REGULATION:

Supreme Court affirms EPA's authority to regulate CO2, even as it hauls on the agency's reins

You're getting what you wanted, but watch your step.

That was the gist of the message delivered by the Supreme Court to U.S. EPA yesterday, as the court ruled for the third time in seven years to affirm the agency's authority to regulate greenhouse gas emissions under the Clean Air Act (CAA).

In a ruling that split the justices 7-2, the court found that EPA can require certain permits and carbon-control technologies for the majority of stationary carbon-emitting sources in the United States -- provided those requirements are triggered not by carbon dioxide alone, but by other, more conventional pollutants.

But in a strongly worded decision -- and one that will likely resurface in future court challenges to EPA authority -- four justices and Chief Justice John Roberts rejected the agency's broadest interpretation of its regulatory authority and found that it overstepped its bounds when it shaped a section of the CAA to accommodate carbon dioxide.

"An agency has no power to 'tailor' legislation to bureaucratic policy goals by rewriting unambiguous statutory terms," noted Justice Antonin Scalia, writing for the majority of the court.

"We are not willing to stand on the dock and wave goodbye as EPA embarks on this multiyear voyage of discovery," he added.

Court rules agency violated separation of powers

The "tailoring rule" in question was originally a workaround issued by EPA after the agency determined that its responsibility to regulate carbon dioxide as a pollutant -- established and affirmed in previous court cases -- meant that large greenhouse gas emitters were subject to permitting under the Prevention of Significant Deterioration and Title 5 programs of the CAA.

These requirements already apply to conventional pollutants like nitrogen and sulfur oxides. But the triggering thresholds originally set forth by Congress -- 100 to 250 tons per year for relevant pollutants -- proved far too low for carbon dioxide, which is emitted in much larger quantities, said Sean Donahue, who argued the case before a lower appeals court on behalf of a number of environmental organizations.

"The program would be unrecognizable if you applied it to all the sources that emit more than 250 tons of carbon dioxide," he said. Schools, hospitals and even apartment buildings would trigger permitting requirements and shoulder the associated financial burdens, he said.

To get around this problem, EPA, through its tailoring rule, raised the threshold for carbon dioxide from 250 tons to 100,000 tons per year.

In its opinion, the court agreed with EPA that regulating small emitters as if they were large power plants would go well beyond the intent of the original act. But by granting itself the power to set new thresholds for pollutants -- and by extension, to potentially regulate a huge swath of the economy not designated in the CAA -- the agency violated the government's separation of powers, whereby Congress makes laws and the president and agencies execute them, the court said.

"In the Tailoring Rule, EPA asserts newfound authority to regulate millions of small sources ... and to decide, on an ongoing basis and without regard for the thresholds prescribed by Congress, how many of those sources to regulate," Scalia wrote.

"We reaffirm the core administrative-law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate," he added.

A shift in the court's 'center of gravity'?

In addition to rejecting the permitting rule, the court found that EPA is not required to regulate climate-changing emissions under the PSD and Title 5 programs. But because these substances are designated pollutants elsewhere in the CAA, the court agreed that they could be permitted once the programs are triggered by sufficient levels of more conventional pollutants.

Based on those criteria, the court's decision doesn't greatly affect the scope of EPA's permitting authority, said Richard Revesz, dean emeritus at the New York University School of Law and director of the Institute for Policy Integrity.

Because emitters that put out more than 100,000 tons of carbon dioxide a year tend to emit large quantities of other pollutants, as well, "under the decision of the court, EPA can regulate 83 percent of stationary source greenhouse gas emissions," he said.

"The only thing the agency could have done if it won across the board was to regulate an additional 3 percent of emissions" if the tailoring rule had been upheld, he said.

Moreover, he said, the strong majority of the court that voted to uphold the EPA's broad authority to regulate greenhouse gas emissions under the program -- which included Scalia, Roberts and Justice Anthony Kennedy -- "indicates that the center of gravity of the court has shifted and has come to accept EPA's broad regulation of greenhouse gases under the Clean Air Act."

A comfortable outcome for most

EPA, for its part, responded positively to the court's ruling. In a statement, the agency noted that "the Supreme Court's decision is a win for our efforts to reduce carbon pollution because it allows EPA, states and other permitting authorities to continue to require carbon pollution limits in permits for the largest pollution sources."

"We are pleased that the Court's decision is consistent with our approach to focus on other Clean Air Act tools like the Clean Power Plan to limit carbon pollution as part of the President's Climate Action Plan," it noted.

Even some of the plaintiffs in the case, who had originally challenged EPA on a number of issues regarding its authority to regulate greenhouse gases, expressed satisfaction. In a call with reporters, Cal Dooley, president and CEO of the American Chemistry Council, said that that the ruling would allow EPA to progress on its work of curbing greenhouse gas emissions while constraining the agency's authority in an appropriate manner.

A major concern among his constituents, he said, was that the tailoring rule was designed to potentially ratchet down the triggering thresholds over time and could have captured many sources that engage in new construction or major modifications. With the rule struck down, smaller pollution sources -- including those that would have fallen in the extra "3 percent" of regulated emission sources -- can proceed with more regulatory and financial certainty, he said.

One group that had been watching the ruling carefully is the biomass industry, which had been seeking status as a 'low carbon' energy source under different sections of the CAA, including the tailoring rule (see related story).

A 'line in the sand'

For those parties who take a stronger view and question EPA's basic authority to regulate greenhouse gas emissions under the CAA -- a stance echoed by Justices Clarence Thomas and Samuel Alito in an opinion dissenting from the seven-justice majority -- the ruling was less than ideal.

"I'm disappointed. I wish the majority had followed the lead of Thomas and Alito," said William Yeatman, an energy policy expert and a senior fellow with the Competitive Enterprise Institute, which along with the Southeastern Legal Foundation was a co-petitioner in the case.

Greenhouse gases are "fundamentally incompatible" with both the Clean Air Act Prevention of Significant Deterioration program and the Title 5 permitting program, he said.

If there's a silver lining, he said, it's that the court "appears to have drawn a line in the sand regarding deference to agency decisionmaking: The agency will not be permitted to blatantly re-write laws. This is, alas, a pretty low bar."

Nevertheless, those sentiments will likely be highlighted in future challenges to EPA's still-to-be-finalized standards for new and existing power plants.

While not legally binding, "the language in the decision [regarding the tailoring rule], the themes in the opinion will be cited back to EPA in both advocacy and litigation," said Roger Martella, a partner in the Environmental Practice Group at Sidley Austin LLP.

"If you're someone who's concerned about the EPA's regulatory authority, that's language you're going to be paying attention to," he said.

Email: nmassey@eenews.net

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