly the CAA nowhere authorizes EPA to revise statutory provisions to avoid administrative debacles of its own making. The Tailoring Rule just substitutes one absurdity for another.

EPA claims it had no choice but to regulate GHGs once it made an endangerment finding, because the Supreme Court in Massachusetts v. EPA ruled that GHGs “fit well within the Clean Air Act’s capacious definition of air pollutant.” True, but to reach that conclusion, the Court’s 5-4 majority had to play fast and loose with the statutory definition of “air pollutant” in CAA Sec. 302(g). As I explain elsewhere:

The Court argued that, under CAA Section 302(g), CO2 and other greenhouse gases are “air pollutants” because they are “emitted into” or “otherwise enter” the air. The CAA exists, of course, to control and prevent “air pollution.” Therefore, the Court concluded, EPA has authority to regulate such substances if the agency determines that greenhouse gases endanger public health or welfare.

But 302(g) does not define “air pollutant” as anything “emitted.” It says that “air pollution agents” – substances that damage air quality – are “air pollutants” when emitted. The Court decoupled the term “air pollutant” from its plain English meaning – as if any “emitted” substance is an “air pollutant” whether or not it actually damages air quality. Carbon dioxide – like water vapor, the atmosphere’s main greenhouse gas – is a necessary constituent of clean air.

As Justice Antonin Scalia quipped in dissent, as defined by the Court, “everything airborne, from Frisbees to flatulence, qualifies as an ‘air pollutant.’” Indeed, even absolutely clean, pollution-free air qualifies as an “air pollutant” the moment it moves or circulates, which is plainly absurd.

Section 302(g) is only two sentences long. The Court not only ignored a key term (“air pollution agent”) of the first sentence, it also ignored the entire second sentence, which holds that a “precursor” of a previously designated air pollutant is also an “air pollutant.” Congress would not have needed to say that if, as the Court opined, anything emitted per se is an “air pollutant,” because precursors form air pollutants only by being emitted.

Courts are not supposed to assume that Congress pads statutes with surplus verbiage. For a court to ignore a key term and an entire sentence of a two-sentence definition, in a case where the provision’s meaning is critical to the outcome, is not kosher. The entire greenhouse of cards EPA is now putting in place, with all its enormous economic and political ramifications, rests on the Court’s tortured reading of the CAA definition of “air pollutant.”

In addition, the Court would have been less likely to rule that GHGs “fit well within the Clean Air Act’s capacious definition of air pollutant” if counsel for EPA had made clear that such a ruling would set the stage for “absurd results,” and that EPA would have to play lawmaker and amend the CAA to avoid an administrative meltdown. However, not once in the four years when Mass. v. EPA was litigated before the D.C. Circuit Court of Appeals and the U.S. Supreme Court did counsel for EPA mention these ramifications.

Nor did EPA’s counsel make the fundamental point that EPA could not issue an endangerment rule without eventually regulating GHGs from numerous categories of mobile and stationary sources under the CAA as a whole, effectively ‘legislating’ climate policy for the nation. That is obviously not an authority Congress meant to confer on EPA when it enacted the CAA in 1970.

Indeed, even after almost two decades of global warming advocacy, if Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.), instead of introducing a cap-and-trade bill, had introduced legislation authorizing EPA to regulate GHGs via the CAA as it sees fit – i.e. do exactly what the agency is doing now — the bill would have been dead on arrival. How absurd, then, to suppose that Congress authorized EPA to legislate climate policy in 1970, years before global warming became a policy issue!

Why did EPA’s counsel pull its punches in Mass. v. EPA? Not being privy to the inter-agency discussions that shaped the Justice Department’s brief, we can only speculate. This much however is clear: By losing the case, EPA gained the truly awesome, economy-restructuring power to regulate CO2, the most ubiquitous byproduct of industrial civilization.

* The Institute for Energy Research posted an excellent commentary on EPA’s brief last Friday. It is available here.

Yesterday (Feb. 16), House Energy and Power Subcommittee Chairman Ed Whitfield (R-KY) engaged in a colloquy with Interior and Agriculture Subcommittee Chairman Mike Simpson (R-ID) on Sec. 1746 of H.R. 1, the One-Year Continuing Appropriations Act of 2011.

Sec. 1746 of H.R. 1 states:

None of the funds made available to the Environmental Protection Agency by this division or any other Act may be expended for purposes of enforcing or promulgating any regulation (other than with respect to section 202 of the Clean Air Act) or order, taking action relating to, or denying approval of state implementation plans or permits because of the emissions of greenhouse gases due to concerns regarding possible climate change.

