On June 23, 2014, the U.S. Supreme Court decided in Utility Air Regulatory Group v. Environmental Protection Agency that the Environmental Protection Agency (EPA) cannot regulate a stationary emitter of greenhouse gases (GHGs) unless the agency is already regulating the source for the emission of other air pollutants. This decision follows over half a decade of court decisions and administrative agency rulings over whether and how the agency will regulate GHGs. Please call our toll-free number at (855) 977-1212 to see how one of our attorney members can provide you a FREE CONSULTATION on your legal issue.

The Clean Air Act (CAA) and the amendments passed in 1990 requires that the EPA identifies air pollutants that can have a negative impact on human health and then regulate their emission. Chapter 1 of the law establishes that the agency will find and determine if an airborne substance constitutes a danger to public health. Once the agency has determined that an air pollutant is a danger to public health, then it follows the procedures established by Chapter 1 of the Act to regulate stationary sources. Chapter 2 governs how to regulate moving sources, such as motor vehicles. Chapter 5 creates a permitting process for the stationary sources in Chapter 1. Most relevant to the case above is that Chapter 1 states that a stationary source of an air pollutant must pollute between 100 to 250 tons of that air pollutant in order to have to obtain a permit.

In 2007, the U.S. Supreme Court ruled in Massachusetts v. EPA that the EPA must determine if GHGs are a danger to human health and if GHGs do endanger human health, then the EPA must regulate the moving sources of them under Chapter 2 of the Clean Air Act. Prior to the Court’s decision, the EPA refused to define and treat GHGs as air pollutants for the purposes of the Clean Air Act. Therefore, the Supreme Court in Massachusetts clarified that “air pollutant” in the endangerment section of the act means any substance in the air that can harm human health.  

As a result of the Supreme Court’s order in Massachusetts, the EPA investigated GHGs and in 2009 drafted an Endangerment finding that said that GHGs are a danger to human health. The agency next promulgated rules under Chapter 2 for moving sources of GHGs in 2010. When the EPA was investigating the danger of GHGs from moving sources, the agency found that any rule regarding moving sources of GHGs would require another rule for stationary sources as well.  

Therefore, the EPA started developing regulations for stationary sources of GHGs as well. Yet, the agency found that the triggering mechanism in Chapter 1 for stationary sources was too low for GHGs. As mentioned above, Chapter 1 of the CAA requires that a stationary source that emits over 100 to 250 tons of an air pollutant must be regulated by the EPA. Furthermore, the CAA mandates that the EPA ensure that the source of the air pollutant use the “best available control technology” (BACT) to reduce its emission of the pollutant. The problem with GHGs is the emission 100 to 250 tons is too low a threshold for complex permitting requirements in the CAA. If the EPA were to regulate all stationary sources that emit more than 100 tons of GHGs, the rule would require office buildings, malls, hospitals, schools and other low-level emitters of GHGs to obtain a permit through the complicated permitting process in Chapter 5.  Both the EPA and the Court acknowledged in this case that Congress wanted the CAA to govern major industrial sources of pollution and not the sources such as malls mentioned above.  Thus, the EPA created a new rule that tried to tailor regulations on GHGs to only cover industrial sources of GHG pollution.

To tailor the regulation of GHGs to the appropriate major sources of that pollution, the EPA drafted a new rule for stationary sources that would phase-in through three steps (Tailoring Rule). First, the EPA would require no new sources of GHGs to obtain a permit from January 2 to June 30, 2011. Instead, the agency would only require that a stationary sources of GHGs would only have to obtain a permit for GHGs if they are already required to obtain a permit due to emission of another air pollutant. Furthermore, those sources who are already required to obtain a permit (so-called “anyway” sources) because of emission of another air pollutant would only have to find BACT for GHGs if they emit over 75,000 tons of carbon dioxide (or an amount of another pollutant so that it would have the equivalent effect on climate change as 75,000 tons of CO2 (CO2e)). Step 2 stated that new sources of GHGs that were not already required to obtain a permit previously would have to go through the permitting process if they emitted more than 100,000 CO2e. This step would take place between July 1, 2011 through June 30, 2012. Step 3 states that the EPA might (or might not) lower the triggering amount for obtaining a permit to 50,000 CO2e after July 1, 2013.

Almost immediately after the EPA made a final decision on the Tailoring Rule, several states and industry and corporate groups challenged the Tailoring Rule. The EPA successfully defended its rule before the D.C. Circuit Court. Several of the plaintiffs appealed to the U.S. Supreme Court and the Court decided to grant a hearing to six of the petitioners for an appeal.

The Court held that the EPA cannot promulgate rules for new stationary sources of GHGs because Chapter 1 and Chapter 5 which govern regulations of stationary sources and the permitting requirements do not govern GHGs. Also, the Court held that the Tailoring rule that the EPA created was either unworkable or impermissibly changed unambiguous language in the statute. First, the Massachusetts Court held that when the Act refers to “air pollutant” it could govern GHGs if they were found to be a danger to public health. Yet the Court in this case says that while an “[a]ct-wide definition of air pollutant” does cover GHGs, the term “air pollutant” in permitting chapter of the CAA does not refer to GHGs. The Court says that “air pollutant” in these sections have a narrower definition than the act-wide definition of air pollutant and therefore cannot authorize the EPA to require new stationary sources of GHGs to obtain a permit.

Furthermore, the Court held that the Tailoring Rule that the EPA established for new stationary sources of GHGs are either impractical or impermissibly changes the statute’s language. The Court, like the EPA, acknowledges that the triggering level of 100 to 250 tons of air pollution emissions from a stationary source is too low for GHGs. Yet the Court holds that the EPA cannot  attempt to circumvent that triggering level by increasing it by 1000 times its current level.  The Court states that to do so would impermissibly rewrite statutory language. Therefore, the Court struck down Step 2 and 3 of the EPA’s Tailoring Rule.

The Court though did not prevent the EPA from regulating GHG emissions from stationary sources entirely. Step 1 of the EPA’s Tailoring Rule requires that “anyway” sources of GHGs, or stationary sources that are already required to obtain a permit for another air pollutant, that have GHG emissions of more than 75,000 CO2e obtain the BACT for GHGs as well. The petitioners challenged this rule as well, but the Court held that this rule is permissible. The Court argues that this rule is permissible because the term “air pollutant” as referred to in the section governing BACT has a broad definition like the “act-wide” definition and unlike the definition of air pollutant concerning the permitting process. Thus, the Court held that requiring BACT for “anyway” sources was a permissible interpretation and upheld Step 1 of the Tailoring Rule.

Despite the Court’s striking down major portions of the Tailoring Rule and preventing regulation of new sources of emissions, the EPA’s Tailoring Rule still will have a major effect on GHG emission. The EPA and the Court asserted that 83% of the facilities that the Tailoring Rule was going to govern can still be regulated because they are “anyway” sources of GHGs.  Furthermore, the Solicitor General, who represented the EPA in this case, stated that Steps 2 and 3 would have only reached another 3% of stationary sources of GHG.  Therefore, the Court’s decision that narrows the authority of the EPA regarding GHGs but does not diminish the impact that the new Tailoring Rule will have on reducing GHG emissions.

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