The Clean Air Act And The Basis for Regulation of Greenhouse Gases–Part 2

Rulemakings Following Massachusetts

After Massachusetts, EPA embarked on the process of grounding its reasons for action in the statute, as directed by the Supreme Court. In July, 2008, EPA published an Advanced Notice of Proposed Rulemaking (ANPR) in which it solicited comments on “a wide variety of issues regarding the potential regulation of greenhouse gases under the CAA.” [60] Interestingly, the “ANPR also contained a summary of much of the work EPA had done in 2007 regarding draft greenhouse gas emission standards for light duty vehicles and trucks under section 202(a) of the Act.” [61] The fact that work was done in 2007 on such standards seems to imply that, at least informally, a ‘judgment’ under Section 202 had already been made.

After reviewing the comments received pursuant to the ANPR, EPA formally announced its ‘judgment’ under Section 202, the ‘Endangerment and Cause or Contribute Finding,’ that GHG “cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.” [62] Having made that ‘judgment,’ EPA then issued regulations as required by Section 202, the ‘Light-Duty Vehicle Rule,’ which set emission standards for cars and light trucks. [63] Thereafter, EPA issued two rules, the ‘Timing Rule’ and the ‘Tailoring Rule,’ which expanded the regulation of GHGs to the PSD and Title V Programs. [64]

A.  The Endangerment and Cause or Contribute Finding

Under Section 202, if EPA was to promulgate regulations prescribing standards applicable to the emission of any air pollutant from new motor vehicles or engines, a ‘judgment’ was required that an air pollutant causes, or contributes to, air pollution which may reasonably be anticipated to endanger public health or welfare. EPA interpreted Section 202 as requiring “two separate determinations: first, whether air pollution may reasonably be anticipated to endanger public health or welfare, and second whether emissions of any air pollutant from new motor vehicles or engines cause or contribute to this air pollution.” [65]

The ‘judgment’ to be made by EPA applies to both the ‘may reasonably be anticipated’ and the ’cause or contribute’ determinations as it “modifies both” phrases in Section 202. [66] Thus, in each determination, EPA weighed risks, assessed potential harms, and made reasonable projections of future trends and possibilities. [67] EPA felt it was required to balance “the likelihood and severity of effects” on a sliding scale. [68] To properly strike this balance, EPA stated that it must exercise reasoned decision making and avoid speculative inquires, while acknowledging uncertainties and limitations on available data and information. [69]

1.  Endangerment

The first determination under Section 202 requires a finding that air pollution may reasonably be anticipated to endanger public health or welfare.

EPA defined the ‘air pollution’ at issue as the six main greenhouses gases: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. [70] EPA included these gases together because, among other things, their common properties regarding climate effects, the estimation that these gases are the primary cause of human-induced climate change, and the expectation that they will remain the key driver of future climate change. [71]

EPA regarded the phrase ‘may reasonably be anticipated to endanger’ to encompass “current and future risks.” [72] The statutory language of Section 202, in EPA’s estimation, did not require EPA to “merely react to harm or to act only when certainty has been achieved.” [73] Indeed, if EPA “did not act to prevent harm or to act in conditions of uncertainty,” EPA would “abjure the Administrator’s statutory responsibilities.” [74]

In arriving at this interpretation, EPA relied heavily on the decision in Ethyl Corp. v. EPA. [75] In Ethyl Corp., the court considered EPA’s authority to promulgate regulations regarding lead in gasoline, which were based on Section 211 of the Act as it existed at that time. Section 211 authorized such regulations if the additive “will endanger the public health or welfare.” [76] The court found that the word ‘endanger’ “means something less than actual harm” and thus, when a “statute allow[s] for regulation in the face of danger [it] is, necessarily, a precautionary statute.” [77] EPA also noted that the legislative history of Section 202 confirmed that Congress, in amending Section 202 in 1977, itself relied heavily on the decision in Ethyl Corp. to make it clear that Section 202 was intended to be preventative in nature by including the ‘may reasonably be anticipated to endanger’ phrase. [78]

EPA noted that there are no definitions in the CAA of ‘public welfare’ or ‘public health.’ As to public welfare, the definition of ‘effects on welfare’ in Section 302 “is quite broad” and includes, among other things, effects on weather and climate. [79] Public health simply means “the health of the public.” [80] As to public health, EPA has looked at mortality and morbidity, such as impairment of lung function and other acute and chronic effects. [81]

Based on its interpretation of the statutory text, EPA easily arrived at its ‘judgment’ that elevated concentrations of greenhouse gases in the atmosphere may reasonably be anticipated to endanger the public health and to endanger the public welfare of current and future generations. [82] Public health impacts included increased risk of mortality and morbidity from, among other things, direct temperature effects, air quality effects, the potential for changes in vector-borne diseases, and the potential for changes in the severity and frequency of extreme weather events. [83] Public welfare impacts “climate-sensitive sectors,” such as food production and agriculture, forestry, water resources, sea level rise and coastal areas, energy, infrastructure, and settlements, and ecosystems and wildlife. [84]

2.  Cause or Contribute

The second determination under Section 202 involves whether emissions of any air pollutant from new motor vehicles or engines cause or contribute to this air pollution.

