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Focus on Regulation

D.C. Circuit Upholds EPA’s Greenhouse Gas Rules

In a per curiam decision (issued by the whole three-judge panel), the D.C. Circuit recently upheld EPA’s endangerment finding and several greenhouse gas (GHG) emission rules under the Clean Air Act (CAA). The decision endorses EPA’s current regulation of GHGs, and paves the way for future GHG rulemaking. The D.C. Circuit addressed challenges to several GHG-related EPA actions. First, industry and states challenged EPA’s Dec. 15, 2009, Endangerment Finding that GHG emissions “may reasonably be anticipated to endanger public health or welfare.” Second, industry and states challenged EPA’s May 7, 2010 Tailpipe Rule establishing light-duty vehicle greenhouse gas emission standards under the Title II mobile source provisions of the CAA.  Third, industry and states challenged the so-called Timing and Tailoring rules, which embody EPA’s long-standing interpretation that once EPA determines an air pollutant endangers public health and regulates emissions of that pollutant from mobile sources, the CAA automatically requires regulation of stationary sources of the same pollutant under the CAA’s Prevention of Significant Deterioration (PSD) and Title V programs (Timing and Tailoring Rules).  In rejecting these challenges, the D.C. Circuit included what may well be the first citation to a Schoolhouse Rock video in a federal court opinion.

A brief description of the D.C. Circuit’s analysis with respect to each of the challenges follows.

Endangerment Finding.  In upholding the Endangerment Finding, the D.C. Circuit held that EPA correctly declined to consider policy decisions when making an endangerment finding.  The D.C. Circuit also dismissed industry petitioners’ argument that EPA improperly delegated its judgment by relying on climate-change assessments from other organizations. Instead, the court deferred to EPA’s expertise, and the “substantial” record demonstrating the adverse impacts climate change may have on human health and welfare, and whole-heartedly supported EPA’s approach to the science. The court further ruled that the CAA does not require EPA to set a precise numerical value as part of an endangerment finding, and dismissed the state petitioners’ argument (primarily advanced by Texas) that the Endangerment Finding was arbitrary and capricious because it did not quantify the atmospheric concentration at which GHGs may endanger public health or welfare.

Tailpipe Rule. Petitioners did not challenge the substance of the Tailpipe Rule, but instead asserted that EPA acted arbitrarily and capriciously in failing to consider the full consequences of the regulation—in particular, the impact regulating emissions from motor vehicles would have on stationary sources by triggering GHG regulation under the PSD and Title V programs. The D.C. Circuit held the CAA’s requirement that EPA consider compliance costs when establishing emissions standards for mobile sources requires only that EPA consider “the cost to the motor-vehicle industry to come into compliance with the new emission standards, and does not mandate consideration of costs to other entities not directly subject to the proposed standards.”

Timing and Tailing Rules.  The Court next addressed industry and state petitioners’ contention that EPA incorrectly interpreted the CAA as automatically requiring EPA to regulate GHGs under the PSD and Title V programs, applicable to stationary sources. As an initial matter, the Court held that petitioners waived their arguments with respect to the Title V program as they failed to brief the issue on appeal. As applied to the PSD program, the D.C. Circuit agreed with EPA that the CAA unambiguously required EPA to regulate GHGs under the PSD program, because the requirements of the PSD program apply to “each pollutant subject to regulation under [the CAA].”

The D.C. Circuit never reached the merits of the challenges to the substance of the Timing and Tailoring Rules (e.g., whether EPA appropriately departed from the statutory emissions thresholds), however, and instead held that none of the petitioners had standing to challenge either of these rules. In so holding, the Court noted that instead of harming the industry petitioners, the Tailoring Rule actually mitigated the impact of regulating GHGs under the PSD program. The Court was not persuaded by industry petitioners’ argument that overturning the Tailoring Rule would spur corrective legislation from Congress (to relieve the overwhelming burden on permitting authorities), finding such relief too speculative for purposes of Article III standing.  Quoting Schoolhouse Rock, I’m Just a Bill, the D.C. Circuit reasoned that as “a generation of schoolchildren know . . . it’s very unlikely that a bill will become a law.”  Finally, the D.C. Circuit also rejected the state petitioners’ untimely attempt to put on their “environmentalist hat,” and establish standing based on the alleged environmental harm that resulted from EPA’s failure to regulate GHGs at smaller sources sooner.

Petitioners have 45 days to request a rehearing or to seek review before the full D.C. Circuit.  Given the unanimity of the panel’s decision, it is unlikely such request would be granted, and therefore unlikely it will be sought.  Petitioners also have 90 days to petition the U.S. Supreme Court to review the case, but such petitions are rarely granted.