EPA on Winning Streak as High Court Backs Greenhouse Permits

Jun 24, 2014 1:52 pm ET

(Updates with EPA approval in second graf under ‘Calpine, Exxon’ subheadline.)

June 24 (Bloomberg) -- The Obama administration added to a series of environmental court wins, as the Environmental Protection Agency retained the right to curb greenhouse gases from power plants, refineries and chemical factories.

The U.S. Supreme Court yesterday upheld the EPA’s requirement that such facilities address the emissions as part of permits for expansion. The court said the agency couldn’t apply the rule to smaller emitters such as apartment buildings, schools or restaurants. After the decision, facilities responsible for 83 percent of emissions still need a permit.

“The practical result is that virtually all large new pollution sources will have to apply modern pollution controls to their carbon pollution,” said David Doniger, the top climate lawyer for the Natural Resources Defense Council. “The most important message from this case is that the Supreme Court stands behind its prior decisions that EPA has the authority and responsibility to” address climate change.

The high court’s ruling follows its rejection last year of a plea to reconsider its 2007 decision letting the agency regulate greenhouse gases. In April, the court upheld the EPA’s rule cutting pollution from power plants tied to soot and smog that crosses state lines. A lower court upheld its far-reaching mercury rule.

In each of the earlier cases the court deferred to the agency in figuring out how to apply complex statutory language. Justice Antonin Scalia, a frequent EPA critic who wrote the majority opinion, did that in the decision yesterday.

Power Plants

“EPA is getting almost everything it wanted in this case,” Scalia said in announcing the ruling.

The court’s refusal in October to consider arguments over whether the EPA can address carbon emissions or if those emissions are endangering public health, left business groups fighting the legal basis for permit requirements, which they said could have ultimately affected millions of facilities.

“The real concern was the bringing in of much smaller manufacturing entities,” said Leslie Hulse, a lawyer at the American Chemistry Council, which advocated the divided approach the court adopted.

The court’s ruling heads off that possibility, limiting the rules to a few hundred facilities that already have to get permits for other pollutants. The justices said greenhouse-gas emissions by themselves can’t serve as the trigger for a permit requirement.

Agency Deference

“This ruling clearly limits EPA’s authority in some respects, but it’s equally clear to me that the courts are still providing the agency too much deference,” Louisiana Republican Senator David Vitter said in a statement.

The case splintered the court. Chief Justice John Roberts and Justice Anthony Kennedy joined Scalia’s opinion. The four Democratic appointees -- Stephen Breyer, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan -- said they would have gone further to back the EPA.

Justices Samuel Alito and Clarence Thomas said they would have barred the EPA from regulating greenhouse gas emissions from all sources. They said the court was wrong in 2007 when it said the agency could regulate climate change under the Clean Air Act.

Scalia blasted what he termed the overreach by the agency in requiring a facility to get a permit solely because of greenhouse-gas emissions, which he said would expand the program to include many smaller facilities that lawmakers did not intend to include in the lengthy, expensive process.

Rhetorical Ammunition

That approach “would bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization,” Scalia wrote.

That language will give rhetorical ammunition, though not a controlling legal precedent, to groups that may challenge the administration’s separate and more far-reaching plan to cut carbon emissions from power plants, said Roger Martella, a Washington lawyer who represented the American Chemistry Council in the high court case.

The case also limits how far the EPA can go in requiring efficiency upgrades at factories, Martella’s firm, Sidley Austin, wrote in a client note.

Doniger countered that now the court has re-affirmed the ability of the EPA to tackle this issue through the Clean Air Act, something states such as Texas and some utilities and coal producers have tried to get reversed.

The “decision means three strikes and you’re out” for opponents, he wrote in a blog post.

Calpine, Exxon

The industries primarily affected by the requirements are power plants, chemical facilities, oil and gas projects and cement plants, according to the EPA. Companies that have applied for permits include Calpine Corp., ExxonMobil Corp. and Occidental Petroleum Corp. Since 2011, 172 greenhouse-gas permits have been issued, according to the EPA. The permitting process can take a year or more.

Calpine, based in Houston, said in court papers that it won permits at four plants in California, Delaware and Texas, including the Russell City Energy Center, a 619-megawatt natural-gas fired station near San Francisco.

The EPA today approved a greenhouse-gas permit for a $800 million expansion project at a Mont Belvieu, Texas, plant of ONEOK Inc. that will turn natural-gas liquids into products such as propane and butane.

Any Pollutant

The heart of the court’s decision focused on requirements in the Clean Air Act that facilities get a review if they emit any air pollutant at 100 tons or 250 tons, depending on the type of source. While that is a significant amount for traditional pollutants such as mercury or sulfur dioxide, it could cover many thousands more facilities if carbon dioxide emissions were counted at that level.

“Like EPA, we think it beyond reasonable debate that requiring permits for sources based solely on their emission of greenhouse gases at the 100- and 250-tons-per-year levels set forth in the statute would be ‘incompatible’ with ‘the substance of Congress’s regulatory scheme,’” Scalia wrote.

Before yesterday’s decision, the EPA had instituted a provision to “tailor” the applicability of permits to some facilities as a way to get around the tonnage requirement. EPA said it would eventually move to apply the rules to polluters of all levels, but that approach was tossed by the court.