Supreme Court Upholds Majority of EPA's GHG Permitting Regulations for New and Modified Stationary Sources

July 8, 2014

In a late-session decision, the U.S. Supreme Court partially upheld Environmental Protection Agency permitting rules that reduce greenhouse gas emissions from large stationary sources of pollution, leaving most of the agency's air pollution reduction program in place.

The Court held 7-2 that EPA is allowed to require limits on greenhouse gas (GHG) emissions from newly constructed or modified power plants or other large sources under the Prevention of Significant Deterioration (PSD) program for sources that are already subject to the program because they are major emitters of other air pollutants.  These types of sources—referred to as “anyway” sources—make up 83 percent of national stationary source GHG emissions.

A separate majority of the Court voted 5-4 to overturn part of EPA’s regulations, holding that the agency may not determine that a stationary source is subject to the PSD program, or the more general Title V permitting program, solely because of a facility’s GHG emissions.

Justice Scalia authored the majority opinion in the June 23 decision, Utility Air Regulatory Group v. EPA. (No.12-1146 (U.S. 2014)).

The PSD program requires that any “major emitting facility” receive a permit before beginning new construction or undergoing a major modification. As part of the permit, the facility is required to implement the “best available control technology” (BACT) for each pollutant subject to regulation. Title V of the Clean Air Act similarly requires major sources of air pollution to obtain operating permits, although it does not impose any pollution control requirements.

In both the PSD program and the Title V program, the text of the Clean Air Act specifies a numeric threshold for how much of “any air pollutant” a source may emit without being classified as a major source Depending on the source type and the program, the thresholds are 100 or 250 tons per year. If a source exceeds the emission threshold for either the PSD or Title V program, then it qualifies as a major source and becomes subject to the permit requirements of that program. EPA has historically interpreted the threshold definition to apply to any air pollutant “subject to regulation” under the Clean Air Act. GHGs are emitted in much larger quantities than other air pollutants, and therefore a much larger universe of sources would become subject to the PSD and Title V programs under the thresholds if they were applied to GHGs.

In 2007, the Supreme Court ruled in Massachusetts v. EPA (549 U.S. 497 (2007)) that the Clean Air Act requires EPA to regulate GHGs if the agency determines that such pollution endangers public health and welfare; EPA made this endangerment finding in 2009. In 2010, EPA affirmed its historical interpretation of the PSD program’s applicability, confirming that GHGs would become “subject to regulation,” and therefore subject to PSD or Title V requirements, on the date that EPA’s regulation of GHG emissions from light duty motor vehicles went into effect. (Timing Rule, 75 Fed. Reg. 17,004 (Apr. 2, 2010)). EPA then promulgated the Tailoring Rule to phase in the application of these permitting requirements, beginning with “anyway sources” already subject to the PSD program and including in a subsequent phase other large sources emitting over 100,000 tons of GHGs per year. (75 Fed. Reg. 31,514 (June, 2010)). EPA justified taking a phased approach that did not require regulation of all sources with emissions over 100 to 250 tons per year of GHG emissions by saying that it would be impractical—at least in the near term—to regulate the additional thousands of small sources that could qualify. 

These regulations, along with EPA’s endangerment finding and regulation of GHG emissions from passenger cars, were challenged by industry and state parties in the U.S. Court of Appeals for the D.C. Circuit. The D.C. Circuit upheld all the challenged regulations in several cases consolidated as Coalition for Responsible Regulation v. EPA. (684 F.3d 102 (D.C. Cir. 2012)). For more information about these cases, see D.C. Circuit Upholds EPA Regulations of Greenhouse Gas Emissions. Several challengers petitioned for certiorari on a number of issues, but the Supreme Court granted review only as to whether EPA’s regulation of GHG emissions from motor vehicles triggered applicability of the PSD and Title V programs.  

In the Court’s Utility Air Regulatory Group v. EPA decision, a five-justice majority—Justice Scalia, Chief Justice Roberts, and Justices Kennedy, Thomas, and Alito—held that the agency is neither compelled nor authorized to interpret GHGs as one of the air pollutants that would trigger categorization of a source as a major emitter under the PSD and Title V provisions. The Court found that including GHGs would expand each provision’s coverage from hundreds of larger sources to tens of thousands of smaller sources, which would be unreasonable and contradictory to the intent of the Clean Air Act. This majority also held that the agency overstepped its authority in the Tailoring Rule when its regulations effectively altered the numerical thresholds in the statute.

A separate, seven-justice majority—all but Justices Thomas and Alito—held that it is reasonable for EPA to require “anyway” sources that require PSD permits based on their emission of other pollutants to also comply with BACT emission standards for GHGs. In order to obtain a PSD permit, a source must be subject to the BACT for “each pollutant subject to regulation under the act,” and EPA’s inclusion of GHGs under that broader description is consistent with the plain language of the statute and does not yield the same kind of unworkable results as regulating smaller GHG sources. This was the approach taken by EPA in the first phase of the Tailoring Rule.