Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act

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Key Historical Court Decisions Shaping EPA’s

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R43699

Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act

Summary

This report provides a selective overview of court decisions that historically have most shaped

EPA’s program under the Clean Air Act (CAA or Act). Court decisions described in the report

deal with the following:



National ambient air quality standards (NAAQSs), holding that in setting the

standards EPA is not to consider economic and technological feasibility.

State implementation plans for achieving NAAQSs, holding that EPA may not

consider economic and technological feasibility in approving or disapproving

such plans, or that the state plan is more stringent than necessary, or does not

require an EPA-preferred control method.

Interstate air pollution, holding that EPA may consider costs in applying the

CAA “good neighbor” provision, but any emissions trading program must assure

some emission reduction in each upwind state. Nor does the CAA require that

states be given a second opportunity to file an implementation plan after EPA has

quantified the state emissions budget; EPA may promulgate its own plan for the

state immediately.

New source performance standards (NSPSs), holding that while the Act

requires NSPSs to be based on “adequately demonstrated” technology, EPA is

allowed to consider technologies that will be fairly projected in the future so long

as the technology is not speculative.

New source review in areas not subject to NAAQSs, holding that EPA may

override a state’s determination of the “best available control technology”

required for new stationary sources. EPA may require new source review for

greenhouse gas emitters only if the new source will emit certain pollutants above

threshold amounts.

The “routine maintenance” exemption from NSPSs and new source review,

created by EPA and accepted by the courts despite statutory silence. Courts hold

that whether the exemption applies depends on the increase in a plant’s expected

life due to the project, and the project’s cost, nature, and magnitude. Expansive

interpretation of the exemption has been judicially rejected.

The “bubble concept,” an EPA approach that looks at net changes in the

emissions of a pollutant from a facility, holding that its permissibility depends on

statutory context.

National standards for hazardous air pollutants, holding that EPA may

determine if a facility triggers the Act’s “maximum achievable control

technology” requirement for such pollutants by aggregating emission sources in a

contiguous plant under common control, not just sources within the same source

category. EPA is not limited in setting emission standards to hazardous air

pollutants currently controlled with technology.

Greenhouse gas emissions, holding that the CAA generally covers them, and

that EPA has to exercise that authority based on policy concerns. See, however,

“new source review” above.

Enforcement, holding that the recipient of an administrative compliance order

must be allowed to seek pre-enforcement review of the order in court.

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Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act

Contents

Introduction ..................................................................................................................................... 1

National Ambient Air Quality Standards ......................................................................................... 1

State Implementation Plans ............................................................................................................. 2

Interstate Pollution .......................................................................................................................... 3

New Source Performance Standards ............................................................................................... 5

Emission Guidelines Under CAA Section 111(d) ..................................................................... 6

New Source Review ........................................................................................................................ 7

“Routine Maintenance” ................................................................................................................... 9

Bubble Concept .............................................................................................................................. 11

National Emission Standards for Hazardous Air Pollutants .......................................................... 12

Greenhouse Gas Emissions ........................................................................................................... 16

Enforcement .................................................................................................................................. 17

Glossary of Acronyms ................................................................................................................... 19

Contacts

Author Contact Information .......................................................................................................... 19

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Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act

Introduction

This report provides a selective overview of court decisions that have shaped the U.S.

Environmental Protection Agency’s (EPA’s) implementation of the Clean Air Act (CAA or Act).1

The subjects these decisions cover are broad, because almost every major EPA rule has been

challenged in court. Challenges to EPA actions are filed largely in the U.S. Court of Appeals for

the D.C. Circuit (D.C. Circuit), as the CAA requires for challenges to “nationally applicable

regulations.”2 Claims that EPA has failed to perform a nondiscretionary duty under the Act, such

as meeting a statutory deadline, are challenged through “citizen suits” filed in federal district

courts.3 Over the 46 years of the modern CAA’s existence, more than a dozen circuit and district

court decisions on the Act have yielded Supreme Court opinions on appeal.

This report also highlights several court cases currently being litigated that address a number of

unresolved questions related to EPA’s CAA authority.

A glossary of acronyms used in this report is provided on page 19.

National Ambient Air Quality Standards

The central construct of the CAA is the national ambient air quality standard (NAAQS), a

maximum concentration for an air pollutant that all areas of the country must meet. To establish

NAAQSs, CAA Section 108 directs EPA to issue air quality criteria—documents assessing the

scientific evidence on a pollutant’s effects—for pollutants that “may reasonably be anticipated to

endanger public health or welfare,” and “the presence of which in ambient air results from

numerous or diverse mobile or stationary sources ....”4 Section 109 then requires EPA to set

primary NAAQSs at a level requisite to protect public health, allowing an “adequate margin of

safety,” and secondary NAAQSs at a level requisite to protect the “public welfare” from any

known or anticipated adverse effects.5 Finally, Section 110 requires states to adopt state

implementation plans to attain or maintain each NAAQS (see following section).6

In the 1970s, EPA established NAAQSs for six pollutants, commonly referred to as “criteria”

pollutants.7 The agency has not added any pollutants to the list since then, although it is required

to review the existing standards at five-year intervals and promulgate revisions if appropriate.8

These reviews have raised continuing issues among stakeholders, including states, industrial and

other sources of pollution, and nongovernmental organizations (NGOs) in the health and

42 U.S.C. §§ 7401-7671q.

CAA § 307(b); 42 U.S.C. § 7607(b). In contrast, petitions for review of EPA actions that are only “locally or

regionally applicable” must be filed in the U.S. Court of Appeals for the “appropriate” circuit, though even these

actions must be filed in the D.C. Circuit if “based on a determination of nationwide scope or effect.” Id.

CAA § 304(a); 42 U.S.C. § 7604(a).

CAA § 108(a)(1); 42 U.S.C. § 7408(a)(1).

CAA § 109(b); 42 U.S.C. § 7409(b). “Welfare” is a term of art, defined in the CAA to include at a minimum “effects

on soils, water, crops, vegetation, manmade materials, animals, wildlife, weather, visibility, and climate, damage to and

deterioration of property, and hazards to transportation, as well as effects on economic values and on personal comfort

and well-being ....” CAA § 302(h); 42 U.S.C. § 7602(h).

CAA § 110(a)(1); 42 U.S.C. § 7410(1)(1).

NAAQSs have been set for ozone, particulate matter, carbon monoxide, sulfur dioxide, nitrogen dioxide, and lead. 40

C.F.R. pt. 50.

CAA § 108(d)(1); 42 U.S.C. § 7408(d)(1).

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environmental fields, particularly over the role of cost and feasibility in determining the level at

which standards should be set. In directing EPA to set and revise the NAAQSs, Sections 108 and

109 make no reference to the cost or feasibility of attaining the standards—in contrast to other

CAA sections where cost, feasibility, or the role of demonstrated technology are specifically

required to be considered.

The silence of Sections 108 and 109 as to cost and feasibility led to a number of cases, all of

which held that EPA must set NAAQSs without regard to their cost or technological feasibility. In

Lead Industries Ass’n v. EPA, the D.C. Circuit addressed the primary and secondary NAAQSs for

lead,9 holding that requiring EPA to consider cost and feasibility in setting NAAQSs was “totally

without merit.”10 Specifically rejected was the argument that the “adequate margin of safety”

required by Section 109 to be factored into primary NAAQSs requires EPA to consider costs and

feasibility. Persuasive to the court was that the CAA expressly provides for EPA to factor in costs

and feasibility, and that even if the technology to achieve a NAAQS did not currently exist, the

CAA was of a “technology forcing” character.11

In 2001, in Whitman v. American Trucking Ass’ns,12 the Supreme Court unanimously affirmed

Lead Industries, finding it impermissible to consider costs in setting primary NAAQSs. The

Whitman challengers had argued that the high costs of imposing a stringent primary NAAQS

might injure health by closing down whole industries and impoverishing workers and consumers

dependent on them. The Whitman challengers contended that EPA had to consider this effect on

health, too. The Court disagreed, pointing out that CAA Section 110(f)(1) allowed EPA to waive

compliance deadlines for stationary sources in certain circumstances, and that, as noted in Lead

Industries, numerous CAA provisions allow EPA to take compliance costs into account.13 That

being so, the Court refused to infer from the ambiguous language of Section 109 an authority for

EPA to consider costs that elsewhere in the Act had been granted expressly.

