Climate Change and The Clean Air Act: Proposed Endangerment Finding and Implications For New Source Review

The U.S. Environmental Protection Agency (USEPA) has in recent weeks taken significant steps toward addressing Greenhouse Gases (GHG) under the Clean Air Act (CAA). The most prominent action is USEPA’s proposed finding that GHG emitted from new motor vehicles “cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.” [1] This proposed finding is USEPA’s response to the remand of this issue by the United States Supreme Court in the landmark case Massachusetts v. USEPA, decided two years ago.

There is little doubt that USEPA will make an endangerment finding concerning GHG from new motor vehicles. There is substantial uncertainty, however, about the timing and impact of this endangerment finding on multiple, interlocking CAA programs that may also be affected. The CAA uses remarkably similar language as the threshold to trigger regulation under several individual CAA programs.

This E-Update explores potential implications of USEPA’s proposal and describes USEPA’s efforts to attempt to retain control over the timing and extent of the onset of GHG regulation. Initiating GHG regulation administratively under the existing CAA is highly problematic because the CAA was not enacted to address the unique global problem of GHG, so some programs might be able to effectively regulate GHG while others could be inefficient and only marginally effective, with high transaction costs. The program where USEPA may be least able to manage, in an effective and orderly way, the onset of GHG regulation is in the New Source Review (NSR) program, which governs the pre-construction permitting of major new stationary sources, and of significant modifications of existing major stationary sources.

The Structure of USEPA’s Proposed Endangerment Finding

USEPA’s proposal relates to new motor vehicles or motor vehicle engines under Section 202(a) of the CAA (the “Section 202(a) sources”). These sources were the subject of the initial rulemaking petition that USEPA denied, which denial the U.S. Supreme Court reversed and remanded in Massachusetts v. USEPA. USEPA carefully structured its proposal to make two separate findings.

First, the proposal determines that GHGs constitute “air pollution” that may reasonably be anticipated to endanger public health and welfare (the “endangerment finding”). USEPA reviewed available science, particularly the assessment reports of the Intergovernmental Panel on Climate Change, and made the proposed finding with regard to the combination of six GHG: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. This is the family of GHG regulated under the United Nations Framework Convention on Climate Change, and is a group of long-lived, globally well-mixed and directly emitted GHG.

USEPA then separately considered what it termed its “cause or contribute finding.” While the endangerment finding was generic regarding the climate change impact of GHG emissions, the “cause or contribute” finding was specifically tailored to emissions of GHG from Section 202(a) sources. In the past, USEPA made the “cause or contribute” finding for individual categories of new motor vehicles, while this proposal considered emissions from all new motor vehicles. USEPA’s past practice may form a basis, in making future GHG findings regarding other CAA programs, for USEPA to focus on only particular types of source categories in determining the onset of GHG regulation under the CAA. Thus, the “cause or contribute” finding allows USEPA to identify and address different industrial sectors or types of sources that contribute to the air pollution caused by GHGs.

USEPA also emphasized that the Court did not rule in Massachusetts v. USEPA on the question of whether policy concerns can inform USEPA’s actions once it makes an endangerment finding. Indeed, the Court noted USEPA’s latitude as to the timing, content and coordination of any emission regulations with those of other agencies.[2]

Impact of the Proposed Finding on CAA Regulatory Programs

USEPA was careful to limit the scope of its findings to Section 202(a) sources. Contrary to its standard practice, USEPA also did not issue the proposed finding along with proposed emission regulations for Section 202(a) sources. This attempt to limit the impact of the proposed finding is consistent with the USEPA Administrator’s preference for Congressional action to sort out the United States’ national approach to GHG emission reductions. There is near-universal acknowledgement that the CAA is well-designed to address problems of local and regional air pollution, but was not designed to deal effectively with the global challenge posed by GHG and their climate change impacts. As a result, the USEPA’s proposal suggests a plan to carefully sequence the roll-out of any related findings under other CAA programs, as well as the ultimate emission regulations for Section 202(a) sources, in a way that gives Congress ample opportunity to clarify national policy for GHG emission reductions and adopt new CAA provisions better-tailored to address this unique environmental problem.

USEPA’s narrow tailoring of the “cause or contribute” finding to Section 202(a) sources suggests that USEPA will take the position that it must make a separate finding for each regulatory program, and perhaps each source category within each program, under the CAA. It therefore appears that USEPA may produce a “double-layer” of endangerment proposals, and later emission regulations, to control the timing of the onset of CAA regulation of GHG. USEPA went so far as to say that it “is not proposing or taking action under any other provision of the CAA.”

