'Deferral Rule' is Derailed - Biogenic Greenhouse Gas Emitters Stand By to Be Regulated

'Deferral Rule' is Derailed - Biogenic Greenhouse Gas Emitters Stand By to Be Regulated

The greenhouse gas rule you’ve never heard of, the Deferral Rule, has been shot down (barely) by the D.C. Circuit. See Center for Biological Diversity v. Environmental Protection Agency, No. 11-1101 (D.C. Cir., July 12, 2013), [enhanced version available to lexis.com subscribers]. The opinion offers a wonderful primer on greenhouse gas rulemaking and describes the Timing Rule, the Tailpipe Rule and the Tailoring Rule. It also explains in great detail numerous doctrines concerning agency rulemaking. And it balances on the edge of a knife. There is an opinion (Tatel, J.). There is a concurring opinion (Kavanaugh, J.) that joins the opinion but goes even further, and which additionally states that “I believe, contrary to this Circuit’s precedent, that the PSD statute does not cover carbon dioxide.” Opinion at 24. And last, there is a detailed dissent (Henderson, J.) that addresses the arguments of the opinion to good effect. If one is looking for definitive guidance this opinion will not suffice.

Even without the Court’s decision, the rule would have died a year from now anyway. The rule we are talking about is found at 76 Fed. Reg. 43,490 [enhanced version available to lexis.com subscribers], Deferral for CO2 Emissions From Bioenergy and Other Biogenic Sources Under the Prevention of Significant Deterioration (PSD) and Title V Programs. To those less tied to formality, it is the Deferral Rule. Under the Deferral Rule, EPA delayed for three years regulation as stationary sources under the Clean Air Act emitters of “biogenic” carbon dioxide while it further assessed the subject. Biogenic CO2, is biologically derived CO2, as opposed to CO2 derived from fossil fuels. It includes emissions from burning landfill methane, combustion of municipal biologically derived solid waste, fermentation processes for ethanol manufacturing and the burning of biomass.

Biogenic CO2 is not discernably different in the atmosphere from that derived from fossil fuels. Its difference lies in its context. Biogenic CO2, when considered over time, may have a neutral or even reducing effect on total CO2 emissions because, for example, while the burning of biomass releases CO2, the growing of biomass pulls CO2 out of the atmosphere and sequesters it. On the whole, facilities burning biomass might actually result in less CO2 emissions. The purpose of the Deferral Rule was to permit EPA to spend some more time studying biogenic CO2 so as to avoid issuing regulations that accomplished little.

In its rulemaking EPA offered three doctrines as justifications for its rule: the de minimis, one-step-at-a-time, and administrative necessity doctrines. The de minimis doctrine allows an administrative agency to grant regulatory exemptions ”when the burdens of regulation yield a gain of trivial or no value.” Opinion at 13. The one-step-at-a-time doctrine allows an agency to proceed in a “piecemeal fashion.” Id. And the administrative necessity doctrine allows an agency to “avoid implementing a statute by showing that attainment of the statutory objectives is impossible.” Id. at 15-16. The absurd results rule, which EPA set forth in its brief, rejects the interpretation of a statute that would produce an absurd result. Id. at 17.

The Court rejected all four theories. The de minimis doctrine only applied to permanent exemptions, as the EPA conceded. Id. at 13. Accordingly, it did not apply. The dissent disagreed. It saw the exception as available, particularly when the statute “expressly does not regulate “minor” sources that cause little harm because they release below-threshold levels of pollutants.” Id. at 35.

Application of the one-step-at-a-time doctrine was found to be arbitrary and capricious because EPA did not set out how it intended to achieve the statutory goal: “We simply have no idea what EPA believes constitutes ‘full compliance’ with the statute. In other words, the Deferral Rule is one step towards … what? Without a clear answer to that question, EPA has no basis for invoking the one-step-at-a-time doctrine.” Id. at 15. The dissent was not buying: “just as EPA proceeded gradually in regulating GHGs under the Tailoring Rule, EPA has delayed its regulation of a specific GHG via the Deferral Rule. The fact that EPA is required to take action does not preclude it from phasing in the action using the step-at-a-time method.” Id. at 33.

The Court found fault with the administrative necessity theory because EPA did not explore what the Court referred to as the “middle-ground option,” requiring permitting except where the source took steps to reduce its biogenic CO2 emissions. Because EPA had an “obligation to adopt the narrowest exemption possible, it should have explained why it rejected an option that would have reduced emissions from sources the Deferral Rule permanently exempts.” Id. at 16-17.

Last, there was the absurd results rule, which EPA sought to apply “because ‘emissions of CO2 derived from certain forms of biomass may not only fail to endanger public health and welfare, but in fact may benefit the public by reducing the net emissions of CO2,’ …[and] it would run afoul of congressional intent to regulate them.” Id. at 17-18. The Court found, however, that EPA did not utilize this rule in its rulemaking, notwithstanding passing references. Simply put, “[t]hese passing references [fell] far short of satisfying EPA’s ‘fundamental’ obligation to ‘set forth the reasons for its actions.’” Id. at 18.

The concurrence, as noted above, did not believe CO2 was even regulated by the statute. But that had been previously decided to the contrary and “that’s water over the dam in this Court.” Id. at 25. As to the issue before him, that answer was easy: “EPA simply lacks statutory authority to distinguish biogenic carbon dioxide from other forms of carbon dioxide.” Id. at 21. In sum, EPA was required to address emissions of CO2 and there was no part of the statute that allowed “EPA to exempt … emissions of a covered air pollutant just because the effects of those sources’ emissions on the atmosphere might be offset in some other way.” Id. at 22.

The last point raised by the dissent, in our view, sums up the entire case: what was the point? The dissent would have dismissed because the case was not ripe. First, it needed to be fit for review. The rule was temporary and by July 2014 EPA would either have let the rule expire or issued a new rule, one that the petitioners might like, but certainly one that would have been informed by the additional three years of research. Id. at 38. Second, deferring decision would work no real hardship to petitioners. Only one facility had been identified as being able to avoid permitting as a result of the Deferral Rule. The dissent pointed out that the facility enjoyed no more than the previous status quo: “the hardship of which the petitioners complain is hyperbolically overblown. The Deferral Rule does not deregulate scores of polluters. Instead, it temporarily maintains the theretofore long-time status quo for a limited number of stationary sources that – until July 1, 2011 – had never been subject to regulation as a major source under PSD.” Id. at 42.

In our view, substantively, this decision accomplished little. A rule that was going to expire next year, expires this year. Parties seeking to rely on a decision by esteemed arbiters of the law find the arbiters completely at odds with one another. But that may be the true significance of Center for Biological Diversity. Notwithstanding that “the task of dealing with global warming is urgent and important at the national and international level,” id. at 25, consistency of approach is by no means assured in any arena, including the courts.

    J. Wylie Donald, a partner at McCarter & English, LLP, counsels and litigates for clients on insurance coverage, environmental and products liability matters. Mr. Donald co-chairs the firm's Climate Change and Renewable Energy Practice. He draws on his substantial environmental experience, his prior non-legal technical work, and his deep involvement in risk management to assist clients in understanding and controlling the coming regulatory and non-regulatory impacts of climate change. He has tried cases and argued appeals in the state courts in New Jersey and Maryland, conducted private arbitrations and mediations, and argued motions in federal courts across the nation.

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