On June 26, 2012, the United States Court of Appeals for the District of Columbia Circuit ruled that the United States Environmental Protection Agency (“EPA”) acted properly in moving to regulate the emission of certain greenhouse gases (“GHGs”) under the Clean Air Act (“CAA”). The court rejected claims made by a variety of petitioners – including states and affected industry groups – that EPA acted arbitrarily, capriciously, and without legal or scientific support when it found that the emission of the GHGs endangered the public health and welfare, and began issuing regulations governing such emissions from mobile and stationary sources.
Coalition for Responsible Regulation, et al. v. EPA, No. 09-1322 (D.C. Cir., Jun. 26, 2012), as joined with three other matters, encompassed over ninety consolidated claims challenging four actions taken by EPA in the wake of Massachusetts v. EPA, 549 U.S. 497 (2007) (holding that EPA was obliged to respond to a rulemaking petition regarding the regulation of GHG emissions from mobile sources).
A. Endangerment Finding
EPA’s Endangerment and Cause or Contribute Findings for Greenhouse gases Under Section 202(a) of the Clean Air Act, 74 Fed. Reg. 66,496 (Dec. 15, 2009) (“Endangerment Finding”) defined as a single “air pollutant” a group of six greenhouse gases and found that motor vehicle emissions of this “pollutant” drive climate change, which in turn is reasonably anticipated to endanger the public health and welfare. Petitioners challenged the Endangerment Finding on the grounds that EPA failed to consider its economic and political impact, and relied too heavily upon an uncertain and occasionally incorrect scientific record.
The Court disagreed, holding that a plain reading of the CAA shows that EPA was required to exercise scientific judgment, not policy acumen, in determining whether an air pollutant might endanger the public, and if so, whether motor vehicle emissions cause or contribute to the danger. Moreover, while EPA relied upon a voluminous scientific record in making its finding, it did not substitute that record for its own judgment. And while the scientific record is in some ways uncertain or incorrect, Congress did not restrict EPA to remedial regulation and any mistakes were inconsequential to EPA’s finding.
B. Tailpipe Rule
EPA’s Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards, 75 Fed. Reg. 25,324 (May 7, 2010) (“Tailpipe Rule”) was issued pursuant to the CAA requirement that EPA establish motor vehicle emission standards for any air pollutant for which there has been an endangerment finding. It set GHG emission standards for cars and light trucks beginning January 2, 2011 as part of a joint rulemaking with the National Highway Transportation Safety Administration (“NHTSA”). Petitioners challenged the Tailpipe Rule on the grounds that EPA should have deferred regulating mobile source GHG emissions until the economic implications of similar stationary source regulations – which would necessarily follow – could properly be addressed. The Court rejected this argument based upon plain text of the CAA and the opinion issued in Massachusetts, both of which prohibit EPA from withholding action under such circumstances.
C. Timing and Tailoring Rules
EPA interpreted the CAA as requiring additional regulation of stationary GHG emission sources once the Tailpipe Rule was enacted. This additional regulation falls under the Act’s Prevention of Significant Deterioration of Air Quality (“PSD”) and Title V programs, which require the issuance of permits for the construction and operation of stationary sources that emit certain quantities of “any air pollutant.” EPA addressed this issue by enacting its Reconsideration of Interpretation of Regulations That Determine Pollutants Covered by Clean Air Act Permitting Programs, 75 Fed. Reg. 17,004 (Apr. 2, 2010) (“Timing Rule”), and its Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, 75 Fed. Reg. 31,514 (Jun. 3, 2010) (“Tailoring Rule”).
The Timing Rule mandated that stationary emitters must begin employing Best Available Control Technology (“BACT”) for the six GHGs named in the Endangerment Finding as of January 2, 2011, the date the Tailpipe Rule went into effect. The Tailoring Rule increased the PSD and Title V emissions thresholds for GHGs to allow for a phased application of the rules as they pertained to GHGs, beginning with the largest emitters and gradually capturing other affected entities. Petitioners challenged these rules on the grounds that EPA improperly extended the PSD and Title V requirements to GHGs.
The Court found in favor of EPA, holding that the terms of the CAA and the Massachusetts decision call for an extension with respect to “any” air pollutant. Moreover, none of the petitioners had Article III standing to challenge these rules because none of them had suffered a redressable injury-in-fact. Petitioners are compelled to comply with the PSD and Title V standards by automatic operation of the CAA, not the rules themselves. Moreover, petitioners failed to show how they had suffered actual harm as a result of the rules and offered little other than speculative scenarios of what injury might occur if the rules were not vacated and Congress had to enact corrective legislation.
While clearly a blow to industries that are already heavily regulated, this decision is favorable from a litigation perspective. In AEP v. Connecticut, 131 S. Ct. 2527 (2011), the Supreme Court held that the Congressional delegation of air quality regulation to EPA displaces federal common law nuisance suits seeking judicially-imposed GHG emission caps. By holding that EPA acted properly in exercising its power, the District of Columbia Circuit made it more likely that displacement will play a role in the outcome of other similar suits. Chief among them is Kivalina v. ExxonMobile, 663 F.Supp.2d 863 (N.D. Ca. 2009), which is currently on appeal to the Ninth Circuit. As a result, members of affected industries and their counsel are encouraged to continue monitoring developments in this area of the law.