In making this determination, EPA made it clear that the statutory text merely requires a finding that the air pollutant need only ‘contribute’ to air pollution as it “clearly indicates a lower threshold than the sole or major cause. [85] Indeed, the contribution need not be significant. [86] Although there may be some threshold level of contribution below which EPA might not act, EPA has ample discretion in the exercise of its judgment whether, under the circumstances presented, the cause or contribute criterion has been met. [87]

EPA defined the term ‘air pollutant’ as the same six greenhouse gases comprising the ‘air pollution.’ In including all six, EPA noted that the definition of ‘air pollutant,’ which the Supreme Court described as ‘sweeping’ and ‘capacious,’ includes any “combination of [air pollutant] agents.” [88] EPA also regarded the term ‘air pollutant’ as the same as ‘air pollution.’ In doing so, EPA explained that ‘air pollution’ should be thought of “as the total, cumulative stock in the atmosphere, while the air pollutant can be thought of as the flow that changes the size of the total stock.” [89]

As to the source categories of new motor vehicles or engines, EPA included passenger cars, light-duty trucks, motorcycles, buses, and medium and heavy-duty trucks. Based on its data, EPA noted that four percent of total global greenhouse gas emissions and just over twenty-three percent of total U.S. greenhouse gas emissions are emitted from this source category. [90] Clearly, then, this source category contributed to the total, cumulative stock of greenhouse gases in the atmosphere.

Based on its interpretation and facts, EPA again easily arrived at its ‘judgment’ that “CAA Section 202(a) source categories contribute to air pollution that may be reasonably anticipated to endanger public health and welfare.” [91] Interestingly, this determination is one of contribution rather than cause.

B.  The Light-Duty Vehicle Rule

After issuing the Endangerment and Cause or Contribute Finding and making its ‘judgment’ under Section 202, EPA turned its attention to the mandatory requirement in Section 202, namely, that it prescribe standards applicable to the emission of GHG from new motor vehicles or engines. It initially did so for light-duty vehicles and later, for heavy-duty vehicles.

On May 7, 2010, EPA published emission standards for light-duty vehicles for model years 2012 – 2016. [92] These vehicles include passenger cars, light-duty trucks, and medium-duty passenger vehicles. EPA estimated that the standards would reduce 960 million metric tons or total carbon dioxide equivalent over the lifetime of the vehicles sold in those model years, a twenty-one per cent reduction by 2030 from the light-duty fleet without the imposition of the standards. [93]

C.  Timing Rule

The Endangerment and Cause or Contribute Rule and the subsequent Light Duty Vehicle Rule applied to mobile sources and were grounded in the text of Section 202. However, in order to regulate greenhouse gases emitted from stationary sources under the PSD or Title V Programs, statutory provisions beyond Section 202, or an interpretation of those provisions, was required. The Timing Rule provided that framework.

Under PSD Program, a regulated pollutant includes “any pollutant that otherwise is subject to regulation under the Act.” [94] The CAA specifies that major facilities are “subject to the best available control technology for each pollutant subject to regulation under this chapter emitted from, or which results from, such facility.” [95]

After Massachusetts, “issues were raised regarding the scope of pollutants that should be addressed in PSD permitting.” [96] In other words, guidance was required as to what pollutants were subject to regulation under the PSD Program, and specifically whether GHG were so regulated. To address these issues, EPA initially issued the PSD Interpretative Memo in December, 2008, setting forth its interpretation in that regard, and then issued the Timing Rule, which slightly modified the PSD Interpretative Memo after EPA granted a petition to reconsider the PSD Interpretative Memo. [97]

EPA declared that a pollutant is subject to regulation, and thus a regulated pollutant under the PSD Program, when it is “subject to a provision in the Act or regulation adopted by EPA under the Act that requires actual control of emissions of that pollutant.” [98] EPA excluded from the definition those pollutants for which EPA requires only monitoring or reporting. [99]

In the PSD Interpretive Memo, EPA noted that this interpretation was of long-standing. Among other things, it reviewed prior PSD permits, finding that emission limits had only been included in permits “for pollutants subject to regulations requiring actual control of emissions” and that none had included pollutants requiring only monitoring or reporting requirements. [100] In fact, EPA noted that regulations had been in place since 1993 requiring monitoring and reporting of carbon dioxide emission, but no permit had required emission limitations. [101]

EPA also felt that it was important to address “the precise point in time when a pollutant becomes subject to regulation.” [102] The PSD Interpretive Memo decreed that the fourth part of the definition of regulated pollutant (i.e., any pollutant that otherwise is subject to regulation under the Act) applies “to a pollutant upon promulgation of a regulation that requires actual control of emissions.” [103] The Timing Rule modified this conclusion to require that a pollutant becomes subject to PSD Program requirements “when the first controls on a pollutant take effect.” [104]

EPA then addressed the timing of regulation of GHG under the PSD Program. Based on its conclusion that air pollutants become ‘subject to regulation’ when the regulation requiring actual control ‘takes effect,’ EPA concluded that “GHGs will initially become ”subject to regulation’ under the CAA on January 2, 2011.” [105] This date is the earliest date on which a light-duty vehicle to which the Light Duty Vehicle Rule applied (the 2012 models) could be introduced in commerce. [106]

