This is a follow-up to this morning’s post on the Supreme Court’s decision in Utility Air Regulatory Group v. Environmental Protection Agency (UARG v. EPA), in which the Supreme Court struck down the EPA’s so-called “tailoring rule,” but otherwise reaffirmed the agency’s authority to regulate greenhouse gases (GHGs) under the Clean Air Act.

The UARG decision is simultaneously very significant and somewhat inconsequential.  It is significant because it struck down an EPA rule in which the agency effectively asserted extremely broad authority to revise clear statutory text in order make it easier for the agency to implement the law in accord with the agency’s policy preferences.  It is somewhat inconsequential in that the ultimate effect of this decision on the EPA’s ability to regulate greenhouse gas emissions is quite limited.  Based on the best estimates, had the EPA rule been upheld, the agency would have been able to regulate 86 percent of industrial GHG emissions under the relevant statutory provisions.  After UARG, it appears the agency will still be able to reach an estimated 83 percent of industrial GHG emissions.  Moreover, this decision does not in any way curtail the EPA’s underlying authority to treat GHGs as pollutants subject to regulation under the Clean Air Act.

Below are some additional thoughts about the decision.

1. Massachusetts v. EPA is here to stay.  In 2007 the Supreme Court held that GHGs are air pollutants subject to regulation under the Clean Air Act.  In UARG, the court had an opportunity to revisit this decision, but decided not to.  This is understandable because concerns for stare decisis are greatest in the statutory context.  The court, as a general matter, is very reluctant to overturn its own prior statutory interpretations because, unlike with constitutional interpretations, Congress can have the last word by revising statutes if it disagrees with the court.   (See the court’s decision today in the Halliburton case on this point.)  Two Justices (Alito and Thomas) reiterated their disagreement with Mass v. EPA, but they were alone in expressing any willingness to revisiting this decision.  (For more on Mass v. EPA, and why many of us believe it was wrongly decided, see this brief article I wrote at the time.)

2. EPA regulation of greenhouse gas emissions is here to stay.  Most of EPA’s regulation of GHGs will continue.  This includes the regulation of mobile source emissions under Section 202 of the Act, as well as the EPA’s proposed regulations governing power plant emissions under Section 111 of the Act.  The EPA will also be able to continue to regulate GHGs from sources that are already subject to the PSD and Title V provisions of the Act at issue in UARG — so-called “anyway” sources. What the Court’s holding means is that EPA may not use a sources emissions of GHGs as the basis for subjecting that source to PSD and Title V requirements.  Once a source is already subject to regulation under these sections of the Act — because it emits a sufficient quantity of other regulated pollutants — the EPA is permitted to require these sources to reduce their emissions of GHGs too.

3. The D.C. Circuit fared as bad as or worse than the EPA.  Given the opinion was written by Justice Antonin Scalia, one would expect some pointed barbs directed at the EPA.  In this the decision did not disappoint. But the Court was also bluntly critical of the D.C. Circuit’s decision upholding the tailoring rule (largely by adopting a statutory interpretation that enabled the lower court to sidestep the substantive arguments).  The court not only rejected the D.C. Circuit’s textual analysis of the Clean Air Act, but also rejected the lower court’s claim that petitioners had forfeited certain arguments (a position, Scalia noted in FN4, the Solicitor General was unwilling to defend).  Here’s Scalia on the D.C. Circuit:

The Court of Appeals reasoned by way of a flawed syllogism: Under Massachusetts, the general, Act-wide definition of “air pollutant” includes greenhouse gases; the Act requires permits for major emitters of “any air pollutant”;therefore, the Act requires permits for major emitters of greenhouse gases. The conclusion follows from the premises only if the air pollutants referred to in the permit requiring provisions (the minor premise) are the same air pollutants encompassed by the Act-wide definition as interpreted in Massachusetts (the major premise). Yet no one—least of all EPA—endorses that proposition, and it is obviously untenable.

