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EPA Greenhouse Gas Rules Survive Numerous Court Challenges

July 5, 2012
Environmental Alert

In a major decision, the United States Court of Appeals for the District of Columbia Circuit (Court) has upheld a series of United States Environmental Protection Agency (EPA) actions under the Clean Air Act (CAA) to address greenhouse gas (GHG) emissions against a host of challenges brought by industry groups and several states. Coalition for Responsible Regulation, Inc., et al v EPA, D.C. Cir. (June 26, 2012). As a result of the Court’s decision, the EPA’s GHG regulations covering everything from motor vehicle tailpipe emissions to permitting and emission control requirements for major sources of GHGs remain in effect.

The rules at issue were adopted by the EPA between 2009 and 2010, following the United States Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497 (2007), that GHGs are “air pollutants” under the CAA. The challenged actions included regulations limiting GHG emissions from new cars and light duty trucks beginning in January 2011 and regulations requiring stationary sources (e.g., factories and power plants) that have the potential to emit more than 100,000 tons of carbon dioxide equivalent (CO2e) per year to comply with Prevention of Significant Deterioration (PSD) and Title V operating permit requirements under the CAA. The decision leaves each of these regulations intact.

The specific EPA actions involved are: (1) the EPA’s finding that GHGs in the atmosphere endanger public health and welfare and that emissions of GHGs from new motor vehicles cause or contribute to that endangerment (74 Fed. Reg. 66496 (Dec. 15, 2009)) (Endangerment Finding); (2) regulations restricting emissions of GHGs from automobiles and light duty trucks (75 Fed. Reg. 25324 (May 7, 2010)) (Tailpipe Rule); (3) the EPA’s interpretation that PSD requirements under the CAA apply to emissions of any pollutant regulated under the CAA and not just criteria pollutants, first set forth in 1978 (43 Fed. Reg. 26380 (June 19, 1978)); (4) the EPA regulations specifying that GHG emissions from stationary sources would be regulated under the PSD and Title V operating permit programs beginning on January 2, 2011, the date the Tailpipe Rule emission limits took effect (75 Fed. Reg. 17004 (Apr. 2, 2010)) (Timing Rule); and (5) a regulation setting higher alternate emission thresholds for GHGs (i.e., 100,000 tons per year CO2e, instead of 100 or 250 tons per year) from stationary sources to be subject to the PSD and Title V programs (75 Fed. Reg. 31514 (June 3, 2010)) (Tailoring Rule).

Endangerment Finding supported by substantial evidence

The Court upheld the EPA’s Endangerment Finding against several arguments. First, industry groups argued that the EPA failed to consider a number of relevant factors when deciding that GHGs presented an endangerment to public health and welfare, including: the benefits of activities that require GHG emissions, the ineffectiveness of GHG regulations that would be trigged by the Endangerment Finding, and the potential for social adaptation to or mitigation of climate change. The Court rejected this argument, holding that the CAA requires the EPA to make a scientific judgment about whether GHGs may reasonably be anticipated to endanger public health or welfare and whether emissions from motor vehicles cause or contribute to that endangerment. The Court ruled that the other considerations raised by the industry groups had no bearing on these questions and, therefore, the EPA’s failure to consider them was not improper.

Industry groups also argued that the EPA did not have an adequate scientific basis to make the Endangerment Finding. These groups argued that the EPA in effect improperly delegated its decision-making authority to the Intergovernmental Panel on Climate Change (IPCC), the U.S. Global Climate Research Program (USGCRP) and the National Research Council (NRC) by relying so heavily on reports issued by those organizations and that the scientific information was insufficient to support the EPA’s findings.

The Court held that the EPA did not improperly delegate its decision-making authority to IPCC, USGCRP and NRC, but instead sought out and critically reviewed the best available scientific information from these organizations to inform its decision. Regarding the sufficiency of the scientific information, the Court stated that it will “give an extreme degree of deference to the agency when it is evaluating scientific data within its technical expertise.” The Court then found that the EPA had amassed a substantial body of scientific evidence in support of the Endangerment Finding, including empirical evidence that global warming is occurring and correlated with GHG emissions, historical evidence suggesting that recent warming temperatures are unusual and computer-based climate models that indicate that the observed warming is caused by anthropogenic GHG emissions. Ruling that the EPA is not required to determine the existence of an endangerment with absolute scientific certainty, the Court refused to re-weigh the scientific evidence before the EPA and reach its own conclusion. Because the EPA’s action was supported by substantial evidence when considered on the record as a whole, the EPA’s decision was upheld.