To arrive at the January 2, 2011 date, EPA relied on other provisions of the CAA which require that a vehicle manufacturer may not introduce a specific model year vehicle without a certificate of conformity for that model year. [107] The certificate of conformity applies only to vehicles produced in that model year, and for model year 2012, the production period may begin no earlier than January 2, 2011. [108]

Thus, January 2, 2011 is the very first date that a 2012 model year vehicle may be introduced into commerce. [109] As the first model year to which the Light Duty Vehicle Rule applies is 2012, and since no model may be introduced into commerce before January 2, 2011, that date is the date the Light Duty Vehicle Rule ‘takes effect.’ [110]

D.  The Tailoring Rule

In the Timing Rule, EPA bound itself to the application of GHGs to the PSD Program. However, it also recognized that, in doing so, it was creating “overwhelming permitting burdens that would … fall on permitting authorities and sources.” [111] Thus, to relieve this burden, EPA tailored “the applicability criteria that determine which GHG emission sources become subject to the PSD and title V programs.” [112] Instead of an immediate application which would affect very small sources, EPA decided on a phased-in approach to applicability and applied the first two steps of that approach to the largest emitters of GHGs. [113]

As noted above, the 100/250 TPY Threshold applies under the PSD Program. PSD applies to 28 source categories which emit or have the potential to emit 100 tons per year or more of any pollutant subject to regulation under the CAA or any other source which emits or has the potential to emit such pollutants in amounts equal to or greater than 250 tons per year. [114] GHGs are emitted in amounts greater than 250 TPY by multiple types of smaller sources, each of which would require permits if the CAA was applied literally.

EPA indicated that tens of thousands of such sources would be brought within the ambit of the PSD Program and millions within the ambit of the Title V Program. [115] EPA found that sources would expend tens of thousands of dollars preparing permit applications. For example, the costs to the average commercial or residential source would be at least $59,000. [116] Additionally, there would be a massive increase in the number of applications which must be processed by state agencies. [117]

To avoid this result, EPA announced three steps in the phase-in for all sources and the judicial and administrative law doctrines “that authorize departure from a literal application of the statutory provisions.” [118]

1.  The Three Steps

In the Tailoring Rule, EPA established the first two phases of its phase-in approach, which it called Step 1 and Step 2. [119] For Step 3, it committed to apply PSD and Title V to additional sources by July 1, 2013 based on a final rule to be issued no later than July 1, 2012. [120]

Step 1 of the phase-in began on January 2, 2011, the date the Light Duty Vehicle Rule took effect. [121] As to PSD, a GHG source “will become subject to PSD for their GHG emissions if they undergo PSD permitting anyway [for new construction or modifications] based on emissions of non-GHG pollutants.” [122] Even then, these projects would need to address their GHG emissions only “if they increase GHG emissions by 75,000 TPY CO2e or more.” [123] In other words, a source that would otherwise be subject to PSD based on its non-GHG emissions would be subject to PSD based on its GHG emissions only if its GHG emissions were greater than 75,000 TPY CO2e. These sources were referred to as ‘anyway PSD sources’ because they were subject to PSD ‘anyway’ due to their non-GHG emissions. [124] EPA made it clear that no source would become subject to PSD “based solely on their GHG emissions.” [125]

As to Title V, “only sources required to have title V permits for non-GHG pollutants will be required to address GHGs as part of their title V permitting.” [126] EPA named these sources ‘anyway title V sources.’ It again made clear that “no sources will become major for title V based solely on their GHG emissions.” [127]

Step 2 began on July 1, 2011 and applied to the ‘anyway’ sources previously subject to regulation under Step 1. As to PSD, any new source with the potential to emit over 100,000 TPY CO2e would be considered a major source for PSD permitting, even if the project did not exceed the permitting threshold for non-GHG pollutants. [128] Also, any physical change at a major source which results in a net GHG emission increase of 75,000 TPY CO2e will be subject to PSD review and requirements with respect to GHGs, even if they do not increase emissions of non-GHG pollutants. [129] As to Title V, GHG sources with emissions greater than 100,000 TPY CO2e will be required to obtain a Title V permit, even if they were not required to obtain a permit based on non-GHG pollutants. [130]

As to Step 3 for smaller sources, EPA established an “enforceable commitment to complete another rulemaking by July 1, 2012.” [131] The rule making would solicit comments or proposed lower thresholds for PSD and Title V applicability, which would take effect by July 1, 2013. [132]

2. Justification for Departure

In order to depart from the literal wording of the CAA and avoid the consequences of applying the CAA as written to the “extraordinarily large number of small sources” emitting GHG above the 100/250 TPY Threshold, EPA invoked and relied on three judicially created ‘doctrines.’ [133] EPA determined that, together, they “authorize departure from a literal application of statutory provisions.” [134]

The ‘absurd results’ doctrine “authorizes such a departure if the literal application would produce a result that is inconsistent with congressional intent, and particularly if it would undermine congressional intent.” [135] The ‘administrative necessity’ doctrine “authorizes an agency to depart from statutory requirements if the agency can demonstrate that the statutory requirements, as written, are impossible to administer.” [136] The ‘one-step-at-a-time’ doctrine “authorizes an agency, under certain circumstances, to implement a statutory requirement through a phased approach.” [137]

The application of the ‘absurd results’ doctrine seemingly contradicted the two-step process established by the Supreme Court, called the Chevron analysis after the case in which it was articulated, to determine whether an agency’s interpretation of a statute was permissible. [138] Under Step 1 of the Chevron analysis, the agency must determine whether Congress’s intent is clear; if so, the agency is bound by and must follow that intent. Under Step 2 of the Chevron analysis, which is invoked if the intent is not clear, the agency must provide a reasonable interpretation of the statute.