State Implementation Plans

The CAA directs EPA to translate NAAQSs into emission limits for specific stationary sources.

After EPA promulgates or revises NAAQS, CAA Section 110 requires each state to submit a state

implementation plan (SIP) to EPA within three years.14 SIPs specify what mix of federal, state,

and local air pollution control measures the state will implement in order to reach or maintain the

NAAQSs. To be approved by EPA, the SIP must satisfy a long list of requirements in Section

110(a)(2).15 For example, the SIP must contain enforceable emission limitations, timetables for

compliance, air quality monitoring, provisions addressing interstate pollution, and so on.16

Because Section 110(a)(2) does not require that SIPs be economically and technologically

feasible, the Supreme Court concluded in Union Electric Co. v. EPA that EPA may not consider

647 F.2d 1130 (D.C. Cir. 1980).

Id. at 1148.

Id. at 1149.

531 U.S. 457 (2001).

For example, the Court noted CAA Section 202(a)(2), specifying that motor vehicle emission standards can take

effect only “after such period as the [EPA] Administrator finds necessary to permit the development and application of

the requisite technology, giving appropriate consideration to the cost of compliance ....” 42 U.S.C. § 7521(a)(2).

CAA § 110(a)(1); 42 U.S.C. § 7410(a)(1).

42 U.S.C. § 7410(a)(2).

Id.

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infeasibility when approving or disapproving a SIP.17 Further, the Supreme Court held that states

may submit SIPs more stringent than the CAA requires and EPA must approve them if they meet

the Section 110(a)(2) factors.18 In addition, as held in Michigan v. EPA, EPA may not condition

SIP approval on a state’s adoption of any specific control measure under the CAA.19

Finally, under Indiana & Michigan Electric Co., EPA does not have to prepare an environmental

impact statement under the National Environmental Policy Act (NEPA) when approving or

disapproving a submitted SIP.20 Courts have held EPA actions generally to be exempt from NEPA

requirements, because the agency’s mission of protecting the environment duplicates that of

NEPA.21

Interstate Pollution

After EPA sets or revises a NAAQS, the governor of each state, using available monitoring data,

must submit to EPA a list identifying each air quality control region in the state as either

attainment, nonattainment, or unclassifiable for the pollutant in question.22 After reviewing these

submissions, and often after negotiating over the boundaries of the listed areas, EPA formally

promulgates a list of nonattainment areas.23 Affected states are then required to submit SIPs or

SIP revisions specifying what mix of federal, state, and local air pollution control measures will

be implemented for each of the areas to reach or maintain the NAAQS.24

In many states, particularly in the Northeast, air quality is so affected by emissions from other

states (referred to as “transported” air pollution) that it is difficult or impossible for the state to

demonstrate how all areas in the state will reach attainment. To assist these downwind states, the

CAA contains several provisions dealing with transported air pollution. The most important (and

most frequently litigated) is Section 110(a)(2)(D),25 the so-called “good neighbor” provision.

Section 110(a)(2)(D)(i)(I) requires that a state prohibit stationary sources within the state from

emitting air pollutants in amounts that will “contribute significantly” to NAAQS nonattainment,

or “interfere with maintenance” of a NAAQS, in any other state. States must include such

measures in the SIPs they submit to EPA.26 When EPA determines that existing SIPs must be

revised to satisfy the good neighbor provision (or other CAA requirements), it issues a “SIP call,”

sometimes to many states at once.27

427 U.S. 246, 256 (1976). Several CAA provisions noted in the Union Electric decision have been amended since,

but it has never been suggested that these amendments undermine the Court’s essential holdings.

Id. at 265.

213 F.3d 663, 687 (D.C. Cir. 2000).

509 F.3d at 842.

See, e.g., Getty Oil Co. v. Ruckelshaus, 467 F.2d 349, 359 (3d Cir. 1972).

CAA § 107(d)(1)(A); 42 U.S.C. § 7407(d)(1)(A). For a list of air quality control regions, see 40 C.F.R. pt. 81.

CAA § 107(d)(1)(B); 42 U.S.C. § 7407(d)(1)(B).

CAA § 110(a)(1)-(2); 42 U.S.C. § 7410(a)(1)-(2).

CAA § 7410(a)(2)(D).

CAA § 110(a)(2); 42 U.S.C. § 7410(a)(2).

CAA § 110(k)(5); 42 U.S.C. § 7410(k)(5). Besides Section 110(a)(2)(D), the CAA also addresses interstate pollution

through Section 126, 42 U.S.C. § 7426. Section 126(b) allows a state or political subdivision to petition EPA to make a

“finding that any major source or group of stationary sources emits or would emit any air pollutant in violation of the

prohibition of section 110(a)(2)(D)(ii).” If EPA makes the finding, the source or sources in question cannot be

constructed or can no longer operate, except under emission limitations and a compliance schedule prescribed by EPA.

Supplementing these provisions, CAA Section 115 creates a mechanism for dealing with emissions in the United States

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Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act

Litigation over the good neighbor provision generally has involved emissions of nitrogen oxides

(NOx), particulates, and sulfur dioxide (SO2), all of which can remain in the atmosphere and

travel long distances from the point of emission. These substances are not only pollutants in their

own right; they also contribute (through atmospheric reactions) to the formation of ozone,

particulates, acid deposition, and other widespread regional pollution problems.28 Litigation over

the good neighbor provision has addressed how EPA defines when a state “contribute[s]

significantly” to another state’s pollution; what role cost-effectiveness can play in identifying

control measures; whether regional cap-and-trade systems can substitute for emission control

requirements imposed at specific sources; and the respective roles of EPA and the states in

identifying required controls.29

In 2000, the D.C. Circuit held in Michigan v. EPA30 that nothing in Section 110(a)(2)(D) bars EPA

from considering costs.31 Consequently, EPA had acted lawfully when it determined that a state

would no longer be contributing “significantly” to a downwind state’s NAAQS nonattainment if

the state reduced the relevant emissions by the amount that could be eliminated using “highly

cost-effective controls” (those that eliminate a ton of the relevant pollutant for less than $2,000

per ton).32 The court found that EPA may apply this standard uniformly to all the covered states,

no matter the amount of each state’s contribution.33

North Carolina v. EPA34 involved a challenge to EPA’s Clean Air Interstate Rule (CAIR), issued

in 2005.35 CAIR sought to reduce SO2 and NOx precursor emissions in 28 states in order to reduce

nonattainment of the NAAQSs for fine particulate matter and ozone in downwind states. The

D.C. Circuit, however, found CAIR to be flawed.36 Most important to the court, CAIR’s

emissions trading program, though aimed at reducing emission-control costs as approved in

Michigan, did not assure some “measurable” emission reduction in each upwind state.37

Emissions reduction by the upwind states collectively was not enough to satisfy Section

110(a)(2)(D).38 Second, the court said, EPA must give independent effect to the “interfere with

maintenance” prohibition in Section 110(a)(2)(D)—not, as CAIR did, as a prohibition triggered

only after the “contribute significantly” prohibition was triggered.39

EPA’s effort to remedy the CAIR deficiencies identified in North Carolina led it to issue the

Cross-State Air Pollution Rule, also known as the Transport Rule or CSAPR, in 2011.40 This rule

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that might endanger health or welfare in a foreign country. 42 U.S.C. § 7415.

