SUPREME COURT:

Tricky permit issue seen splitting challengers to EPA climate rules

Dozens of industry groups and several states are applauding the Supreme Court for taking up their challenge to a slice of U.S. EPA's greenhouse gas program, but a significant issue lurking below the surface could split them when justices hear arguments early next year.

The court granted review yesterday of a portion of EPA's greenhouse gas rules: whether the agency "permissibly determined" that its standards for motor vehicles "triggered permitting requirements" for stationary sources, such as power plants and other industrial facilities (Greenwire, Oct. 15).

Industry has criticized that trigger because it would mean that new or modified facilities emitting carbon dioxide and other greenhouse gases would need to obtain a Prevention of Significant Deterioration, or PSD, permit from EPA before beginning construction.

PSD permits typically require facilities to limit emissions deemed harmful to public health -- nitrogen oxides, sulfur dioxide or other so-called conventional pollutants -- by installing pollution-control technologies. The challengers contend that greenhouse gases shouldn't be listed among pollutants that trigger PSD permitting.

But there's disagreement about whether a facility that would already qualify for a PSD permit because of traditional pollutants should have greenhouse gases included in its permit terms.

Electric utilities, for example, categorically reject in court documents that greenhouse gases have any place in the PSD program and say including them leads to "absurd results."

EPA regulations, the Utility Air Regulatory Group wrote, "compelled inclusion of a pollutant in the PSD program that does not deteriorate air quality, where that inclusion expands regulation demonstrably beyond the bounds set by Congress."

But the American Chemistry Council (ACC), which typically represents smaller facilities, contends that plants falling under the PSD program because of emissions for which EPA has set a National Ambient Air Quality Standard, or NAAQS, could have greenhouse gas measures included in the terms of their permits.

"Facilities subject to the PSD permitting program, based on their emissions of NAAQS pollutants," the group wrote, "would still be required under this interpretation to adopt the 'best available control technology' for greenhouse gas emissions ... in their PSD permit."

That difference could be a critical component of the Supreme Court case, said Thomas Lorenzen, a former assistant chief for the Department of Justice's Environment and Natural Resources Division.

"This could be divisive among the petitioners," said Lorenzen, who is now a partner at Dorsey & Whitney LLP. "There are some who will not want to concede that greenhouse gases can be regulated under PSD under any circumstances."

In June 2012, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit unanimously upheld EPA's regulations. Industry petitioned the court for rehearing and, while the court denied the request, Judge Brett Kavanaugh -- one of the country's leading conservative judges -- wrote a dissent that largely espoused ACC's view.

ACC claims that its interpretation would "still cover 83 percent of the national greenhouse gas emissions that would otherwise be covered" by the PSD program. Under EPA's later tailoring rule, which phased in when and which facilities qualify for the PSD program, the permits would cover 86 percent of those emissions -- only a 3-point difference, ACC claims.

David Doniger of the Natural Resources Defense Council echoed Lorenzen and said power plants and large emitters will likely be reluctant to sign onto ACC's view.

"Any power plant is going to have enough nitrogen oxides, sulfur dioxide or particulate matter to get a PSD permit," he said. "So any power plant would have to have [best available control technology] for greenhouse gas emissions."

Environmental lawyers said the court's grant suggests the justices want to engage with both arguments. And either could lead to significant consequences for the applicability of the PSD permitting requirement for greenhouse gases.

If the court sides with the utilities, it would wipe out the permitting requirement altogether. If it sides with ACC, it would reduce the number of facilities that need PSD permits by eliminating sources that would qualify for the permit only because of greenhouse gas emissions. Such facilities would likely include hospitals, stadiums and perhaps apartment buildings.

Either of those scenarios could also have major ramifications for the tailoring rule, lawyers involved in the case say, even though the court didn't specifically grant review of the regulation. EPA crafted the tailoring rule to avoid "absurd" consequences of requiring all greenhouse gas emitters to obtain PSD permits.

It is worth noting that the PSD program is separate from EPA's New Source Performance Standards for greenhouse gases that the agency recently rolled out for new power plants and is currently drafting for existing facilities. Those standards are not at issue in the case.

Justices also declined to review other aspects of EPA's program, including the automobile rules and the agency's finding that greenhouse gases endanger public health.

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