EPA acknowledged that the “best indicator of congressional intent [is] the plain meaning of the statute.” [139] Here, the plain wording of the 100/250 TPY Threshold seems to provide a clear expression of congressional intent that sources emitting more than the threshold limits of GHG should be regulated under the PSD Program. However, EPA noted that courts may examine, among other things, “whether a literal application of the provisions produces a result that the courts characterize variously as absurd, futile, strange, or indeterminate, and therefore so illogical or otherwise contrary to sensible public policy as to be beyond anything Congress would reasonably have intended. In such cases, the literal language cannot be said to reflect the intention of the drafters, and therefore does not control.” [140] EPA concluded that applying the statute literally “would be contrary to congressional purpose … as found in the statutory provisions and legislative history. [141] Thus, EPA avoided a literal interpretation by concluding that Congress could not have intended the ‘absurd result’ that smaller sources of GHG be immediately subject to the PSD and Title V Programs.

The application of the ‘administrative necessity’ in the Tailoring Rule is apparent. EPA estimated a large increase in PSD and Title V permitting, thus making it “impossible [for permitting authorities] to administer programs of these sizes as of” January 2, 2011. [142] EPA justified the application of the ‘one-step-at-a-time’ doctrine, embodied in the phased-in approach of Step 1 and Step 2 of the Tailoring Rule, because EPA’s compliance with the literal wording of the CAA “depends on facts, policies, or future events that are uncertain,” EPA “estimated the extent of its remaining obligation,” the phased-in approach is “structured in a manner that is reasonable in light of the uncertainties,” and EPA “is on track to full compliance with the statutory requirements.” [143]

EPA concluded that each doctrine was consistent with Chevron Step 1 as Congress could not have intended ‘absurd results’ and otherwise intended for the permitting programs to be administrable. [144] Further, in light of the absurd results and insurmountable administrative burden, congressional intent was not to apply the PSD and Title V Programs to all sources when GHG become subject to regulation, thus allowing the application of a phased approach. [145]

EPA also recognized that congressional intent may be unclear. Thus, under Chevron Step 2, EPA also asserted it had discretion “to adopt the Tailoring Rule because it is a reasonable interpretation of the statutory requirements.” [146]

Utility Air Regulatory Group v. EPA

Petitions to review all the above-mentioned GHG Rules were filed and consolidated in the United States D.C. Court of Appeal. A single decision was issued. [147] In Coalition for Responsible Regulation, the D.C. Circuit upheld the Endangerment and Cause or Contribute Finding and Light-Duty Vehicle Rule and found that the petitioners did not have standing to contest the Timing and Tailoring Rules.

From that decision, the Supreme Court granted review of a single, narrow question:

Whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases. [148]

In other words, does the regulation of GHG emissions from vehicles (the Light Duty Vehicle Rule) mandate that GHG must also be regulated under the PSD and Title V Programs. In deciding this issue in Utility Air Regulatory Group v. EPA, the Supreme Court seems to have rejected the Timing Rule and invalidated the Tailoring Rule, except for the authority to impose BACT on ‘anyway’ sources. [149]

In Utility Air, the Supreme Court identified “two distinct challenges to EPA’s stance on greenhouse-gas permitting for stationary sources. First, we must decide whether EPA permissibly determined that a source may be subject to the PSD and Title V permitting requirements on the sole basis of the source’s potential to emit greenhouse gases. Second, we must decide whether EPA permissibly determined that a source already subject to the PSD program because of its emission of conventional pollutants (an ‘anyway’ source) may be required to limit its greenhouse-gas emissions by employing the ‘best available control technology’ for greenhouse gases.” [150]

In responding to the first challenge, the Supreme Court addressed whether the CAA mandated regulation of GHG within the PSD and Title V Programs, whether EPA had discretion to do so, and whether EPA acted contrary to the statute by doing so.