USEPA’s approach appears designed to provide Congress with the maximum breathing room USEPA can provide consistent with its statutory responsibilities under the CAA. In addition, USEPA is clearly trying to retain control over how it rolls out GHG regulation under individual CAA programs. By making individual findings with relation to different kinds of mobile and stationary sources under the CAA, as well as utilizing a two-step process to make the “cause or contribute” finding and then separately propose substantive emission regulations, USEPA has some opportunity to avoid chaotic imposition of CAA regulation of GHG.

This point applies, however, only to programs that are implemented by rule. Because rules can take months or years to develop, even if there is a judicial determination that USEPA must proceed to make requisite GHG findings, and regulate if warranted by those findings, the National Ambient Air Quality Standards program and the New Sources Performance Standards program could take years to develop broad-based standards and regulations for GHG.

New Source Review Permitting Requirements

The exception to USEPA’s ability to control the timing and onset of GHG regulation is the NSR pre-construction permitting program for new major sources and major modifications of existing stationary sources. While other CAA programs have as their regulatory threshold statutory language that is very similar to the endangerment and “cause or contribute” language in Section 202(a), NSR applies to any air pollutant “subject to regulation” under the CAA. Because this language references the entire CAA, GHG emission regulation of new motor vehicles could satisfy this threshold. USEPA appears to have little latitude to control the timing and extent of applicability of NSR to stationary sources once USEPA promulgates any type of GHG emission regulation under a CAA program.

While current controversy and litigation is centered on proposals for new coal-fired power plants, the statutory thresholds under NSR’s Prevention of Significant Deterioration of Air Quality (PSD) requirements are a potential to emit of 250 tons per year (or 100 tons per year for 28 listed source categories), of any air pollutant subject to regulation under the CAA. Already, advocates have argued that the Court’s finding that GHGs meet the CAA’s definition of “air pollutant” by itself makes GHGs “subject to” regulation under the CAA under PSD. In contrast, the USEPA has viewed this language as applying only when there is a provision of the CAA that regulates the actual emissions of a pollutant, not other provisions such as emission reporting provisions.[3]

USEPA, however, is reconsidering in a separate docket whether the PSD program would be triggered by its final endangerment finding. USEPA’s reconsideration grows out of the United States Environmental Appeals Board’s (EAB’s) remand of the PSD permit for the proposed Deseret power plant. In the Deseret case, the EAB reversed and remanded the PSD permit to USEPA for development of a full record on the issue of whether carbon dioxide should be considered a pollutant “subject to regulation” under the PSD program. In its remand, the EAB noted that this issue should be addressed by a national determination, rather than through an individual permit proceeding.

In response, former USEPA Administrator Johnson issued an interpretation of which pollutants were covered by the federal PSD program, and concluded in December 2008 that PSD would be triggered only when a pollutant like carbon dioxide is subject to the control of actual emissions under a CAA program. USEPA is now reconsidering this interpretive guidance in a separate proceeding.[4]

One of the most difficult aspects of the USEPA’s deliberations on reconsideration is that a determination that carbon dioxide is “subject to regulation” under the CAA could make a large number of new sources and changes at existing sources immediately subject to the requirement to obtain an NSR permit before construction. Movement toward GHG regulation under other CAA programs would take much longer, allowing Congress time to fashion some tailored amendments to the CAA to make programs more workable in the GHG context, or replace them with a comprehensive federal program to address climate change.

The existing statutory standards for PSD were established to define major sources of traditionally regulated air pollutants, not GHG. The 100/250 ton per year threshold for PSD applicability is ten times smaller than the 25,000 ton per year cutoff under USEPA’s proposed mandatory GHG reporting rule that was announced on March 10, 2009. While the controversy over whether carbon dioxide is “subject to regulation” under the PSD program is centered on proposed construction of new coal-fired power plants, these thresholds could apply PSD requirements to more than ten times the number of sources that are currently subject to the NSR program.

USEPA’s attempts to control the timing and make deliberate the roll-out of CAA regulation of GHGs is laudable, particularly because it allows Congress latitude to take action to address GHG. While it may be an effective strategy with regard to other CAA programs, however, USEPA could easily trigger the immediate and broad onset of NSR program applicability to thousands of stationary sources across the country.