D.C. Court of Appeals Dismisses Challenges to EPA Climate Regulation

By: Danielle Sugarman, Fellow

On Tuesday, June 26, 2012, in a major victory for the environment and President Obama’s Administration, the U.S. Court of Appeals for the District of Columbia Circuit dismissed a series of challenges to EPA’s body of greenhouse gas regulation.  The cases, called Coalition for Responsible Regulation v. EPA, were brought by various states and industry groups.

In Massachusetts v. EPA, 549 U.S. 497 (2007), the Supreme Court held that greenhouse gases “unambiguous[ly]” may be regulated as an “air pollutant” under the Clean Air Act (CAA), (id. at 529), and that EPA had a “statutory obligation” to regulate harmful greenhouse gases. (Id. at 534). In direct response, EPA then issued an Endangerment Finding, in which it determined that greenhouse gases may “reasonably be anticipated to endanger public health or welfare.” See 42 U.S.C. § 7521(a)(1). This finding led to the promulgation of a series of greenhouse gas-related rules.  First, EPA issued the Tailpipe Rule, which set emission standards for cars and light-duty trucks.  EPA next determined that the CAA requires major stationary sources of greenhouse gases to obtain construction and operating permits.  However, due to the fact that immediate regulation of all such sources would result in overwhelming permitting burdens on permitting authorities and sources, EPA issued the Timing and Tailoring Rules.  The Timing Rule required that new controls of greenhouse gas emissions from stationary sources be triggered Jan. 2, 2011.  The Tailoring Rule determined that only the largest stationary sources would initially be subject to permitting requirements.

Petitioners challenged all four of these rules, arguing that they were based on improper constructions of the CAA and were otherwise arbitrary and capricious.  However, the three-judge panel, which included Chief Judge David Sentelle, a conservative appointed by President Reagan, Judge Judith Rogers and Judge David Tatel, both Clinton appointees, concluded that: 1) the Endangerment Finding and Tailpipe Rule were neither arbitrary nor capricious; 2) EPA’s interpretation of the governing CAA provisions was unambiguously correct; and 3) no petitioner had standing to challenge the Timing and Tailoring Rules.  The court dismissed for lack of jurisdiction all petitions for review of the Timing and Tailoring Rules, and denied the remainder of the petitions.  The major points of reasoning behind the courts holdings are explained below.

1) The Endangerment Finding and Tailpipe Rule are Neither Arbitrary Nor Capricious

In arguing that the Endangerment finding was arbitrary and capricious, Industry Petitioners alleged that EPA “improperly interpreted CAA § 202(a)(1) as restricting the Endangerment Finding to a science-based judgment devoid of considerations of policy concerns and regulatory consequences.”  (Decision at 22-23).  In reaching its decision, the appeals court ruled that Petitioners’ contentions were foreclosed by the language of the statute and the Supreme Court’s decision in Massachusetts v. EPA.  The court reasoned that Massachusetts v. EPA required only that the endangerment evaluation “relate to whether an air pollutant ‘cause[s], or contribute[s] to, air pollution which may reasonably be anticipated to endanger public health or welfare.’” (Decision at 23).  “These questions require a ‘scientific judgment’ about the potential risks greenhouse gas emissions pose to public health or welfare—not policy discussions.”  (Decision at 23, quoting Massachusetts v. EPA, 549 U.S. at 549).  The court reiterated that, as in Massachusetts v. EPA, a “‘laundry list of reasons not to regulate’ simply has ‘nothing to do with whether greenhouse gas emissions contribute to climate change.’” (Decision at 25). So long as EPA grounded its reasons for action in the statute, its obligations had been met.