The Supreme Court first addressed EPA’s position that the CAA compelled or mandated regulation of GHG under the PSD and Title V Programs, once GHGs were regulated under Section 202. EPA’s interpretation that the inclusion of GHG within the Act-wide definition of ‘air pollutant’ meant that GHGs were included wherever the term ‘air pollutants’ is found, including the PSD and Title V Programs. The Supreme Court found, however, that EPA had routinely given the term ‘air pollutant’ a “narrower, context-appropriate meaning.” [151] For example, EPA has never regulated steam, oxygen, or other harmless substances, so “it takes some cheek for EPA to insist that it cannot possibly give ‘air pollutant’ a reasonable, context-appropriate meaning in the PSD and Title V contexts when it has been doing precisely that for decades.” [152]

The sweeping, Act-wide definition of ‘air pollutant’ “is not a command to regulate, but a description of the universe of substances EPA may consider regulating under the Act’s operative provisions” and the Massachusetts decision “does not strip EPA of authority to exclude greenhouse gases from the class of regulable air pollutants under other parts of the Act where their inclusion would be inconsistent with the statutory scheme.” [153] Therefore, the Supreme Court held that the CAA does not bar EPA from concluding that “the permitting triggers of PSD and Title V to encompass only pollutants emitted in quantities that enable them to be sensibly regulated at the statutory thresholds, and to exclude those atypical pollutants that, like greenhouse gases, are emitted in such vast quantities that their inclusion would radically transform those programs and render them unworkable as written.” [154] Thus, the CAA did not compel or mandate the regulation of GHG under the PSD and Title V Programs just because GHGs were regulated under Section 202.

The Supreme Court next turned to whether EPA’s regulation of GHG within the PSD and Title V Programs was justified as an “exercise of its discretion to adopt ‘a reasonable construction of the statute.'” [155] The Supreme Court noted that, even under the deferential Chevron framework, “agencies must operate ‘within the bounds of reasonable interpretation.'” [156] Even EPA had acknowledged that applying PSD and Title V permitting requirement to GHG “would be inconsistent with – in fact, would overthrow – the Act’s structure and design.” [157] Indeed, doing so was “beyond reasonable debate” because “the PSD program and Title V are designed to apply to, and cannot rationally be extended beyond, a relative handful of large sources capable of shouldering heavy substantive and procedural burdens.” [158] Further, EPA’s “interpretation is also unreasonable because it would bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization.” [159]

Finally, contrary the 100/250 TPY Threshold plainly set forth in the CAA, EPA established an alternative threshold of 100,000 TPY CO2e. The Supreme Court found that the “rewriting of the statute was impermissible” because an agency “has no power to ‘tailor’ legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.” [160] In doing so, EPA went “well beyond the ‘bounds of its statutory authority.'” [161]

In responding to the second challenge, the Supreme Court turned to the ‘anyway’ sources and whether EPA had authority to require best available control technology, or BACT, for these sources. BACT is required for “‘for each pollutant subject to regulation under this chapter’ (i.e., the entire Act).” [162] As GHG are subject to the Act by virtue of their regulation under Section 202, BACT is required. The Supreme Court found that the “more specific phrasing of the BACT provision suggests that the necessary judgment has already been made by Congress.” [163] The Supreme Court’s “narrow holding is that nothing in the statute categorically prohibits EPA from interpreting the BACT provision to apply to greenhouse gases emitted by ‘anyway’ sources.” [164]

At the end of the opinion, the Supreme Court noted that “EPA may require an ‘anyway’ source to comply with greenhouse-gas BACT only if the source emits more than a de minimis amount of greenhouse gases.” [165] It did not define what a de minims amount was but cautioned that EPA must justify its selection of the amount on proper grunds. [166]

Other Rules In The Wake Of Massachusetts v. EPA

EPA has finalized or proposed various other regulations regarding GHGs. Some of the major ones are detailed below.

EPA requires the “reporting of greenhouse gas emissions from all sectors of the economy.” [167] EPA was directed in the Consolidated Appropriations Act for 2008 to utilize existing authority under the CAA to develop a mandatory GHG reporting rule. [168] Under Section 114, EPA has the authority to require any person who owns or operates any emission source or who is subject to any requirement of the CAA to provide such information as the EPA may reasonably require, either on a one-time, periodic, or continuous basis. [169] The GHG Reporting Rule, as it became known, required the collection of data beginning January 1, 2010, with the first report due March 31, 2011 and annually thereafter. [170]

EPA continued to utilize its Section 202 authority to issue emission standards for vehicles. EPA published rules to further reduce GHGs from light-duty vehicles applicable to model years 2017 – 2025. [171] EPA also published rules applicable to medium- and heavy-duty vehicles, applicable to model years 2014-2018. [172]

The Energy Policy Act of 2005 added Section 211(o) to the CAA, which required EPA to promulgate regulations ensuring that gasoline contains a certain level of renewable fuel. [173]Utilizing this new authority, EPA published the Renewable Fuel Standards (RFS1), which it anticipated would reduce carbon dioxide emissions by 8 – 13 million metric tons. [174] The Energy Independence and Security Act of 2007 again amended Section 211(o) and required the setting of the first mandatory GHG reduction thresholds for the various categories of renewable fuels. [175] Thereafter, under the amended Section 211(o), EPA issued RFS2, which replaced RFS1 and set specific reduction requirements in GHG emissions for each category of renewable fuel. [176] EPA estimated that RFS2 would reduce 4.15 billion toms of CO2 over 30 years. [177]

EPA has also used other provisions of the CAA to issue regulations regarding GHG. EPA issued a rule regulating emissions from a variety of operations in the oil and gas industry. [178] As noted above, Section 111 requires EPA to issue standards of performance for various categories of sources. [179] Section 112 requires EPA to regulate the emissions of hazardous air pollutants, such as benzene, which is prevalent in emissions from oil and gas related sources. [180] Although the rule was aimed primarily at reductions of volatile organic compounds and hazardous air pollutants, the requirement in the rule for gas wells to engage in ‘reduced emission completions’ was anticipated to reduce methane emissions by one million tons. [181]

