D.C. Circuit to Decide EPA’s Authority to Regulate Greenhouse Gas Emissions

The Legal Intelligencer

(by Gary Steinbauer)

Lawsuits pending before the U.S. Court of Appeals for the D.C. Circuit are likely to shape the U.S. Environmental Protection Agency’s (EPA’s) authority to regulate greenhouse gas (GHG) emissions from stationary sources under the Clean Air Act (CAA). These legal challenges involve two high-profile CAA deregulatory actions: The EPA’s Affordable Clean Energy rule (“Repeal of the Clean Power Plan; Emission Guidelines for Greenhouse Gas Emissions from Existing Electric Utility Generating Units; Revisions to Emission Guidelines Implementing Regulations,” 84 Fed. Reg. 32520 (July 8, 2019)) (ACE Rule) and the EPA’s rule eliminating the transportation and storage segments from and rescinding methane requirements in the new source performance standards for the oil and gas industry (“Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Review Rule,” 85 Fed. Reg. 57,018 (Sept. 14, 2020)) (policy Amendments rule) (collectively referred to as the rules). The rules repeal and replace Obama-era GHG emission regulations promulgated pursuant to Section 111 of the CAA, 42 U.S.C. Section 7411.

Section 111 of the CAA grants the EPA authority to establish national performance standards for categories of sources that cause or significantly contribute to “air pollution which may reasonably be anticipated to endanger public health or welfare.” Section 111 of the CAA establishes separate regulatory tracks for new, reconstructed and modified sources and existing sources that would otherwise qualify as regulated new sources. For new, reconstructed, or modified sources, the CAA requires the EPA to establish new source performance standards (NSPS), representing the “best system of emission reduction” (BSER), that apply directly to the particular source category. See 42 U.S.C. Section 7411(b). For existing sources, the EPA is to establish BSER-based emission guidelines that are to be applied through state-issued performance standards. See 42 U.S.C. Section 7411(d).

  • The Policy Amendments Rule—Regulating GHG Emissions From New Sources Under Section 111(b) of the CAA Background

The Policy Amendments Rule revised an Obama-era NSPS for the oil and gas industry located at 40 C.F.R. Part 60, Subparts OOOO and OOOOa. There are three inter-related components of the policy amendments rule: the removal of the transmission and storage segments of the oil and natural gas sector from the category of sources regulated in NSPS OOOO and OOOOa; the rescission of NSPS OOOOa’s methane requirements for the production and processing segments of the oil and natural gas sector (i.e., the sources remaining within the category after removing the transmission and storage segments); and a legal determination that Section 111 of the CAA must or should be interpreted to require a finding that a pollutant causes or significantly contributes to dangerous air pollution before it can be added to an existing NSPS.

The EPA’s rationale for rescinding the NSPS OOOOa methane requirements is that methane-specific controls are redundant. Notably, methane emission controls from the production and processing segments are no different than the VOC-specific controls, and the same was true for the VOC and methane emission controls that previously applied to the transmission and storage segment. The consequence of this determination is that the EPA will no longer be required to regulate methane emissions from existing sources in the industry’s production and processing segment. The EPA also justifies the rescission of methane requirements by finding that, contrary to Section 111 of the CAA, the Obama administration failed to find that methane contributes significantly to dangerous air pollution when it added the methane requirements to NSPS OOOOa in 2016.

What’s at Stake? 

Opponents wasted no time filing lawsuits challenging the policy amendments rule. Environmental groups, 20 democratic states attorney general (including Pennsylvania), the District of Columbia, and two municipalities have challenged the policy amendments rule.  These consolidated actions are moving forward on an expedited schedule. The D.C. Circuit has issued an order temporarily staying the policy amendments rule, while the court considers the merits of the challenges. The court was careful to note that its temporary stay order “should not be construed in any way as ruling on the merits.” The court has issued an expedited schedule for briefing on the challengers’ motions to stay and summarily vacate the Policy Amendments Rule, with final briefs due Oct. 5.

At issue in the policy amendments rule litigation is what the EPA must do to expand an NSPS source category to include sectors beyond those included in the original category of sources. In addition, the D.C. Circuit will be deciding what the EPA must do to add pollutants to those already regulated in its approximately 90 existing NSPSs. More specifically, the D.C. Circuit must determine whether Section 111 of the CAA requires the EPA to find that a proposed new pollutant, such as a GHG, significantly contributed to dangerous air pollution or merely that there is a rational basis for regulating such a pollutant. If the D.C. Circuit adopts the interpretation of Section 111 advanced by the EPA by in the policy amendments rule, it decreases the likelihood that both new and existing sources within the oil and natural gas industry sector and many other industry sectors will be subject to GHG emission standards under an NSPS.

  • The ACE Rule—Regulating GHG Emissions From Existing Sources Under 111(d) of the CAA

Background 

The ACE rule is comprised of three separate regulatory actions: the repeal of the Obama-era Clean Power Plan; the replacement of the CPP with the new ACE rule emission guidelines; and a set of revisions to the rules implementing Section 111(d) of the CAA. As compared to the Obama-era CPP, the ACE Rule’s definition of BSER from existing coal-fired power plants or electricity generating units (EGUs) is far more limited. The ACE rule adopts a carbon dioxide (CO2) emission rate comprised of heat rate improvement measures for existing coal-fired EGUs. States are responsible for adopting plans to establishing performance standards on a unit-by-unit basis, based on candidate technologies identified by the EPA, source-specific factors, and the remaining useful life of the source. States will have three years, or until 2022, to submit these plans to the EPA.

The BSER in the ACE rule is the product of the Trump administration’s more limited view of Section 111(d) of the CAA. More specifically, the CO2 emission rates adopted in the ACE rule apply solely within the plant sites at issue. In sharp contrast, the Obama administration interpreted its Section 111(d) more broadly, establishing emissions guidelines that would have required states to direct coal-fired EGUs offset their CO2 emissions by obtaining credits from lower-or zero-emitting power generation sources.

What’s at Stake? 

Public health groups challenged the ACE rule the same day it was finalized. In addition, 22 states (including Pennsylvania), the District of Columbia, and six municipalities filed a separate challenge, and environmental groups have also joined the fray with a third challenge. These now-consolidated lawsuits are pending in the D.C. Circuit, with numerous industry groups, power companies and others intervening to support and oppose the ACE rule. Oral argument on the ACE rule challenges is scheduled for Oct. 8.

The D.C. Circuit will be tasked with interpreting the scope of the EPA’s authority to regulate GHG emissions from existing sources under 111(d). Because the U.S. Supreme Court stayed the CPP before it became effective and the lawsuits challenging the CPP were subsequently dismissed as moot after the ACE rule was promulgated, the ACE rule lawsuits will be the first time a court has ruled on the merits of the Trump and Obama administration’s competing views of the scope of Section 111(d).

Conclusion

Based on the current litigation schedules, it is expected that the D.C. Circuit will decide the fate of the rules through the lens of the Trump administration’s narrower interpretation of Section 111 of the CAA. It remains to be seen whether the ACE rule and policy amendments rule survive the D.C. Circuit Court challenges and whether the challenges will ultimately reach the Supreme Court. In the meantime, the EPA’s authority to regulate GHG emissions from stationary sources under the CAA hangs in the balance.

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Reprinted with permission from the October 6, 2020 edition of The Legal Intelligencer© 2020 ALM Media Properties, LLC. All rights reserved.