In response to a petition by several industry groups, the U.S. Chamber of Commerce, and several states, the U.S. Supreme Court ruled on Monday, June 23, that EPA lacks the authority to require air quality permits from facilities based solely on their greenhouse gas emissions. It affirmed, however, that EPA can regulate GHG emissions from sources already subject to Prevention of Significant Deterioration and Title V permitting requirements due to their emissions of conventional criteria pollutants, including requiring the installation of Best Available Control Technology (BACT). EPA estimates these sources to account for approximately 83% of U.S. stationary source GHG emissions although this figure may overestimate the emissions that are ultimately targeted since existing facilities can net-out to avoid PSD for conventional pollutants and also avoid regulation of GHGs.

The ruling invalidates several key elements of EPA’s PSD and Title V Tailoring Rule (“the Tailoring Rule”) that was issued following the 2007 landmark GHG U.S. Supreme Court case, Massachusetts v. EPA, which paved the way for regulation of carbon dioxide and other greenhouse gases as pollutants under the Clean Air Act (CAA). The Court ruled that EPA could not change the major source thresholds legislated in the Clean Air Act as it had attempted to do in order to adapt the process to the inherently higher levels of GHG pollutants in the environment. However, the court upheld EPA’s authority to establish a PSD de minimus increase trigger for sources otherwise subject to PSD regulations though EPA will be required to properly justify this level.

What this means for GHG sources with permits in the pipeline is not clear. The DC Circuit Court must implement the Supreme Court’s decision, effectively requiring EPA to rescind or withdraw the vacated portion of the rule. From there, it is anticipated that EPA will issue new guidance to permitting agencies on how to proceed in the interim.

The path forward for facilities with permits in the pipeline may depend primarily on whether they are an “anyway" source. These are sources or modifications which were defined under the tailoring rule as sources subject to regulation anyway due to emissions of non-GHG pollutants. Since the court upheld the EPA’s authority to regulate GHG emissions from sources that anyway sources, major sources of criteria pollutants can expect continued regulation of GHG emissions through Title V and PSD permits. For those sources subject to PSD, this could mean continued requirements to install BACT for GHG emissions. It also means that until EPA provides guidance, state agencies will be hesitant moving forward on any major source permits with GHG components.

For sources referred to in the tailoring rule as non-anyway sources, permitting requirements could be drastically reduced by this ruling. The Supreme Court sent a clear message that EPA exceeded its authority under the clean air act by specifically tailoring major source thresholds of GHG emissions. This has in effect overturned any portion of the tailoring rule which could cause any source to become a major source under the CAA or subject to PSD permit requirements solely on their GHG emissions. For sources previously defined as major sources of GHG only, this should mean significant regulatory relief from Title V permitting requirements as well as opening up additional permitting options under state minor source review permitting programs.