However, perhaps the most controversial rules are those proposed to curb GHGs from new and existing power plants utilizing fossil fuels. [182]

As to new fossil fuel-fired electric utility generating units (EGU or units), EPA based the proposed rule on CAA Section 111(b), which requires EPA to establish standards of performance for sources within established categories. [183] A ‘standard of performance’ requires the application of the ‘best system of emission reductions,’ or BSER. [184]

EPA initially proposed standards for emissions of carbon dioxide from new units in April, 2012. [185] After receiving over 2.5 million comments, EPA withdrew that proposal and proposed a new rule. [186] Although the original proposal included a single standard and single type of BSER for all new fossil fuel-fired units, the second, current proposal establishes separate standards and BSER for fossil fuel-fired units (mainly coal-fired units) and natural gas-fired units. [187] The proposed emission limit for new fossil fuel-fired units is 1,100 lb CO2/MWh, based on partial implementation of carbon capture and storage (CCS) as BSER. [188] The proposed emission limit for new natural gas-fired units is 1,000 lb CO2/MWh for larger units and 1,100 lb CO2/MWh for smaller units, based on modern, efficient natural gas combined cycle technology as BSER. [189]

EPA felt that it was important to set a separate standard for any new coal plant because power generated by combustion or gasification of coal emits more CO2 than power generated by the combustion of natural gas. [190] EPA cited examples of specific coal-fired power plants currently under construction that are designed to utilize CCS and that “partial capture CCS has been implemented successfully in a number of facilities over many years.” [191] EPA concluded that partial capture CCS was achievable and cost-effective and thus chose it as BSER. [192] The new natural gas-fired power plants being built utilize the natural gas combined cycle (NGCC) technology, which EPA found to be advanced, efficient, and inherently lower in CO2 emissions. CCS was not being included in these designs. Thus, EPA felt that this technology was appropriate as BSER. [193]

As to existing fossil fuel-fired units, EPA relied on Section 111(d), which allows EPA to “prescribe regulations … under which each State shall submit … a plan which … establishes standards of performance for existing sources for any air pollutant.” [194] Additionally, EPA has the authority under that sub-section to prescribe its own plan for a State “where the State fails to submit a satisfactory plan.” [195]

EPA’s proposed rule seeks to achieve a thirty percent emission reduction of CO2 from 2005 emission levels. [196] To accomplish this, EPA set CO2 emission goals for each state “that each state is required to meet.” [197] However, EPA did not “prescribe how a state should meet its goal,” alluding to the “partnership” between EPA and the states in which “the EPA sets these goals and the states take the lead on meeting them by creating plans that are consistent with the EPA guidelines.” [198] Thus, a state has the “flexibility to design a program to meet its goals,” either alone or in collaboration with other states. [199]

To achieve these goals, EPA established BSER in this context. EPA described it as being “based on a range of measures that fall into four main categories, or ”building blocks,’ which comprise improved operations at EGUs, dispatching lower-emitting EGUs and zero-emitting energy sources, and end-use energy efficiency.” [200] The building blocks included the possible use of CCS or conversion to natural gas from coal. [201]

EPA usually seeks to quantify the costs and benefits of its major rules. As to the proposed rule regarding new power plants, EPA “projected that this proposed rule will result in negligible CO2 emission changes, quantified benefits, and costs by 2022.” [202] EPA projected this based on its conclusion that even without this rule, “existing and anticipated economic conditions will lead electricity generators to choose new generation technologies that would meet the proposed standard without the installation of additional controls.” [203] In other words, regardless of what EPA does, electric companies are building cheaper, more efficient natural gas power plants which will meet the standards anyway. As to the proposed rule for existing power plants, EPA estimated that the rule would result in “net climate and health benefits of $48 billion to $82 billion.” [204]

Future Regulation of Greenhouse Gases

President Obama released a Climate Action Plan in June, 2013, in which he stated that “we have a moral obligation to future generations to leave them a planet that is not polluted and damaged.” [205] EPA Administrator, Regina McCarthy, has stated that “carbon pollution … causes climate change and thereby poses a threat to the health and welfare of the American people” and that EPA’s actions to address GHG are “good policy.” [206] Based on these statements and positions, it is highly likely that additional regulations seeking to reduce GHG will be issued in the near term. However, beyond that safe prediction, there are very few certainties.

EPA will finalize the proposed rules for new and existing power plants. Once finalized, it is highly likely that judicial review will be sought. Challenges are expected based on the use of Section 111(d) to set a state’s specific CO2 reduction goals and the choice of CCS as BSER. While the outcome of such litigation is speculative, the deference provided by courts to a regulatory agency to make reasonable choices based on the agency’s review of the scientific facts before it would tend to favor EPA.

EPA will have to address the Supreme Court’s decision in Utility Air. The Supreme Court held that the CAA authorized the imposition of BACT on ‘anyway’ sources. It is unclear how EPA will apply this ruling, to whom it will be applied, and the BACT choices it will make. Further, as the 100,000 TPY CO2e limit was rejected as a substitute for the 100/250 TPY Threshold, it remains to be seen if EPA will attempt to establish an alternate limit.

