Supreme Court Rejects EPA’s Expansive Regulation of Greenhouse Gas Emissions, Affirms Regulation of Existing Permitted Sources

U.S. Supreme Court Alert

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In Utility Air Regulatory Group v. EPA, 573 U.S. __, 2014 WL 2807314 (June 23, 2014), the Supreme Court affirmed the power of the Environmental Protection Agency (EPA) to regulate greenhouse gas emissions from major emitting facilities, such as large factories and power plants, which already emit other pollutants and operate under a Clean Air Act (CAA) permit. These already-permitted or “anyway” sources account for roughly 83% of all stationary-source greenhouse gas emissions in the United States. But the Court rejected the EPA’s expansion of its regulatory power beyond the “anyway” sources to millions of smaller stationary sources, including schools, churches, office and apartment buildings, and retail stores, which account for only 3% of emissions.

As a practical matter, the Court’s opinion confirms the EPA’s power to combat global warming by forcing large industrial sources and manufacturers of new motor vehicles—which account for the vast majority of all greenhouse gas emissions in the United States—to develop and implement technology to curb such emissions. As Justice Scalia, who authored the majority opinion, remarked from the bench when announcing the Court’s decision: “EPA is getting almost everything it wanted in this case.”

A. Background The EPA regulates greenhouse gas emissions for all stationary sources and industry groups object.

Utility Air Regulatory Group and the consolidated cases presented an industry challenge to the EPA’s regulation of greenhouse gas emissions from all stationary sources that exceeded the statutory emissions threshold established by the CAA. The regulations were enacted under the Obama Administration in 2011, following the Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497 (2007), which established that greenhouse gases were “air pollutants” that could be regulated under the CAA if they endanger public health and welfare. Prior to that decision, the EPA under the Bush Administration had refused to regulate greenhouse gases.

In 2009, the EPA made an “endangerment finding” based on the global warming effect of greenhouse gases, which obligated the agency to regulate emissions from new motor vehicles. Following a longstanding agency interpretation of the CAA that read the term “air pollutant” consistently across all provisions of the Act, the EPA treated its regulation of mobile-source emissions as a “trigger” for regulating the identical greenhouse gas pollutants from stationary sources governed by Title V and the Act’s Prevention of Significant Deterioration (PSD) provisions. Industry groups appealed and the Court agreed to review the EPA’s “triggering rule.”

B. The Court rejects the EPA’s “triggering rule,” but affirms its authority to implement greenhouse gas controls for “anyway” sources.

Writing for a 5-4 majority of the Court, Justice Scalia rejected the EPA’s “triggering rule,” reasoning that while the CAA’s “act wide” definition of “any air pollutant” includes greenhouse gases as announced in Massachusetts, the definition of “air pollutant” in the stationary-source provisions of the Act must be given a “narrower, context-appropriate meaning.” Rather than making the usual assumption that identical words in different parts of a statute are intended to have the same meaning, the Court relied on the “fundamental canon of statutory construction that words in a statute must be read in their context and with a view to their place in the overall statutory scheme.” Under this principle, the Court determined that reading “any pollutant” to include greenhouse gases in the CAA’s stationary-source provisions would produce absurd results. For example, the EPA’s permitting program would expand from roughly 82,000 stationary sources to over six million sources; the costs of administering the program would balloon from $62 million to over $21 billion; and the EPA would be given an “unheralded power” to regulate a significant portion of the American economy—results that Congress could not have intended when it enacted the CAA.

Rejecting the position of the EPA and the four dissenting justices, the Court also held that EPA could not save its “unreasonable” interpretation of the CAA by tailoring implementation of the greenhouse gas regulation to apply to major emitters first and then gradually expanding it to smaller sources. As the EPA conceded, all six million soon-to-be-regulated small stationary sources exceeded the emission thresholds established by the CAA itself. Accordingly, the Court reasoned, the “tailoring rule” amounted to “rewriting the statutory thresholds” for air pollution, something that executive-branch agencies have no power to do. As the Court put it, allowing agencies to “tailor” unambiguous legislation to meet “bureaucratic policy goals” would “deal a severe blow to the Constitution’s separation of powers.”

Though the Court rejected EPA’s “triggering rule,” the Court agreed that EPA had the statutory authority to regulate greenhouse gases under the “best available control technology” (BACT) provisions applicable to “anyway” sources (major emitters that already operate under a CAA permit). Deferring to the EPA’s reasonable construction of the BACT provisions, the Court acknowledged that the EPA also could require major emitters of other air pollutants to implement controls for greenhouse gases as well. As noted, these major sources account for 83% of all stationary greenhouse gas emissions.

Utility Air Regulatory Group affirms the EPA’s immediate power under the BACT provisions to regulate the most significant emitters of greenhouse gas pollution, although it acknowledges that these large emitters amount to a “relative handful” of all pollution sources. Beyond the immediate effects of this decision, which the Court found to be both dictated by the CAA’s language and not “disastrously unworkable,” the opinion reaffirms the Roberts Court’s close scrutiny of EPA and other agency decisions that either attempt to find new executive agency powers under long-extant statutes or may have significant economic impacts.