The Environmental Protection Agency’s Breathtakingly Lawless Attempt To Regulate Greenhouse Gases

Yesterday the Supreme Court heard oral arguments in Utility Air Regulatory Group v. EPA. The case is the first since Massachusetts v. EPA (2007) to examine the extent of the EPA’s Clean Air Act authority to regulate greenhouse gas (GHG) emissions.

The Court is limiting its review to one question: “Whether EPA permissibly determined that greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases.” In other words, the Court is reviewing the agency’s April 2010 Timing Rule.

According to the Timing Rule, regulation of any air pollutant under any part of the Clean Air Act automatically triggers New Source Review (NSR) preconstruction and Title V operating permit requirements for “major” stationary sources of that pollutant. This means that “major” sources of carbon dioxide (CO2), the chief anthropogenic greenhouse gas, became subject to NSR and Title V permitting on the day the agency’s greenhouse Tailpipe Rule took effect (January 2, 2011).

The specific type of NSR permit required by the Timing Rule is called Prevention of Significant Deterioration (PSD). To obtain a PSD permit, a covered source must commit to meet casespecific emission limitations known as “best available control technology” (BACT).

The Stakes

Despite the narrow scope of review and the arcane terminology, the case has far-reaching economic, political, and constitutional implications.

Because there are no bolt-on commercial technologies to reduce CO2 emissions from industrial processes, the BACT for CO2 will consist mainly of facility-specific changes in work practices and equipment to improve energy efficiency. Thus, warns the Energy-Intensive Manufacturers Working Group, a petitioner in the case, BACT for CO2 will empower the EPA and its state counterpart agencies to meddle in “every aspect of a facility’s operation and design that affects either its emission of carbon dioxide or its consumption of energy, because the latter is the primary determinant of the former.” Options listed by EPA include everything from changing light bulbs in the factory cafeteria, to replacing draft fans and water heaters, to basic design changes that, in EPA’s words, “fundamentally redefine the nature” of the facility.

The associated CO2 reductions are likely to be trivial, economically-wasteful, or both, because manufacturers continually improve energy efficiency to cut costs and improve bottom line.

Note too that bureaucratic second-guessing of operation and design decisions would not be confined to one industry or sector. EPA and its allies love the Timing Rule because it empowers agencies to regulate CO2 from all industries in one fell swoop.

For that very reason, though, overturning the Timing Rule would be a huge political setback for the Obama administration. The EPA might still be able to regulate CO2 from stationary sources, but it would have to do so one industry at a time, by imposing what are called new source performance standards (NSPS). For example, the EPA’s proposed “carbon pollution rule” would establish NSPS for CO2 from fossil-fuel power plants.

However, NSPS regulation is not only narrowly targeted, it’s also slow moving. EPA committed to adopting the standards more than three years ago. Moreover, the rule is beset with legal problems, since it is based on the fiction that carbon capture and storage – a technology at least 10 years away from commercialization – has been “adequately demonstrated.”

In short, if EPA’s only option is to fight for each inch of regulatory territory via the NSPS route, that could buy enough time for future Congresses and the next president to halt or even roll back EPA’s greenhouse regulatory agenda.

The Issues

The EPA acknowledges that applying the PSD and Title V programs as enacted to greenhouse gases leads to “absurd results” – unintended consequences that conflict with congressional intent. Congress intended for the permit programs to apply only to large industrial facilities, but literally millions of small, non-industrial facilities emit enough CO2 (250/100 tons per year) to qualify as “major” sources under the PSD and Title V provisions.

To avoid a self-inflicted administrative meltdown, the EPA in June 2010 issued its so-called Tailoring Rule, which revises the “major” source applicability thresholds from 250/100 tons per year, as specified in the statute, to 100,000/75,000 tons per year. The Tailoring Rule is itself an absurd solution, because under the constitutional separation of powers agencies have no authority to rewrite statutes
The EPA could have avoided both the Timing Rule’s absurd results and the brazen overreach of its attempt amend (“tailor”) clear, numerical, statutory provisions had it bothered to inquire whether Congress ever intended to regulate greenhouse gases through the permitting programs in the first place.

To shed light on the key issue of congressional intent, I undertook two analyses of legislative history using Thomas, the search engine of the Library of Congress.

The first analysis examines all 692 bills introduced during the 101st-111th Congresses containing the term “greenhouse gas” and all 55 bills containing the term “best available control technology” – the regulatory standard associated with PSD, the type of NSR permit required under the Timing Rule.

I chose that 21-year span (1989-2010) as the period of analysis because the 101st Congress was the last time Congress debated major amendments to the Clean Air Act since enacting the PSD provisions in 1977, and the 111th Congress was the last time Congress debated major greenhouse gas regulatory legislation.

Although scores of bills proposed to regulate greenhouse gases, none proposed to require NSR and BACT for CO2. Only one bill, the SAFE Climate Act, introduced by Rep. Henry Waxman (D-Calif.) in the 109th and 110th Congresses, might be construed as authorizing NSR/BACT regulation of greenhouse gases (the terms NSR and BACT don’t occur in the statute). And even then, use of “best management practices” and “technology-based requirements” would be at EPA’s discretion, not, as per the Timing Rule, by “automatic operation of the statute.”

More importantly, although the SAFE Climate Act garnered 155 co-sponsors in the 110th Congress, the bill never got beyond the introduction stage of the legislative process. No committee approved it, and the House did not vote on it.

But here’s the kicker: Rep. Waxman did not reintroduce the SAFE Climate Act in the 111th Congress. Instead, he co-sponsored H.R. 2454, the American Clean Energy and Security Act. ACESA was not only the only cap-and-trade bill ever to pass in a chamber of Congress. It was also the only bill ever introduced specifically addressing the issue of the applicability of Clean Air Act permitting requirements to greenhouse gases. And guess what? Sections 834 and 835 of ACESA expressly prohibit application of PSD and Title V to stationary sources based on their greenhouse gas emissions.

To make sure nothing fell through the cracks, I conducted a second analysis of all 35 bills introduced during the 101st-111th Congresses containing the term “prevention of significant deterioration.” Only one bill with greenhouse gas regulatory provisions also mentions “prevention of significant deterioration” – S.1168, the Clean Air/Climate Change Act, introduced in the 110th Congress. The term occurs in a finding that is separate from, and unrelated to, the bill’s greenhouse gas regulatory provisions.

What about Title V permitting? The purpose of Title V is to facilitate Clean Air Act compliance by consolidating all of a covered source’s pollution control requirements into a single, comprehensive, operating permit. The 101st Congress enacted Title V as part of the Clean Air Act Amendments of 1990. In its deliberations on those amendments, the 101st Congress considered and rejected proposals to regulate greenhouse gases from both mobile and stationary sources. Clearly, the Congress that enacted Title V had no intention of applying it to sources based on their greenhouse gas emissions.

More than 99% of the estimated 6.1 million ”sources” that emit enough CO2 to qualify as “major” under Title V are small (mostly non-industrial) facilities and currently have no emission control requirements to comply with or report. A significant fraction of those sources would have compliance requirements to report in Title V permits if they were subject to PSD permitting and BACT for CO2. But, as just shown, Congress never dreamed of requiring PSD and BACT regulation of greenhouse gases. It would be the height of absurdity for Congress to impose Title V permitting fees and paperwork burdens on sources with no emission control requirements. There is not a shred of evidence that Congress ever did so.

The legislative history reveals a breathtaking absence of congressional intent for the regulatory path prescribed by the EPA’s Timing Rule. The Timing Rule clearly exceeds any plausible congressional intent. The Supreme Court should overturn it.