Supreme Court Rules on Major Greenhouse Gas Regulation

The Supreme Court rejected EPA’s approach to regulating greenhouse gases (GHGs) for smaller sources. At the same time, though, it gave EPA what it really wanted – the authority to regulate the GHGs emitted by sources already deemed “major.”

Because GHGs are subject to regulation under the Clean Air Act (CAA), EPA believed it had to regulate all sources of GHGs, both large and small. However, there are millions of small sources of GHGs that would become subject to the CAA based solely on their emissions of GHGs. Regulating this many sources would create an enormous permitting burden on regulatory agencies and would also contradict the intent of Congress.

In what EPA calls the Tailoring Rule, EPA tried to strike a balance between regulation of larger sources and the eventual regulation of smaller sources. Larger sources were those that were already subject to permitting requirements by virtue of their emissions of non-GHG pollutants like sulfur dioxide. These are major sources of air emissions, which account for approximately 85 percent of GHG emissions. EPA called these larger sources “anyway” sources because they were subject to the CAA anyway as major sources of non-GHG pollutants. Smaller sources (non-major sources) have generally not been subject to permitting based on their non-GHG emissions.

In the Tailoring Rule, for major sources emitting over 100,000 tons per year of GHG, EPA imposed requirements on these “anyway” sources to include their GHG emissions in permits. EPA did not immediately impose regulation on the smaller sources but pledged to issue future rules dealing with these sources. As with most of EPA’s rules, the Tailoring Rule was appealed. The Supreme Court recently ruled on its validity.

For smaller sources, the Supreme Court found they could not be subjected to permitting requirements on the sole basis of their emissions of GHG. Essentially, the Supreme Court found EPA’s regulation of GHG was not justified as an exercise of its discretion to adopt a reasonable construction of the CAA. EPA had previously acknowledged applying permitting requirements to GHGs “would be inconsistent with – in fact, would overthrow – the act’s structure and design.” Further, such regulation would bring about an enormous expansion in EPA’s regulatory authority without clear congressional authorization. In sum, EPA had “no power to ‘tailor’ legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.” In doing so, EPA went “well beyond the bounds of its statutory authority.”

For the larger, “anyway” sources, the Supreme Court held EPA could impose best available control technology (BACT) requirements on them in order to limit their GHG emissions. The Supreme Court found, under the express and clear wording of the CAA, BACT is required for each pollutant subject to regulation under the CAA. As GHGs are subject to the CAA, BACT is required. The Supreme Court’s “narrow holding is nothing in the statute categorically prohibits EPA from interpreting the BACT provision to apply to GHGs emitted by ‘anyway’ sources.”

The Supreme Court’s decision should be a welcome one for smaller sources such as small businesses. They will not be required to obtain permits based solely on their emissions of GHGs. In fact, to do so would be against the intent of Congress. On the other hand, EPA is authorized to regulate GHG emissions from the larger, “anyway” sources. This means, in all likelihood, EPA’s regulation of new and existing fossil fuel-fired power plants will continue unabated.

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