Sec. 1746 would block EPA regulation of greenhouse gases from stationary sources for the remainder of fiscal year 2011, which ends on September 30. “The funding limitation will allow Congress to carefully and thoroughly debate a permanent clarification to the Clean Air Act to ensure it remains a strong tool for protecting public health by regulating and mitigating air pollutants, and that it is not transformed into a vehicle to impose a national energy tax,” explains Chairman Whitfield’s press release. Whitfield is a co-sponsor of the Energy Tax Prevention Act, which would overturn the legal force and effect of EPA’s Endangerment Rule, Tailoring Rule, and other rules imposing greenhouse gas permitting requirements on state governments and stationary sources.

In the colloquy, Chairman Simpson states: ”EPA’s GHG regulations need to be stopped in their tracks, and that’s what section 1746 does – it provides a timeout for the balance of the fiscal year, during which time EPA will be prohibited from acting on them or enforcing them.” In Whitfield’s words: “This CR [Continuing Resolution] provision is Congress hitting the pause button during the very brief period of the CR, allowing time to go through regular order and pass the Upton-Inhofe bill.”

Whitfield spotlights the constitutional principle at stake: “EPA’s regulations are an attempt by unelected bureaucrats to slip in through the regulatory backdoor what Congress has thus far wisely blocked from coming in through the front door.” The Energy Tax Prevention Act takes no position on climate science. As Simpson remarks, one need not be a global warming skeptic to be an ”EPA GHG [greenhouse gas] regulation skeptic.”

The political benefits of Congress passing Sec. 1746 are obvious. It would be a clear rebuke to EPA’s shocking power grab. It would put Team Obama on notice that Congress is determined to defend the separation of powers. It would energize congressional and public support for a more permanent solution to the ’EPA problem.’ It would draw a big bright line in the sand helping the public identify which Members of Congress want to raise energy prices and which do not.

This defunding, or appropriations rider, strategy, as it is sometimes called, however, is not without economic risk.

“Rider striking funds for EPA regs could cause unintended consequences for industry,” yesterday’s Greenwire (subscription required) reports. The article explains:

The rider does nothing to nullify the 2009 finding that greenhouse gases endanger human health, or to reverse EPA’s final rules, including its prevention of significant deterioration guidelines or the tailoring rule, which lays out the agency’s timetable for regulating greenhouse gases from large stationary emitters.

By simply defunding the agency’s greenhouse gas permitting programs, Congress would do nothing to remove EPA’s obligation to address greenhouse gases through the permitting process, the [unidentified industry] attorney said.

“It doesn’t change the fact that those rules and regulations are final,” the attorney said.

Which means, notes Rep. Jim Moran (D-VA):

“The legislation is there, you’re not repealing the legislation, so EPA has a legal responsibility to implement the Clean Air Act, the Clean Water Act, other pieces of legislation that are still on the books,” he said yesterday. “That’s their responsibility, and they really can’t shirk that responsibility just because Congress doesn’t provide them the resources. The Congress has to either repeal the law, or be it reluctantly, they’re just going to have to fund the resources to carry out the law.”

Both Moran and Greenwire miss a more important point. The Clean Air Act imposes obligations not just on EPA but also on regulated entities such as power plants, refineries, factories, and other emission sources.

Under the Act, before a firm may build or modify a “major emitting facility,” it must undertake a “best available control technology” (BACT) analysis and, on that basis, apply for and obtain a “prevention of significant deterioration” (PSD) pre-construction permit. Similarly, before a firm may operate a major emitting facility, it must obtain a Title V operating permit.

EPA has issued regulations applying PSD and Title V to greenhouse gases. Those are already on the books, and they impose legal requirements on private entities as well as on EPA and state permitting agencies. Thus, even if EPA lacks the funds to administer PSD and Title V for greenhouse gases, major greenhouse gas emitting facilities must still obtain PSD and Title V permits or they cannot lawfully build, modify, or operate.

Moreover, even if EPA lacks the funds to prosecute firms for failing to obtain permits, eco-litigation groups could still drag those firms into court under Clean Air Act citizen-suit provisions. Trial lawyers could have a field day as affected firms find themselves in a Catch-22. On the one hand, the law (the Clean Air Act as interpreted by EPA rules) would require firms to obtain PSD and Title V permits for greenhouse gases. On the other hand, the law (the appropriations rider) would prevent them from doing so.