See EPA, National Air Quality: Status and Trends of Key Air Pollutants, at https://www.epa.gov/air-trends.

See, e.g., North Carolina v. EPA and Michigan v. EPA decisions discussed in immediately following paragraphs.

213 F.3d 663 (D.C. Cir. 2000).

Id. at 679.

Id. at 680.

Id. at 679-680.

531 F.3d 896 (D.C. Cir. 2008).

70 Fed. Reg. 25,162 (May 12, 2005).

Though initially vacating the CAIR rule, the D.C. Circuit changed its mind some months later, leaving CAIR in

effect “until it is replaced by a rule consistent with our opinion.” North Carolina v. EPA, 550 F.3d 1176, 1178 (D.C.

Cir. 2008).

531 F.3d at 908.

Id.

Id. at 910.

76 Fed. Reg. 48,208 (Aug. 8, 2011).

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addresses the same pollutants and the same states as did CAIR. Under CSAPR, an upwind state is

deemed to “contribute significantly” to downwind nonattainment to the extent its pollution

produces more than 1% of the NAAQS concentration in at least one downwind state and could be

eliminated cost-effectively. Through modelling, EPA set the total amount of pollution an upwind

state could produce in a given year. This second EPA effort also was found by the D.C. Circuit to

be inconsistent with Section 110(a)(2)(D),41 but this time the decision was reversed by the

Supreme Court. In EPA v. EME Homer City Generation, L.P., the High Court upheld CSAPR.42

First, the Court found no fault with the fact that EPA, having found the relevant SIPs to be

inadequate, had along with CSAPR promulgated federal implementation plans allocating each

state’s total allowed emission amount among sources of that pollutant within the state. The CAA,

held the Court, does not require that states be given a second opportunity to file a SIP after EPA

has quantified the state’s emissions budget.43 Second, the Court held that nothing in the Good

Neighbor Provision compelled the “cost-blind” interpretation of the D.C. Circuit.44 Rather, it

concluded, EPA’s allocation of emission reductions among upwind states based on costeffectiveness is a permissible, workable, and equitable reading of the Provision.45

New Source Performance Standards

CAA Section 11146 directs EPA to develop federal “standards of performance” for new, modified,

and reconstructed stationary sources of air pollution, called New Source Performance

Standards (NSPSs). NSPSs are nationally uniform, lessening the incentive for companies to

“shop” for locations with less stringent requirements. “Standards of performance” are defined as

emission standards reflecting the amount of emission reduction “achievable” through the use of

the “best system of emission reduction” (BSER) that is “adequately demonstrated,” “taking into

account” cost and nonair quality impacts.47

Most of the phrases just quoted have been litigated, beginning in the CAA’s early years. Case law

holds that “adequately demonstrated” does not necessarily imply that any existing source of the

type proposed for an NSPS is able to meet the NSPS. Rather, Portland Cement Ass’n v.

Ruckelshaus says that Section 111 “looks toward what may fairly be projected for the regulated

future, rather than the state of the art at present ....”48 Still, Lignite Energy Council v. EPA cautions

that “EPA may not base its determination that a technology is adequately demonstrated or that a

standard is achievable on mere speculation or conjecture ....”49 The agency may compensate for

the absence of emissions data in a new source category by, for example, “extrapolation of a

technology’s performance in other industries.”50 Where EPA is able to show that existing sources

of the type proposed for an NSPS can meet the NSPS, National Lime Ass’n v. EPA instructs that

those existing sources must be representative of the industry as a whole.51 Finally, courts have

696 F.3d 7 (D.C. Cir. 2012).

134 S. Ct. 1584 (2014).

Id. at 1600-1602.

Id. at 1583.

Id. at 1603-1609.

42 U.S.C. § 7411.

CAA § 111(a)(1); 42 U.S.C. § 7411(a)(1).

486 F.2d 375, 391 (D.C. Cir. 1973).

198 F.3d 930, 934 (D.C. Cir. 1999).

Id.

627 F.2d 416, 432-433 (D.C. Cir. 1980).

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noted that Section 111 is silent as to the weight to be given the cost and nonair quality impacts of

a control technology, the section saying only that they shall be “taken into account.”52 Given that

silence, Lignite Energy Council and other D.C. Circuit decisions have granted EPA much

discretion: “EPA’s choice [of best adequately demonstrated technology] will be sustained unless

the environmental or economic costs of using the technology are exorbitant.”53

As to what standards are “achievable,” Essex Chemical Corp. v. Ruckelshaus describes an

achievable standard as “within the realm of the adequately demonstrated system’s efficiency and

which, while not at a level that is purely theoretical or experimental, need not necessarily be

routinely achieved within the industry prior to its adoption.”54 The question on what standards are

considered “adequately demonstrated” is central in the litigation over EPA’s regulations limiting

CO2 emissions from new power plants.55 Twenty-five states—led by North Dakota and West

Virginia—have filed petitions in the D.C. Circuit challenging EPA’s final NSPS for carbon

dioxide (CO2) emissions from new, modified, and reconstructed fossil fuel-fired power plants

under CAA Section 111(b), which it calls the “Carbon Pollution Standards.”56 The states have

been joined by other petitioners including a labor union, a rural electric cooperative association,

several other fossil-fuel-related companies and utilities, and several industry and trade groups.57

One of the primary issues raised by the petitioners is whether the technologies on which EPA

based the standards of performance, including carbon capture and sequestration/storage (CCS),

have been “adequately demonstrated” or are the “best system” under Section 111(b).58 A threejudge panel is to hear oral argument for this case on April 17, 2017.59

Emission Guidelines Under CAA Section 111(d)

At the same time or after it issues Section 111(b) NSPSs, EPA must establish, under certain

circumstances, emission guidelines for existing sources in that category pursuant to Section

111(d).60 These guidelines establish binding requirements that states are required to address when

they develop plans to regulate the existing sources in their jurisdictions.61 Similar to Section 110

of the CAA, which requires states to develop and revise implementation plans to achieve EPA’s

NAAQS and subsequent changes to those standards, Section 111(d) directs EPA to establish state

plan “procedures.”62

See, e.g., New York v. Reilly, 969 F.2d 1147, 1150 (D.C. Cir. 1992).

Lignite Energy Council, 198 F.3d at 933.

486 F.2d 427, 433-434 (D.C. Cir. 1973).

North Dakota, et al. v. EPA, No. 15-1381 (D.C. Cir. filed Oct. 23, 2015); Standards of Performance for Greenhouse

Gas Emissions From New, Modified, and Reconstructed Stationary Sources: Electric Utility Generating Units; Final

Rule, 80 Fed. Reg. 64,510 (Oct. 23, 2015) (hereinafter “NSPS Final Rule”).

See generally docket for North Dakota v. EPA, No. 15-1381 (D.C. Cir. filed Oct. 23, 2015); Standards of

Performance for Greenhouse Gas Emissions From New, Modified, and Reconstructed Stationary Sources: Electric

Utility Generating Units; Final Rule, 80 Fed. Reg. 64,510 (Oct. 23, 2015) [hereinafter NSPS Final Rule].

For further information on the legal challenge to the NSPS Final Rule, see CRS Report R44480, Clean Power Plan:

Legal Background and Pending Litigation in West Virginia v. EPA, by (name redacted) and (name redacted) .

See, e.g., State Pet’rs’ Opening Br., North Dakota v. EPA, Nos. 15-1381 (D.C. Cir. filed Oct. 13, 2016).

Order, North Dakota v. EPA, No. 15-1381 (D.C. Cir. Dec. 2, 2016).

CAA Section 111; 42 U.S.C. § 7411(d)(1).

Id.

