Blog Post

Quick Thoughts on UARG v. EPA

Jun 23, 2014 | Nathan Richardson

SCOTUS released its decision in UARG v. EPA today, with the majority opinion authored by Justice Scalia. The issue in the case was whether EPA appropriately subjected stationary sources to new source review obligations for their GHG emissions. Here are some quick thoughts. If you're unfamiliar with the case or with EPA's regulatory agenda for greenhouse gases, this may be a little tough to follow. If you need more background, take a look at this post on the cert grant and the lower court's decision or the good coverage at Legal Planet. 1)  The court reviewed three related parts of EPA's carbon policy. After 2007's Massachusetts decision and its subsequent move to regulate GHG emissions from vehicles, EPA:

a. Required new & modified large stationary emitters (power plants and factories) undergoing new source review (aka PSD permitting – the difference is immaterial here) due to their emissions of conventional pollutants to implement best available control technology (BACT) for GHGs.

b. Required GHG emitters to go through PSD permitting based on GHG emissions alone, even if they would not have to do so for other pollutantsc.

c. Limited the group in b) to large emitters over  100k tons CO2e/year despite the statute’s requirement of 250 tons/year (this is the "Tailoring Rule").

2)  The court (5-4) rejected policy b) on the grounds that it contradicted the plain meaning of the statute. This is interesting because EPA had claimed that a plain reading required it to include all GHG emitters in PSD, despite the fact that doing so would be really expensive and burdensome. The court's reading of the statute is reasonable, but it has some problems in light of court's traditional deference to agencies on questions of statutory interpretation (see #8 below).

3)  The court (5-4) also rejected EPA’s attempt with the tailoring rule (policy c) to legitimize requiring PSD permits based on GHG emissions alone. This was not a surprise – the tailoring rule was always legally bogus. EPA only had the gall to suggest it because its aim was to limit regulation.

4)  The court (7-2), however, preserved policy a): EPA’s authority to require sources that undergo PSD for other reasons to demonstrate BACT for GHGs.

5)  This makes it look like EPA won some and lost some. That’s strictly true, but reality is much more favorable to the agency’s policy priorities. The “anyway” sources are large power plants and factories that emit 83% of stationary source GHGs. They’re the real prize here, and EPA gets to force them to do GHG BACT when they are built or modify. Read together with the recent NSPS, this means no new coal plants and tight efficiency requirements when coal plants modify (and maybe CCS in the future). The other sources EPA sought to bring into the PSD program are only responsible for 3% of stationary source GHG emissions. Moreover, EPA has been trying for years not to regulate them. There are a lot of small sources that EPA doesn’t really want to spend resources regulating. The only reason the agency went to all this trouble (tailoring, etc.) was because it read the statute as requiring PSD review. SCOTUS let them off the hook.

6)  In strict legal terms, this decision has no effect on EPA’s plans to regulate new or existing power plants with performance standards. Those programs will continue without any changes, and would have done so under any reasonable outcome of this case.

7)  However, if EPA is looking for something to worry about, it can find it in this line from Scalia:

When an agency claims to discover in a long-extant statute an unheralded power to regulate “a significant portion of the American economy” . . . we typically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign an agency decisions of vast “economic and political signifi­cance.”

8) [this item slightly edited from its original version]  Normally in a Chevron case, the agency finds the governing statute is ambiguous and offers an interpretation. That interpretation prevails unless either the court disagrees that the statute is ambiguous or, much more rarely, the court agrees it's ambigous but finds the agency's interpretation is beyond the realm of the reasonable. In this case, the agency isn't claiming ambiguity - it claims the statute has one plain interpretation. The court disagrees, which you would think would mean that, by any reasonable definition, the statute is in fact ambiguous.  If so, the court could have accepted EPA's resolution of the ambiguity, could have remanded to the agency for a new decision in light of the court's new interpretation of law, or (again, less likely) could have remanded to the agency and ruled that the agency's interpretation of the ambiguity was unreasonable.

But in today's decision, the court went even further than that, finding  that the statute does indeed have an unambiguous plain meaning that is the opposite of the plain meaning EPA claims. The "plain" meaning the court finds involves reading language ("any pollutant") to have a different meaning in one part of the statute than in another, based on an understanding of context and Congressional intent.  That's fine as a matter of statutory interpretation, but in my view it stretches the meaning of "plain" and in doing so does some violence to Chevron's division of authority between courts and agencies.

I think the court would have been much better served by simply clarifying to EPA that the agency's interpretation of the statute was not required by the text. Since EPA is trying to avoid regulating here, the likely result would have been that EPA reinterprets the statute in the same way the court ends up doing, but without having to fight over "plain meaning." Even going a step further and preemptively rejecting the agency's interpretation as unreasonable would have been a better move, though courts are historically unwilling to do this, in part because "reasonableness" is a much harder line to draw than "plain meaning" (in fact, some have argued as a result that Chevron really only has one analytical step). As it stands, I fear this decision risks undermining Chevron. Courts may become more ambitious about finding "plain" meanings, and agencies may regulate differently in the shadow of that possibility. Chevron  is a court-created doctrine and SCOTUS is free to revise it, but I don't think that was the majority's intent here.