The Court also rejected arguments that the EPA’s Endangerment Finding was invalid because the EPA did not quantify the endangerment or define the atmospheric concentration of GHGs that would not endanger public health or welfare because the Court found that the CAA did not require the EPA to render its decision with such precision. An argument claiming that the EPA acted improperly in including perfluorocarbons and sulfur hexafluoride, pollutants not commonly emitted by motor vehicles, in the Endangerment Finding was dismissed because the Court found that none of the industry petitioners had demonstrated that they were directly harmed by the EPA’s decision to include these pollutants and, therefore, the industry petitioners did not have standing to raise this issue.

The Court also rejected a procedural argument that the EPA failed to submit the Endangerment Finding to its Science Advisory Board (SAB). The Court questioned whether the Endangerment Finding was required to undergo formal review and comment by other federal agencies under the CAA and held that the petitioners had failed to show that SAB review would have resulted in any significant changes to the rule.

The Court upheld the EPA’s decision not to amend the Endangerment Finding in response to petitions for reconsideration that were based on internal emails and other documents from the University of East Anglia’s Climate Research Unit that cast doubt on some of the information included in the IPCC assessment report and other new information. The Court found that, although it appeared that two non-peer-reviewed studies included in the IPCC assessment were inaccurate, the IPCC assessment relied on approximately 18,000 peer-reviewed studies and the two erroneous studies did not undermine the substantial overall evidentiary support for the Endangerment Finding. Likewise, a more recent study on violent storms and climate change was insufficient to require the EPA to overturn the Endangerment Finding.

Accordingly, the Court rejected all of the challenges raised against the Endangerment Finding.

Tailpipe Rule not arbitrary and capricious for failing to consider cost impacts on stationary sources

Industry groups argued that the EPA should have considered the fact that regulating GHG emissions from automobiles and light duty trucks through the Tailpipe Rule would result in GHG emissions also being regulated from stationary sources and the associated costs that would result. The Court, however, ruled that although the EPA was required to (and did) consider the cost impact of the Tailpipe Rule on vehicle manufacturers, nothing in the specific CAA section at issue or in the structure of the CAA in general required the EPA to consider the costs to other entities not directly subject to the proposed tailpipe standards. The Court also rejected the argument that the EPA failed to demonstrate that the Tailpipe Rule would effectively address the endangerment identified in the Endangerment Finding, ruling that the CAA required the EPA only to find that vehicle emissions contributed to the endangerment, not that regulation of tailpipe emissions would curtail the endangerment.

Accordingly, the Court denied the petitions against the Tailpipe Rule.

Court upheld the EPA’s finding that regulation of GHGs from motor vehicles under the CAA also required regulation of GHGs from stationary sources

Before turning to the merits of various challenges raised by industry groups to the EPA’s determination that PSD permit requirements apply to emissions of air pollutants regulated only under the mobile source provisions of the CAA, the Court first had to determine whether a challenge to such a long-standing EPA determination (originating in 1978) could be heard in light of the limitation in Section 307 of the CAA that challenges to the EPA actions must be filed within 60 days after the action is published in the Federal Register, with an exception for actions filed within 60 days after new grounds for a petition arise. The Court found that two industry groups, the National Association of Home Builders (NAHB) and the National Oilseed Processors Association (NOPA), had demonstrated that their members had not been impacted by the EPA’s 1978 determination or any subsequent rulemakings until the Tailpipe Rule made some of their members subject to PSD regulations due to GHG emissions. The Court found that any earlier challenge by NAHB or NOPA before the Tailpipe Rule to the EPA’s interpretation that PSD regulations apply to all pollutants regulated under the CAA would likely have been rejected as unripe for judicial review or for lack of standing. Accordingly, the Court ruled that NAHB and NOPA were entitled to judicial review of the EPA’s policy because they filed petitions within 60 days after publication of the Tailpipe Rule.

Turning to the merits of the argument, the Court ruled that the term “any air pollutant” as used in the PSD provisions of the CAA requires emissions of all pollutants from stationary sources to be regulated. The Court found that although the phrase “any air pollutant” was capable of narrower interpretations in some contexts in the CAA – such as in the visibility protection provisions of the CAA, where the phrase has been interpreted to refer only to pollutants that impact visibility – the purposes of the PSD program are very broad and include protection of public health and welfare from all types of adverse effects, including weather and climate. Therefore, the Court held that there was no basis to restrict the PSD program to only criteria pollutants and that the EPA was correct in applying the PSD program to all pollutants regulated under the CAA, including pollutants such as GHGs regulated under the mobile source provisions of the CAA.

