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, 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!

As explained previously (here, here, and here), EPA is ’legislating’ climate policy under the guise of implementing the Clean Air Act (CAA), a statute enacted in 1970, years before global warming became an issue. Al Gore’s “planetary emergency” is bogus, but America’s constitutional crisis is real. Under the U.S. Constitution, only the people’s representatives get to make the big decisions concerning the content and direction of national policy. When agencies legislate, the separation of powers is breached, and the people have no one to hold accountable at the ballot box for the burdens government places upon them. 

EPA’s power grab is breathtaking. EPA is not only making climate policy through the regulatory backdoor, it has also hijacked federal fuel economy regulation by establishing GHG standards for new motor vehicles.

As explained here, here, and here, motor vehicle GHG standards are almost 95% fuel economy regulation (because 94-95% of all motor vehicle GHGs are carbon dioxide from the combustion of motor fuel, and because there is a single pool of technologies that reduces motor fuel consumption and thereby CO2 emissions as well). This means EPA can effectively tighten federal Corporate Average Fuel Economy (CAFE) standards just by tightening its GHG standards. Yet the CAA provides no authority to EPA (or any other agency) to regulate fuel economy. And although 1975 Energy Policy Conservation Act (EPCA) and 2007 Energy Independence and Security Act (2007) authorize EPA to test automakers’ compliance with CAFE standards, those statutes reserve the authority to prescribe CAFE standards to NHTSA.

The auto industry supported EPA’s GHG standards, but only to escape a worse regulatory fate. EPA threatened to inflict a patchwork quilt of GHG/fuel economy standards on the U.S. auto market by granting CARB’s request for a waiver to establish GHG emission standards for new cars sold in California. A baker’s dozen other states were poised to opt into the CARB GHG/fuel economy regime. “Are you gonna come along quietly, or do we have to let the California Air Resources Board muss ya up?” That was the gist of the deal EPA offered in 2009 to obtain auto industry support for a “national” GHG/fuel economy standards program.

To run this greenhouse protection racket, however, EPA had to flout EPCA Sec. 32919, which prohibits states from adopting laws or regulations “related to” fuel economy standards. To repeat, GHG motor vehicle standards are largely fuel economy standards by another name.

Rep. Austria’s amendment would put the kibosh on further mischief of this sort during FY 2012. And, as Capital Alpha opines, if the amendment is enacted into law, “opponents would be hard-pressed to strip it out in future years.”

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.

A quick overview of the case.

A company called Avenal Power Center seeks to build a state of the art 600 megawatt natural gas-fired power plant in California’s San Joaquin Valley. In February 2008, Avenal submitted to EPA an application for a Prevention of Significant Deterioration (PSD) preconstruction permit. Section 165(c) of the Clean Air Act (CAA) requires EPA to grant or deny a PSD permit application within one year. Almost two years later, EPA “still had no final or foreseeable resolution to its application.” On March 9, 2010, Avenal petitioned the District Court “seeking judicial relief to deal with EPA’s continued violation of Congress’s one-year deadline under Section 165(c) of the CAA.”

On February 4, 2011, the head of EPA’s Air Office announced that the agency would issue a final permit decision by May 27, 2011. “Unfortunately,” writes Judge Leon, “that was not to be!” He continues: “As plaintiff appropriately points out, EPA’s promise of a ‘final permit decision’ under 40 C.F.R. § 124.15 was inherently disingenuous.” In reality, all EPA was promising to do was render an “interim decision” that can be appealed to EPA’s Environmental Appeal’s Board (EAB) — and then overturned. As EPA concedes, EAB review ”could take anywhere from six to eight months, or longer, to complete.”

Here’s where the fun starts.

EPA contends that its appealable interim decision ”is sufficient to satisfy the CAA’s one year deadline” (even though already two years overdue), and that, in any event, the District Court “lacks jurisdiction” to require a final determination. Why? Because EPA has authority to delegate decisions to the EAB, and EAB reviews take, well, as long as they take.

“For the following reasons,” writes Judge Leon, “I disagree with defendants’ oh so clever, but unsupportable, position.”

