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Supreme Court Takes on GHG Regulation

Issue 12 and Volume 117.

We know there’s an endangerment; we just don’t know what authority EPA has to address it.

By Robynn Andracsek, P.E., Burns & McDonnell and Seth D. Jaffe, Foley Hoag LLP

Once again, the future of coal-fired generation is in the hands of the courts. While it is not possible to predict how the Supreme Court will rule in Utility Air Regulatory Group v. EPA, it is wise to understand the basics about this possible game-changing court case. At the most basic level, the Supreme Court accepted six petitions but limited their review to 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.”

It is equally important to understand both what the Supreme Court decided to review AND what it chose to let stand, as well as the position on both sides.

Let’s first look at what is not in question. The significance of the Supreme Court’s decision to review the greenhouse gas (GHG) rules can only be fully appreciated by understanding the petitions that it denied. The Supreme Court did not accept the challenge to EPA’s Endangerment Finding, nor did it accept the challenge to EPA’s tailpipe rules for motor vehicle emissions. The Endangerment Finding stated that the current and projected concentrations of greenhouse gases threaten the public health and welfare of current and future generations. The Cause or Contribute Finding stated that GHGs from motor vehicles contribute to GHG pollution which threatens public health and welfare. Thus, those two issues are off the table. Most fundamentally, EPA’s core decision that GHGs are pollutants which endanger public health is now final.

Regarding the question that the Supreme Court is reviewing, what are the arguments on each side? EPA’s position is that the Prevention of Significant Deterioration (PSD) program applies to any major source of “any air pollutant” regulated under the Act. Once it concluded through the Endangerment Finding that GHG are pollutants under the Clean Air Act (CAA), and regulated them under the tailpipe rule, the stationary source rule followed necessarily.

The petitioners have two different views as to why EPA’s position is wrong. First, the utilities argue “any air pollutant” actually refers only to those pollutants subject to National Ambient Air Quality Standards (NAAQS). EPA has not established a NAAQS for GHG, nor has EPA made any indication that it will do so in the future. According to the utilities, this would essentially prohibit EPA (at least for now) from regulating GHG emissions from existing stationary sources. Second, the American Chemistry Council (ACC) takes a narrower position and argues that facilities which are otherwise subject to PSD review due to their emissions of conventional pollutants (e.g. nitrogen dioxide, sulfur dioxide, etc.) may also be subjected to GHG limits. Given that most large emitters such as power plants are subject to PSD anyway, the ACC estimates that this would leave 83 percent of GHG emissions subject to EPA PSD regulations.

Separate from the issue of whether GHG should be regulated under the PSD program are EPA’s other issued and proposed GHG rules. The EPA has proposed New Source Performance Standards (NSPS) for new coal-fired boilers that would likely prohibit new construction of coal-fired boilers in the absence of carbon capture and storage. An NSPS for existing coal-fired boilers is expected to be proposed in June 2014 and finalized by June 2015.

EPA’s development of these NSPSs for GHGs is a separate rulemaking from the PSD issue that the Supreme Court will decide. These GHG NSPSs will probably not be significantly affected by any Supreme Court decision.

The NSPSs could be slightly delayed if the Supreme Court’s decision in the current case caused EPA to conclude that it needed to issue a separate endangerment finding for stationary sources, but EPA would presumably be ready to do so without much delay.

The backdrop to this court case is an atmosphere of open hostility toward coal combustion by regulators and citizen groups. The Treasury Department is now advising development banks to end U.S. government support of public financing of new coal plants overseas except in “very limited” circumstances and only where carbon capture and sequestration (CCS) is included. CCS is, according the EPA, the “best system of emissions reduction adequately demonstrated,” however CCS has yet to reach commercial-scale operation anywhere in the world.

As usual, coal-fired U.S. utilities, the backbone of our stable, affordable power grid, are left to operate in a state of uncertainty. We know there’s an endangerment; we just don’t know what authority EPA has to address it. 2014 will be a very interesting year.

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