Both U.S. EPA and its adversaries faced tough questioning this morning on the second day of arguments over the lawfulness of the agency's greenhouse gas regulations.

On the one hand, the three judges of the U.S. Court of Appeals for the District of Columbia Circuit appeared to have strong concerns about whether industry challengers had standing to challenge one of the rules.

But they also indicated that it might be possible for a separate challenge to existing regulations that regulate major polluters to proceed.

Today's hearing was the second of two days of closely watched arguments over EPA's suite of four climate rules (Greenwire, Feb. 27).

Yesterday, the judges considered EPA's endangerment finding, the agency's original conclusion that greenhouse gases pose a health risk and should be regulated under the Clean Air Act, and the "tailpipe" rule that set greenhouse gas emissions standards for cars and light-duty trucks beginning with 2012 models (Greenwire, Feb. 28).

Today, the focus was on the "tailoring" rule, which interprets the Clean Air Act in such a way that only major polluters are required to obtain permits for greenhouse gas emissions. The court was considering it alongside the "timing" rule, which required that new controls of greenhouse gas emissions from stationary sources would be triggered on Jan. 2, 2011, and the challenge to older regulations.

The tailoring rule is considered the most vulnerable to legal attack because EPA was forced to effectively rewrite the Clean Air Act in order to prevent the regulations from applying to nonindustrial sources like schools and apartment buildings.

A key issue is whether the petitioners -- industry groups, utilities and states -- have standing to challenge the rule because they are not currently injured by its impact and would not be affected if the court struck it down. All that would mean is EPA would have to regulate more polluters.

All of the judges expressed some belief that standing could be a major obstacle for petitioners.

Chief Judge David Sentelle in particular appeared incredulous that the remedy the petitioners seek is effectively to give EPA more power to regulate.

"Counsel, that doesn't even make good nonsense," he told Texas Solicitor General Jonathan Mitchell.

In response, Mitchell said the theory is that Congress would intervene if greenhouse gas regulations were applied to a much larger range of emitters, a concept that those observing the proceedings in the packed courtroom found amusing based on Congress' failure to enact climate legislation.

It emerged later in the argument that the separate challenge to several of EPA's past Clean Air Act regulations, could be more fruitful for petitioners.

As Peter Keisler of Sidley Austin argued, the petitioners maintain that EPA should never have applied its prevention of serious deterioration program for major stationary sources to all air pollutants. Instead, it should have limited it to pollutants covered by the national ambient air quality standards, known as NAAQS.

Keisler said that his interpretation of the statute would have been a reasonable alternative that undermines EPA's argument that the tailoring rule was a "last resort" in order to prevent smaller nonindustrial sources from being regulated.

The agency "took a critical wrong turn 30 years ago," he told the court.

The judges, to the dismay of EPA's lawyers, seemed to think that such a challenge was not barred based on previous rulings of the court, in large part because at least one of the challengers was not affected by the regulations before they were applied to greenhouse gases.

"Not until now do we have a petitioner before us who is: a) challenging the historic interpretation and b) injured by it," Judge David Tatel said.