Id.; CAA Section 110; 42 U.S.C. § 7410.

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On the same day that EPA issued the Carbon Pollution Standards for new, existing, and

reconstructed power plants under CAA Section 111(b), the agency finalized emission guidelines

to regulate CO2 emissions from existing fossil-fuel power plants under Section 111(d). These

guidelines, commonly referred to as the Clean Power Plan (CPP),63 have been among the more

controversial environmental regulations that EPA has ever promulgated, as reflected by the multiparty litigation over the CPP in the D.C. Circuit.64 One of the key issues in the litigation is

whether EPA has the authority under the CAA to go beyond the “fenceline” of an individual

regulated source and consider shifting from fossil fuel to natural gas-fired power and renewable

energy in the interconnected electric grid to establish the BSER.65 Another issue in the CPP

litigation relates to the interpretation of two differing amendments of Section 111(d)(1)(A) that

were enacted into law, which sets forth exclusions to EPA’s authority to issue Section 111(d)

emission guideline rules.66

On September 27, 2016, the en banc (full court) D.C. Circuit heard oral argument in the CPP

litigation.67 Judicial decisions in this and the litigation over the Carbon Pollution Standards for

new power plants will likely establish the boundaries of EPA’s authority under CAA Section 111.

New Source Review

The CAA seeks not only attainment of NAAQSs in dirty-air areas; it also aims to limit air quality

deterioration in areas that have met or exceeded the NAAQSs. To achieve the latter goal, the

Act’s Prevention of Significant Deterioration (PSD) program imposes requirements in addition

to those in Section 111 for new and newly modified stationary emission sources in areas

classified as attainment or unclassifiable as to a NAAQS.68 For new major emitting facilities and

new major modifications, this program requires new source review—in particular,

preconstruction permits conditioned on installation of the best available control technology

(BACT).69

BACT is determined by the states, with review by EPA, and thus may vary somewhat from state

to state. However, BACT must be at least as stringent as the NSPS and Section 112 (hazardous air

pollutant) standards for the pollutant,70 and the PSD new source review program uses the same

definitions as to what constitutes a major source, what is a modification, etc., as the NSPS

program.71 Because states can impose more stringent requirements than NSPS, and may need to

Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, Final Rule,

80 Fed. Reg. 64,661, 64,663 (October 23, 2015). For additional background, see CRS Report R44341, EPA’s Clean

Power Plan for Existing Power Plants: Frequently Asked Questions, by (name redacted) et al.

See docket for West Virginia, et al. v. EPA, No. 15-1363 (D.C. Cir. docketed Oct. 23, 2015). For further information

on the legal challenge to the CPP, see CRS Report R44480, Clean Power Plan: Legal Background and Pending

Litigation in West Virginia v. EPA, by (name redacted) and (name redacted) .

See generally Opening Br. of Pet’rs on Core Legal Issues, at 29-61 (filed Feb. 19, 2016). For further information on

the legal issues raised in the CPP litigation, see CRS Report R44480, Clean Power Plan: Legal Background and

Pending Litigation in West Virginia v. EPA, by (name redacted) and (name

redacted)

See “A Selection of Arguments on the Merits: Section 112 Exclusion” section of CRS Report R44480, Clean Power

Plan: Legal Background and Pending Litigation in West Virginia v. EPA, by (na me redacted) and (name redacted) for

additional information on this issue.

Order at 2, West Virginia v. EPA, No. 15-1363 (D.C. Cir. May 16, 2016).

CAA §§ 165-169; 42 U.S.C. §§ 7475-7479.

CAA § 165(a)(4); 42 U.S.C. § 7475(a)(4).

CAA § 169(3); 42 U.S.C. § 7479(3).

Note that Section 169(2)(C) states that “modification” in the PSD section shall be construed “as defined in” the

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do so for nonattainment areas to demonstrate attainment, there may be states or areas with less

stringent and more stringent emission requirements. However, by imposing NSPS and hazardous

air pollutant standards as a floor in all states, this disparity is minimized.

The early D.C. Circuit decision in Alabama Power Co. v. Costle remains the fullest judicial

exposition of new source review in PSD areas.72 Among other things, the decision held that new

source review is required only for sources to be constructed in PSD areas, not in other areas based

on a source’s projected adverse impacts in a PSD area in another state.73 Alabama Power also

held that the PSD sections of the CAA impose no requirement for post-construction monitoring of

emissions.74 Finally, the decision approved EPA’s use of the “bubble concept” to define which

changes in a stationary source constitute a “modification.” (See later section on “Bubble

Concept.”)

The Supreme Court has weighed in on the federal-state relationship in determining BACT. In

Alaska Dep’t of Environmental Conservation v. EPA,75 the high court said that the CAA authorizes

EPA to block construction in a PSD area of a major emitting facility, despite the state’s issuance

of a PSD permit, when EPA finds that the state’s determination of BACT for that facility is

inconsistent with the CAA definition of BACT.76 The state had argued that the Act limits EPA to

reviewing whether the state’s permit contained a BACT determination.77

In 2014, the Supreme Court took up the issue of whether PSD new source review applies in the

special case of greenhouse gas (GHG) emissions. EPA had argued that once its regulations

limiting GHG emissions from new motor vehicles78 took effect in 2011, it was required to apply

PSD new source review to GHG emissions from stationary sources as well. Its argument had

some force: the PSD portion of the Act defines the new sources to which it applies as those

emitting more than a certain amount of “any air pollutant”79 and requires BACT for “each air

pollutant subject to regulation under this act.”80 In 2007, the Supreme Court had squarely held

that GHGs are indeed “air pollutants” under the CAA.81 The problem with this argument,

however, was administrative unwieldiness. EPA’s view concededly meant that tens of thousands

of new and modified stationary sources would now require PSD permits, owing to the low

statutory emissions thresholds that trigger those permitting requirements and the huge number of

sources that emit above-threshold quantities of CO2, the primary GHG. Moreover, millions of

existing stationary sources—office buildings, large apartment buildings, hospitals, etc.— would

require Title V operating permits,82 for the same reason. EPA proposed to take care of this

(...continued)

NSPS section. In Environmental Defense v. Duke Energy Corp., 549 U.S. 561, 576 (2007), however, the Supreme

Court held that this common statutory definition does not remove EPA discretion to define the term differently in

regulations under the two sections of the statute, if context so requires.

636 F.2d 323 (D.C. Cir. 1979).

Id. at 364-366.

Id. at 373.

540 U.S. 461 (2004).

Id. at 492-493. The CAA definition of BACT is in Section 169(3), 42 U.S.C. § 7479(3).

540 U.S. at 488.

75 Fed. Reg. 25,323 (May 7, 2010).

CAA § 169(1); 42 U.S.C. § 7479(1) (definition of “major emitting facility”). Emphasis added.

CAA § 165(a)(4); 42 U.S.C. § 7475(a)(4). Emphasis added.

Massachusetts v. EPA, 549 U.S. 497 (2007).

CAA § 502; 42 U.S.C. § 7661a.

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problem with its “Tailoring Rule,”83 under which EPA raised the emission thresholds that would

trigger PSD and Title V permitting, starting with the largest emitters, and then gradually would

phase in lower thresholds.

