Constitutional Crisis: Regulating CO2 under the Clean Air Act

1
Constitutional Crisis Regulating CO2 under the
Clean Air Act

• Marlo Lewis, Ph.D.
• Senior Fellow
• Competitive Enterprise Institute
• mlewis_at_cei.org
• Heartland Institute International Climate Change
  Conference
• March 9, 2009

2
Mass v. EPA bare bones

• April 2, 2007, Supreme Court decided 5-4 that
  GHGs are air pollutants within the meaning of
  CAA 302(g).
• EPA must determine whether air pollution from
  motor vehicle GHG emissions may reasonably be
  anticipated to endanger public health or
  welfare, or provide statutory reasons why the
  Agency cannot or will not make such
  determination.
• If EPA finds that GHG-related air pollution
  endangers public health or welfare, it must
  establish first-ever GHG emission standards for
  new motor vehicles.

3
EPA should not issue an endangerment finding
because...

• An endangerment finding would set the stage for
  multiple policy disasters no Congress would ever
  approve.
• Had the Justices understood this back in 2006 and
  early 2007, they likely would have decided Mass
  v. EPA differently.
• The only way EPA can regulate GHGs under CAA
  without risking administrative chaos and economic
  devastation is to assume legislative power and
  amend the Act.
• It is unreasonable at this time to anticipate
  endangerment of public health and welfare from
  AGW.
• EPA cannot establish GHG standards for new motor
  vehicles yet avoid inconsistency with EISA fuel
  economy standards.
• EPA cannot coherently define air pollution
  related to GHGs so it lacks the requisite subject
  matter on which to make an endangerment finding.

4
Mass v. EPA selective reading of CAAs most
abstract provision

• 302(g) The term air pollutant means any air
  pollution agent or combination of such agents,
  including any physical, chemical, biological, or
  radioactive (including source material, special
  nuclear material, and by-product material)
  substance or matter, which is emitted into, or
  otherwise enters, the ambient air. Such term
  includes any precursors to the formation of any
  air pollutant, to the extent that the
  Administrator has identified such precursor or
  precursors for the particular purpose for which
  the term air pollutant is used.

5
Absurd!

• The Courts reading makes the first sentence
  hopelessly circular (an air pollutant is an air
  pollutant) and turns the definition into a
  formalism whereby a thing can be an air
  pollutant even if it does not pollute the air.
• Scalia Everything from flatulence to Frisbees.
• Indeed, under the Courts reading, even clean
  air--air with zero air pollution--becomes an air
  pollutant if it is emitted.

6
Petitioners bamboozled the Justices

• Petitioners said their litigation posed no risks
  to the economy because NAAQS program (Title I) is
  entirely separate from mobile source regulation
  (Title II), and because 202 requires EPA to
  consider compliance costs and lead times.
• Persuaded by these assurances, the Court rejected
  EPAs argument, based on FDA v Brown
  Williamson, that GHG regulation was a policy
  decision of such economic and political
  magnitude that Congress would not delegate it to
  an administrative agency, especially in so
  cryptic a fashion.
• The Court concluded an endangerment finding would
  not lead to extreme measures.

7
In reality...

• Setting GHG emission standards for new motor
  vehicles would trigger a regulatory cascade
  through multiple CAA provisions.
• As a matter of law, EPA would have to regulate
  CO2 from stationary sources.
• Sources potentially subject to regulation power
  plants, refineries, cement kilns, and, indeed,
  virtually all energy-consuming equipment,
  facilities, or processes including lawnmowers,
  aircraft takeoffs and landings, factory work
  practices, diesel truck cruising speeds, marine
  vessel coatings, large commercial office
  buildings, big box stores, enclosed malls, even
  household furnaces.
• The endangerment finding prerequisite to
  regulating motor vehicle GHG emissions under 202
  would establish a precedent for NAAQS regulation
  of CO2. We could end up with CO2 air quality
  standards that even outright de-industrialization
  would be insufficient to meet.

