EPA’s Standing Argument: A Sleeping Giant in the Tailoring Rule Litigation?

On Feb. 28 and 29, the D.C. Circuit is scheduled to hear arguments on a suite of industry-led challenges to EPA-issued greenhouse gas rules.  While attention has focused on industry’s challenge to EPA’s finding that greenhouse gases (GHGs) endanger the environment, industry’s challenge to the greenhouse gas permitting “tailoring” rule – a rule limiting the CAA’s application to only the largest GHG sources – is just as important, and just as interesting a battle.  At issue is constitutional law’s most hard-fought doctrine in environmental litigation: standing to sue. 

In its September 2011 brief, EPA contends that the Tailoring Rule is designed to alleviate the burden that the CAA would otherwise impose on a wide variety of stationary GHG sources.  Because it is alleviating, not imposing, a burden, the Tailoring Rule does not create the “injury” that industry must demonstrate to have standing to sue.  If the plaintiffs lack standing, then the court must dismiss industry’s challenge.  The injection of standing into the case makes the tailoring litigation all the more interesting because, as a result, the court may have a strong basis for dismissing what is otherwise considered a robust legal challenge to the Tailoring Rule. 

As an industry group argues in the Tailoring Rule case, Coalition for Responsible Regulation v. EPA, the agency’s rule raising the emission thresholds for Prevention of Significant Deterioration and Title V permits flatly contradicts the express language of the Clean Air Act.  The Clean Air sets these thresholds at 250 and 100 tons per year, multiples lower than the Tailoring Rule’s regulatory thresholds of at least 75,000 tons per year. EPA argues that upping the thresholds was “necessary” to avoid “absurd results” that would otherwise flow from the administrative burdens created by low statutory thresholds, thresholds that could subject numerous small-scale sources, like restaurants and other small businesses, to CAA permitting requirements for the first time. (EPA has said that simply implementing GHG controls without the Tailoring Rule would theoretically require 230,000 new employees to handle the permitting). This is a good common sense argument, but many courts are reluctant to ignore a statute’s literal language.  The courts may never reach the merits, however, if EPA succeeds in having the suit dismissed on standing grounds. 

When environmental and citizens groups have sued to obtain greater protection of the environment, government and industry have often countered that the environmental plaintiffs lack standing because of their failure to articulate a sufficiently precise and immediate injury. Standing law has largely been formed by the success of this strategy, as seen in cases such as  Lujan v. National Wildlife Federation (1990), Summers v. Earth Island Institute (2009) and Steel Co. v. Citizens for a Better Environment (1998).

Now the standing argument is being raised in defense of the environment.  In a recent filing with the Court, the Obama Justice Department is arguing that industry’s lack of standing requires the dismissal of its challenge to the EPA GHG Tailoring Rule.  The Department’s argument is simple:  since the Tailoring Rule actually relaxes statutorily-imposed thresholds for permitting of greenhouse gas emissions, industry cannot show that it is injured by the rule.  Moreover, it cannot show that its requested remedy – the vacation of the rule – will ameliorate its injury.   Instead, EPA is arguing, the industry group’s requested relief will actually make it worse off because, without the Tailoring Rule, thousands of small sources of greenhouse gases would be subject to the Act’s 250 ton threshold for a Prevention of Significant Deterioration permit and the 100 ton threshold for Title V permits.

What’s more, EPA has a recent DC Circuit case to cite in its favor:  National Association of Home Builders v. U.S. Army Corps of Engineers Dec. 16, 2011).  In that case, a panel of the DC Circuit dismissed an industry challenge to the Army Corps of Engineers nationwide permitting program under Section 404 of the Clean Water Act for lack of standing.  Because the generic rule issued by the agency alleviated a regulatory burden by allowing industry to discharge dredge and fill material into a “water of the United States” without having to go through the lengthy and expensive individual permitting process, the Court ruled that the homebuilders’ association lacked the requisite injury under Lujan v. Defenders of Wildlife (1992).  According to the Court, the homebuilders’ injury – the risk of sanctions for filling a wetland without a permit – “predates and is in no way aggravated by, the issuance of the Corps’ generic permitting rule.”

In the tailoring litigation, EPA argues something similar: that industry’s alleged injury results from the application of the Clean Air Act’s PSD, and consequently also its Title V permitting, requirements, and not from the Tailoring Rule.  Specifically, the agency argues that the applicability of the permitting requirement to sources of greenhouse gas emissions is a function of the Act’s definition of a “major emitting facility”, which requires all facilities emitting more than a threshold amount of “any air pollutant” subject to regulation under the Act to obtain a permit.   Hence, the agency argues, the injury is a consequence of the Clean Air Act, and not EPA’s Tailoring Rule.  According to EPA, industry is really trying to relitigate whether the permitting programs apply to air pollutants for which the agency has not established a national ambient air quality standard.  Like it or not, EPA asserts, that issue was resolved when the DC Circuit, in Alabama Power v. Costle (1979), upheld the EPA’s regulations applying the PSD permitting requirement to such pollutants and the agency has confirmed this interpretation in subsequent regulations.  Thus EPA argues industry is both crying over spilled milk and barking up the wrong tree.  The agency’s brief seems to say:  “It’s too late to challenge an agency interpretation made in 1978.  And besides, by relaxing the statutory thresholds, we’re being your friend, sillies, not your enemy.”    

The industry group does not appear to have a convincing response. In a brief filed before EPA brought the NAHB case analogy to the Court’s attention, it argues that, to determine standing, the Court should just presume that their legal challenge has merit (see p. 27).  Thus, they argue, because their members are injured by the requirement to obtain PSD and Title V permits for GHG emissions, they have standing to challenge the tailoring rule.  But – as EPA argues – the injury arises from applying the Clean Air Act and its permitting requirements to GHGs, as upheld in Massachusetts v. EPA, and has nothing to do with the agency’s Tailoring Rule.

Ironically, industry may be better off if its suit is dismissed.  Whatever the motive behind the challenge, certainly it cannot be a preference for the Clean Air Act’s lower greenhouse gas permitting thresholds.  Instead, one can only surmise that the industry group is engaged in a cynical effort to topple the agency’s greenhouse gas regulations by provoking an outcry by the multitude of small sources that would be swept within the Act’s reach by the statutory thresholds. Whatever the precise consequences, applying the literal statutory thresholds, were it even practicable from the perspective of the administrative burdens it would entail, would certainly divert attention away from the largest sources of greenhouse gases.  EPA’s Tailoring Rule maintains a focus on these large sources and, in doing so, represents feasible, fair and effective regulatory policy.    

It will be interesting to see how this all plays out.  While EPA’s rule faces possible trouble, the standing argument could end up being a key defense.  Stay tuned.