EPA Rule to Find Support at Business-Friendly Court

Photographer: Andrew Harrer/Bloomberg

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Photographer: Andrew Harrer/Bloomberg

The U.S. Capitol Building stands past the natural gas and coal fueled Capitol Power Plant, which provides heating and cooling throughout the 23 facilities on Capitol Hill including House and Senate Office Buildings, in Washington, D.C.

The pro-business track record of the U.S. Supreme Court hasn’t always extended to environmental cases. That’s good news for supporters of President Barack Obama’s proposed cuts in greenhouse-gas emissions.

The court under Chief Justice John Roberts has often been quick to back business interests, supporting unlimited corporate campaign spending and letting companies funnel disputes with customers into arbitration.

The story is different when it comes to climate change and the environment. It was a Supreme Court decision in 2007 that cleared the way for the Environmental Protection Agency to regulate carbon emissions in the first place.

The court “very clearly embraced the idea that the EPA has regulatory authority under the Clean Air Act to deal with greenhouse gases,” said Amanda Leiter, an environmental-law professor at American University’s Washington College of Law. “That at least suggests that the current court is likely to give the agency a little bit of leeway to figure out how to exercise that authority.”

The EPA has won a string of courtroom victories in recent months. Most notably, the Supreme Court upheld a rule designed to reduce pollutants that cause smog and acid rain across state lines, and a federal appeals court backed regulations to cut mercury and other emissions from power plants.

Boldest Step

The rule proposed yesterday is Obama’s boldest step yet on climate change. It would slash greenhouse-gas emissions from power plants by an average of 30 percent from 2005 levels. The plan drew immediate opposition from Republicans and promises that it will face courtroom challenges from states and industry.

“We see many, many legal defects,” West Virginia Attorney General Patrick Morrisey said. “We’re now going to work together to put a coalition in place to challenge this rule.”

The EPA is relying on a Clean Air Act provision that has been tested in court only sparingly. The provision, known as section 111(d), lets the agency set emissions standards for major sources of air pollution.

The main issue with the proposed rule is that it wouldn’t simply limit pollutants from smokestacks. Instead, it would count emissions reductions attributable to energy-efficiency measures, greater use of renewable energy and carbon-trading programs. States would be given emissions targets and a menu of options for reaching those goals.

Biggest Opening

Although the administration touts that flexibility as one of the program’s benefits, that may also give opponents their biggest opening to challenge the plan, says Jonathan Adler, director of the Center for Business Law & Regulation at Case Western Reserve University School of Law in Cleveland.

“It’s somewhat uncharted waters here,” Adler said. “They’re doing something they haven’t really tried before.”

The language of the statute requires the agency to focus on emissions from smokestacks or, at most, pollutants coming from “inside the fence” of the facility, said Richard Faulk, an environmental lawyer in Washington.

“The Clean Air Act is not flexible,” Faulk said. “It says that you do these things based on point-source emissions.”

A second issue stems from an earlier administration proposal to limit greenhouse gases from new plants under a related provision in the Clean Air Act. A court ruling striking down the rule for new facilities might have a domino effect: toppling the rule for existing facilities as well.

Insulating Proposal

In crafting its rule, the EPA took steps to try to insulate the proposal from legal challenge. The rule says that if a court were to invalidate part of the measure -- for example, by rejecting one of the options afforded to states for meeting the targets -- the rest of the plan should remain intact.

The EPA has won at least six courtroom clashes over air quality this year, with only a single setback. Five of the victories came at the Washington-based federal appeals court that would probably take the first look at the agency’s rules.

In the Supreme Court decision, issued in April, a 6-2 majority rejected contentions that the Clean Air Act requires pollution reductions to be tied to the volume of a state’s pollutants.

The EPA instead focused on the cost of reducing pollutants, taking an approach that Justice Ruth Bader Ginsburg said in her opinion for the court was “permissible, workable and equitable.”

New Case

The court is scheduled to rule within a month on a less-sweeping Obama administration effort to combat climate change. The question there is whether the EPA had authority to impose new permitting requirements on some power plants and factories, requiring them to install the best available pollution-control technology.

The court’s decision in that case “may help read the tea leaves on how much leeway particularly Justice Kennedy is likely to give the agency in its implementation of all of its climate change rules,” Leiter said, referring to Anthony Kennedy, the court’s frequent swing vote.

The latest rule won’t be completed for another year, complicating any efforts to predict the courtroom outcome. The Supreme Court, which has four justices age 75 or older, could have a different composition by the time a lawsuit arrives.

“I don’t even know what the Supreme Court is going to look like by the time this gets up there,” Faulk said. That, he added, “could be years from now.”

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story: Patrick Oster at poster@bloomberg.net Mark McQuillan, Laurie Asseo

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