A divided Supreme Court held that the Environmental Protection Agency (EPA) exceeded its authority under the Clean Air Act (CAA) when it required certain sources emitting greenhouse gases (GHG) to obtain permits under the Prevention of Significant Deterioration (PSD) and Title V Operating Permits (Title V) programs. The decision in Utility Air Regulatory Group v. EPA (No. 12-1146) on Monday, June 23, reversed the decision of the D.C. Circuit Court of Appeal that upheld EPA’s rules. The decision, however, allows EPA to continue to require sources that have to obtain PSD permits for other air pollutants to demonstrate that they will use the best available control technology (BACT) for GHG emissions in order to obtain the PSD permit. Because BACT was EPA’s primary focus in GHG permitting, the decision’s impact on large industrial sources will be limited. You may view the decision here.

Below is a summary of the holdings on the primary issues in the case:

1. EPA erred when it concluded that the CAA required permitting of GHG emissions following EPA’s determination that GHG were subject to regulation under the Act. Four justices dissented on this point.

2. EPA lacks the authority to interpret the CAA as allowing it to require permitting of GHG emissions. The majority found that PSD and Title V were intended to apply only to large industrial sources. EPA had agreed but promulgated the “tailoring rule” to address that concern. The tailoring rule changed the CAA definition of “major source” to limit the number of GHG sources that would have to obtain permits. The Court held EPA did not have authority to change the statutory definition. Because the statutory definition of major source when applied to GHG emissions would have resulted in substantial numbers of sources having to obtain GHG permits, contrary to the intent of the CAA to limit the permit requirements to large industrial sources, the Court held that EPA lacked authority to require GHG sources to obtain permits. Four justices also dissented on this point.

3. EPA does, however, have the authority to require sources having to obtain PSD permits anyway due to emissions of other pollutants - “anyway sources” - to demonstrate that they will use BACT to control GHG emissions from those sources. EPA may establish a de minimis level of GHG emissions that would be exempt from the BACT requirement. Two justices dissented on this issue stating that EPA did not have the authority to require BACT for GHG emissions.

The decision means that sources will not have to obtain PSD or Title V permits solely because of their GHG emissions. Sources that have to obtain PSD permits because of emissions of other pollutants will, however, have to include GHG emissions in the BACT review unless those emissions are below any de minimis level EPA may establish. Additionally, EPA likely will continue its efforts to use other CAA provisions, such as the New Source Performance Standards (NSPS) to regulate GHG emissions from new and existing power plants and other sources, as its authority under those programs does not appear to be directly affected by this decision.

If you have any questions, please contact one of the attorneys listed below.