EPA's Missed Opportunity To Ground Its GHG Tailoring Rule In The Statute: What The Situs Argument Would Mean For The Future Of The PSD Program

Published in ELR News & Analysis

On February 28 and 29, 2012, the U.S. Court of Appeals for the District of Columbia (D.C.) Circuit heard oral argument in a series of closely watched lawsuits1 challenging regulations issued by the U.S. Environmental Protection Agency (EPA) to regulate greenhouse gas (GHG) emissions from automobiles and manufacturing facilities under the Clean Air Act (CAA).2 Many observers consider the suite of GHG lawsuits,3 brought by industry groups and state petitioners, among the most significant in CAA and administrative law in the last 30 years.4

This is because the D.C. Circuit's decision will address the proper scope of EPA's prevention of significant deterioration (PSD) program and of rarely invoked judicial doctrines of last resort like "absurd results" and "administrative necessity." Moreover, the court's decision will address those issues in the context of GHG emissions, one of the most politically and scientifically charged issues of our times.

In these rulemakings, EPA made a "public health and welfare endangerment" finding for GHGs emitted from cars and, based on that finding, issued regulations limiting those emissions from cars. Critical in EPA's rulemakings was the Agency's determination that regulating such emissions for vehicles would also mean that preconstruction permitting requirements would be triggered for thousands and thousands of "stationary sources"—from large industrial plants to office buildings and large residences— many of which had never previously been regulated by the Act's permitting programs. EPA concluded such permitting burdens would grind to a halt air permitting issuance throughout the country, overwhelming federal, state, and local permitting agencies and distorting the Act's permitting regime into something that would be unrecognizable by the U.S. Congress that enacted it. Given its view of the statute, EPA chose to rewrite the statutory provisions it considered the culprits in causing this unintended onslaught of permitting requirements—the "major source thresholds" of 100 and 250 tons per year (tpy)—to 100,000 tpy.

The following discussion demonstrates that EPA need not and should not have turned to doctrines of "last resort," such as administrative necessity and absurd results, to justify rewriting the Act's major source thresholds. Instead, EPA should have implemented statutory language that by its terms limited applicability of the PSD permit program. Giving effect to this limiting language, referred to as the "situs requirement," would have managed the stationary source construction permitting implications of regulating GHGs from automobile tailpipes. If EPA had taken this simple step, no additional major source construction permits would have been required, and EPA would have been able to impose GHG controls only on the large sources Congress intended to regulate under PSD, and would do so only when those plants were obtaining permits anyway. Situs offered EPA a statutorily based way of implementing its decision that GHGs could fall within the scope of the PSD permit program, without also creating absurd results and administrative necessities. EPA chose time and again to reject the implementable path that situs offered.5

  1. BACKGROUND

    The EPA actions at issue in the GHG cases included the following.

    The Endangerment Finding6: On December 15, 2009, EPA issued its final action, Endangerment and Cause or Contribute Findings for GHGs Under Section 202(a) of the Clean Air Act, which found that six GHGs may reasonably be anticipated to endanger public health or welfare within the meaning of CAA §202(a)(1).7 The Tailpipe Rule8: On May 7, 2010, EPA issued, in conjunction with the National Highway Transportation Safety Administration (NHTSA), regulations limiting GHG emissions from the tailpipes of light-duty vehicles, i.e., cars, and establishing new Corporate Average Fuel Economy (CAFE) standards beginning with 2012 models.9 In this rulemaking, EPA stated its conclusion that issuance of the Tailpipe Rule under Title II of the CAA for "mobile sources" would trigger permitting requirements under CAA Title I, Part C, the PSD permitting program, and under CAA Title V, the operating permits program, that apply to "stationary sources"10 emitting GHGs in amounts of 100 tpy or 250 tpy emissions. For the typical pollutants regulated under the CAA, 100 or 250 tpy of emissions represents a relatively large industrial facility, but, for GHGs, an ordinary office building, apartment complex, or very small manufacturing facility could exceed these emission levels.11 Indeed, EPA's Tailoring Rule found that over 80,000 PSD permits per year would be required if the statutory major source thresholds were applied to GHGs.12 The Subject to Regulation Decision and Tailoring Rule (Tailoring Rule Case): EPA took two actions that it claimed would help address the drastic effects for stationary source permitting programs through issuance of the Tailpipe Rule. On April 2, 2010, EPA issued a decision determining that the Tailpipe Rule would not trigger stationary source impacts until the first compliance date for the Tailpipe Rule.13 Then, on June 3, 2010, EPA issued a rule designed to ameliorate the impact of its decision that the Tailpipe Rule would trigger PSD.14 Termed the Tailoring Rule, it raised the statutory 100/250 tpy major source thresholds.15 The Grounds Arising After (GAA) or Historic Regulations Case: In its PSD regulations, issued in 1980, EPA interpreted the CAA as meaning that PSD permitting can be triggered by any pollutant "subject to regulation" under the Act, not just by pollutants for which the Agency has established national ambient air quality standards (NAAQS).16 Although the CAA generally imposes a 60-day statute of limitations for challenging EPA final rules, petitioners brought this case—asking the court to invalidate EPA's historic interpretation—under an exception to that rule that allows challenges if "new grounds arise" after the 60-day deadline.17 While a court ruling is not expected for some months, what can be said now is that if the Endangerment Finding is upheld by the court, and if the Tailpipe Rule is also upheld, and if EPA's conclusion that regulation under the Tailpipe Rule brings GHGs within the purview of the PSD program is upheld, the situs argument would backstop EPA's progression to apply the statutory major source thresholds to emissions of GHGs—a progression that EPA acknowledges would lead to some 82,000 PSD permits per year, as compared with the current levels in the hundreds.18

