D.C. Circuit Court of Appeals upholds EPA’s Greenhouse Gas Regulations

On June 26, 2012, in Coalition for Responsible Regulation, Inc., et al., v. Environmental Protection Agency, No. 09-1322 (D.C. Cir. June 26, 2012), the D.C. Circuit Court of Appeals upheld the Environmental Protection Agency’s Endangerment Finding and Tailpipe Rule regarding greenhouse gases. The court also upheld the agency’s interpretation of the Clean Air Act (CAA) requiring major stationary sources of greenhouses gases to obtain construction and operating permits. Opponents of these rules disputed the Endangerment Findings and EPA’s authority to regulate GHG emissions under the CAA based upon the finding.

Background and Procedure

The EPA promulgated the disputed rules following the Supreme Court’s holding in Massachusetts v. EPA that GHGs may be regulated as an air pollutant under the CAA. In response to this holding, the EPA first issued its Endangerment Finding for GHGs. The Finding was based “on a considerable body of scientific evidence,” and EPA concluded that emissions of specified GHGs “contribute to the total greenhouse gas air pollution, and thus to the climate change problem, which is reasonably anticipated to endanger public health and welfare.” Based on this finding, the EPA was required under the CAA to establish motor-vehicle emission standards for GHGs. The ensuing Tailpipe Rule set GHG emission standards for cars and light trucks as part of a joint rule-making with fuel economy standards issued by the National Highway Traffic Safety Administration.

Due to EPA’s standing interpretation of the CAA, the Tailpipe Rule automatically triggered regulation of stationary GHG emitters under the Prevention of Significant Deterioration of Air Quality (PSD) program and Title V. The PSD program requires state-issued construction permits for stationary sources producing either 100 tons per year (tpy) or 250 tpy of any air pollutant. Title V requires state-issued operating permits for stationary sources that have the potential to emit at least 100 tpy of any air pollutant. EPA then issued two rules phasing in stationary source GHG regulation. First, in the Timing Rule, EPA concluded that an air pollutant becomes subject to regulation under the CAA (and therefore to PSD and Title V) only once a regulation requiring control of that pollutant takes effect. Therefore, EPA determined major stationary emitters of GHGs would be subject to PSD and Title V permitting requirements on the date the Tailpipe Rule became effective—or the date when GHGs first became regulated under the CAA. Following the Timing Rule, EPA promulgated the Tailoring Rule, providing that only the largest sources of GHG emissions, those exceeding 75,000 or 100,000 tpy CO2e, would initially be subject to the GHG permitting. This rule was adopted after the EPA determined requiring permitting for all sources would be overwhelmingly burdensome for both permitting authorities and stationary sources.

A number of states and regulated industries filed petitions for review of these new GHG regulations, arguing the EPA misinterpreted the CAA or otherwise acted arbitrarily and capriciously.

Challenges to the Endangerment Finding.

Petitioners challenged EPA’s Endangerment Finding on numerous substantive and procedural grounds. All challenges were rejected by the court.

  1. EPA’s interpretation of CAA section 202(a)(1).

Petitioners argued that the EPA improperly interpreted CAA § 202(a)(1) as restricting the finding to a science-based judgment without considerations of policy concerns and regulatory consequences. Petitioners believed the EPA was required to consider the benefits of activities emitting GHGs, the effectiveness of emissions regulation, and the potential for societal adaptation to or mitigation of climate change. Petitioners argued that, by not considering these factors, EPA acted arbitrarily and capriciously.

The Court determined the plain language of CAA § 202(a)(1) was contrary to these arguments. The language of the section requires only that the endangerment evaluation relate to whether an air pollutant causes or contributes to air pollution which may reasonably be anticipated to endanger the public health or welfare. The court held that the evaluation process required “scientific judgment”—not policy discussions—about the potential risks of GHGs. The court also held that CAA § 202(a)(1) does not allow the EPA to consider, as part of the endangerment inquiry, the implications or impacts of regulations that might result from a positive endangerment finding.

  1. The Scientific Record

Petitioners also challenged the adequacy of the scientific record underlying the endangerment findings. Petitioners initially challenged the EPA’s reliance on publications issued by the Intergovernmental Panel on Climate Change (IPCC), the U.S. Global Climate Research Program, and the National Research Council.  The court summarily rejected this argument, noting the scientific literature was peer-reviewed and consisted of thousands of individual studies on GHGs and climate change. The court also rejected, as “little more than a semantic trick,” that EPA delegated its authority by relying on these studies. The EPA relied on the reports not as substitutes for its own judgment but as evidence upon which it relied to make its ultimate judgment. The court noted that EPA is not required to re-prove “the existence of the atom every time it approaches a scientific question.”

Finally, in their challenge to the adequacy of the scientific record, Petitioners argued EPA erred in reaching the Endangerment Finding due to scientific uncertainty surrounding climate change. The court responded by noting the “substantial” body of scientific evidence supporting the Endangerment Finding. The court held the existence of some uncertainty does not, without more, warrant invalidation of an endangerment finding. The statute itself is designed to be precautionary in nature and to protect the public health. Further, the Supreme Court itself ruled in Massachusetts v. EPA that the agency may make an endangerment finding despite lingering uncertainty. The court held that the EPA’s decision was supported by substantial evidence and that the agency had relied on the scientific record “in a rational manner.” The court noted that it was not its role to reweigh the evidence before it and reach its own conclusion.

  1. Lack of a quantitative threshold

Petitioners contended that the Endangerment Finding was arbitrary and capricious because the EPA did not define, measure or quantify either the atmospheric concentration at which GHGs endanger the public health or welfare, the rate or type of climate change anticipated to endanger the public welfare, or the risk or impacts of climate change. The court, again relying on the plain language of CAA § 202(a)(1), held that EPA is not required to establish a precise numerical value as part of its endangerment findings. Instead, section 202(a)(1) allows for a qualitative approach that allows the EPA to make case-by-case determinations based on the potential severity of harm in relation to the probability that the harm will occur.