It’s not even clear that Sec. 1746 would stop the government from enforcing EPA’s greenhouse regulations. The language says nothing about withholding funds from the Department of Justice, so DOJ prosecutors could enforce EPA’s regs even if EPA couldn’t.

The side effects of this bizarre situation are potentially serious. Construction projects might have to be mothballed or cancelled for lack of proper permits. Otherwise healthy firms facing novel litigation risks might be unable to obtain financing or venture capital.

Considerations of this sort led Alaska Sen. Lisa Murkowski to abandon an appropriations rider strategy she had been exploring in late 2009 and instead introduce legislation to overturn EPA’s Endangerment Rule — the headwaters of EPA’s greenhouse regulatory surge.

The question for opponents of EPA’s power grab, therefore, is whether the political benefits of a defunding strategy outweigh the economic risks. This is a prudential matter about which reasonable people may disagree. I will hazard two observations.

(1) The best way to minimize the potential collateral damage to regulated entities is to quickly enact legislation that overturns EPA’s greenhouse gas rules. If passage of Sec. 1746 galvanizes congressional action toward that end, then it would likely do more good than harm. (2) However, if enactment of Sec. 1746 leads to construction bottlenecks and an upsurge of anti-business litigation while Congress is still debating the Energy Tax Prevention Act or similar measures, the rider strategy could damage the credibility of EPA’s congressional critics.

Can environmental agencies use BACT determinations to require major emitting facilities to switch fuels?

This arcane-sounding question is of great practical importance to energy consumers and the economy. It is a question addressed in EPA’s long-awaited PSD and Title V Permitting Guidance for Greenhouse Gases, posted online yesterday in Politico.

EPA’s guidance document is intended to assist permit writers and permit applicants determine what constitutes “best available control technology” (BACT) for greenhouse gas (GHG) emitting facilities. On January 2, 2011, EPA’s motor vehicle GHG emission standards will go into effect, making GHGs air pollutants “subject to regulation” under the Clean Air Act’s Prevention of Significant Deterioration (PSD) pre-construction permitting program. Any firm planning to build or modify a large GHG-emitting facility (e.g. a coal-fired power plant, an oil refinery, a cement production facility) will first have to obtain a PSD permit from EPA or a State environmental agency.  To obtain a PSD permit, the applicant will have to demonstrate that the new or modified facility incorporates BACT by virtue of its combustion processes, work practices, technology controls, or some combination thereof.

A question that has come up time and again in discussions of EPA regulation of GHGs is whether BACT can be interpreted to require facilities to change the fuels they use. For example, could a permitting agency decide that an electric generating unit is not BACT-compliant unless the facility switches fuels from coal to natural gas, or from natural gas to a mixture of gas and wind?

Waxman-Markey died in the Senate when the public realized that cap-and-trade is a stealth energy tax.  Cap-and-trade functions as an energy tax in large part because it is designed to suppress and, ultimately, eliminate electricity production from coal, America’s most abundant and affordable electricity fuel.

If BACT can be interpreted to require fuel switching, then it can empower activist bureaucrats to implement the anti-coal agenda that the American people rejected on November 2.

Where does EPA’s guidance document stand on this critical issue? Here’s what it says:

While Step 1 [of the BACT determination process] is intended to capture a broad array of potential options for pollution control, this step of the process is not without limits. EPA has recognized that a Step 1 list of options need not necessarily include inherently lower polluting processes that would fundamentally redefine the nature of the source proposed by the permit applicant.* [p. 25]

* In re Prairie State Generating Company, 13 E.A.D. 1, 23 (EAB 2006).

EPA does not interpret the CAA to prohibit fundamentally redefining the source and has recognized that permitting authorities have the discretion to conduct a broader BACT analysis if they desire.**  The “redefining the source” issue is ultimately a question of degree that is within the discretion of the permitting authority. [p. 28]

** In re Knauf Fiber Glass, 8 E.A.D. at 136; In re Old Dominion Cooperative, 3 E.A.D. at 793.

So, although BACT options ”need not necessarily include inherently lower polluting processes that would fundamentally redefine the nature of the source,” EPA “does not interpret” BACT “to prohibit fundamentally redefining the source,” leaving such decisions to the “discretion of the permitting authority.”

It would be prudent to suppose that anti-coal bureaucrats at EPA and State agencies will do whatever they think they can get away with.