This does not mean the EPA was spared Scalia’s pointed pen.  For instance:

It is plain as day that the Act does not envision an elaborate, burdensome permitting process for major emitters of steam, oxygen, or other harmless airborne substances. It takes some cheek for EPA to insist that it cannot possibly give “air pollutant” a reasonable, context-appropriate meaning in the PSD and Title V contexts when it has been doing precisely that for decades.

4. A majority of the court is wary of broad assertions of power by regulatory agencies.  Last year, the Supreme Court appeared to give agencies substantial room to expand the scope of their regulatory authority through creative statutory interpretation in City of Arlington v. FCC.  Today’s decision in UARG makes clear, however, that Scalia — the author of the Arlington opinion — is not yet ready to give up on agency overreach.  Specifically he explained that an agency interpretation of a statute that has the clear effect of aggrandizing agency authority and creating still more opportunities for authority-enhancing interpretations, is unacceptable.

The fact that EPA’s greenhouse-gas-inclusive interpretation of the PSD and Title V triggers would place plainly excessive demands on limited governmental resources is alone a good reason for rejecting it; but that is not the only reason. EPA’s interpretation is also unreasonable because it would bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization. When an agency claims to discover in a long-extant statute an unheralded power to regulate “a significant portion of the American economy,” Brown & Williamson, 529 U. S., at 159, we typically greet its announcement with a measure of skepticism. . . . The power to require permits for the construction and modification of tens of thousands, and the operation of millions, of small sources nationwide falls comfortably within the class of authorizations that we have been reluctant to read into ambiguous statutory text.Moreover, in EPA’s assertion of that authority, we confront a singular situation: an agency laying claim to extravagant statutory power over the national economy while at the same time strenuously asserting that the authority claimed would render the statute “unrecognizable to the Congress that designed” it. Tailoring Rule31555. Since, as we hold above, the statute does not compel EPA’s interpretation, it would be patently unreasonable—not to say outrageous—for EPA to insist on seizing expansive power that it admits the statute is not designed to grant.

5. Agency authority to interpret ambiguous statutory provisions does not include the power to rewrite such provisions.  The court reaffirmed that an agency interpretation of ambiguous statutory text must still be reasonable and consonant with the statutory text.

We conclude that EPA’s rewriting of the statutory thresholds was impermissible and therefore could not validate the Agency’s interpretation of the triggering provisions. An agency has no power to “tailor” legislation to bureaucratic policy goals by rewriting unambiguous statutory terms. Agencies exercise discretion only in the interstices created by statutory silence or ambiguity; they must always “‘give effect to the unambiguously expressed intent of Congress.’” . . .  It is hard to imagine a statutory term less ambiguous than the precise numerical thresholds at which the Act requires PSD and Title V permitting. When EPA replaced those numbers with others of its own choosing, it went well beyond the “bounds of its statutory authority.” . . .
In the Tailoring Rule, EPA asserts newfound authority to regulate millions of small sources—including retail stores, offices, apartment buildings, shopping centers, schools, and churches—and to decide, on an ongoing basis and without regard for the thresholds prescribed by Congress, how many of those sources to regulate. We are not willing to stand on the dock and wave goodbye as EPA embarks on this multiyear voyage of discovery. We reaffirm the core administrative-law principle that an agencymay not rewrite clear statutory terms to suit its own sense of how the statute should operate. EPA therefore lacked authority to “tailor” the Act’s unambiguous numerical thresholds to accommodate its greenhouse-gas-inclusive interpretation of the permitting triggers. Instead, the need to rewrite clear provisions of the statute should have alerted EPA that it had taken a wrong interpretive turn.Agencies are not free to “adopt . . . unreasonable interpretations of statutory provisions and then edit other statu- tory provisions to mitigate the unreasonableness.” App. 175,2012 WL 6621785, *16 (Kavanaugh, J., dissenting fromdenial of rehearing en banc). Because the Tailoring Rule cannot save EPA’s interpretation of the triggers, that interpretation was impermissible under Chevron.

