Tailoring Rule

Post image for CO2 Litigation: Court and EPA Can’t Both Be Right — and Both May Be Wrong

Is the Clean Air Act so badly flawed that it will cripple environmental enforcement and economic development alike unless the EPA and its state counterparts defy clear statutory provisions or, alternatively, spend $21 billion annually to employ an additional 320,000 bureaucrats?

That is a central issue in a recent lawsuit by Southeastern Legal Foundation (SLF), the Competitive Enterprise Institute (CEI), a host of lawmakers and several companies, who are petitioning the Supreme Court to review an appellate court decision upholding the EPA’s global warming regulations.

I discuss some of the legal issues today in a column on Forbes.com. My conclusion: The Court’s reading of the Clean Air Act in Massachusetts v. EPA (2007) and the EPA’s reading of the Act in regulating greenhouse gas emissions from “major” stationary sources cannot both be right — and both may be wrong!

Unless the Court is prepared to take ownership of the bizarre notion that the the Clean Air Act was wired from the start to self-destruct four decades later, it should either overturn the EPA’s regulation of stationary sources, revise its decision in Mass. v. EPA, or both.

Post image for Will the Supreme Court Review EPA’s Greenhouse Gas Regulations?

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. [click to continue…]

Post image for How Absurd Is Regulating Greenhouse Gases through the Clean Air Act?

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. [click to continue…]

Post image for House Committee Opens New Front in Fuel Economy Battle

Yesterday, the House Appropriations Committee approved an amendment to the Fiscal Year 2012 Interior, Environment, and Related Agencies appropriations bill that would block EPA from using any funds to:

  • Develop greenhouse gas (GHG) emission standards for new motor vehicles and vehicle engines manufactured after the 2016 model year; and
  • Consider or grant a Clean Air Act waiver allowing the California Air Resources Board (CARB) to establish GHG emission standards for new motor vehicles and vehicle engines manufactured after the 2016 model year. 

Capital Alpha Partners, LLC, a firm providing political and policy risk analysis to institutional investors, rightly notes that the amendment, sponsored by Rep. Steve Austria (R-Ohio), could ”shift the debate over fuel economy standards and pressure the administration to soften its 56.2 mpg target floated two weeks ago.” In addition, the measure “would slice two of the three currently-involved agencies [EPA and CARB] out of the rule-making loop,” leaving fuel economy regulation to the National Highway Traffic Safety Administration (NHTSA), ”the one agency seen as ‘most reasonable’ by industry and other observers.” 

Capital Alpha reckons the measure “has a 25% chance of enactment into law this year.” If enacted as part of the one-year EPA funding bill, the measure would expire on September 30, 2012. “However,” says Capital Alpha, ”should it make it into law, opponents would be hard-pressed to strip it out in future years.” An exciting prospect for liberty-loving Americans! [click to continue…]

Okay, maybe I was wrong. Just because the Supreme Court in Massachusetts v. EPA legislated from the bench in order to empower EPA to legislate from the bureau does not necessarily mean that lower courts will tolerate similar breaches of the separation of powers.

Yesterday (May 26, 2011), in Avenal Power Center v. EPA, District of Columbia Judge Richard Leon mockingly rejected EPA’s arguments for attempting to amend the Clean Air Act to suit the agency’s administrative convenience. Although not mentioned by him, Judge Leon’s reasoning may strengthen legal challenges to EPA’s greenhouse gas Tailoring Rule.

[click to continue…]

Today at Pajamas Media.Com, I discuss the latest stratagem of the greenhouse lobby to protect EPA’s purloined power to dictate national climate and energy policy: Sen. Max Baucus’s (D-Mont.) amendment to the small business reauthorization bill.
 
The Baucus amendment would essentially codify EPA’s Tailoring Rule, which exempts small greenhouse gas (GHG) emitters from Clean Air Act (CAA) permitting requirements.
 
That may seem innocent enough. However, if enacted, the Baucus amendment would also codify the ever-growing ensemble of EPA climate initiatives of which the Tailoring Rule is only a small piece.
 
EPA’s current and probable future climate regulations include GHG/fuel-economy standards for all categories of mobile sources (cars, trucks, marine vessels, aircraft, non-road vehicles and engines) and GHG/energy-efficiency standards for dozens of industrial source categories. 
 
Congress, however, never authorized EPA to determine fuel economy standards for motor vehicles, much less dictate national policy on climate change. The Baucus amendment would put Congress’s legislative stamp of approval on EPA’s end-run around the legislative process.
 
The amendment has almost no chance of passing in the GOP-led House of Representatives. However, it does not need to pass to perpetuate EPA’s shocking power grab. All it has to do is peel off enough votes in the Senate to prevent passage of the Inhofe-Upton Energy Tax Prevention Act. That bill, which is almost certain to pass in the House, would overturn most of EPA’s current GHG regulations and stop the agency permanently from promulgating climate change policies Congress never approved.
 
Whether the Baucus amendment is adopted or just blocks passage of Inhofe-Upton, the U.S. economy will be exposed to the risk that EPA will be litigated into establishing national ambient air quality standards (NAAQS) for GHGs, and to the risk that EPA will use BACT (“best available control technology”) determinations and NSPS (New Source Performance Standards) to restrict America’s access to affordable, carbon-based energy. [click to continue…]

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.