En Banc Petitions in D.C. Circuit Greenhouse Gas Litigation

Earlier this month, several of the parties challenging the Environmental Protection Agency’s decision to regulate greenhouse gases under the Clean Air Act filed petitions for panel rehearing or rehearing en banc in Coalition for Responsible Regulation v. EPA, in which the U.S. Court of Appeals for the D.C. Circuit turned away all of the state and industry challenges to the EPA’s rules. I summarized the court’s decision here, and provide greater background on the EPA’s regulations and associated policy issues here.

The en banc petitions stress the unusual magnitude and importance of the regulations at issue, as well they should, but that’s often not enough for en banc review. Nor are protestations that that the original panel muffed the merits (case in point), particularly where (as here) most of the issues could be resolved on traditional administrative law grounds. The industry argument that the panel erred in refusing to force the EPA to consider potential adaptation to climate change, for example, is a non-starter. Even if the panel got this question wrong (and I don’t believe it did), that’s not the sort of question that is worthy of en banc review.

There is one issue, however, that could well be en banc-worthy: the panel’s conclusion that industry petitioners lacked standing to challenge the EPA’s so-called “tailoring rule.” While the strict application of Article III standing requirements is nothing new on the D.C. Circuit, here the panel applied the standing rules to prevent the object of a government action from challenging the lawfulness of that action, on the grounds that the harm would not be redressable by a favorable ruling on the merits. Though a plausible reading of the relevant standing precedents, this is a holding that could insulate all manner of regulatory action from judicial review, and expand the already troubling, de facto agency authority to issue “waivers” or otherwise disregard applicable legal requirements.

A bit of background: The Clean Air Act requires the EPA to impose various regulatory requirements on stationary sources that have the potential to emit more than 100 or 250 tons per year of regulated pollutants. (The specific threshold depends on the type of facility.) As applied to traditional pollutants, these thresholds catch thousands of facilities. But applied to greenhouse gases — carbon dioxide in particular — they catch millions. This, the EPA claims, would be an “absurd” result because it would impose an insuperable burden on the EPA and cooperating state agencies. To remedy this, the EPA sought to “tailor” the Act’s requirements by substituting numerical thresholds of its own devising for those contained in the statute itself. So with a wave of its administrative hand, the EPA substituted 75,000 and 100,000 for 100 and 250, and reserved the right to lower the threshold at its discretion in the future.

Industry and state petitioners challenged the Tailoring Rule on the grounds that the EPA has no authority to rewrite the statute by administrative fiat. Applying the plain text of the statute, however, would result in more stringent regulation, not less. Larger facilities subject to the Tailoring Rule would not be guaranteed any direct relief from the rule’s requirements — save whatever relief would come from delay caused by the litigation — and therein lied the problem. If being subject to an illegal regulation were not itself sufficient for standing, all the companies could claim was that subjecting some portions of industry to stringent greenhouse gas permitting rules while exempting others would produce a competitive harm in the form of an unlevel playing field. Exempting some companies from the requirements could give exempted parties a competitive advantage against those who emit enough to still be regulated under the “tailored” rule. Yet unless Congress were to amend the Act (or the EPA were forced to adopt an alternative statutory construction), the larger facilities would be regulated no matter what.

Because the industry petitioners could not claim their suit would necessarily relieve them of any regulatory burdens, the panel concluded, industry petitioners lacked standing to sue. (Indeed, the panel went further and said there was no injury because the regulation of stationary sources was an inevitable consequence of the endangerment finding.) There is a logic to the D.C. Circuit’s reasoning — after all, if winning won’t relieve someone of any regulatory burdens, how could their claim be redressable? One possible response is that rejecting the “Tailoring Rule” could force the EPA to consider alternative ways to avoid the “absurd results” it fears from applying the Act as written to greenhouse gases — alternatives that might well exempt some of the industry petitioners from regulation — but the court closed that door by accepting the EPA’s interpretation of the Act in other portions of the opinion (and then conveniently ducking whether the EPA’s Tailoring Rule is itself permissible under the Act).

A consequence of this decision is that no party subject to the Tailoring Rule has standing to challenge its legality. Thousands of companies are forced to comply with the regulation, and none can have their day in court. Applied more broadly, this decision could have substantial implications, effectively giving agencies like the EPA carte blanche to issue rules selectively exempting politically favored constituencies from statutorily mandated rules. (Indeed, that’s exactly what happened here, as the EPA was well aware that trying to impose the Clean Air Act to stationary source emissions of greenhouse gases would produce a substantial political backlash.) That doesn’t mean the decision is wrong — the rule against taxpayer standing insulates many allegedly illegal government actions from judicial review — but it should raise some questions.

The decision also rests uneasily with the Supreme Court’s treatment of procedural rights in standing cases, which hold that requiring the government to observe such procedural rights is sufficient to satisfy the redressability requirement, even if the ultimate government action will be unchanged. So, for instance, if a plaintiff alleges a federal agency failed to conduct an Environmental Impact Statement under the National Environmental Policy Act, she does not need to allege that the agency would have made a different decision had the EIS been completed. The mere fact that she is injured as a consequence of the agency’s procedurally deficient action is enough. Yet under the D.C. Circuit’s reasoning, there is sufficient redressability for standing when an agency causes injury by failing to follow statutorily prescribed procedures, but not sufficient redressability for standing when an agency causes injury by adopting a regulation that violates the statute’s plain text. [Note: For purposes of standing, such allegations must be accepted as true, so the standing claim does not turn on whether the industry petitioners are correct on the merits on this point — though, as it happens, they are.]

This aspect of the D.C. Circuit’s standing holding are also at odds with Massachuetts v. EPA. While not all would read the Clean Air Act to provide procedural rights, the Mass v. EPA majority did. Specifically, they held that Section 307(b)(1) of the Clean Air Act provides a “procedural right to challenge” an unlawful EPA action “as arbitrary and capricious,” so there was no need to show that allowing the EPA to regulate greenhouse gases would halt global warming. As the Mass v. EPA majority explained, “When a litigant is vested with a procedural right, that litigant has standing if there is some possibility that the requested relief will prompt the injury-causing party to reconsider the decision that allegedly harmed the litigant.” This case, too, is a challenge to an unlawful EPA action under Section 307(b)(1), and the industry petitioners are unquestionably injured by being forced to comply with the relevant permitting rules — and yet the D.C. Circuit held they did not have standing.

In Lujan v. Defenders of Wildlife, Justice Scalia explained “there is ordinarily little question” that one who is the object of government action has standing to challenge that action. Yet under the D.C. Circuit’s decision, no entity subject to the Tailoring Rule has standing to challenge it — and that might be enough to make the issue en banc-worthy.

UPDATE: Nathan Richardson comments at Common Resources here.