Why Dangerous Greenhouse Gases May Be Incapable Of Regulation

The Massachusetts v. EPA Paradox

Environmental statutes, such as the Clean Air Act (CAA), provide broad guidelines in which the Environmental Protection Agency (EPA) is expected to fill in the gaps through rulemakings, permit issuance, and enforcement actions. With Congress playing a “surprisingly small role” in overseeing the content of EPA regulations, the role of federal oversight of EPA has fallen on the judiciary.[1] Under the CAA, federal courts are given authority to hear petitions challenging EPA actions, such as rulemaking, as well as petitions asserting that the EPA has failed to undertake nondiscretionary duties, such as deciding what pollutants will be regulated.[2]

It is within this context that the United State Supreme Court issued its 2007 landmark decision in Massachusetts v. EPA. With its decision, the Supreme Court confirmed EPA’s authority to regulate greenhouse gases (GHGs) under the CAA. However, in the agency actions and court cases that followed Massachusetts, new questions have arisen as to whether GHGs are, in fact, air pollutants under the CAA that cannot be reasonably regulated.

Massachusetts v. EPA

In 1999, a group of private organizations filed a rulemaking petition with EPA, asking it to regulate GHG emissions from new motor vehicles under the CAA. In 2003, EPA denied the petition, concluding that the CAA did not authorize it to issue mandatory regulations to address global climate change and, even if it did, it would have been unwise to do so at that time. The petitioners, along with several intervening local and state governments, sought review of the denial in the U.S. Court of Appeals for the District of Columbia Circuit. In a split panel, the D.C. Circuit denied review, and the U.S. Supreme Court accepted petitioner’s writ of certiorari.

As a preliminary matter, the Court held that at least one of the petitioners (the state of Massachusetts) had standing to challenge EPA’s denial of the rulemaking petition. Briefly, the Court found that Massachusetts had suffered an injury that was both actual and imminent (the loss of coast line due to rising sea levels allegedly caused by global warming); that EPA’s refusal to regulate GHG emissions was, at a minimum, contributing to Massachusetts’ injuries (according to petitioners, the U.S. transportation industry alone emits more than six percent of worldwide carbon dioxide emissions); and while regulating motor vehicle emissions might not reverse global warming, it would reduce domestic emissions thereby slowing its pace.[3]

Next, the Court considered whether Section 202(a)(1) of the CAA authorizes EPA to regulate GHGs from new motor vehicles in the event it forms a “judgment” that such emissions contribute to climate change. The Court found that it does. Section 202(a)(1) provides, in part, that EPA “shall by regulation prescribe … standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, which in [the Administrator’s] judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.” The CAA defines “air pollutant” to include “any air pollution agent …, including any physical, chemical … substance … emitted into … the ambient air ….” The Court held that GHGs easily fit the definition and, therefore, EPA has the statutory authority to regulate the emission of such gases from new motor vehicles.

Finally, the Court found that EPA offered no reasoned explanation for its refusal to decide whether GHGs cause or contribute to climate change and, therefore, concluded that EPA’s denial was arbitrary, capricious, or otherwise not in accordance with law. The Court reversed and remanded, leaving EPA with three options: (1) determine that GHG emissions from new motor vehicles “cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare”; (2) determine that such GHG emissions do not do so; or (3) explain why the agency is unable to make either determination.

EPA Response to Massachusetts

Since Massachusetts, EPA has initiated and completed several rulemakings related to GHGs. The following is a summary of four of the most significant:

In April 2009, EPA issued a proposed finding that GHG emissions from new motor vehicles endangered public health and welfare. EPA finalized the “endangerment finding” in December 2009, and it became effective a month later. In the finding, EPA concluded that carbon dioxide, methane and four other GHGs are reasonably likely to endanger the public health and welfare, and four GHGs emitted by new motor vehicles in the United States contribute to that air pollution. The endangerment finding itself has no effect on outside parties. Instead, its importance is that it triggers a duty under Section 202(a) for EPA to promulgate emission standards for the source category creating the endangerment – in this case, new motor vehicles.

In October 2009, EPA issued a final rule requiring reporting of GHG emissions from 31 types of emission sources. The sources include suppliers of fossil fuels and industrial GHGs, manufacturers of vehicles and engines, and facilities with annual emissions of 25,000 metric tons of carbon dioxide equivalents – in all about 10,000 facilities that emit about 85 percent of total U.S. GHG emissions. Data collection began on January 1, 2010 with the first monitoring reports due the following year.

In May 2010, EPA and the National Highway Traffic Safety Administration (NHTSA) jointly finalized rules setting GHG emission and fuel economy standards for 2012-16 model year light-duty vehicles, including passenger cars, light-duty trucks and medium-duty passenger vehicles (commonly known as the “tailpipe rule”). The standards increase each year, culminating in an EPA fuel economy equivalent of 35.5 miles per gallon (mpg) and an NHTSA fuel economy standard of 34.1 mpg by 2016.

In June 2010, EPA issued a final rule addressing GHG emissions from stationary sources under two CAA permitting programs: the Prevention of Significant Deterioration (PSD) program and Title V (commonly known as the “tailoring rule”). The rule “tailored” the requirements of those programs to limit the facilities required to obtain PSD and Title V permits. Under the rule, facilities responsible for nearly 70 percent of U.S. GHG emissions from stationary sources are subject to the permitting requirements, including the largest GHG emitters (power plants, refineries and cement production facilities). EPA reasoned that, without the rule, tens of thousands of new PSD permits and millions of new Title V permits would be required, thereby overly burdening previously unregulated businesses (such as small farms, restaurants and small commercial facilities) and overwhelming the permitting authorities.