Notwithstanding EPA’s syllogistic argument for eventual full coverage of GHGs under PSD and

Title V, the Supreme Court took a different tack in Utility Air Regulatory Group v. EPA.84 As the

Court explained, just because “air pollutant” as used in the CAA generally covers GHGs does not

mean it includes GHGs every place it is used—especially since EPA has historically adopted

narrow readings of “air pollutant” in specialized CAA contexts.85 Moreover, the administrative

unwieldiness of demanding PSD and Title V permits for so many sources argued strongly, in the

Court’s view, against a GHG-inclusive reading of those programs.86 Nor did the Court allow EPA,

through its Tailoring Rule, to phase in the low statutory emission thresholds in an effort to ease

the daunting administrative workload, since the Act states the thresholds in absolute numerical

terms.87

Yet the Court softened its ruling by holding that when new source review, with its BACT

requirement, is required because a new or modified source emits a conventional pollutant, then

such review can be demanded for GHG emissions from that source as well.88 According to the

Solicitor General’s numbers submitted in the case, such “anyway” sources, so called because they

are covered independently of their GHG emissions, account for roughly 83% of American

stationary source GHG emissions. Had EPA’s Tailoring Rule survived, EPA would have reached

only 3% more of those emissions. Thus, on the primary UARG holding, EPA was largely

victorious, even though its Tailoring Rule was rejected.

“Routine Maintenance”

As mentioned, NSPSs and new source review in PSD areas apply not just to new sources, but also

to existing sources that undergo modifications (NSPS) or major modifications (PSD).89 The CAA

defines “modification” as “any” physical or operational change in a stationary source “that

increases the emissions of any air pollutant or results in the emission of any air pollutant not

previously emitted.”90 A modification is subject to the same requirements as a new source.

The CAA definition of “modification” has been interpreted by EPA and state pollution control

agencies. Most important, EPA since 1974 has construed the term not to include “routine

maintenance, repair, and replacement” (RMRR) at a stationary source91—despite the CAA’s

75 Fed. Reg. 31,514 (June 3, 2010).

134 S. Ct. 2427 (2014).

Id. at 2439-2442.

Id. at 2442-2444. Said the Court: “the PSD program and Title V are designed to apply to, and cannot be extended

beyond, a relative handful of large sources capable of shouldering heavy substantive and procedural burdens.” Id. at

2443.

Id. at 2444-2446.

Id. at 2444-2449.

In the parlance of the CAA, “new source” is defined to include both new and modified existing sources. CAA §

111(a)(2); 42 U.S.C. § 7411(a)(2).

CAA § 111(a)(4), 42 U.S.C. § 7411(a)(4), defines “modification” for purposes of the NSPS section of the CAA.

CAA § 169(2)(C), 42 U.S.C. § 7479(2)(C), specifies that that definition applies as well within the PSD portion of the

statute.

40 C.F.R. § 60.14(e) (as to applicability of NSPS); 40 C.F.R. § 52.21(b)(2)(iii)(a) (as to applicability of PSD

program).

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inclusion of “any” physical or operational change that increases emissions in its definition of

modification.92 Courts have long accepted this agency-created exemption as reasonable.93 Given

the powerful financial incentives for a source to avoid application of stringent NSPSs, utilities

have argued for an expansive reading of the RMRR exemption, extending even to major

renovations.94

The seminal RMRR judicial pronouncement remains Wisconsin Elec. Power Co. v. Reilly,95

referred to as the WEPCO decision. WEPCO, decided in 1990 by the Seventh Circuit, was the

first time a court held that an electric power plant renovation was not RMRR and thus triggered

NSPS and PSD new source review.96 The case established that determining whether the RMRR

exemption applies to an existing-source renovation depends on a case-by-case weighing of four

factors: the resulting increase in a plant’s life expectancy, and the project’s cost, nature, and

magnitude.97 These factors are routinely cited by courts decades after the WEPCO decision.98

The other major RMRR decision is New York v. EPA,99 rejecting a 2003 EPA effort to expand the

exception. In its Equipment Replacement Rule of that year, the agency stated that the replacement

of a plant’s components is categorically within the RMRR exception if the new equipment does

not exceed 20% of the replacement value of the process unit and does not change its basic design

parameters.100 The D.C. Circuit found this rule overbroad—inconsistent with the CAA definition

of “modification” as including “any” physical change that increases emissions.101 Phrased another

way, the court found the rule too broad to fit within the de minimis rationale for the RMRR

exception.

In Environmental Defense v. Duke Energy Corp.,102 the Supreme Court took on the question of

what constitutes a “modification,” a threshold issue for application of the RMRR exception under

either NSPS or PSD new source review. The Court held that even though the CAA defines

“modification” in its PSD portion to mean the same as the NSPS definition of the term,103 EPA

did not have to define the term the same in each CAA program, owing to the different statutory

contexts.104 EPA, the Court held, can define the definitional phrase “any change in the method of

operation of a stationary source”105 by different measures of the amount of pollutant emitted. To

this day EPA defines the emissions increase required by the definition of “modification”

CAA § 111(a)(2); 42 U.S.C. § 7411(a)(2).

See, e.g., Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901,906 (7th Cir. 1990).

See, e.g., United States v. Ohio Edison Co., 276 F. Supp. 2d 829, 840-849 (S.D. Ohio 2003).

893 F.2d 901 (7th Cir. 1990).

Id. at 912.

Id. at 910-911.

See, e.g., United States v. Duke Energy Corp., 5 F. Supp. 3d 771, 775-76 (M.D.N.C. 2014).

443 F.3d 880 (D.C. Cir. 2006).

100

68 Fed. Reg. 61,248, 61,270 (Oct. 27, 2003). See also 70 Fed. Reg. 33,838 (June 10, 2005).

101

443 F.3d at 890.

102

549 U.S. 561 (2007).

103

The NSPS definition is at CAA § 169(2)(B); 42 U.S.C. § 7479(2)(B).

104

549 U.S. at 574.

105

Id. at 578-579.

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differently in the NSPS and PSD contexts: in terms of emissions amount per hour for NSPS,106 in

terms of emissions amount per year for PSD.107

Bubble Concept

In three different CAA programs—NSPS, PSD, and nonattainment areas—the Act attaches

regulatory consequences to modifications at an emissions source that increase the amount of an

emitted regulated pollutant.108 In the CAA’s early years, a central question was whether the

determination as to whether an emissions increase occurred focused on each individual unit at a

plant, or instead on the net aggregate effect of contemporaneous changes within the same

source.109 The latter view was dubbed the bubble concept since it imagines a huge dome—that

is, a bubble—placed over a facility, with a single emissions point at the top. Because the amount

of emissions at the top of the dome is unaffected by emission increases at individual plant units

that are offset by emissions decreases elsewhere in the plant, the bubble image was used to

support measuring emission amounts on an aggregate plantwide basis. The bubble concept is

preferred by industry because it allows a plant to avoid stringent CAA regulation triggered by

emission increases by finding offsetting emission decreases.

By regulation, EPA adopted the bubble concept in each of the three programs listed above, and on

each occasion was challenged. In ASARCO v. EPA, the D.C. Circuit in 1978 found the CAA

barred the bubble concept for determining when a “modification” to an existing stationary source

occurred for purposes of triggering application of NSPSs.110 (As noted earlier, a modification to

an existing source triggers NSPSs the same as construction of a new source.) The court saw EPA’s

bubble regulations, which defined “stationary source” to include any “combination of ...

facilities,”111 to be irreconcilable with the CAA definition of “stationary source” as “any building,

structure, facility, or installation.”112 Nor was the court moved by EPA’s argument that the

flexibility afforded by the bubble concept was needed because the cost of bringing modified

existing facilities into compliance with NSPSs was, EPA claimed, much greater than the cost of

bringing new facilities into compliance.113

The following year, the D.C. Circuit further addressed the bubble concept. In Alabama Power Co.

v. Costle, the same court that found the bubble concept unacceptable for determining whether

NSPSs apply held that the bubble concept is required in PSD areas.114 The alternate view, based

on individual units within a plant, was, in the court’s view, “unreasonable and contrary to the

106

40 C.F.R. § 60.14(b).

40 CFR §§ 52.21(b)(2)(i), 52.21(b)(23)(i).

108

As noted in the preceding section of this report, applicability of NSPSs is triggered by, among other things,

“modifications” of existing stationary sources. “Modification” is defined for NSPS purposes as a physical or

operational change in an existing stationary source that “increases” the amount of emissions therefrom. Both the PSD

and nonattainment portions of the CAA are also triggered by modifications of existing stationary sources, and both

incorporate the NSPS definition of the term. CAA § 168(2)(C), 42 U.S.C. § 7479(2)(C) (PSD); CAA § 171(4), 42

U.S.C. § 7501(4) (nonattainment).