    This Article explains the situs argument under the CAA and how its adoption would implement "statutorily compelled tailoring" rather than a tailoring approach that abrogates to EPA the authority to determine which plants are subject to PSD and which are not. It also outlines the opportunities that EPA had to avoid the "absurdities" and "administrative necessities" it claimed required it to revise plainly written statutory thresholds as it was moving toward issuing the Tailpipe Rule in 2009 and 2010. Finally, the Article explains the practical implications of implementing situs as was originally dictated by statutory language, contemplated by the Congress, and required by the Alabama Power Co. v. Costle decision.

  2. WHAT IS THE SITUS REQUIREMENT?

    Title I, Part C, of the CAA establishes a PSD preconstruction permit program that requires some sources of air emissions to obtain permits before beginning construction or undertaking a modification.19 Knowing that obtaining PSD permits would be hard and implementing them costly, Congress required them only for "facilities which, due to their size, are financially able to bear the substantial regulatory costs imposed by the PSD provisions and which, as a group, are primarily responsible for" air pollution.20 As the D.C. Circuit found: "The numbers of sources that meet these criteria . . . are reasonably in line with EPA's administrative capability."21

    Before EPA issued the Tailpipe Rule and concluded that GHG emissions alone would trigger PSD permitting requirements, the Agency counted just a few hundred PSD permits issuing each year—a total consistent with congressional intent to limit the PSD program to a manageable number of large industrial sources.22 Yet, because of the Tailpipe Rule, EPA estimated the annual number of PSD permits would explode to over 82,000 and include many small and nonindustrial sources.23 Exceeding EPA's administrative capability, each permit would take "a decade or longer" to obtain.24 While EPA admitted that such an explosion of PSD permits is "inconsistent with Congress's expressed intent," the Agency nonetheless contended that the "literal application" of the Act compels it.25 The fault lies not in the CAA, however, but in the Agency's improper interpretation of it. Specifically, the problem arose from EPA's failure to read and implement the operative applicability terms of the PSD program—the situs legal requirement.

    1. Situs: Location as Key Determinant for PSD Triggering

      The PSD program in Part C of Title I was enacted to prevent air quality in areas in attainment with NAAQS from worsening to the point that they are no longer in attainment.26 The first substantive PSD provision, §161, tethers the PSD program to attainment areas. It requires implementation plans to "contain emission limitations and such other measures as may be necessary . . . to prevent significant deterioration of air quality in each region (or portion thereof) designated . . . as attainment" pursuant to §107.27

      Preconstruction or premodification permitting is the central PSD requirement.28 Section 165(a) commands that "[n]o major emitting facility . . . may be constructed in any area to which this part applies" unless the facility has a PSD permit.29 Securing and satisfying a PSD permit are demanding obligations. To get one, a facility must show, among other things, that its emissions will not...

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