  1. EPA’s definition of “air pollutant”

EPA defined the GHG “air pollution” and “air pollutant” subject to the Endangerment Finding as an aggregate of six GHGs, which the EPA called “well mixed greenhouse gases”: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). Industry Petitioners argued EPA’s decision to include PFCs and SF6 was arbitrary and capricious because motor vehicles do not emit these pollutants. The court responded that no petitioner established standing to make this argument, as no petitioner could demonstrate an injury-in-fact resulting from EPA’s decision to include PFCs and SF6 in the Endangerment Finding.

  1. Failure to submit Endangerment Finding for review by Science Advisory Board

Petitioners claimed that the EPA’s failure to submit the Endangerment Finding to the Science Advisory Board (SAB) violates its mandate to “make available” to the SAB “any proposed criteria document, standard, limitation, or regulation under the Clean Air Act” at the time it provides the same “to any other Federal agency for formal review and comment.” The court noted that it wasn’t clear this obligation was even triggered because it wasn’t clear that the EPA provided the Endangerment Finding to any Federal agency for formal review and comment—it had only been submitted to the Office of Information and Regulatory Affairs pursuant to Executive Order 12,866 for informal review. The court found that even if the EPA violated its mandate by failing to submit the Endangerment Finding to the SAB, Petitioners did not show this error was prejudicial to the rulemaking.

  1. Denial of petitions seeking reconsideration of Endangerment Finding

In the final challenge, Petitioners argued the EPA erred by denying all ten petitions for reconsideration of the finding. Petitioners asserted that internal documents and emails obtained from the University of East Anglia’s Climate Research Unit undermined the scientific evidence upon which the EPA relied. When determining whether to commence reconsideration of a rule, EPA considers an objection to be of “central relevance to the outcome” of that rule “if it provides substantial support for the argument that the regulation should be revised.” Additionally, the party raising the objection must demonstrate that it was impracticable to raise the objection during the public comment period.

The court rejected Petitioners’ assertion, finding that they failed to provide substantial support for their arguments that the Endangerment Findings should have been revised. The assessment had relied on over 18,000 peer-reviewed studies, and two errors identified in IPCC reports were harmless because EPA did not actually rely on such errors to reach the positive Endangerment Finding. Isolated errors identified by Petitioners did not rise to the level of substantial evidence required to support their arguments to overturn the Endangerment Findings.

Challenges to the Tailpipe Rule

Petitioners did not directly challenge the vehicle emission standards set by the Tailpipe Rule, and instead argued the EPA acted arbitrarily and capriciously by failing to consider and justify the costs of its conclusion that the Rule triggers stationary-source regulation under the PSD Program and Title V. The court rejected this argument and held that once EPA made the Endangerment Finding, the language of section 202(a)(1) created a non-discretionary duty that the EPA adopt regulation applicable to vehicle GHG emissions. The court noted this interpretation was supported by the Supreme Court’s decision in Massachusetts v. EPA.

Petitioners also advanced a claim under the Administrative Procedures Act, alleging that EPA failed to show that the proposed standards “would meaningfully mitigate the alleged endangerment.” The court rejected this argument, indicating that petitioner misread earlier D.C. Circuit decisions on EPA air regulations. EPA was under no requirement to establish a particular level of mitigation that the regulation had to achieve. Instead, EPA was only required to show that the Tailpipe Rule would contribute to “meaningful mitigation of greenhouse gas emissions.”

Finally, the court rejected an argument made by Petitioners that EPA should have considered the cost of stationary source permitting that would follow adoption of the Tailoring Rule. The D.C. Circuit had previously held that section 202(a)(2) reference only compliance costs to the motor vehicle industry and does not mandate consideration of costs to other entities not directly subject to the proposed tailpipe emission standards.

Challenges to EPA’s interpretation of PSD Permitting, Timing and Tailoring Rules

Petitioners challenged EPA’s longstanding interpretation of the scope of the permitting requirements for construction and modification of major emitting facilities under the CAA. Since 1978, EPA has defined “major stationary source” as a source that emits major amounts of “any air pollutant regulated under the [CAA].” This interpretation held through EPA’s PSD regulations adopted in 1980 and 2002. “Any pollutant” was interpreted by the EPA to include both criteria pollutants for the National Ambient Air Quality Standards (NAAQS) and non-criteria pollutants. As a result, when EPA determined that GHGs would become a regulated pollutant, emissions of more than 100 or 250 tpy of GHGs would trigger a PSD permitting requirement. Petitioners challenged this interpretation and argued that EPA could and should have avoided extending the PSD permitting program to major GHG emitters. The court adopted a plain meaning of section 169(1), which requires PSD permits for stationary sources emitting major amounts of “any air pollutant.” Both the EPA and the Supreme Court in Massachusetts v. EPA clearly established that GHGs are air pollutants. As a result, the court rejected Petitioners’ arguments that EPA should not have extended the PSD permitting program to major GHG emitters. The court rejected the Petitioners’ alternative interpretations of the PSD permitting triggers, as none cast doubt on the unambiguous nature of the statute.

Petitioners also challenged the Tailoring and Timing Rules established by EPA to facilitate initial regulations of GHGs. The court determined Petitioners lacked standing to challenge these two Rules because none had suffered an injury-in-fact as a result of the rules. Instead, the court found the Timing and Tailoring Rules actually mitigated Petitioners’ purported injuries, as many would be subject to PSD and Title V permitting requirements at an earlier time absent the rules.