109

For a summary of the rulemaking proceedings, see ASARCO v. EPA, 578 F.2d 319, 322-325 (D.C. Cir. 1978).

110

Id. at 326.

111

Id. at 324 (emphasis added).

112

CAA § 111(a)(3); 42 U.S.C. § 7411(a)(3).

113

578 F.2d at 328.

114

636 F.2d 323, 400-403 (D.C. Cir. 1979).

107

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expressed purposes of the PSD provisions of the Act” and “extremely burdensome.”115 The court

distinguished its earlier holding, in ASARCO, by pointing out differences in EPA’s NSPS and PSD

bubble regulations and noting the differing statutory purposes of the two programs.116

Finally, in 1984, the Supreme Court found EPA’s use of the bubble concept in areas not attaining

a NAAQS to be grounded on a permissible reading of the CAA. In Chevron, U.S.A. v. NRDC,117

the Court found the Act’s language and legislative history to be sufficiently vague as to use of the

bubble concept in nonattainment areas as to warrant deference to EPA’s interpretation. The only

relevant definition, said the Court, is the general CAA definition of “major stationary source,”

which equates “major stationary source” with “major emitting facility.”118 The Court found it

within “common English usage to take a reference to a major facility or a major source to connote

an entire plant as opposed to its constituent parts.”119

National Emission Standards

for Hazardous Air Pollutants

Loosely speaking, “hazardous air pollutants” under the CAA are pollutants that are more toxic

than pollutants addressed by NAAQSs.120 For this reason, they are regulated pursuant to Section

112 of the Act, which directs EPA to set National Emission Standards for Hazardous Air

Pollutants (NESHAPs). Section 112 is among the most litigated sections of the CAA.121 In the

1970s and 1980s, EPA was slow to implement the section, largely because it found its

requirements to be unworkable.122 By 1990, the agency had set standards for only seven

hazardous air pollutants (and not all sources of even these seven), despite informal

acknowledgement that hundreds of substances might merit emission controls.123 EPA was

challenged frequently in court for its failure to act.124

As enacted in 1970, Section 112 directed EPA to issue NESHAPs that protected public health

with an “adequate margin of safety.” For several EPA Administrators, under both Democratic and

Republican Presidents, this language posed a dilemma.125 Many of the substances that might

merit regulation under Section 112 were possible or probable human carcinogens.126 As there is

no known exposure level at which exposure to a carcinogen is considered safe, this implied that

115

Id. at 401.

Id. at 397.

117

467 U.S. 837 (1984).

118

CAA § 302(j); 42 U.S.C. § 7602(j).

119

467 U.S. at 860.

120

A more formal definition of hazardous air pollutants is at CAA Section 112(d)(2), 42 U.S.C. § 7412(d)(2).

121

42 U.S.C. § 7412.

122

See generally Hearing Before the Subcomm. on Oversight and Investigations, House Comm. on Energy and

Commerce, 98th Cong., 2d Sess. 21 (1984) (statement of William D. Ruckelshaus, Administrator, EPA).

123

See S. Rep. No. 101-228, at 3 (1989).

124

See, e.g., Sierra Club v. Gorsuch, 551 F. Supp. 785 (N.D. Cal. 1982) (radionuclides); New York v. Gorsuch, 554 F.

Supp. 1060 (S.D.N.Y. 1983) (arsenic).

125

See Hearing Before the Subcomm. on Oversight and Investigations, supra note 122.

126

Id.

116

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emissions of such substances should be completely eliminated (though the D.C. Circuit rejected

this view).127

This and other issues raised in litigation during the 1980s led Congress to rewrite completely

Section 112 in the 1990 CAA amendments.128 First, instead of requiring the Administrator to

identify hazardous air pollutants, the 1990 amendments listed 187 hazardous air pollutants

(HAPs) for EPA to regulate—a list EPA may then revise.129 Second, instead of initially requiring

EPA to protect public health with an adequate margin of safety, the 1990 amendments require the

Administrator, as a first step, to impose technology-based emission standards, called “floors,” for

both new and existing sources. For “major sources,” these standards must require use of

“maximum achievable control technology” (MACT);130 for other sources, termed “area sources”

by the Act, EPA may elect to impose more lenient standards.131 In the second, risk-based stage of

regulation, EPA must review any residual health risks not eliminated by the foregoing standards,

and report them to Congress.132 If Congress does not act, EPA must impose standards providing

an ample margin of safety to protect public health, or a stricter standard if needed (considering

costs) to prevent adverse environmental effects.133 These are called “beyond the floor” standards.

Because of ambiguities in the CAA definition of “major source,” the D.C. Circuit held in

National Mining Ass’n v. EPA134 that EPA may determine if a facility is a major source by

aggregating all sources in a contiguous plant site under common control; EPA is not restricted to

aggregating only sources within a single source category or under the same Standard Industrial

Classification Code.135 Elsewhere, the court addressed the CAA directive that EPA, in

determining what facilities are major sources, calculate whether a facility’s “potential to emit”

meets the Act’s threshold quantities only after “considering controls.”136 The court found that the

directive does not allow EPA to limit itself to controls that are federally enforceable.137

In National Lime Ass’n v. EPA, the D.C. Circuit found that Section 112 requires EPA to create a

NESHAP for a hazardous air pollutant in a source category even if no sources in the category use

technological controls for that pollutant.138 Nothing in the statute, the court said, suggests that

EPA may set emission levels only for listed hazardous air pollutants that are currently controlled

with technology.139 To the contrary, the D.C. Circuit noted, the CAA requires EPA to set emission

standards for each category or subcategory of major sources of hazardous air pollutants listed for

regulation.140

127

NRDC v. U.S. EPA, 824 F.2d 1146 (D.C. Cir. 1987) (en banc).

P.L. 101-549, 104 Stat. 2531 (1990).

129

CAA § 112(b); 42 U.S.C. §7412(b).

130

CAA § 112(d)(2); 42 U.S.C. § 7412(d)(2). “Major source” is defined in CAA Section 112(a)(1).

131

CAA § 112(d)(5); 42 U.S.C. § 7412(d)(5). “Area source” is defined in CAA Section 112(a)(2) as any stationary

source of hazardous air pollutants that is not a “major source.”

132

CAA § 112(f); 42 U.S.C. § 7412(f).

133

CAA § 112(f)(2)(A); 42 U.S.C. § 7412(f)(2)(A).

134

59 F.3d 1351 (D.C. Cir. 1995).

135

Id. at 1359.

136

CAA § 112(a)(1); 42 U.S.C. § 7412(a)(1).

137

59 F.3d at 1364.

138

233 F.3d 625, 633-634 (D.C. Cir. 2000).

139

Id. at 633.

140

Id.

128

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In NRDC v. EPA,141 the D.C. Circuit wrestled with an ambiguous CAA instruction as to secondstage risk-based standards. The statute says that if the initial, technology-based standard for a

source category does not reduce lifetime excess cancer risk to less than 1 in 1 million, EPA “shall

promulgate standards ... for such source category.”142 Because this instruction is silent about the

stringency of those standards and is “deliberately ambiguous,”143 the court upheld EPA’s

reaffirmation of its existing technology-based standard for the source category in question under

which no individual would face an excess lifetime cancer risk of greater than 100 in 1 million.

