Justices challenge both sides in GHG case
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February 25, 2014
Justices challenge both sides in GHG case

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On Monday February 24, 2014, the U.S. Supreme Court listened to oral arguments in Utility Air Regulatory Group (UARG) v. EPA.  Arguments in the case addressed a single question—“Whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases.”

Supreme Court

In 2007, the Supreme Court ruled in Massachusetts v. EPA that the EPA does indeed have the authority to regulate greenhouse gas (GHG) emissions from new light-duty motor vehicles.  The motor vehicles industry has been remarkably cooperative with the Agency in the development of rules to implement that authority.

However, that cooperation is not apparent throughout the many industries, including those dominated by small businesses, which may be affected should the Court find that the EPA may impose stationary-source limits on GHG emissions under its Prevention of Significant Deterioration (PSD) program.

Accordingly, the current case has attracted the intense interest of all stakeholders.  Bear in mind that opinions issued by the Supreme Court do not always “answer” the question(s) posed with crystal clarity.  But often the views expressed by the justices during the oral presentations give a clue of where the court may be headed.

To acquire insight into the possible direction of the case based on what the justices said, BLR posed some questions to Thomas A. Lorenzen, a partner with the law firm of Dorsey & Whitney.  Lorenzen served for 16 years in the Department of Justice’s (DOJ) Environment and Natural Resources Division.  He represented the DOJ in Massachusetts v. EPA and provided legal advice to the White House during the development of the GHG regulations for light-duty motor vehicles.  As such, is eminently qualified to comment on the day’s proceedings. 

Q: The justices were aggressive in questioning counsel for both sides.  Do you have a sense of which side fared better in their responses?

A: Both Peter Keisler, who argued on behalf of the industry petitioners, and Solicitor General Donald Verrilli Jr., who argued on behalf of EPA, acquitted themselves very well in what was an extraordinarily complex argument before a very active Court.  Both also faced real challenges while at the lectern.  Mr. Keisler’s greatest challenge may have been that he was representing multiple parties that very obviously do not agree with one another on how the Clean Air Act ought best to be interpreted to deal with greenhouse gas regulation under the prevention-of-significant-deterioration permitting program.

Mr. Keisler started by arguing the more aggressive position: that PSD is limited to the six criteria pollutants and that greenhouse gases aren’t regulated under PSD at all.  When he later advanced the alternative position favored by some of his other clients—namely, that entry into the PSD program is governed by emissions of the criteria pollutants but that the control obligations then extend to all pollutants, including greenhouse gases—he found himself in trouble.

At that point, one justice offered Keisler yet a third possible interpretation, leading Keisler to plead mercy, as he was already having difficulty advancing just the two.  While this led to some good-natured laughter, it also led Justice Kagan to ask Keisler whether the inability of the petitioners to agree on a single argument suggested that this is precisely the type of case where deference to the federal agency’s interpretation is highest.

Solicitor General Verrilli had the most difficulty when trying to find legal precedent for EPA’s “tailoring” of the statutory emission thresholds to suit the unique emission levels associated with greenhouse gases, which are far higher than those associated with other pollutants emitted by stationary sources.  Effectively, he was asking the Court to trust EPA to rewrite a portion of the statute to comply with congressional intent, and the Court is not likely to allow that absent some limiting principle that will avoid separation-of-powers problems.   

Q: Justice Breyer continually made the point that the EPA could customize regulations to ensure that most small sources of GHG emissions would not be subject to PSD and Title V permitting.  If the EPA made it clear that it would take this approach and explained how it would do so, do you think it would soften opposition to the GHG regulation of stationary sources?

A: I don’t think it would.  The battle in the Court today was not being waged by the small sources of GHGs.  They’re already exempt (at least for now) under EPA’s Tailoring Rule, because they fall well below the 100,000 ton-per-year regulatory threshold that EPA created in that rule.  This case is primarily about whether the largest sources of greenhouse gases will be required to control their emissions absent issuance of category-specific New Source Performance Standards.  More about that in a moment.

Q: Counsel for the petitioners implied that GHGs could be better regulated under other CAA programs (e.g., New Source Performance Standards (NSPSs)).  Does that open the door to a different approach should the EPA lose this case?

