Utility Air Regulatory Group v. EPA et al. 573 U.S. ____ (2014)

On June 23, 2014, the United States Supreme Court held that the Environmental Protection Agency (EPA) overstepped its authority under the Clean Air Act when it attempted to regulate greenhouse gas emissions from stationary sources not already subject to a permit controlling emissions of more conventional pollutants.  The Court reasoned the Act’s language did not compel the EPA to regulate greenhouse gas emissions from such sources and, further, that the EPA’s efforts to do so were incompatible with Congress’s intent.  The Court further held, however, that stationary sources that did need a permit for their emissions of conventional pollutants could be subject to further regulation for emitting greenhouse gases.  This holding likely means the greenhouse gas emissions of many hotels, offices, residential buildings, retail establishments, and similar facilities will remain immune to the Clean Air Act’s permit requirements because such sources do not typically emit conventional pollutants at sufficient levels to require a permit.  Conversely, stationary sources that are required to get a permit for emitting conventional pollutants likely will also be subject to EPA regulation regarding their greenhouse gas emissions.

The Clean Air Act requires stationary sources of pollution that have the potential to emit 250 tons per year of “any air pollutant” or 100 tons per year for some types of sources, to seek a permit from the EPA.  To get a permit, certain types of such stationary sources are obligated to comply with emissions limitations that reflect the “best available control technology” (BACT).  In its 2007 decision in Massachusetts v. EPA, the Court held that the Act-wide definition of the term “air pollutant” included greenhouse gases.  In response to Massachusetts, the EPA effectively determined that if greenhouse gases were encompassed by the phrase “air pollutant,” then they were also encompassed by the phrase “any air pollutant.”  The EPA concluded, therefore, that stationary sources were subject to the Act’s permit requirements if the level of greenhouse gas emissions from those sources met either of the permit-requiring thresholds.  Moreover, the EPA determined that some of these stationary sources were also subject to the BACT requirement.

The EPA also concluded that enforcing the permitting requirement for greenhouse gases at the statutorily identified thresholds would dramatically increase the number of stationary sources needing permits, rendering the permitting program impossible to administer and contrary to Congressional intent.  To avoid this, the EPA purported to “tailor” the threshold at which stationary sources emitting only greenhouse gases would be required to seek a permit.  In particular, the EPA opted to phase in a progressively more restrictive threshold for greenhouse gas emissions that, over a period of at least five years, would drop from 100,000 tons per year to, potentially, 50,000 tons per year.  Several parties, including a number of states, challenged these EPA actions regarding greenhouse gases.

In its holding, the Court struck down the EPA’s application of the permit requirements to stationary sources that emitted greenhouse gases only.  The Court first determined that such an application was not compelled by the Clean Air Act’s language.  In particular, the Court reasoned that while the Act-wide definition of “air pollutant” was all encompassing and included greenhouse gases, as per Massachusetts, the phrase “any air pollutant” in the Act’s permit provisions had a narrower, context-appropriate meaning.  To support this reasoning the Court cited several examples where EPA had interpreted the phrase “any air pollutant” to apply to a narrow set of pollutants that did not include greenhouse gases.

Next, the Court held that the application of the Act’s permit requirements to stationary sources emitting only greenhouse gases was not a permissible exercise of the Agency’s discretion.  The Court reasoned that requiring such sources to get permits would be “incompatible with the substance of Congress’ regulatory scheme.”  According to the Court, the Act’s language left no doubt its permit requirements for stationary sources could not rationally extend beyond a relative handful of large sources that could shoulder the burden of the permit-seeking process.  Moreover, the Court believed that extending the permit requirements as the EPA had planned would cause an “enormous and transformative” growth in the agency’s authority without unambiguous Congressional approval.

The EPA’s efforts to tailor the permit program were also held impermissible because the Clean Air Act itself had set unambiguous thresholds at which permits would be required for stationary sources.  According to the Court, the Act’s precision in this regard left the EPA no authority to replace the threshold numbers with others of its own choosing.

The Court also held, however, that under the Act, the EPA could require stationary sources to comply with BACT for their greenhouse gas emissions if they were already required to seek a permit for their emission of conventional pollutants.  The Court noted the phrasing of the BACT provision – requiring BACT “for each pollutant subject to regulation under the Act” – was not amenable to a narrower, context-specific construction and therefore encompassed greenhouse gases.  Moreover, requiring stationary sources that were already subject to the Act’s permit requirement to also apply BACT would not lead to a dramatic expansion of the EPA’s authority.