We Still Don’t Need No Stinkin Cooperative Federalism: The D.C. Circuit Court of Appeals Holds that GHG Sources Require PSD Permits Even Absent a State Implementation Plan

Last Friday, I posted about the limits to EPA’s cooperation with states in the name of “cooperative federalism” under the Clean Air Act.  On the same day, in Texas v. EPA, the D.C. Circuit Court of Appeals only emphasized my point, by affirming EPA’s assertion of PSD permitting jurisdiction in Texas and Wyoming in the face of those states’ failure to prepare state implementation plans to incorporate permitting programs to implement EPA’s greenhouse gas rules under the PSD program.

The crux of the court’s holding was that § 165(a) of the CAA is self-executing, and requires sources newly regulated under the CAA to obtain a permit prior to construction with regard to each pollutant subject to regulation under the Act.  Texas and Wyoming (and some industry groups) had argued that EPA’s own regulations provide states with 3 years to revise their SIPs to address newly regulated pollutants.  No such luck.  The Court concluded that the regulations did not unambiguously provide states with the 3 year window and that, in any case, the regulations could not override the statute.

As the Court noted, § 165(a) provides that:

No major emitting facility on which construction is commenced after August 7, 1977, may be constructed in any area to which this part applies unless–

(1) a permit has been issued for such proposed facility….

On this language, the Court determined, under step 1 of its Chevron analysis, that the statute is unambiguous:

By its plain terms, CAA § 165(a) prohibits construction of a major emitting facility absent a Part C PSD permit that requires, inter alia, BACT for each pollutant subject to regulation under the Act. Its prohibition applies directly to stationary sources….

Once the Court found that § 165(a) is self-executing, its conclusions about the merits flowed directly.  Because affected sources require GHG permits even absent a SIP, the Court found that Texas and Wyoming were not harmed by EPA’s rules, and thus had no standing.

Because CAA § 165(a) is self-executing, construction of a major emitting facility could not commence … without a PSD permit…. The challenged rules operated to fill a permitting gap in several States and thereby ensure that a permitting authority existed to issue necessary PSD permits. Vacating the challenged rules would mean neither those States nor EPA could issue greenhouse gas PSD permits, and construction of a major emitting facility could not proceed in those States.

Industry petitioners premise their standing on the contention that without the challenged rules industry would not have been subject to PSD requirements for greenhouse gases in those several States until they revised their SIPs and EPA approved them. But because by its plain text CAA § 165(a) is self-executing, industry petitioners’ purported injury was caused by automatic operation of the Act, not the challenged rules. The challenged rules mitigated the injury that otherwise would have occurred when industry petitioners could not obtain lawful PSD permits in those States.

Judge Kavanaugh dissented and I certainly would not be shocked to see a petition for en banc review.  However, for now, EPA’s rules stand.  There are limitations on how much EPA must cooperate with states under the CAA.

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