EPA Moves to Fulfill Supreme Court Mandate in Massachusetts v. EPA
 
August 20, 2008
 
Lois Godfrey Wye - Washington

On July 11, 2008, EPA released an Advance Notice of Proposed Rulemaking (ANPR) regarding regulation of greenhouse gases (GHG) under the Clean Air Act (CAA). In an extremely unusual move, however, on the same day many other parts of the administration, including the White House, immediately moved to distance themselves from EPA’s position. Indeed, the ANPR was released together with a letter from the Office of Management and Budget (OMB); a joint letter and comments from Departments of Agriculture, Commerce, Transportation and Energy; a joint letter from the Council of Economic Advisors and the Office of Science and Technology Policy; a letter from the Council on Environmental Quality; and a letter from the Small Business Administration, all criticizing the ANPR and explaining why they believe the CAA is a poor vehicle for regulation of GHGs. In its letter, OMB explained that the administration “has been unable to reach interagency consensus in a timely way, and as a result, this staff draft cannot be considered Administration policy or representative of the views of the Administration.” Nevertheless, the administration determined that in view of a recent U.S. Supreme Court decision requiring certain actions, no such consensus was required in order for EPA to begin taking comments on potential GHG regulation under the CAA. The ANPR and the letters are published at 73 Fed. Reg. 44,354 (July 30, 2008) and public comments are due within 120 days of publication.

Greenhouse Gas Regulation Issues

The ANPR is a response to the U.S. Supreme Court’s 2007 decision in Massachusetts v. EPA, 549 U.S. 497 (2007). That decision arose out of a petition seeking to require EPA to regulate GHG emissions from new motor vehicles under CAA section 202(a). In 2003, EPA denied the petition both on policy grounds and on the grounds that the CAA did not authorize regulation of GHGs. The denial was challenged by 12 states, local governments and a variety of environmental organizations. Ten states and several industry trade associations intervened in support of the EPA. Last year the Supreme Court rejected EPA’s reasoning on both grounds. The Court held that GHGs are “pollutants” under the Clean Air Act and that EPA was therefore required under CAA 202(a) to make a determination as to whether the pollutants endanger public health and, if so, to regulate emissions from new motor vehicles or new motor vehicle engines. The Court held that EPA does have some discretion in bringing policy considerations to bear in making its determinations, but that those policy considerations must bear directly on the requirements of the statute; that is, they must be connected to the health and welfare objectives of the statute.

Nevertheless, the agencies and offices identified above have expressed grave concerns about the wisdom of moving forward with GHG regulation under the CAA, although there appears to be no dispute that climate change is a serious matter that requires attention. While their comments are varied and address specific concerns within each of their areas of expertise, certain general themes emerge. There is concern regarding the impact of unilateral action by the United States to address climate change if other nations do not undertake similar activities. The impact of such action, agencies fear, will be to place the United States at a competitive disadvantage, while not resulting in any reduction in worldwide emissions of GHG. The impacts of such regulation on both the economy and the climate, they argue, are extremely difficult to predict or gauge and regulation under the CAA will have significant hidden costs. They are also concerned that the CAA, which requires a piecemeal approach, is not a practical tool for addressing the intricacies of climate change and that such regulation will interfere with efforts under other statutes, such as the recently-passed Energy Independence and Security Act. Finally, they express concern that some of the proposals for regulatory approaches are based on untested legal theories that may not withstand judicial scrutiny.

Notwithstanding these challenges, EPA believes it must move forward in order to comply with the Supreme Court’s mandate. As this 588-page ANPR explains, this is not simply a matter of making the necessary endangerment determination and then, if necessary, crafting regulations. Instead, because other CAA provisions have similar endangerment provisions, such a finding under section 202(a) has potential implications for regulatory requirements in a host of other settings, as well. Moreover, because of the unique challenges of climate change issues, action under the CAA on these matters could have implications well beyond the statute itself, as addressed in many of the comments from other agencies. In issuing the ANPR, therefore, EPA is seeking to consider the broad technological, legal, economic and policy implications of regulating GHG under the CAA.

