Decision comes as next big legal challenge to EPA looms on horizon
By Kimberly Atkins
The Daily Record Newswire
WASHINGTON, DC — States and business groups challenging controversial Environmental Protection Agency regulations aimed at curbing greenhouse gas emissions won a battle, but largely lost the war, after a U.S. Supreme Court ruling left the agency’s regulatory scheme largely intact.
“The court’s holding confirms that the EPA can use the Clean Air Act to regulate greenhouse gas emissions for 83 percent of stationary emission sources,” said Todd E. Palmer, a member of the energy practice group at Michael Best & Friedrich in Milwaukee.
But the justices issued a stern warning in Utility Air Regulatory Group v. EPA, No. 12-1146, that the agency cannot overstep the limits established by Congress.
“The Supreme Court gave a stinging and devastating rebuke to EPA’s grand design of regulating the entire American economy on the basis of greenhouse gases,” said Richard O. Faulk, a partner at Hollingsworth in Washington, D.C.
The decision comes as the next big legal challenge to EPA regulations looms on the horizon. The agency is finalizing its proposed Clean Power Plan, a set of regulations unveiled earlier this month aimed at cutting carbon pollution from power plants. Business groups cannot challenge the rules until they are finalized next year, but attorneys are already prepping to file suit in federal court as soon as that happens.
“The Clean Power Plan that EPA proposed very clearly will be a rule that will have vast economic and political significance going forward,” Palmer said.
‘A wrong interpretive turn’
The regulations at issue, which were implemented by the EPA early in the Obama administration, came two years after the Supreme Court’s 2007 ruling in Massachusetts v. EPA, which held that the agency was statutorily required to regulate greenhouse gases as air pollutants under the Clean Air Act.
In 2009, the EPA issued the “Tailpipe Rule,” which set emissions standards for cars and light trucks.
According to the EPA, the automobile regulations automatically triggered its obligation also to regulate greenhouse emissions from stationary sources, such as power plants, under two CAA provisions: the Prevention of Significant Deterioration (PSD) of Air Quality provision; and the Stationary Source Operation Permit program of Title V.
Those regulations quickly followed, but in an effort to prevent them from affecting smaller stationary sources such as apartment buildings, churches and small businesses, the EPA also issued a “Tailoring Rule,” which raised the minimum amount of emissions that would trigger the rules.
Still, several states and business industry groups challenged the law in federal court, accusing the EPA of exceeding its authority under the CAA. The U.S. Court of Appeals for the D.C. Circuit ultimately ruled in the agency’s favor, finding the regulations were rational and legally permissible under the CAA.
The Supreme Court granted certiorari to resolve two questions: whether the agency can subject stationary pollution sources to PSD and Title V permitting requirements (and its “Tailoring Rule”) solely on the basis of the source’s potential to emit greenhouse gases; and whether sources already subject to PSD permitting because of their emission of other kinds of pollutants (so-called “anyway” sources) can also be required to employ the “best available technology” for greenhouse gases.
In a 7-2 decision, the court answered “no” to the first question, and “yes” to the second.
The agency “lacked authority to ‘tailor’ the Act’s unambiguous numerical thresholds to accommodate its greenhouse-gas-inclusive interpretation of the permitting triggers,” Justice Antonin Scalia wrote for the majority. “Instead, the need to rewrite clear provisions of the statute should have alerted EPA that it had taken a wrong interpretative turn.”
While the ruling does strike down one of the EPA’s rules, the actual effect is small: roughly 83 percent of the country’s stationary-source greenhouse gas emissions comes from “anyway” sources that are governed by the provision that survived Supreme Court scrutiny. Just 3 percent would have been covered by the other rule. In announcing the decision, Scalia pointed out that the EPA got “almost everything it wanted in this case.”
That did not stop those on both sides of the issue from claiming victory.
Oklahoma Attorney General Scott Pruitt, one of several state officials who joined private sector industry groups in challenging the regulations, called the ruling “a major victory.”
“In siding with Oklahoma, the Supreme Court has placed an important check on the EPA and preserved state authority under the Clean Air Act,” Pruitt said in a statement.
EPA General Counsel Avi S. Garbow had a different take.
“Today’s Supreme Court decision is a resounding win for EPA,” Garbow said, noting that it “largely upheld EPA’s approach to requiring that carbon pollution be addressed in permits for large emitters, such as power plants and refineries.”
Officials from states who supported the EPA as amicus in the case echoed Garbow’s sentiment.
“We are pleased by the court’s continued recognition of the EPA’s authority to address dangerous greenhouse gas pollution,” Massachusetts Attorney General Martha Coakley said in a statement.
Warning to the EPA
Regardless of who claims victory in the case, five of the court’s justices joined a part of the opinion that essentially gave a warning to the EPA that overly broad interpretations of the agency’s own power would be carefully scrutinized.
“When an agency claims to discover in a long-extant statute an unheralded power to regulate a significant portion of the American economy, we typically greet its announcement with a measure of skepticism,” Scalia wrote in a section of the opinion joined by four other justices. “Since, as we hold above, the statute does not compel EPA’s interpretation, it would be patently unreasonable — not to say outrageous — for EPA to insist on seizing expansive power that it admits the statute is not designed to grant.”
Palmer said that statement almost guarantees a challenge to the upcoming Clean Power Plan.
“This decision suggests that the Supreme Court will review EPA’s Clean Power Plan with that degree of skepticism,” Palmer said.
Faulk, who also serves as senior director of Energy and Environment Initiatives at the Law and Economics Center of George Mason University School of Law, said that the Supreme Court’s admonition to the EPA is good news for small businesses, which he said can get caught in the agency’s aggressive efforts to address climate change.
“Ultimately, those businesses faced potential regulation and expensive permitting,” Faulk said.
But like the parties at issue in the case, experts disagree on who came out on top in one of the most highly anticipated rulings of the term.
Faulk called the decision “a victory for common sense and plain language — and a profound loss for regulators who erroneously believed that the Clean Air Act was endlessly elastic.”
Palmer, however, called the decision a mixed bag for the EPA.
“As Justice Scalia said in his announcement, the court largely gave EPA what it wanted. … Smaller sources clearly benefit from [the] ruling, but I don’t think the EPA intended to regulate churches.”
