In what has been described as a “sweeping victory” for the U.S. Environmental Protection Agency the United States Court of Appeals for the District of Columbia Circuit issued a decision on June 26, 2012 in lawsuits that challenged various aspects of the Agency’s regulatory scheme for greenhouse gases (GHGs). EPA’s challenged actions stem from a decision by the U. S. Supreme Court in 2007 in the case of Massachusetts v. EPA which found that greenhouse gases are an “air pollutant” as that term is defined under the Clean Air Act. This decision precipitated a series of pronouncements and regulations by EPA related to greenhouse gases. The first action was the issuance of an “endangerment finding” in which EPA determined that greenhouse gases may “reasonably be anticipated to endanger public health or welfare.” The next step was the issuance of the “Tailpipe Rule” in which EPA set emissions standards for cars and light trucks. This regulation triggered the “Tailoring Rule” which established permitting thresholds for sources emitting greenhouse gases and the “Timing Rule” which established effective dates for the GHG permitting program.

The decision by the D.C. Circuit Court in these lawsuits challenging the greenhouse gas regulatory scheme has been greatly anticipated by regulated industry and initial indications on the basis of oral argument in these lawsuits suggested that EPA’s position may be vulnerable. The D.C. Circuit Court, however, concluded otherwise. With respect to the endangerment finding and the Tailpipe Rule the court concluded that neither of these actions was arbitrary or capricious as had been alleged by the petitioners. With respect to the Timing and Tailoring Rules the court found that the agency’s interpretation of the controlling Clean Air Act provisions was correct and further found that there was no petitioner that had standing to challenge these rules because they could not demonstrate that they were injured by the rules, i.e., the rules limited the number of sources that would otherwise be required to obtain permits and gave definition to the effective date of the permit requirement. 

Given the significance of the GHG regulatory program to industry and the states, an appeal of this decision to the U.S. Supreme Court is very likely.