A: EPA is already proposing to regulate the largest domestic stationary source of greenhouse gases—fossil fuel-fired power plants—under the New Source Performance Standards provisions of the Act.  That effort, too, promises to be hard-fought, perhaps (like this case) all the way to the Supreme Court.  One of the most interesting things that happened today—or that didn’t happen, as the case may be—was the concession by industry, and the lack of argument to the contrary by any party in court, that EPA has that authority over greenhouse gases under the NSPS program.  So, unless things go in a very unexpected direction in the opinion, EPA’s power to regulate GHGs under the Clean Air Act more broadly is likely to be further affirmed in this case.  Massachusetts v. EPA will remain the law of the land.   

Justice Sotomayor raised the possibility than an EPA loss in this case would result in a reversal of Massachusetts v. EPA.  Counsel for the petitioners disagreed. What’s your position?

A: Some of the arguments advanced by some of the petitioners—such as some advanced by the state of Texas—might have resulted in a reversal of Massachusetts. I had no sense this morning that those arguments gained any traction with the Court.  And Mr. Keisler’s virtual concession, on behalf of industry, that EPA would retain authority over GHGs under the NSPS even if the Court ruled that EPA lacks authority over them under PSD, suggests that a reversal of Massachusetts is exceedingly unlikely.

It’s worth remembering here that American Electric Power v. Connecticut, the other very important Supreme Court greenhouse gas case that was mentioned repeatedly today, is a decision in which the Court ruled that states and citizen groups cannot proceed with nuisance suits against large GHG emitters such as power plants precisely because EPA has authority to regulate GHGs under the Clean Air Act following Massachusetts.  Reversing Massachusetts would raise the specter of reviving such nuisance suits, which could lead to chaos as individual judges decided case by case whether and to what extent GHG emitters would be required to reduce their GHG emissions or curtail operations.

Q: Justice Kagan referred to this case as the “apex of Chevron deference,” and asks why the EPA shouldn’t be allowed to make the “thing work as it can?”  How would you answer?

A: Justice Kagan has a good point.  Typically, where there are multiple interpretations (such as the two that Mr. Keisler advanced at argument), the statute is deemed ambiguous, and the agency that has been delegated authority is entitled to deference so long as its interpretation is reasonable.  This case is not so easy.  Here, EPA admits that its interpretation of the statute can lead to absurd results—that is, that if it is implemented as to all covered sources all at once, at the statutory thresholds, then permit writers would be overwhelmed by the volume. 

Another judicial canon says that statutes should be interpreted, whenever possible, to avoid absurd results.  The two canons—deference to agency interpretations of ambiguous statutes, and interpretation of statutes to avoid absurd results—clash here.  The question will be, What happens when the absurdity is (as EPA asserts) only a temporary one?

Q: There appears to be acceptance that the EPA does have the authority to regulate GHG emissions from sources already subject to PSD permitting, or 83 percent of emissions, an authority that would continue even if the EPA loses the case.  A loss means that it would not be allowed to regulate an additional 3 percent.  That seems like a small difference.  Why, then, do the EPA and its supporters believe this case is so important?

There are a few reasons.  First, EPA has long interpreted PSD as being triggered by above-threshold emissions of any pollutant, not just criteria pollutants.  A contrary ruling would result in upsetting 34 years of consistent practice.  More significantly, EPA views PSD as a necessary program alongside NSPS.  Developing an NSPS is a slow, cumbersome process, and each applies only to one industrial category of sources.  PSD covers all sources, regardless of category.  Thus, PSD requires case-by-case permitting and installation of pollution controls even for sources in categories for which no NSPS has been developed.  And, as Solicitor General Verrilli said, it forces new and modified sources to continually “up their game” in the 8-year period between revisions of an existing NSPS.  So, both are very important to EPA. 

The transcript of the oral argument

Thomas A. Lorenzen, Partner
Dorsey & WhitneyY
Email:  Thomas A. Lorenzen
Phone: 202-442-3525

Thomas A. Lorenzen is a partner in Dorsey & Whitney’s Regulatory Affairs Group. His practice focuses on environmental law and the federal rulemaking process. He represents clients in environmental compliance counseling, due diligence and other transactional work, and in trial and appellate litigation, administrative actions, enforcement proceedings and complex negotiations relating to environmental review, major facility permitting, air and water quality, hazardous and solid waste and environmental cleanup. From 2004 until joining Dorsey in 2013, Mr. Lorenzen was an Assistant Chief in the U.S. Department of Justice’s Environment and Natural Resources Division (ENRD). During that time, he supervised the federal government’s legal defense of all Environmental Protection Agency rules, regulations and other final actions judicially reviewable under the various federal pollution control statutes. Mr. Lorenzen represented the DOJ in Massachusetts v. EPA and provided legal advice to the White House during the development of the GHG regulations for light-duty motor vehicles. 

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