DC Circuit Affirms EPA GHG Regulations

June 27, 2012

In a searing and trenchant per curiam opinion (Coalition for Responsible Regulation et al. v. EPA, No. 09-1322, June 26. 2012), the U.S. Court of Appeals for the DC Circuit unequivocally denied all challenges to EPA’s greenhouse gas (GHG) regulations, setting the stage for a potential rematch of the parties before the Supreme Court.

Numerous companies, trade associations and states had filed challenges to various aspects of the EPA’s actions and rulemakings. The opponents challenged EPA’s finding that GHGs (including CO2, methane and four other compounds) were collectively an “air pollutant” that potentially endangered human health and the environment (“Endangerment Finding”) as well as, its regulation of GHG emissions from the automotive sector through the “Tailpipe Rule” and its limitation of the scope and impact of regulating GHG emissions from stationary sources through the Timing and Tailoring Rules.

These challenges were consolidated into one matter and the court heard numerous days of oral arguments. The DC Circuit drew on the plain language of the Clean Air Act (CAA) and the Supreme Court’s application of that language to GHG emissions in Massachusetts v. EPA, (2007) to thoroughly eviscerate all challenges and leave the rules intact.

The opinion focused primarily on EPA’s actions to regulate GHGs under Section 202 because that issue led to the Supreme Court’s decision in Massachusetts. The Court held that GHG could be considered “air pollutants” under Section 202 and that the CAA therefore required EPA to evaluate as a scientific matter whether the emission of GHG caused or contributed to environmental endangerment.

As a result, the DC Circuit easily rejected claims that the Endangerment Finding was improper for failing to consider the policy implications of regulating GHG under the CAA. The court noted that the plain language of the CAA and the Supreme Court’s interpretation of that language in Massachusetts precluded consideration of policy issues in the context of the Endangerment Finding.

The court also rejected claims that the scientific record used by the EPA in support of its Endangerment Finding was inadequate. The court noted the extensive range of climate science documents reviewed by EPA and rejected claims that this material was somehow lacking, stating, “This is how science works.” The court refused to second-guess EPA’s scientific findings or its ability to make those findings in the face of scientific uncertainty. The court held that the CAA’s requirement for EPA to act if the air pollutant “may reasonably be anticipated to” cause an endangerment allowed the EPA to be proactive and “precautionary.”

Turning to the Tailpipe Rule, the court noted that the state and industry challengers did not challenge the rule for how it regulated mobile sources but for the impact of that rule on subsequent requirements for stationary sources. The court denied claims that EPA had the authority to avoid automatic requirements to regulate stationary sources as a result of the issuance of the Tailpipe Rule. The court also rejected challenges to the EPA’s scientific findings in crafting these rules.

The court then turned to the larger issue for petitioners, which was the impact of the adoption of the Tailpipe Rules on GHG requirements for stationary sources. In its Timing Rule, EPA had determined that GHGs became “regulated air pollutants” on January 2, 2011, when the Tailpipe Rule began to impose requirements on car manufacturers. Consistent with longtime EPA interpretations, EPA stated that when GHGs became regulated air pollutants, the CAA required major stationary sources to consider GHG emissions in seeking preconstruction (“PSD”) or operating (“Title V”) permits. In the Tailoring Rule, EPA sought to limit the application of these permitting requirements to those emitting more than 100,000 tons of GHG per year.

Industry and state challengers attacked the longtime EPA interpretation of the CAA, linking the identification of a regulated air pollutant and permit requirements for major sources. Yet the court held that both the plain language of the CAA and the Supreme Court’s finding in Massachusetts required the determination that GHGs were subject to the CAA as “air pollutants.” The court rejected attempts to interpret the CAA term “air pollutants” in different contexts to exclude GHGs, finding that the attempts were not supported by the CAA.

Finally, in what may prove to be the most controversial part of the opinion, the court refused to hear challenges to the Tailoring Rule, holding that the state and industry challengers were not injured by the rule and therefore had no standing. The court pointed out that the Tailoring Rule was intended to limit the impact of GHG regulation only to the largest emitting sources and as a result no petitioner could identify any injury it might suffer as a result of the rule. It specifically rejected Texas’ claim that it was injured, because any reduction in impact from the rule would lessen the probability that Congress would make changes to limit EPA’s authority to regulate GHGs, generously terming the argument too speculative. As a result it did not address the key issue of whether the CAA authorized the EPA to essentially modify the statutory definition of “major sources” to limit the application of the permitting requirements.

Despite the significance of the opinion, the court actually broke no new legal ground. It consistently grounded its findings in the language of the CAA and in Massachusetts. In contrast to Massachusetts, the court included no sweeping declaration regarding the importance of GHG controls and the need to address climate change. It affirmed EPA’s scientific determinations on these issues, but did so on the very traditional grounds that Congress gave EPA broad authority to make those decisions and the courts are not empowered to second-guess EPA. While the finding that state and industrial petitioners lacked standing to challenge EPA rules was completely consistent with Supreme Court precedent requiring close scrutiny of standing of individuals and groups claiming injury as a result of environmental rules, it was unusual in that this scrutiny is more typically applied to environmental groups than to business trade associations.

Of more lasting significance perhaps was the court’s willingness to clearly state that EPA is authorized to act proactively and take steps that were “precautionary” even in the face of scientific uncertainty. While the court’s statement was tied to specific CAA language and court precedent, it also appeared to be a veiled statement on the debate regarding the “precautionary principle.” As asserted by the environmental community, this principle requires government to curtail business activity unless it can be proven that the activity is safe. This is generally not consistent with the current regulatory framework, which allows and permits most activity even if the ultimate risks are unknown. While the court’s decision evinced no effort to revolutionize the current regulatory scheme, the court also sought to point out that Congress clearly gave EPA the power to act even without complete certainty that its actions would be useful or even necessary.

While the decision will certainly be appealed, Supreme Court review is far from certain. The circuit court grounded much of the decision in Massachusetts and it would be unusual, even for this Court, to take a case for the purpose of reversing a relatively recent decision in which most of the current members of the Court participated. This was also an absolute victory for the EPA, and the Obama Administration would certainly and strongly oppose any petition for certiorari. Yet the issue remains highly controversial and will not be resolved until the Supreme Court announces its decision of whether to take the case.

McGuireWoods LLP Clean Air Act Team

McGuireWoods LLP is a full service law firm with a focused practice in climate change and Clean Air Act matters. For more information on the final light duty vehicle rule or EPA’s initiatives to regulate greenhouse gases, please contact the authors, or any member of our Clean Air Act team.