In 2007, the United States Supreme Court directed EPA to regulate greenhouse gas emissions (“GHG”) as a pollutant under the Clean Air Act.   Since that time, EPA has published an Endangerment Finding and issued a series of GHG-related rules and regulations.  Under the Tailpipe Rule, for example, EPA and the National Highway Traffic Safety Administration established motor-vehicle emission standards for GHGs.  Next, with the Timing Rule, EPA addressed major stationary emitters through the Title V and PSD provisions of the Clean Air Act, and staggered the applicability of these programs to the largest emitters first under the Tailoring Rule.   Generally, EPA’s GHG regulatory programs thus far have focused on carbon dioxide emissions from human-induced combustion of fossil fuel sources, like coal-fired power plants, refineries, and cement production facilities.

But when it comes to biogenic carbon dioxide emissions, those emissions that result naturally from the decomposition of waste associated with landfills, wastewater, manure management processes, feedstocks and ethanol production, the Agency sought to delay.  Back in 2011, EPA issued a rule postponing regulation of biogenic carbon dioxide sources for three years, and thereby exempting these GHG sources from regulations under the Tailoring and Timing Rules.  In support of its so-called Deferral Rule, EPA cited scientific uncertainty over how to account for biogenic carbon dioxide’s unique role in the carbon cycle.  Indeed, some of the studies EPA and those in the industry cited indicated that the biomass industry is, in general, “carbon neutral,” and should therefore not be regulated in the same manner as fossil fuels.  In its Deferral Rule, EPA indicated its intent to conduct its own scientific studies of this class of GHG emissions, presumably before issuing a biogenic-specific rule.

Importantly, under the Deferral Rule the Agency’s delay would not have been indefinite, as the Rule contained a sunset provision requiring that, absent Agency action, biogenic carbon dioxide would be regulated under the PSD and Title V programs beginning July 21, 2014.

But last week, the Court of Appeals for the D.C. Circuit struck down EPA’s Deferral Rule.  Finding that EPA had improperly distinguished between classes of GHG emissions –i.e., GHGs from human-induced combustion of fossil fuel stationary sources vs. GHGs from biogenic stationary sources – the D.C. Circuit held that “The [Clean Air Act] does not give EPA the authority to distinguish a stationary source’s emissions of biogenic carbon dioxide from emissions of other forms of carbon dioxide for purposes of these permitting programs.”  In other words, a GHG emission is a GHG emission, and so long as that emission comes from a stationary source, it must be regulated uniformly under the Clean Air Act.

While some commentators question whether EPA will ultimately seek certiorari to the Supreme Court, industry insiders indicate that the Court’s ruling has created “great uncertainty” about permitting requirements.

In a statement responding to the decision, EPA said it will “review the decision to determine next steps.”  []

Indeed, absent expeditious Agency action and the issuance of a new rule, the  D.C. Circuit’s ruling likely means that biogenic carbon sources will be regulated by default under the existing Title V and PSD provisions, as modified by the Tailoring Rule.   Stay tuned for more. . .