83% of a Loaf Is Better Than None: The Supreme Court Affirms EPA’s Authority to Regulate “Anyway Sources”, But Rejects Regulation of Otherwise Exempt Sources

The Supreme Court today affirmed EPA’s authority to subject 83% of greenhouse gas emissions to its PSD and Title V Operating Permit programs. However, EPA’s rationale for the rule did not fare so well, and EPA does not have authority to regulate GHG emissions from facilities not otherwise subject to PSD review or the Title V program.

To EPA and the court below, the main issue – EPA’s authority – was not difficult. PSD applies to “any regulated air pollutant.” Once EPA issued the tailpipe rule, GHGs became a regulated pollutant. Thus, EPA had not just discretion to regulate GHGs, it had a statutory duty.

The Supreme Court was not persuaded. The Court noted that there are numerous places in the Clean Air Act where EPA has limited the scope of a reference to “any pollutant.” It thus concluded that the definition of “any pollutant” must be context-dependent. Since the context persuaded the Court that the intent of the PSD program was to capture approximately 800 major sources, rather than 80,000 sources (many of them quite small), the Court concluded that the context revealed that EPA was not compelled to regulate GHG under the PSD program.

Turning to EPA’s discretionary authority, the Court concluded that EPA’s rule was not “within the bounds of reasonable interpretation.” Why not? Here, it was the Court which took the literal and simple, if not simplistic, interpretive approach. EPA’s rule just could not be squared with the volume thresholds in the CAA, and that problem could not be solved by the Tailoring Rule, because, the Court concluded, EPA had no authority to make up new exemption thresholds out of whole cloth.

So how did EPA end up with 83% of a loaf? Because sources representing 83% of carbon emissions in the U.S. are major sources for traditional criteria pollutants and thus subject to PSD anyway. Those facilities, when undergoing modifications, must attain BACT “for each pollutant subject to regulation under this chapter.” While the majority was not willing to read “any pollutant” to mean “every pollutant”, it was willing to read “each pollutant subject to regulation under this chapter” to mean “every pollutant.”

Whereas the dubious breadth of “any air pollutant” in the permitting triggers suggests a role for agency judgment in identifying the subset of pollutants covered by the particular regulatory program at issue, the more specific phrasing of the BACT provision suggests that the necessary judgment has already been made by Congress.

Justice Breyer dissented from the first part of the opinion, arguing that the majority itself amended the statute be creating “an atextual greenhouse gas exception to the phrase ‘any air pollutant.’” To Justice Breyer, EPA’s approach, creating an exception for sources based on their size, is truer to the statutory intent than the majority’s exception based on what is an “air pollutant.” There is a certain logic to Justice Breyer’s approach, but it is not surprising that five justices found those clear numerical thresholds in the statute difficult to avoid or ignore.

Which brings us to the real question for the day: what, if anything, does this portend for judicial review of EPA’s NSPS rule for existing sources. EPA and environmental NGOs are pointing to footnote 5, in which Justice Scalia made clear that this decision is not about EPA’s NSPS authority. Opponents of EPA’s NSPS rule emphasize sections of the majority opinion which seem to show great reluctance authorize EPA to regulate energy use or to regulate “outside the fence” of a source’s emissions.

I wouldn’t read too much into this opinion. It is clear that the four justices in the minority will be inclined to support an EPA existing source rule similar to EPA’s draft. It is not clear to me that Scalia, Kennedy, or Roberts would necessarily oppose EPA’s authority. While there is text in the decision seeming to limit EPA to regulating “inside the fence”, it is also clear that EPA’s NSPS rule, which only affects electric utility generating units, does not pose the same kind of interpretive difficulty as the PSD program’s numerical emissions thresholds. I’m still not betting on whether the NSPS rule will survive judicial review, but however you’re handicapping it, I don’t think that UARG v. EPA changes the odds.

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