Additionally, State and Industry Petitioners asserted that EPA improperly “delegated” its judgment to the IPCC, USGCRP, and NRC by relying on these assessments of climate-change science.  The appeals court disagreed, finding that EPA had properly sought out and reviewed existing scientific evidence to determine whether a finding of endangerment was warranted.  The court stated that “EPA is not required to re-prove the existence of the atom every time it approaches a scientific question.”  (Decision at 28).  Rather, the court gives “an extreme degree of deference to the agency when it is evaluating scientific data within its technical expertise.” (Decision at 28).  Furthermore, the court also rejected Petitioners’ attempts to invoke Petitions for Reconsideration of series of internal emails and documents stolen from the University of East Anglia’s Climate Research Unit (CRU) as proof that the scientific evidence supporting the Endangerment Finding was undermined.  The court found that EPA had properly considered these documents and agreed that the documents “were exaggerated, contradicted by other evidence, and not a material or reliable basis for questioning the credibility of the body of science at issue . . . .” (Decision at 37).

Similarly, the court dismissed the Petitioners’ contention that the scientific evidence left too much uncertainty to support the Endangerment Finding.  The court stressed that “[r]equiring that EPA find ‘certain’ endangerment of public health or welfare before regulating greenhouse gases would effectively prevent EPA from doing the job Congress gave it . . . utilizing emission standards to prevent reasonably anticipated endangerment from maturing into concrete harm.” (Decision at 31).  Ultimately, “[a]waiting certainty will often allow for only reactive, not preventive, regulation,” (Decision at 31, quoting Ethyl Corp. v. EPA, 541 F.2d 1, 25 (D.C. Cir. 1976)), and would be contrary to the Statute’s precautionary purpose.

Finally, Petitioners contended that the Endangerment Finding was arbitrary and capricious because EPA did not “define,” “measure,” or “quantify” either the atmospheric concentration at which greenhouse gases endanger public health or welfare, the rate or type of climate change that it anticipates will endanger public health or welfare, or the risks or impacts of climate change, and thus, EPA’s Endangerment finding was a “subjective decision.” (Decision at 33).  In discounting this challenge, the court reasoned that EPA’s failure to “distill this ocean of evidence into a specific number at which greenhouse gases cause ‘dangerous’ climate change is a function of the precautionary thrust of the CAA and the multivariate and sometimes uncertain nature of climate science, not a sign of arbitrary or capricious decision-making.” (Decision at 33).

With regard to the Tailpipe Rule, State and Industry Petitioners contended that in promulgating the Tailpipe Rule EPA relied on an improper interpretation of CAA § 202(a)(1), and was arbitrary and capricious in failing to justify and consider the cost impacts of its conclusion that the Rule triggers stationary-source regulation under the PSD and Title V provisions. (Decision at 39).  The court found that the plain text of 202(a) as well as legal precedent precluded Petitioners’ contentions.  Ultimately, Congress vested a non-discretionary duty on EPA to issue motor vehicle emission standards regardless of stationary-source costs.  (Decision at 40).  Thus, “[h]aving made the Endangerment Finding pursuant to CAA § 202(a) . . . EPA lacked discretion to defer promulgation of the Tailpipe Rule on the basis of its trigger of stationary-source permitting requirements under the PSD program and Title V.”  The Supreme Court’s decision in Massachusetts v. EPA further compelled this interpretation.  (Decision at 41). The plain text of Section 202(a)(1) also negated Industry Petitioners’ contention that EPA had discretion to defer the Tailpipe Rule on the basis of NHTSA’s authority to regulate fuel economy as the Supreme Court dismissed a near-identical argument in Massachusetts v. EPA (Decision at 41).

2) EPA’s Interpretation of the Governing CAA Provisions is Unambiguously Correct

Next Industry Petitioners challenged EPA’s stationary source regulations.  EPA’s historic interpretation of the CAA requires PSD and Title V permits for stationary sources whose potential emissions exceed statutory thresholds for any regulated pollutant—including greenhouse gases.  Industry Petitioners now raised challenges to EPA’s longstanding interpretation of the scope of the permitting requirements for construction and modification of major emitting facilities under CAA Sections 165(a) and 169(1) (“the PSD permitting triggers”). (Decision at 45).  While holding that Petitioners challenges were in fact timely, (Decision at 50) the court went on to uphold EPA’s interpretation of the governing CAA provisions.