It is possible that a new administration in 2016 may have a different view of climate change and the moral imperative to regulate greenhouse gases. Nevertheless, absent amendments to the CAA itself, it will be difficult to reject or ignore the provisions of the CAA, the Supreme Court’s precedential rulings as to greenhouse gases, and EPA’s rules that have already been put in place. Having gone down the path of regulating greenhouse gases under the CAA, it may prove impossible to retrace its steps.

[60] 74 Fed. Reg. 18890 (April 24, 2009). The ANPR may be found at 73 Fed. Reg. 44354 (July 30, 2008).

[61] Id.

[62] 74 Fed. Reg. 18886 (April 24, 2009); 74 Fed. Reg. 66496 (December 15, 2009).

[63] 75 Fed. Reg. 25324 (May 7, 2010).

[64] Timing Rule: 75 Fed. Reg. 17004 (April 2, 2010); Tailoring Rule: 75 Fed. Reg. 31514 (June 3, 2010).

[65] 74 Fed. Reg. 18890 (April 24, 2009).

[66] 74 Fed. Reg. 18891 (April 24, 2009).

[67] 74 Fed. Reg. 66505 (December 15, 2009).

[68] Id.

[69] Id.

[70] 74 Fed. Reg. 66516 (December 15, 2009). Together, the six gas are referred to as CO2e.

[71] 74 Fed. Reg. 66517 (December 15, 2009).

[72] 74 Fed. Reg. 66505 (December 15, 2009).

[73] 74 Fed. Reg. 18891 (April 24, 2009).

[74] Id.

[75] Ethyl Corporation v. EPA, 541 F.2d 1 (D.C. Circuit, 1976)

[76] Ethyl Corporation, 541 F.2d at p. 11.

[77] Ethyl Corporation, 541 F.2d at p. 13.

[78] 74 Fed. Reg. 18891 (April 24, 2009).

[79] 42 USC §7602(h); 74 Fed. Reg. 66510 (December 15, 2009).

[80] 74 Fed. Reg. 66510 (December 15, 2009), citing Whitman v. American Trucking Association, 531 U.S. 457, 466 (2001).

[81] 74 Fed. Reg. 66510 (December 15, 2009).

[82] 74 Fed. Reg. 66516 (December 15, 2009).

[83] 74 Fed. Reg. 66524 (December 15, 2009).

[84] 74 Fed. Reg. 66531 (December 15, 2009).

[85] 74 Fed. Reg. 66508 (December 15, 2009).

[86] Id.

[87] Id.

[88] 74 Fed. Reg. 66537 (December 15, 2009), citing 42 USC §7602(g).

[89] 74 Fed. Reg. 66536 (December 15, 2009).

[90] 74 Fed. Reg. 66537 (December 15, 2009).

[91] Id.

[92] 75 Fed. Reg. 25324 (May 7, 2010).

[93] 75 Fed. Reg. 25328 (May 7, 2010).

[94] 40 CFR 52.21(b)(50)(iv) (2008). This provision was later amended by Tailoring Rule, which added a definition of ‘subject to regulation.’

[95] 42 USC §7475(a)(4).

[96] 75 Fed. Reg. 17004 (April 2, 2010).

[97] EPA’s Interpretation of Regulations that Determine Pollutants Covered by Federal Prevention of Significant Deterioration (PSD) Permit Program, December 18, 2008 (PSD Interpretive Memo); 73 Fed. Reg. 80300 (December 31, 2008); 75 Fed. Reg. 17005-17006 (April 2, 2010).

[98] 75 Fed. Reg. 17007 (April 2, 2010).

[99] Id.

[100] PSD Interpretive Memo, p. 11.

[101] Id.

[102] 75 Fed. Reg. 17015 (April 2, 2010).

[103] PSD Interpretative Memo, p. 14; 75 Fed. Reg. 17015 (April 2, 2010).

[104] 75 Fed. Reg. 17015 (April 2, 2010).

[105] 75 Fed. Reg. 17019 (April 2, 2010).

[106] Id.

[107] 75 Fed. Reg. 17019 (April 2, 2010); 42 USC §7522(a)(1).

[108] 75 Fed. Reg. 17019 (April 2, 2010).

[109] Id.

[110] Id.

[111] 75 Fed. Reg. 31516 (June 3, 2010).

[112] Id.

[113] Id.

[114] 75 Fed. Reg. 31520 (June 3, 2010); 42 USC §7479(1).

[115] 75 Fed. Reg. 31533 (June 3, 2010).

[116] 75 Fed. Reg. 31534 (June 3, 2010).

[117] 75 Fed. Reg. 31535-31536 (June 3, 2010).

[118] 75 Fed. Reg. 31533 (June 3, 2010).

[119] 75 Fed. Reg. 31522 (June 3, 2010).

[120] Id.

[121] 75 Fed. Reg. 31523 (June 3, 2010).

[122] Id.

[123] Id.

[124] Id.

[125] Id.

[126] Id.

[127] Id.

[128] Id.

[129] Id.

[130] 75 Fed. Reg. 31524 (June 3, 2010).

[131] Id.