The EAB exists to serve EPA’s administrative convenience. However, Congress did not create the EAB via the CAA. Rather, EPA created the EAB via a 1992 rulemaking. “Unfortunately,” the Judge observes, ”when the Administrator created that process she failed to build into it the temporal requirement that the EAB’s decision must be completed within the CAA’s statutorily mandated one-year period. . . .As a result, the EPA put in place a review process that can be and has, in this case rendered meaningless this Congressional one-year mandate.”

Judge Leon continues:

Unfazed, the EPA argues, in effect, that this regulatory process trumps Congress’s mandate and relieves the Administrator of complying with it until the EAB renders the Agency’s final decision. . . .In essence, the EPA contends that Congress’s statutory mandate is subservient to EPA’s regulatory process, and as such this Court has no authority to require the Administrator to comply with this statutory requirement. How absurd!

The Judge gets constitutional:

It is axiomatic that an act of Congress that is patently clear and unambiguous — such as this requirement in the CAA — cannot be overriden by a regulatory process created for the convenience of an Administrator, no matter how much notice and comment preceded the creation. . . .Administrators of regulatory agencies derive their power from Congress’s statutory enactments — not from their own discretionary regulatory pronouncements that are drafted for their assistance and convenience. . . .To the extent that a regulatory process frustrates or renders meaningless a Congressional statutory mandate, it must yield to Congress’s will.

Even tarter and tastier are comments Judge Leon imparts in a footnote:

The EPA has labored mightily to convince this Court that the temporal requirement enacted by Congress is somehow ambiguous and, therefore, this Court should defer to its interpretation under Chevron. . . .Horsefeathers! The EPA’s self-serving misinterpretation of Congress’s mandate is too clever by half and an obvious effort to protect its regulatory process at the expense of Congress’s clear intention. Put simply, that dog won’t hunt.

The decision may have implications for ongoing litigation on EPA’s greenhouse gas (GHG) regulations, particularly its Tailoring Rule.

When EPA’s GHG motor vehicle emission standards took effect on Jan. 2, 2011, ”major” stationary sources of carbon dioxide (CO2) became “subject to regulation” under the PSD preconstruction permitting program and the Title V operating permits program. The problem, as is well known, is that literally millions of non-industrial facilities — office buildings, apartment complexes, big box stores, hospitals, schools, large houses of worship, Dunkin’ Donut shops – emit enough CO2 (25o tons per year, 100 tons per year) to qualify as major sources under PSD and Title V.

As EPA admits, regulating GHGs via the CAA leads to “absurd results” – policies that conflict with congressional intent. EPA and its state counterparts would have to process an estimated 81,000 PSD preconstruction permit applications per year (instead of 280) and 6.1 million Title V operating permits per year (instead of 15,000). The permitting programs would crash under their own weight, crippling both environmental enforcement and economic development. 

EPA’s solution is to “tailor” the PSD and Title V programs to exempt all but the largest industrial CO2 emitters (power plants, refineries, cement kilns, steel plants, pulp and paper mills). “Tailoring,” however, is just bureaucrat-speak for “amending.” The Tailoring Rule substitutes one absurd result for another, because administrative agencies have no power to amend statutes.

To borrow Judge Leon’s words, the PSD and Title V numerical definitions of major source are ”patently clear and unambiguous.” If EPA’s claim that it may regulate around the statute’s one-year review deadline is “absurd,” why not its claim that it may regulate around the PSD and Title V major source thresholds?

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.
 
With the possible exception of Michigan Rep. John Dingell, who chaired the House-Senate conference committee on the CAA Amendments of 1990, nobody on Capitol Hill should know better than Sen. Baucus that Congress never authoried EPA to regulate GHGs for climate change purposes. During congressional debate on the CAA Amendments, Baucus tried and failed to persuade the Senate to adopt language requiring EPA to set CO2 emission standards for motor vehicles. He also tried and failed to persuade House-Senate conferees to adopt language establishing GHG emission reduction as a national goal and requiring EPA to regulate manufactured substances based on their “global warming potential.”
 
EPA today is exercising the very powers that Baucus tried and failed to persuade Congress to grant the agency in 1989. Hence the title of my column on the Senator’s amendment: “EPA’s Greenhouse Power Grab: Baucus’s Revenge, Democracy’s Peril.”
 
Sadly, more than a few Members of Congress today seem to believe that the greenhouse agenda is more important than any constitutional principle that might interfere with it. How Senators vote on the Baucus amendment will be a test of their respect for the Constitution.

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.