The Court summarized that the key substantive provision in the PSD program is CAA Section 165(a) which establishes permitting requirements for “major emitting facilities” located in attainment or unclassifiable regions.  Section 165(a) provides that “[n]o major emitting facility . . . may be constructed in any area to which this part applies” unless the facility obtains a PSD permit.  42 U.S.C. § 7475(a).  To obtain a PSD permit, a covered source must, among other things, install the “best available control technology [BACT] for each pollutant subject to regulation under [the CAA]”- regardless of whether that pollutant is a NAAQS pollutant.  Id. at § 7475(a)(4). (Decision at 52).  Since the Tailpipe Rule became effective, EPA has regulated automotive greenhouse gas emissions under Title II of the Act.  Thus, greenhouse gases are now a “pollutant subject to regulation under” the Act, and, as required by the statute itself, any “major emitting facility” covered by the PSD program must install BACT for greenhouse gases. (Decision at 52-53).

The court reasoned that Congress intended the PSD program to cover all regulated pollutants, regardless of the type of harm those pollutants cause, and therefore, “the PSD program was intended to protect against precisely the types of harms caused by greenhouse gases.” (Decision at 63)  Thus, in light of the PSD program’s broad scope of regulation and the express purposes of the statute consistent with Massachusetts v. EPA, Industry Petitioners’ “attempt to fashion a greenhouse gas-exclusive interpretation of ‘pollutant’ is ‘a plainly unreasonable reading’ of the statute.” (Decision at 63)  Further, the court concluded that “EPA’s 34-year-old interpretation of the PSD permitting triggers is statutorily compelled: a source must obtain a permit if it emits major amounts of any regulated pollutant and is located in an area that is in attainment or unclassifiable for any NAAQS pollutant.”  (Decision at 72).

3) No Petitioner had Standing to Challenge the Timing and Tailoring Rules

With regard to the Timing Rule, the court immediately noted that Petitioners failed to make any real arguments against the rule.  State Petitioners contended that the Timing Rule constituted an attempt “to extend the PSD and Title V permitting requirements to greenhouse-gas emissions.” (Decision at 73)  In rejecting this argument outright, the court stated that greenhouse gases are regulated under PSD and Title V “pursuant to automatic operation of the CAA.”  The purpose of the Timing Rule was simply “to delay the applicability of these programs, providing that major emitters of greenhouse gases would be subject to PSD and Title V permitting requirements only once the Tailpipe Rule actually took effect on January 2, 2011.” (Decision at 73).

As for the Tailoring Rule, EPA announced that it was “relieving overwhelming permitting burdens that would, in the absence of this rule, fall on permitting authorities and sources.”  Thus, instead of immediately requiring permits for all sources exceeding the emissions threshold, EPA decided to “phas[e] in the applicability of these programs to [greenhouse gas] sources, starting with the largest [greenhouse gas] emitters.” (Decision at 74-75).  This phased in approach was supported by three administrative law doctrines: the doctrine of absurd results; the doctrine of administrative necessity; and the one-step-at-a-time doctrine.  (Decision at 76). Petitioners argued that none of these doctrines permit EPA to “depart unilaterally from the [CAA’s] permitting thresholds and replace them with numbers of its own choosing.” (Decision at 76).

However, the court never reached the merits of this argument as it held that Petitioners lacked standing to raise the claims.  The court found that Petitioners failed to establish that the Timing and Tailoring Rules caused them “‘injury in fact,’ much less injury that could be redressed by the Rules’ vacatur.” (Decision at 77).  While the Industry Petitioners argued that they were injured because they are subject to regulation of greenhouse gases and State Petitioners claim injury because they own some regulated sources and because they now carry a heavier administrative burden, the court again explained that the CAA mandates PSD and Title V coverage for major emitters of greenhouse gases.  Thus, “Industry Petitioners were regulated and State Petitioners required to issue permits not because of anything EPA did in the Timing and Tailoring Rules, but by automatic operation of the statute.”  (Decision at 77)  As a result, neither the Timing nor Tailoring Rules caused the injury Petitioners allege – namely – having to comply with PSD and Title V for greenhouse gases.  (Decision at 77).

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