Analysis

Following the EPA’s actions to address climate change, a number of entities brought action to challenge the EPA’s rulings. Over eighty claims have been filed by thirty-five different petitioners against the EPA related to, among other matters, the endangerment finding, tailpipe rule and tailoring rule. A large number of the parties in these cases are businesses and industry associations, including the Peabody Energy Company, National Mining Association, American Farm Bureau Association, Coalition for Responsible Regulation and the U.S. Chamber of Commerce. Additionally, at least sixteen states are joining with the petitioners; while, on the other side, sixteen states have intervened in support of the EPA. These claims have been consolidated into three main cases in the U.S. Court of Appeals for the D.C. Circuit: Coalition for Responsible Regulation v. U.S. Environmental Protection Agency (CRR v. EPA) [docket number 09-1322], CRR v. EPA [docket number 10-1092], and CRR v. EPA [docket number 10-1073]. On February 28 and 29, 2012, a three-judge panel heard oral argument on petitioners’ objections to the EPA’s greenhouse rulings. The judges are: Chief Judge Sentelle, David S. Tatel and Judith Ann Wilson Rogers. While it is not possible, at this time, to predict the final outcome of the CRR v. EPA, there are some initial indicators that these lawsuits will produce mixed results:

On one hand, it seems unlikely the court will overturn the EPA’s “endangerment” finding. The reason rests in precedent. In finding that GHGs do endanger the public health and welfare, the EPA was not acting unilaterally. Instead, the EPA was acting in response to the Supreme Court’s ruling in Massachusetts that GHGs easily fall within the CAA’s statutory definition of “air pollutant” and that the EPA was required to determine whether GHGs are, in fact, a danger to human health and welfare. Thus, to overturn the endangerment finding, the D.C. Circuit would have to find that not only was the EPA wrong, but so was the Supreme Court. As attorney and commentator Seth Jaffe observed,[4] Judge Tatel and Sentell felt compelled to remind the petitioners that the Court of Appeals is bound by Massachusetts. As Judge Sentelle remarked during the February 2012 hearing: "Sometimes in reading the petitioners’ briefs, I got the impression that Massachusetts had not been decided."

However, while the EPA’s endangerment finding may be sufficiently bolstered by precedent, the EPA’s other rulings “tailoring” the CAA to GHGs opens up a proverbial can of worms. The tailoring controversy relates to the EPA’s dramatic departure from the CAA’s statutory language. Under the CAA, both the PSD and Title V programs set forth fairly straightforward emission theshold requirements. Under the PSD, a permit is required for a “major emitting facility” that emits more than 250 tons per year of any air pollutant, or is one of 28 enumerated facilities that emit more than 100 tons per year. Similarly, under the Title V program, permits are required for any “major stationary source” that “directly emits, or has the potential to emit, 100 tons per year or more of any air pollutant.” Therefore, under the CAA’s current statutory framework, any facility that has GHG emissions above these threshold requirements would need a permit.

Notwithstanding this straight-forward statutory scheme, GHG emissions pose a peculiar problem under the CAA: GHGs are ubiquitous in our carbon economy. Estimates show that if GHG emitters were held to the CAA’s current threshhold requirements, permitting authorities would go from processing 300 PSD applications per year to 40,000. Likewise, the number of facilities requiring a Title V permit would increase from 15,000 to six million.[5] As commentators have noted – and as the EPA apparently recognized – applying the CAA’s requirements to GHGs would overwhelm state permitting authorities and “bring the economy to a grinding halt.”[6]

Therefore, to avert the “administrative train wreck,” the EPA, as noted, made the commonsense decision to “tailor” the PSD and Title V programs to GHG emissions.[7] Under the tailoring rule, the existing emission thresholds are set aside and replaced with incremental thresholds that are, in some cases, 100 times larger. As such, the question now before the D.C. Circuit is whether the EPA has authority to do so.

From a legal perspective, there is mixed precedent. The EPA has argued – perhaps rightfully so – that the tailoring rule was necessary under the “absurd results” doctrine and the “administrative necessity” doctrine. Indeed, courts have acknowledged that the EPA is permitted to depart from statutory requirements if the agency can demonstrate that the statutory requirements, as written, are impossible to administer. But, the issue in this case is one of degree. With its tailoring rule, the EPA is not applying its own interpretation to an ambiguous requirement. Instead, it is setting aside clearly stated emission thresholds and replacing them with thresholds that constitute a hundred-fold increase. As commentator Jonathan Miller noted in his well-reasoned law review article, Double Absurdity: Regulating Greenhouse Gas Under the Clean Air Act, “[a]pplication of the absurd results doctrine to justify an orders-of-magnitude increase in a statutory threshold” is both “unprecedented” and “problematic.”[8]

All said, the Massachusetts and pending CRR v. EPA cases underscore a fundamental paradox: while there is strong precedent to support a finding that GHGs are air pollutants that endanger human health and welfare, it is not clear that the EPA has the statutory tools at its disposal under the CAA to reasonably regulate GHGs. To be sure, this is an issue that will be litigated for many years to come.