[132] Id.

[133] 75 Fed. Reg. 31533, 31541 (June 3, 2010).

[134] 75 Fed. Reg. 31533 (June 3, 2010).

[135] Id.

[136] Id.

[137] Id.

[138] Chevron USA, Inc. v. NRDC, 467 U.S. 837 (1984).

[139] 75 Fed. Reg. 31543 (June 3, 2010). .

[140] Id., citing United States v. Ron Pair Enterprises, 489 U.S. 235 (1989).

[141] 75 Fed. Reg. 31555 (June 3, 2010).

[142] 75 Fed. Reg. 31577 (June 3, 2010).

[143] 75 Fed. Reg. 31578 (June 3, 2010).

[144] 75 Fed. Reg. 31548 (June 3, 2010).

[145] 75 Fed. Reg. 31549 (June 3, 2010).

[146] 75 Fed. Reg. 31548 (June 3, 2010).

[147] Coalition for Responsible Regulation Inc. v. Environmental Protection Agency, 684 F.3d 102 (D.C. Cir. 2012).

[148] 134 S.Ct 418-419 and 468 (October 15, 2013).

[149] Utility Air Regulatory Group v. EPA, — U.S. —, 134 S.Ct 2427 (2014).

[150] Utility Air, 134 S.Ct. at p. 2438.

[151] Utility Air, 134 S.Ct. at p. 2439.

[152] Utility Air, 134 S.Ct. at p. 2440.

[153] Utility Air, 134 S.Ct. at p. 2441.

[154] Utility Air, 134 S.Ct. at p. 2442.

[155] Id.

[156] Id.

[157] Id.

[158] Utility Air, 134 S.Ct. at p. 2443.

[159] Utility Air, 134 S.Ct. at p. 2444.

[160] Utility Air, 134 S.Ct. at p. 2445.

[161] Id.

[162] Utility Air, 134 S.Ct. at p. 2448, citing 42 USC 7475(a)(4).

[163] Utility Air, 134 S.Ct. at p. 2448.

[164] Utility Air, 134 S.Ct. at p. 2449.

[165] Id.

[166] Id.

[167] 74 Fed. Reg. 56260 (October 30, 2009): Mandatory Reporting of Greenhouse Gases; 40 CFR Part 98.

[168] P.L.110-161, 121 Stat. 1844.

[169] 74 Fed. Reg. 56265 (October 30, 2009), citing 42 USC §§7414(a)(1) and 7542.

[170] 74 Fed. Reg. 56267 (October 30, 2009).

[171] 77 Fed. Reg. 62624 (October 15, 2012).

[172] 76 Fed. Reg. 57106 (September 15, 2011).

[173] P.L. 109-58, 119 Stat. 594; 42 USC §7545(o), (o)(2).

[174] 72 Fed. Reg. 23900 (May 1, 2007).

[175] P.L. 110-140, 121 Stat. 1492.

[176] 75 Fed. Reg. 14670 (March 26, 2010).

[177] 75 Fed. Reg. 14798 (March 26, 2010).

[178] 77 Fed. Reg. 49490 (August 16, 2012). Oil and Natural Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants Reviews.

[179] 42 USC §7411(b).

[180] 42 USC §7412.

[181] 77 Fed. Reg. 49492, 49533 (August 16, 2012). Methane has a global warming potential of 25, which means that this reduction totals about 25 million tons of CO2e. 40 CFR Part 98, Table A-1 to Subpart A.

[182] New Plants: 79 Fed. Reg. 1430 (January 8, 2014); Existing Plants: 79 Fed. Reg. 34830 (June 18, 2014) and 79 Fed. Reg. 34960 (June 18, 2014).

[183] 42 USC §7411(b).

[184] 42 USC §7411(a)(1).

[185] 77 Fed. Reg. 22392 (April 13, 2012).

[186] 79 Fed. Reg. 1430 (January 8, 2014).

[187] 79 Fed. Reg. 1432-1433 (January 8, 2014).

[188] 79 Fed. Reg. 1433 (January 8, 2014).

[189] Id.

[190] 79 Fed. Reg. 1434-1435 (January 8, 2014).

[191] 79 Fed. Reg. 1435 (January 8, 2014).

[192] 79 Fed. Reg. 1435-1436 (January 8, 2014).

[193] 79 Fed. Reg. 1435-1436 (January 8, 2014).

[194] 42 USC §7411(d)(1).

[195] 42 USC §7411(d)(2).

[196] 79 Fed. Reg. 34832 (June 18, 2014).

[197] 79 Fed. Reg. 34833, 34957-34958 (June 18, 2014).

[198] Id.

[199] Id.

[200] 79 Fed. Reg. 34835 (June 18, 2014).

[201] 79 Fed. Reg. 34856 (June 18, 2014).

[202] 79 Fed. Reg. 1495 (January 8, 2014).

[203] Id.

[204] 79 Fed. Reg. 34832 (June 18, 2014).

[205] The President’s Climate Action Plan, June, 2013, p. 4.

[206] McCarthy, Regina, Opening Statement of Regina McCarthy Assistant Administrator for Air and Radiation U.S. Environmental Protection Agency, June 29, 2012, at pp. 1 – 2.

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