The court noted that 100 in 1 million was EPA’s interpretation of “ample margin of safety” before

the 1990 amendments, and that those amendments expressly disavow any intent to change the

agency’s pre-1990 interpretation.144 The court similarly upheld EPA’s consideration of costs in

setting the risk-based standards, since the agency had considered costs before 1990.145

Although EPA may consider cost when setting second-stage risk-based standards, whether EPA

may consider costs when determining if it is “appropriate and necessary” to regulate power plants

under Section 112 has been subject to significant litigation. In Section 112, Congress created a

special procedure for applying the NESHAP program to power plants.146 Congress directed EPA

to study the public-health hazards power plant HAP emissions pose after taking into account

other CAA requirements controlling power plant emissions and allowed EPA to regulate HAP

emissions from power plants under Section 112 only if EPA found that “regulation [was]

appropriate and necessary” after considering the results of the study.147

In 2012,148 EPA found that it was “appropriate and necessary” to regulate coal- and oil-fired

power plants under Section 112 because mercury emissions from power plants (the largest

domestic source of mercury emissions) present significant hazards to public health and the

environment, and the CAA’s other requirements had failed to sufficiently reduce the health

risks.149 In this finding, EPA interpreted the statutory phrase “appropriate and necessary” to

preclude it from considering cost when deciding whether to regulate power plants under Section

112.150 EPA then issued the Mercury and Air Toxics Standard (known as the “MATS rule”), which

limits emissions of mercury and other toxics emitted by power plants.151

141

529 F.3d 1077 (D.C. Cir. 2008).

CAA § 112(f)(2)(A); 42 U.S.C. § 7412(f)(2)(A).

143

529 F.3d at 1081.

144

Id. at 1082. CAA § 112(f)(2)(B); 42 U.S.C. § 7412(f)(2)(B).

145

529 F.3d at 1084.

146

CAA § 112(n)(1)(A); 42 U.S.C. § 7412(n)(1)(A).

147

Id.

148

Prior to the 2012 finding, EPA concluded in 2000 that the regulation of power plants was “appropriate and

necessary.” Regulatory Finding on the Emissions of Hazardous Air Pollutants from Electric Utility Steam Generating

Units, 65 Fed. Reg. 79,825, 79,826, 79,830 (Dec. 20, 2000). However, EPA attempted to revoke its “appropriate and

necessary” finding in 2004 so that the agency could regulate power plants under Section 111(d). Standards of

Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units, 70 Fed. Reg. 28,606,

28,610, 28,624-32 (May 18, 2005). The rule was challenged, and the D.C. Circuit held that Section 111(d) cannot be

used to regulate sources listed under Section 112 and vacated the rule. See New Jersey v. EPA, 517 F.3d 574, 580, 583

(D.C. Cir. 2008).

149

National Emission Standards for Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Steam

Generating Units, 77 Fed. Reg. 9,304, 9,363 (Feb. 16, 2012).

150

Id. at 9326–27.

151

National Emission Standards for Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Steam

Generating Units, 77 Fed. Reg. 9304, 9363 (Feb. 16, 2012).

142

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Twenty-three states, along with numerous industry groups, sought review of EPA’s MATS rule,

arguing, among other things, that EPA acted unlawfully by refusing to consider cost in making its

“appropriate and necessary” finding.152 In a per curiam opinion, a divided panel of the D.C.

Circuit upheld EPA’s decision, holding that EPA’s refusal to consider costs was a permissible

interpretation of the phrase “appropriate and necessary” when it determined to regulate power

plants under Section 112.153 The court reasoned that Section 112(n)(1) on its face neither requires

nor prohibits EPA from considering costs, and that “[t]hroughout section 112, Congress

mentioned costs explicitly where it required EPA to consider them.”154 The court made clear that

once the “appropriate and necessary” determination is made, EPA must consider costs if it seeks

to set emission standards more stringent than those dictated by the statutory MACT standard.155

In 2015, the Supreme Court reversed Michigan v. EPA.156 The Court held that EPA’s failure to

consider costs as a part of its “appropriate and necessary” finding was an unreasonable

interpretation of the CAA.157 Although the Court agreed that EPA’s interpretation of the

ambiguous term “appropriate and necessary” was entitled to deference under Chevron U.S.A., Inc.

v. NRDC, the Court concluded that EPA had “strayed far beyond [the bounds of reasonable

interpretation] when it read § 7412(n)(1) to mean that it could ignore cost when deciding whether

to regulate power plants.”158 The Court explained that

Read naturally in . . . context, the phrase “appropriate and necessary” requires at least

some attention to cost. . . . Agencies have long treated cost as a centrally relevant factor

when deciding whether to regulate. . . . [I]t is unreasonable to read an instruction to an

administrative agency to determine whether “regulation is appropriate and necessary” as

an invitation to ignore cost.159

The dissenting Justices agreed that EPA was unreasonable in not taking into account costs in

adopting the regulations, but they concluded that EPA had satisfied this requirement when it

considered costs when setting the actual emissions standards.160

In response to Michigan v. EPA, EPA issued a supplemental finding in 2016, concluding that a

consideration of cost did not change its determination that regulation of HAP emissions from

power plants is “appropriate and necessary” under Section 112.161 Utilities, industry groups, and

14 states have challenged EPA’s finding while several states and local governments, along with

two energy companies, have intervened in support of EPA.162 The petitioners question, among

other things, EPA’s cost-benefit methodology and whether ancillary or “co-benefits” (i.e.,

reduction of power plants’ emissions of particulate matter and sulfur dioxide, substances that are

targeted neither under the MATS rule nor Section 112) can factor into the agency’s cost-benefit

152

White Stallion Energy Ctr., LLC v. EPA, 748 F.3d 1222, 1236 (D.C. Cir. 2014) (per curiam).

Id. at 1241.

154

Id. at 1237.

155

Id. at 1240.

156

135 S. Ct. 2699 (2015).

157

Id. at 2707.

158

Id.

159

Id. at 2706.

160

Id. at 2716-17 (Kagen, J., dissenting).

161

Supplemental Finding that It is Appropriate and Necessary to Regulate Hazardous Air Pollutants From Coal- and

Oil-Fired Electric Utility Steam Generating Units; Final Rule, 81 Fed. Reg. 24,420 (Apr. 25, 2016).

162

Murray Energy Corp. v. EPA, No. 16-1127 (D.C. Cir. docketed Apr. 25, 2016).

153

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analyses to justify its finding.163 In response, EPA argues that legislative history supports EPA’s

discretionary consideration of “co-benefits” from reducing non-HAP emissions, and “nothing in

the CAA ‘limits’ EPA to considering benefits related only to hazardous air pollutants in a benefitcost analysis.”164 The D.C. Circuit has not scheduled oral argument yet. The decision in the

MATS supplemental finding case may have far reaching impacts on how and what costs and

benefits EPA can or must consider for rulemakings under the CAA.

