Last Monday, the Supreme Court issued its highly-anticipated opinion in Utility Air Regulatory Group v. EPA, No. 12-1146 (June 23, 2014) (available here), partially upholding and partially invalidating EPA’s 2010 regulations governing stationary source emissions of greenhouse gases (GHGs) pursuant to the Clean Air Act’s prevention-of-significant-deterioration (PSD) pre-construction permitting program and Title V operating permits program. The mixed decision could have implications for what EPA proposes to do for new and existing power plants under its separate authority to issue new source performance standards and existing source emission guidelines. But it also has implications today, for those who may already have been issued a permit under the PSD or Title V program and for those who were previously excused from obtaining a permit by the EPA’s PSD/Title V GHG Tailoring Rule.

The Statute and the Tailoring Rule

Following the Supreme Court’s 2007 decision in Massachusetts v. EPA holding that GHGs are “air pollutants” within the meaning of the Clean Air Act and obliging EPA to regulate GHG emissions if it finds GHGs are reasonably expected to endanger public health or welfare, EPA issued regulations governing GHG emissions from new motor vehicles. Under EPA’s interpretation of the Act’s PSD and Title V provisions, which by their terms apply to large stationary sources emitting “any air pollutant” regulated under the Act, the regulation of motor vehicle emissions of GHGs automatically triggered these stationary source permitting requirements.

EPA issued a “Tailoring Rule” to limit the number and size of sources subject to these requirements, concluding that regulating GHG sources at the statutory thresholds of 100 or 250 tons per year would sweep in far too many sources, creating an unmanageable program contrary to Congress’ intent. Thus, the Tailoring Rule exempted from the PSD and Title V requirements all sources emitting less than 75,000 - 100,000 tons per year of GHGs. Sources that emitted more than those “tailored” thresholds were required to obtain permits, either from the State in which they were located, or from EPA if the State lacked permit-writing authority. Such sources would then have to obtain the level of GHG emission reductions achievable by the “best available control technology” (BACT) – which, at present, focuses almost exclusively on the efficient operation of the unit.

The Opinion

The majority opinion, authored by Justice Scalia, is in two parts. In the first (joined by Chief Justice Roberts and Justice Kennedy, with Justices Thomas and Alito concurring), the Court holds that EPA impermissibly determined that a source can become subject to the PSD and Title V permitting requirements on the sole basis of its potential to emit GHGs. The Court held that neither the Act nor Massachusetts compels a GHG-inclusive interpretation of the term “any air pollutant” that automatically triggers PSD and Title V permitting requirements. Instead, EPA must consider on a program-by-program basis whether including GHGs among the pollutants to be regulated comports with Congress’ intent or creates a program that is effectively unworkable. Here, EPA’s need to “tailor” the absolute statutory tonnage thresholds for applicability evidenced the impermissibility of EPA’ interpretation. The Court also found EPA’s broad construction unreasonable because it would “place plainly excessive demands on limited governmental resources” and “bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization.” Instead, the Court held, the PSD and Title V programs must be read so that their applicability is triggered only by emissions of conventional pollutants (i.e., sulfur dioxide, particulate matter, nitrogen dioxide, carbon monoxide, ozone, and lead) at levels above the 100- to 250-ton-per-year thresholds specified in the Act. The Tailoring Rule thus was invalidated as unlawful.

In the second part of the opinion (joined by Chief Justice Roberts and Justices Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan), the Court held that, if EPA is already regulating a specific source because it emits conventional pollutants above threshold levels, then EPA may also require these “anyway” sources to implement BACT to control their non-de minimis GHG emissions as well. (What level of emissions constitutes de minimis emissions, and what specific methods of emission reduction could be considered BACT, were left conspicuously unanswered.)

In an important but carefully worded footnote, the Court acknowledged EPA’s separate authority to regulate GHG emissions under the Act’s section 111 new source performance standard provisions, noting that no party had argued, in this case or a prior one, that this provision was “ill suited to accommodating greenhouse gases.”

There were two dissents, one by Justice Breyer (with Justices Ginsburg, Sotomayor, and Kagan) arguing that EPA’s Tailoring Rule was permissible; and one by Justice Alito (with Justice Thomas) arguing that the Court should revisit its Massachusetts holding that GHGs can be regulated under the Act.

The Implications

The Court’s holding has immediate practical implications for sources emitting GHGs or conventional pollutants. First, at least under federal law, a source is no longer required to meet the PSD and Title V permitting requirements based solely on its GHG emissions. Thus, a source emitting less than the statutory threshold amounts of the each of the six conventional pollutants may not need to obtain a PSD or Title V permit for its GHG emissions. If, on the other hand, a source would need permits based on its emissions of the six pollutants “anyway,” it will still have to comply with BACT requirements for GHGs. One note of caution: the individual States are permitted to regulate more stringently than required by the Clean Air Act. Thus, even though EPA can’t require PSD or Title V permits based on GHG emissions alone, a State probably could. If your State’s regulations require permits based on GHG emissions, then, you may still be required to obtain such a permit until the State withdraws or amends its regulations.

Second, some sources that were shielded from PSD and Title V permitting obligations by the Tailoring Rule’s raised thresholds may find themselves suddenly subject to BACT requirements that didn’t apply before Monday’s decision. Specifically, sources that emit GHGs at levels lower than the Tailoring Rule thresholds (75,000 to 100,000 tpy) but that also emit conventional pollutants at levels higher than the statutory thresholds (100 to 250 tpy) may find that they now have to comply with BACT for their GHG emissions, when they wouldn’t have had such obligations under the Tailoring Rule. Though EPA has the authority to excuse compliance for de minimis GHG emissions, it has not yet identified a level of emission that it would consider de minimis. In short, talking to your permit writer will be necessary to sort out your obligations going forward.

Finally, the decision may bear on the scope of EPA’s authority over existing power plants under its proposed existing source emission guidelines. While the opinion is by its terms limited to EPA’s PSD and Title V authority and suggests that EPA’s authority to address existing source emissions under section 111 remains intact, a number of statements in the majority opinion caution EPA against attempting to regulate broad swaths of the economy, reading expansive regulatory authority into vague statutory provisions, or employing non-traditional means to control emissions. Given that EPA’s proposed GHG emission guidelines for existing power plants seem to attempt all three, expect to see the Court’s decision cited both in comments urging the Agency to proceed cautiously and in court briefs challenging the rule once it’s finalized.

For more information about the decision or its implications, please contact Thomas Lorenzen.

Summer Associate Grant Turpin provided significant assistance in the creation of this article.