8
PSD Basics (i)

• GHG emission standards for new motor vehicles
  would make CO2 subject to regulation under the
  Acts Prevention of Significant Deterioration
  (PSD) pre-construction permitting program.
• PSD defines major stationary source as a
  facility with the potential to emit (PTE) 250
  tons per year (TPY) of a CAA-regulated air
  pollutant.
• Before any firm could build a facility with PTE
  of 250 TPY of CO2, or modify a facility in a way
  that increased emissions, it would have to obtain
  a PSD permit.

9
PSD Basics (ii)

• To obtain a permit, the firm must undertake a
  five-step investigation to determine what it must
  do to comply with best available control
  technology (BACT).
• The PSD permitting process is time consuming and
  expensive. Even apart from any technology
  investment to comply with BACT, the average
  permit in 2007 cost regulated entities 125,120
  and 866 burden hours to obtain.

10
How many firms could be affected?

• U.S. Chamber estimates that any firm using
  70,000 worth a year of oil or natural gas in
  stationary equipment actually emits 250 TPY of
  CO2.
• At least
• 1 million mid-sized to large commercial buildings
• nearly 200,000 manufacturing operations
• 17,000 large farms
• 1.2 million previously unregulated buildings and
  facilities (big box stores, office buildings,
  hotels, enclosed malls, commercial kitchens,
  bakeries) would be vulnerable to new controls,
  paperwork, and penalties.

11
Applying PSD to CO2 could freeze economic
development

• EPA currently processes 200-300 PSD permits per
  year.
• EPAs ANPR says processing 2,000-3,000 per year
  would impose significant new costs and
  administrative burdens on agencies and could
  overwhelm their resources. It would also impose
  new costs, uncertainty, and delay on sources in
  obtaining their permits.
• If just 1 of the 1.2 million entities qualifying
  as major stationary sources undertake new
  construction or modifications, agencies would
  have to process 12,000 permits per year.
• The resulting administrative quagmire would bring
  new construction and development to a screeching
  halt.
• A more potent de-stimulus would be hard to
  imagine.

12
Could EPA manage this process?

• EPAs ANPR outlines several administrative
  options to minimize PSD burdens under a GHG
  control regime.
• Redefine major source cutoff in terms of actual
  emissions instead of PTE, redefine cutoff in
  terms of carbon equivalent emissions, replace
  case-by-case BACT determination (as required by
  the statute) with presumptive BACT approval for
  every facility meeting federal energy efficiency
  standards, or simply reset the cutoff at 10,000,
  25,000, or even 100,000 TPY.
• Each option involves EPA more or less brazenly
  assuming legislative powers and amending the
  statute.

13
Constitutional Crisis

• We could end up with a Kyoto-on-Steroids
  regulatory system without the peoples elected
  representatives ever voting on it or taking
  responsibility for the burdens and economic
  impacts.
• Because the Court legislated, EPA must play
  legislator in order to avoid turning the CAA into
  a gigantic de-stimulus package.

14
Title V

• Title V operating permits program defines major
  stationary source as a PTE 100 TPY of a
  CAA-regulated pollutant.
• Potentially millions of previously unregulated
  sources would be affected.
• Title V is not supposed to create new obligations
  but facilitate compliance with other CAA
  programs.
• But regulating CO2 would compel many small
  entities to obtain Title V permits even if they
  have no other requirements under the Act. For
  them, complying with Title V would be an empty
  paperwork exercise.
• It would also be costly. EPA charges 43.40 per
  ton per source to administer the program. Thats
  a de-facto carbon tax.
• As with PSD, EPAs proposed administrative
  remedies flout the law.

15
NAAQS--mandate for de-industrialization

• The 202 endangerment test would substantively
  satisfy the 108 endangerment test that triggers
  a NAAQS rulemaking.
• NAAQS are parts-per-million atmospheric
  concentration standards.
• EPA is forbidden to consider costs when
  establishing NAAQS.
• Petitioners in Massachusetts and every subsequent
  endangerment petition to regulate CO2 from, e.g.,
  trucks, non-road engines, aircraft, and marine
  vessels, asserts that current levels of CO2 harm
  public health and welfare.
• Kyoto would barely slow the increase in CO2
  levels. Even outright de-industrialization might
  not be enough to lower CO2 levels.
• Yet if EPA establishes a primary (health-based)
  NAAQS for CO2, the entire country would have to
  come into attainment in 10 years!