Greenhouse Gas Emissions

In the absence of congressional action establishing a regulatory regime specifically for

greenhouse gas emissions, the broad authority to control air pollutants provided by the CAA has

become the principal federal tool for addressing GHGs. Under the Act, the term “air pollutant” is

defined in sweeping terms to include “any physical, chemical, biological, radioactive ... substance

or matter which is emitted into or otherwise enters the ambient air.”165 In 1999, advocates

petitioned EPA to use this authority to identify GHGs as air pollutants that potentially endanger

public health and welfare and, as a next step, to control GHG emissions from new motor vehicles

under CAA Section 202.166 Motor vehicles are the source of about one-fourth of all U.S. GHG

emissions.167 In 2003, EPA denied the petition, arguing that the CAA did not give it authority to

regulate GHG emissions, and that, even if it did, the agency would not do so for policy reasons.168

This suit led to the first, and most important, of the Supreme Court’s three decisions on GHG

emissions. In 2007, the Court in Massachusetts v. EPA remanded EPA’s 2003 denial of the

petition, holding 5-4 that, contrary to EPA’s position, “air pollutant” in the CAA is broad enough

to include GHGs169 and that once EPA finds that GHG emissions potentially endanger public

health and welfare it may not decline to regulate them on policy grounds.170 The Massachusetts

decision led EPA in 2009 to a pair of “endangerment findings” under Section 202: that GHGs

currently in the atmosphere potentially endanger public health and welfare, and that new motor

vehicle emissions cause or contribute to that pollution.171 Based on those endangerment findings,

EPA under Section 202 has issued GHG emission standards for model year 2012-2016 cars and

light trucks,172 for 2014 and later model year medium- and heavy-duty vehicles,173 for 2017-2025

model year cars and light trucks,174 for 2018 and later model truck trailers,175 and for 2021-2022

model year medium- and heavy-duty engines and vehicles.176

163

Opening Br. of State and Industry Pet’rs, at 41-55 (filed Nov. 18, 2016).

Br. of Resp’t EPA, at 56-65 (filed Jan. 18, 2017).

165

CAA § 302(g); 42 U.S.C. § 7602(g).

166

Massachusetts v. EPA, 549 U.S. 497, 510 (2007).

167

Sources of Greenhouse Emissions, http://www.epa.gov/climatechange/ghgemissions/sources.html.

168

68 Fed. Reg. 52,922 (Sept. 8, 2003).

169

549 U.S. 497, 532 (2007).

170

Id. at 534.

171

74 Fed. Reg. 66,496 (Dec. 15, 2009).

172

75 Fed. Reg. 25,323 (May 7, 2010).

173

76 Fed. Reg. 57,106 (Sept. 15, 2011).

174

77 Fed. Reg. 62,624 (Oct. 18, 2012).

175

81 Fed. Reg. 73, 478 (Oct. 25, 2016).

176

Id.

164

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The Supreme Court’s second decision on GHG emissions, American Electric Power Co. v.

Connecticut,177 unanimously held that EPA’s authority to regulate GHGs through NSPSs under

CAA Section 111 means that federal judges no longer have authority under the federal common

law of nuisance to impose GHG emission limitations on sources.178 More important, American

Electric Power clarified that including GHGs under CAA Section 202, as provided by

Massachusetts v. EPA, also extends to NSPSs under CAA Section 111(b).179 As such, the Court

eliminated that issue from the debate over EPA’s proposed Section 111 regulations setting NSPSs

for CO2 from new fossil fuel-fired power plants.180 And because such NSPSs are a legal

prerequisite for EPA’s use of Section 111(d) to regulate CO2 from existing fossil fuel-fired power

plants,181 the Court’s ruling also eliminated this authority issue from the debate over EPA’s rule

restricting GHGs from those sources.182

The Supreme Court’s third decision on GHG emissions, Utility Air Regulatory Group v. EPA, was

discussed above in the “New Source Review” section. Briefly, that decision rejected EPA’s

argument that its regulation of new-motor-vehicle GHG emissions (this section, above) required

it to apply two CAA permitting programs for stationary sources to GHG emissions from those

sources. The Court did allow, however, that EPA could impose one of these programs, requiring

installation of Best Available Control Technology on new and modified stationary sources in PSD

areas, to GHG emissions from certain stationary sources: those that emit New Source Review

pollutants in amounts sufficient to come under the program independently.

Enforcement

In TVA v. Whitman, EPA’s use of the administrative compliance order (ACO), was successfully

challenged.183 Under the CAA, EPA has four enforcement options when it believes a violation of

the statute has occurred: ask the Department of Justice (DOJ) to file a court action for civil

penalties: ask the DOJ to do the same for criminal penalties; conduct an EPA adjudication and

impose civil penalties; and finally, issue an ACO.184 All of these options, save ACOs, give the

accused party the right to challenge EPA’s understanding of the law or the facts in court before

penalties can be imposed. By contrast, EPA may seek potentially severe civil penalties or criminal

penalties for noncompliance with an ACO even though EPA issues ACOs based on “any

information available” and absent adjudication. Such penalties are in addition to penalties for

violations of the Act itself. In reviewing an ACO noncompliance case, a court is limited to the

question of whether the party complied with the ACO.

In TVA, the U.S. Court of Appeals for the Eleventh Circuit struck down this scheme as “repugnant

to the Due Process Clause of the Fifth Amendment.”185 Pre-enforcement review by a court, it

177

564 U.S. 410 (2011).

Id. at 424.

179

Id. at 424-26.

180

79 Fed. Reg. 1,430 (Jan. 8, 2014).

181

This linkage between CAA Sections 111(b) and 111(d) is evident from the fact that Section 111(d) applies only to

emissions of air pollutants “to which a standard of performance under [section 111] would apply if such existing source

were a new source.” CAA § 111(d)(1); 42 U.S.C. § 7411(d)(1).

182

79 Fed. Reg. 34,830 (Sept. 25, 2014).

183

336 F.3d 1236 (11th Cir. 2003).

184

CAA § 113(a); 42 U.S.C. § 7413(a).

185

336 F.3d at 1258.

178

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Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act

held, must be made available to the recipient of the order.186 Nor can EPA “save” the statute by

conducting a voluntary adjudication, as before its internal Environmental Appeals Board.187 In the

Circuit’s view, that would relegate Article III district courts to insignificant tribunals serving

merely as forums for EPA to conduct show-cause hearings simply on whether the party complied

with the ACO.188 Parenthetically, the Supreme Court later rendered an identical ruling—that

ACOs are subject to pre-enforcement court review—but in connection with the Clean Water Act

and solely on statutory, rather than constitutional, grounds.189

In Dow Chemical Co. v. United States,190 the Supreme Court held that CAA Section 114191

authorizes EPA to use aerial photography in checking on emission sources.192 Moreover, the

Court rejected that the Fourth Amendment required a warrant for such surveillance on the theory

that expectations of privacy outside an industrial plant are not akin to those surrounding a

residential home.193

186

Id.

Id. at 1259.

188

Id.

189

Sackett v. EPA, 566 U.S. 120 (2012) (holding that Clean Water Act ACOs are “final agency actions” for which preenforcement review is available under the Administrative Procedure Act).

190

476 U.S. 227 (1986).

191

42 U.S.C. § 7414.

192

476 U.S. at 239.

193

Id. at 238-239.

187

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Key Historical Court Decisions Shaping EPA’s Program Under the Clean Air Act

Glossary of Acronyms

ACO: administrative compliance order

BACT: best available control technology

BSER: best system of emission reduction

CAA: Clean Air Act

CAIR: Clean Air Interstate Rule

CO2: carbon dioxide

CPP: Clean Power Plan

EPA: Environmental Protection Agency

GHG: greenhouse gas

HAP: hazardous air pollutant

MACT: maximum achievable control technology

NAAQS: national ambient air quality standard

NESHAP: national emission standard for hazardous air pollutant

NOx: nitrogen oxides

NEPA: National Environmental Policy Act

NSPS: new source performance standard

PSD: prevention of significant deterioration

RMRR: routine maintenance, repair, and replacement

SIP: state implementation plan

SO2 : sulfur dioxide

Author Contact Information

(name redacted)

Legislative Attorney

[redacted]@crs.loc.gov

, 7-....

(name redacted)

Legislative Attorney

[redacted]@crs.loc.gov

, 7-....

Acknowledgments

This report was originally written by (name redacted)

, Legislative Attorney, who has retired from CRS. (name

redacted) and (name redacted) are now handing legal inquiries relating to this subject.

(name redacted), Specialist in Environ mental Policy, CRS Resources, Science, and Industry Division,

with the assistance of Brandon Toth, CRS American Law Division summer intern, also contributed to this

report.

Congressional Research Service

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