Symposium: Can the EPA really rewrite a statute? Really?

The following contribution to our greenhouse gas cases symposium comes from Peter Glaser, a partner at Troutman Sanders LLP in Washington, DC. Mr. Glaser served as counsel of record on two amicus filed by the Washington Legal Foundation in support of Utility Air Regulatory Group.  

No one has ever denied that the Clean Air Act (CAA) is ill-suited for regulating greenhouse gases (GHGs).  The purpose of the CAA, not surprisingly, is to ensure that the air is clean to breathe.  The centerpiece of the Act is the National Ambient Air Quality Standards (NAAQS) program, under which the EPA defines safe ambient air concentrations of the most ubiquitous air pollutants and states are required to adopt plans to ensure those standards are met.  The Act also requires stationary and mobile sources across the economy to limit emissions of all pollutants that endanger the public health or welfare.

This system works for traditional pollutants whose effects are experienced primarily locally or, at most, regionally.  Over time, the air has become much cleaner, although some would debate whether the CAA should get all the credit.

The CAA, however, does not work for GHGs, which are well-mixed in the global atmosphere such that a ton of carbon dioxide emitted in, for instance, Bangladesh has the same effect on global GHG concentrations as a ton of carbon dioxide emitted in Baltimore.  Attempting to shoehorn GHG regulation into the CAA thus will inevitably be futile, as developing country emissions are accelerating while U.S. emissions have actually declined.  Regulating GHGs under the CAA will also produce absurd effects.  For instance, if the EPA sets a GHG NAAQS as environmental groups are demanding, states will be powerless to enact plans that ensure that GHG concentrations in the air are reduced below the NAAQS level, because global emissions will inevitably swamp whatever emission reductions an individual state (or even all states) can make.  Yet the Act severely sanctions states that do not attain the NAAQS and restricts development in NAAQS nonattainment areas.

Nor can there be much doubt that Congress, when it enacted the CAA in 1970, never contemplated that the statute would be a vehicle for regulating GHGs.  Indeed, global warming was not even a significant issue in the scientific community in the 1960s.  Moreover, during the debates on the major CAA amendments in 1977 and 1990 and in every Congress since then, as concerns about climate change heightened, major efforts were made to enact GHG legislation through amendments to the CAA or through other devices such as cap-and-trade legislation.  These efforts belie the notion that the CAA already contained the necessary regulatory authority.  Moreover, Congress rejected these efforts year after year.

The Supreme Court in Massachusetts v. EPA, of course, put all of these concerns aside and held that, given the “capacious” CAA definition of “air pollutant” as any substance emitted to the ambient air, GHGs are CAA air pollutants which the EPA may regulate if it finds that they endanger the public health or welfare.  The EPA tried to warn the Court of the absurd consequences of defining GHGs as CAA air pollutants, specifically highlighting the perverseness of regulating GHGs under the NAAQS program.  But the Massachusetts petitioners pooh-poohed this concern.  They argued that because the case involved judicial review of the EPA’s denial of a petition to regulate motor vehicle GHGs under the Act’s Title II mobile source program, the Court need not concern itself with the absurdity of regulating GHGs under the Title I NAAQS program.  Petitioners went so far as to argue that “to say, as EPA has, that air pollutants associated with climate change may not be regulated under the mobile source program because of the entirely separate [NAAQS] program is to utter a non sequitur.”

Petitioners’ point must have been persuasive, because the Court ducked the absurd consequences that deeming GHGs to be CAA air pollutants would create in other CAA programs.  The Court limited its ruling to the holding “that EPA has the statutory authority to regulate the emission of such gases from new motor vehicles.”  Yet the illogic of regulating GHGs under the CAA could not be avoided for long and is now before the Court in stark terms, although in a posture not anticipated at the time of the Massachusetts briefing.   It turns out that – at least according to the D.C. Circuit (and indeed according to the same parties that told the Court in Massachusetts not to worry about other CAA programs) – absurd CAA regulation as a consequence of the Massachusetts holding is not only not a non sequitur, it is the direct and necessary result.