16
NAAQS--It gets even crazier

• If the U.S. is out of attainment with a primary
  NAAQS for CO2, then all sources must comply with
  lowest achievable emission rate standards.
  Unlike BACT, EPA may not take compliance costs
  into account when establishing LAER standards.
• Emission increases from new or modified sources
  must be offset by emission reductions from
  existing sources elsewhere. Roughly speaking,
  nothing could be built or expanded unless
  something else shuts down.
• CAA 110(a)(2)(D) Sources in one state may not
  contribute to NAAQS non-attainment in other
  states.
• CO2 persists in the atmosphere for decades to
  centuries. Hence, firms in one state would
  practically have to shut down (achieve near zero
  emissions) to avoid contributing to
  non-attainment in other states.

17
Could EPA avert a NAAQS disaster?

• EPA suggests it could avoid triggering a NAAQS
  rulemaking by simply not planning to produce
  the requisite analysis, known as a criteria air
  quality document.
• The 2nd Circuit Court shot down this dodge in
  NRDC v Train (1976), holding that it would gut
  the NAAQS program.
• EPA also suggests it could establish a
  secondary (welfare) NAAQS but not a primary
  (health) NAAQS, the advantage being theres no
  statutory deadline for complying with the latter.
• But there is no precedent for issuing a secondary
  NAAQS only. Petitioners in Massachusetts and
  other litigation specifically allege that AGW
  endangers public health.
• Issuing a secondary NAAQS only would not spare
  agencies or sources from burdens associated with
  PSD, Title V, and LAER.

18
Trust us!

• Proponents of CAA regulation of CO2 say Dont
  worry, CAA regulations are not self-executing.
  Nobody wants to apply PSD to thousands of small
  sources, nobody wants to start a NAAQS
  rulemaking. Nobody wants that--not EPA, not
  industry, not even the environmental community.
  All talk of a PSD nightmare is fear-mongering.
• However, the major environmental groups do not
  have a monopoly on CAA litigation.
• Litigation to apply PSD, Title V, and NAAQS to
  CO2 could be very useful to legions of NIMBY
  activists. Dont want a new Wal-Mart, strip mall,
  or McDonalds coming to your neighborhood? Sue EPA
  to make the developers get a PSD permit and
  install BACT.

19
The Supremes really messed up

• The real issue in Massachusetts was not whether
  the CAA definition of air pollutant could be
  tortured to justify regulating GHGs from one
  source category (new motor vehicles) under one
  provision (202) but whether Congress intended
  for EPA to regulate GHGs from all sectors and
  sources under the CAA as a whole?
• Above all, did Congress intend to regulate GHGs
  under the CAA cornerstone--the NAAQ program
  with its statutory adjuncts, PSD, LAER, and Title
  V?
• Few if any Supreme Court Justices would openly
  and directly order EPA to implement a Super-Kyoto
  program via NAAQS, PSD, LAER, and Title V, for a
  very simple reason. No public official wants to
  take responsibility for wrecking the economy.
• Had the real issue been squarely before the
  Court, Massachusetts would likely have been
  decided differently.

20
Where we are now

• EPA and its allies on the Hill and the
  environmental community use the threat of CAA
  regulation to pressure Congress and industry into
  supporting cap-and-trade bills.
• The deal on offer Legislate emission reduction
  targets and timetables, or incur decades of
  litigation-driven EPA regulation.

21
What we must do

• Call this tactic what it is--Legislative
  thuggery A pretty nice economy you used to
  have. A shame if something were to wreck whats
  left of it. Everybody needs protection. You need
  protection. Its called Lieberman-Warner.
• We should insist that every cap-and-trade bill be
  voted up or down on its merits. Were happy to
  debate your bill, but first you must take that
  gun (CAA regulation) away from our heads.
• Call their bluff. The other team knows theyre
  playing with fire. CAA regulation of CO2 would be
  an administrative nightmare and an economic
  calamity. It would turn the CAA into a gigantic
  de-stimulus package.
• Stay the course. If they open Pandoras Box in
  the pursuit of cap-and-trade, there will be
  political hell to pay.