Supreme Court Strikes Down EPA’s GHG Tailoring Rule (June 2014)

The Supreme Court ruled on June 23, 2014, by a 5 to 4 margin (Justices Scalia, Roberts, Kennedy, Thomas, and Alito in the majority, and Justices Ginsberg, Breyer, Sotomayor, and Kagan in dissent) in UTILITY AIR REGULATORY GROUP v. ENVIRONMENTAL PROTECTION AGENCY ET AL., that the Environmental Protection Agency’s attempt to “tailor” greenhouse gas emissions (GHG) under the Prevention of Significant Deterioration (PSD) and Title V programs, at tailored levels of 100,000 tons per year CO2(e) for a major source, and 75,000 tons per year for a major modification was unconstitutional. But on a 7 to 5 margin, with Justices Alito and Thomas dissenting, also ruled that Best Available Control Technology (BACT) requirements for GHG for sources that trigger PSD for traditional pollutants, the so called “anyway sources” which were the focus of Step 1 of the tailoring rule that was in effect from January 2, 2011 until July 1, 2011 and which emit GHG’s above de minimis levels ,is allowable under the law.  Importantly, the Court noted that by EPA’s own admissions, the tailoring rule thresholds were not de minimis levels.  Consequently, it appears that EPA would have to promulgate de minimis levels for GHGs before they could regulate GHGs even from “anyway” sources.  Justices Alito and Thomas in their dissent argued that BACT analysis was not suitable for use with respect to GHGs in any instance.

This decision is a great, common sense victory for regulated entities in that it will remove many sources from PSD permitting.  The great harm in the tailoring rule was not the GHG emissions themselves or the GHG BACT analysis, but the EPA regulation that requires that once PSD is triggered for one pollutant (e.g. GHG emissions), other pollutants trigger PSD permitting, not at the major source thresholds (100 or 250 tons depending on the specific source), but at the much lower significance levels, which are as low as 10 tons per year in the case of PM2.5.  This frequently resulted in the requirement to do dispersion modeling and BACT analysis for traditional pollutants that would not have triggered PSD permitting without the GHG emissions.  This resulted in more expensive permits, a much longer permitting time frame, and a much greater regulatory burden on sources that, but for the GHG emissions, could have been permitted as minor sources.

It is also a victory for environmental protection.  One of the strongest drivers of increased control of traditional pollutants has been the willingness of industry to voluntarily install increasingly effective air pollution controls specifically to avoid the rigors and costs of PSD permitting.  The PSD program has been very effective in this regard as a “technology driving” mechanism to lower emissions and establish lower BACT limits.  This benefit of the PSD program was effectively lost as a result of the tailoring rule since there were no controls on GHG emissions that could avoid PSD permitting and some of the significance levels for traditional pollutants are so low that PSD avoidance was simply impossible for sources of even a moderate size. The Court’s action today restored this important component of air pollution control.

However, this ruling in no way impedes EPA’s authority to regulate GHG’s under any of its other programs such as New Source Performance Standards or Emissions Guidelines.  The decision only relates to the tailoring levels.

The decision may be found here.