Challenges to Timing Rule and Tailoring Rule rejected for lack of standing

Under the United States Constitution, federal courts have jurisdiction only over actual cases or controversies. One of the essential elements required for a case or controversy is that the petitioner must have suffered an injury in fact that is concrete and particularized, as well as actual and imminent. The injury in fact must also be caused by the conduct complained of and would likely (as opposed to speculatively) be redressed by a favorable decision.

The Court found that none of the petitioners before it had standing to challenge the Timing Rule or the Tailoring Rule. The petitioners – which included both industry groups and several states – argued that they were harmed by the extension of PSD and Title V permitting requirements to GHG emissions by the Timing Rule and the Tailoring Rule. The Court, however, found that the PSD and Title V programs were extended to GHGs not because of the Timing Rule or the Tailoring Rule, but by automatic operation of the CAA, which required all regulated pollutants to be subject to PSD and Title V permit programs. If anything, the Timing Rule and the Tailoring Rule served to mitigate the injury to industry and the states by delaying the applicability of PSD and Title V permits to GHG emissions and drastically reducing the number of sources subject to PSD and Title V requirements due to GHG emissions. If the EPA had not promulgated the Timing Rule and the Tailoring Rule, then many more sources would have been subject to PSD and Title V permit requirements and they would have been subject earlier, which would have increased, rather than decreased, the injury to the petitioners. Accordingly, the Court concluded that the petitioners were in no way harmed by the Timing Rule or the Tailoring Rule and, therefore, they did not have standing to challenge those rules.

Some of the states argued that they had standing to challenge the Tailoring Rule because if they succeeded in overturning the Tailoring Rule, the overwhelming burdens and astronomical costs that would be imposed on the states would require Congress to enact corrective legislation. The Court found that the possibility that Congress would enact new legislation in such circumstances, or that the legislation would be more favorable to the states than the Tailoring Rule, was too speculative to give the states standing. The states also argued that they had standing to challenge the Timing Rule and the Tailoring Rule because they were actually harmed by the failure of the EPA to regulate more GHG sources than are subject to the Tailoring Rule and sooner. The Court found that this argument of asking for more regulation, not less, and sooner rather than later, was completely contrary to the positions taken by the states throughout the litigation up until their final reply brief. The Court found that there is no authority for a party to assert a completely new type of injury to establish standing for the first time in its reply brief. Moreover, the Court found that the states had failed to cite any evidence in the record that they are adversely affected by global climate change.

Therefore, the Court ruled that neither the state petitioners nor the industry group petitioners had standing to challenge the Timing Rule or the Tailoring Rule and, accordingly, those petitions were dismissed.

Matters not addressed in this decision

Although the Court’s June 26, 2012 decision was wide-ranging and addressed over 80 individual petitions, there were a few matters that were not decided. As noted above, the Court did not rule on any challenges to the Timing Rule or the Tailoring Rule because none of the parties before it had standing to challenge those rules. One environmental group, the Center for Biological Diversity (CBD), which might have had standing to challenge the Timing Rule and the Tailoring Rule, had filed a petition to challenge the Timing Rule and the Tailoring Rule but voluntarily withdrew those claims in June 2011. Accordingly, those claims were no longer before the Court and so the Court did not rule on them. Presumably, CBD or any other group would now be prohibited by CAA Section 307 from challenging the Timing Rule or the Tailoring Rule because more than 60 days have passed since those rules were published in the Federal Register unless new grounds for challenging those rules arise in the future.

There are also challenges to the EPA rulemakings regarding State Implementation Plan revisions concerning GHGs that are pending in the D.C. Circuit, but before different panels of judges. Because these challenges are currently pending before other panels, the Court declined to rule on the merits of those cases.

Next actions

Many observers expect that the Court’s decision in these matters will be appealed. At this time, however, there is no confirmation which petitioners, if any, will take an appeal. An appeal of this decision can take one of two forms: (i) a petition for rehearing en banc, which involves arguing the case before all the judges of the D.C. Circuit, rather than a three-judge panel; or (ii) a petition for writ of certiorari to the Supreme Court of the United States. In either case, the court has discretion to grant or deny the request.