6. An agency’s enforcement discretion does not allow it to alter underlying legal obligations.  Given how much the Obama administration suggests enforcement discretion authorizes agencies to disregard deadlines or alter the implementation of complex regulatory statutes (such as the PPACA), the court’s language on this point (highlighting the Solicitor General’s concessions) is significant.

The Solicitor General does not, and cannot, defend the Tailoring Rule as an exercise of EPA’s enforcement discretion. The Tailoring Rule is not just an announcement of EPA’s refusal to enforce the statutory permitting requirements; it purports to alter those requirements and to establish with the force of law that otherwise-prohibited conduct will not violate the Act. This alteration of the statutory requirements was crucial to EPA’s “tailoring” efforts. Without it, small entities with the potential to emit greenhouse gases in amounts exceeding the statutory thresholds would have remained subject to citizen suits—authorized by the Act—to enjoin their construction, modification, or operation and to impose civil penalties of up to$37,500 per day of violation. §§7413(b), 7604(a), (f)(4); 40 CFR §19.4. EPA itself has recently affirmed that the “independent enforcement authority” furnished by the citizen-suit provision cannot be displaced by a permitting authority’s decision not to pursue enforcement. 78 Fed. Reg. 12477, 12486–12487 (2013). The Solicitor General is therefore quite right to acknowledge that the availability of citizen suits made it necessary for EPA, in seeking to mitigate the unreasonableness of its greenhouse-gas inclusive interpretation, to go beyond merely exercising its enforcement discretion.

7. EPA can regulate, but it does not have free rein.  The court made clear that it was not addressing any potential objections as to how the EPA decides to regulate stationary source emissions of GHGs going forward. On this the Court was explicit: “our decision should not be taken as an endorsement of all aspects of EPA’s current approach, nor as a free rein for any future regulatory application of BACT in this distinct context.”

In upholding the EPA’ authority to require facilities already subject to regulation under the PSD program, the court seemed aware that regulating GHG emissions, and carbon dioxide emissions in particular, is different from regulating traditional pollutants and that the EPA may not have a free hand in controlling GHG emissions however it sees fit.  So, for instance, the EPA may be limited in its ability to force facilities to adopt energy efficiency improvements as a means of reducing GHG emissions.

assuming without deciding that BACT may be used to force some improvements in energy efficiency,there are important limitations on BACT that may work to mitigate petitioners’ concerns about “unbounded” regulatory authority. For one, BACT is based on “control technology” for the applicant’s “proposed facility,”§7475(a)(4); therefore, it has long been held that BACT cannot be used to order a fundamental redesign of the facility. . . . For another, EPA has long interpreted BACT as required only for pollutants that the source itself emits . . . ; accordingly, EPA acknowledges that BACT may not be used to require “reductions in a facility’s demand for energy from the electric grid.” . . . Finally, EPA’s guidance suggests that BACT should not require every conceivable change that could result in minor improvements in energy efficiency, such as the aforementioned light bulbs. Id., at 31. The guidance explains that permitting authorities should instead consider whether a proposed regulatory burden outweighs any reduction in emissions to be achieved, and should concentrate on the facility’s equipment that uses the largest amounts of energy.

An obvious question is whether this limits the EPA’s authority to encourage energy efficiency and conservation through the regulation of power plant emissions of GHGs under Section 111 of the Clean Air Act, as has recently been proposed.  I don’t read this language as foreclosing the use of such tactics under Section 111, as the relevant statutory language there is quite different from what the court considered here.  Nonetheless, the EPA will have to tread carefully as the court has reasserted its concern for potentially “unbounded” assertions of regulatory authority.

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I may have more later.  In the meantime, here are links to additional commentary by Philip Wallach (Brookings), Andrew Grossman (Cato@Liberty), Nathan Richardson (RFF), and Daniel Farber (Legal Planet).