Following Massachusetts, the EPA found that motor vehicle GHGs endanger the public health and welfare and adopted motor vehicle GHG regulations.  The EPA also determined, however, that regulating motor vehicle GHGs, automatically and as a matter of law, required stationary facilities to obtain GHG permits under two CAA permitting programs – the Prevention of Significant Deterioration (PSD) preconstruction permit program and the Title V operating permit program.  This is because the EPA interprets the CAA as requiring facilities that emit any air pollutants that are regulated under any CAA program to obtain permits.

But the EPA found that regulating GHGs under these programs was absurd.  Under the CAA, PSD permits are required for facilities that potentially emit at least 100 or 250 tons per year of a regulated pollutant (depending on the type of facility), and Title V permits are required for facilities that potentially emit at least 100 tons per year of a regulated pollutant.  As the EPA found, these statutory thresholds were designed for traditional pollutants that create harmful effects in low quantities.  According to the EPA, Congress adopted the 100/250 ton-per-year thresholds to limit coverage of these programs only to large industrial sources.  Applying the statutory thresholds to GHGs, however, would dramatically expand these programs because any large building that uses natural gas or oil for heating likely emits more than 100 tons per year of carbon dioxide.  (Indeed, the EPA found that more than six million buildings and facilities emit more than this amount, including schools, hospitals and even some large single-family residences.)  The EPA also found that regulating GHGs under these permitting programs would be all pain and no gain – so many facilities would require permits that permit processing would grind to a halt, whereas the multitude of small emitters that would need permits do not, even collectively, emit more than relatively minor amounts of GHGs.

Faced with this dilemma, but unwilling to rule that Congress must not have intended that the PSD and Title V programs would apply to GHGs, the EPA decided to rewrite the statute.  In its “Tailoring Rule,” it changed the statutory permitting thresholds to 75,000/100,000 tons per year (depending on the permit program and whether the facility is newly constructed or modified), so that only facilities that have traditionally been subject to permitting requirements will have to obtain GHG permits.  The EPA said it will consider in the future whether to lower the thresholds, but said it is undecided as to whether it will ever lower the thresholds to the statutory levels.  This creates something of a dilemma for the EPA:  either it will lower the thresholds to the statutory levels, in which case a host of sources that Congress never intended to be subject to these permit programs will be required to obtain permits, or it will never lower the thresholds to the statutory levels, in which case it will have accomplished a permanent rewrite of the CAA.

For obvious reasons, the EPA’s claimed authority to “tailor” the CAA was front and center in comments on the EPA Tailoring Rule rulemaking proceeding and in briefing in the D.C. Circuit and Supreme Court.  The D.C. Circuit neatly sidestepped the validity of the agency’s tailoring, however, holding that no party had standing to challenge the Tailoring Rule because the rule benefitted the small emitters and did not leave the large emitters any worse off than they would otherwise be.  As the briefs to the Supreme Court explain, however, the D.C. Circuit missed the point.  The fact that the EPA deemed it necessary to “tailor” the statute is not a flaw in the Tailoring Rule, and so whether a party has standing to challenge that rule is irrelevant.  Where the EPA went wrong is in concluding that Congress intended to regulate GHGs under these permitting programs in the first place.

Thus, the Supreme Court must now resolve the questions it left open in Massachusetts.  Does the fact that GHGs are air pollutants for purposes of the CAA motor vehicle program automatically mean that GHGs are air pollutants under all CAA programs no matter the absurd consequences that result?  If so, is the EPA then free to refashion the statute in a way that it believes is more logical than the statute that Congress enacted?

Much is at stake in how the Court answers these questions given how hugely consequential GHG regulation will be.  As the D.C. Circuit panel below recognized, “the stakes here are high.  The underlying policy questions and the outcome of this case are undoubtedly matters of exceptional importance.”  Judge Kavanaugh, arguing for granting the rehearing petitions, referred to the “massive real-world consequences.”

Yet the stakes are not just limited to GHG regulation.  With the president announcing in his State of the Union address that he plans to expand the use of executive authority, the question of just how far the courts will let administrative agencies go in substituting what the executive wants over what Congress legislated will increasingly come to the fore.  If the EPA can ignore numerical statutory permitting thresholds, what else can federal agencies do?