In particular, EPA is exploring the following:

• other provisions of the CAA that could require regulation of GHG
• the relationships between these various provisions of the CAA, so that if a regulation is passed under one provision, particularly section 202(a), what are the implications for other provisions
• how GHG regulation would affect current CAA programs such as NSPS, PSD, stratospheric ozone and others
• public policy and economic implications of such regulation
• scientific bases for regulation
• what emissions standards would be appropriate under various authorities

As part of this analysis, EPA initially identifies several currently pending issues that have already been affected by Massachusetts v. EPA. First, since that decision, EPA has received numerous petitions for regulation of other mobile sources, including ships, aircraft, construction equipment and farm equipment. In addition, a 2006 decision by EPA not to regulate GHG emissions of certain steam-generating units under the CAA New Source Performance Standards (NSPS) was based on EPA’s view that the CAA did not authorize regulation of GHG, a decision now necessarily under reconsideration; a similar issue regarding NSPS requirements for portland cement is also under review. A third area already feeling the impact of the Supreme Court’s decision is the Prevention of Significant Deterioration (PSD) program. The PSD permitting process requires public comment and many commenters are now addressing GHG.

Climate Warming Recognized by the Administration

In the ANPR, EPA also includes a discussion of current data on GHG emissions in the United States by gas emitted and by economic sector as well as discussion of the current state of and barriers to advancing technology. In addition, the ANPR describes the scientific work done to date on the endangerment analysis. Of particular interest in this discussion are EPA’s statements that the “warming of the climate is unequivocal,” ANPR at 187, and that “[t]he scientific record shows that there is compelling and robust evidence that observed climate change can be attributed to the heating effect caused by anthropogenic GHG emissions.” Id. at 194. This is a clear departure from earlier administration statements that the impact of human activities on climate change remained uncertain.

The bulk of the ANPR is comprised of a lengthy discussion of the nature of climate change and GHG regulation, authorities available or required under CAA, the technological/economic/policy implications and potential approaches to regulation. In this discussion, EPA identifies what it considers the key characteristics of GHG that make it hard to regulate: long atmospheric lifetime, global impacts, slow response to controls and long-term impact. With these challenges in mind, EPA also identifies several overarching issues to consider in developing an approach to GHG regulation under the CAA:

• To what extent is government action needed to spur technological changes and to what extent will market forces be sufficient?
• Which CAA provisions can best be used to spur technological changes?
• Which CAA provisions can be most effective in addressing GHG?
• What are the impacts on other environmental media?

In addition to these questions, EPA also identifies the following key policy and economic considerations:

• effectiveness of health and environmental risk reductions
• certainty and transparency of results
• cost-effectiveness and economic efficiency
• equity considerations (i.e, are costs and benefits equitably distributed)
• policy flexibility over time
• incentives for technological development
• competitiveness/emission shifts (i.e., will regulation lead to shifts in production and emissions to other sectors or geographic areas and can it take into account the nature of actions taken by other countries)
• administrative feasibility
• enforceability
• unintended consequences
• suitability of the regulatory tool for the job

In discussing policy, EPA highlights especially three issues which it believes are particularly important in designing effective GHG controls: (1) the advantages of a market-based approach; (2) economy-wide and sector-based regulations under the CAA; and (3) the potential for emissions shifts from one sector to another (rather than emission reductions) and international competitiveness considerations.

EPA also identifies the various CAA provisions that could be used to regulate GHG, including those governing both stationary mobile sources. In particular, the ANPR addresses Regional Determinations (§ 107), lists of pollutants (§ 108), air quality standards (§ 109), SIPs (§ 110), NSPS (§ 111) and PSD (§ 110). It also discusses Title VI, which covers stratospheric ozone, but acknowledges that this is not likely to be as useful as other statutory tools. As to each identified statutory authority identified, EPA attempts to address these four questions:

• What does each section require?
• What sources would be affected?
• What would key milestones and timelines be?
• What are possible implications for other parts of the CAA?

In attempting to answer these questions, EPA sets forth potential regulatory approaches and discusses possible advantages and disadvantages to various approaches to regulation.

EPA has requested comment on every aspect of the ANPR. In view of the broad scope of the issues raised in ANPR, it is unlikely that regulations will be proposed in the near term.

For more information, contact:

Lois Godfrey Wye
202.457.7062
lois.wye@hklaw.com
toll free: 1.888.688.8500