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US Supreme Court to hear challenge to Obama carbon regs

In a victory for parts of the American energy industry, the US Supreme Court announced Tuesday that it will take up a host of lawsuits challenging the Obama administration's efforts to regulate greenhouse-gas emissions from power plants, oil refineries and other parts of the economy.

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The high court said it would collectively consider seven separate petitions that were filed by electricity generators, oil-industry groups and other stakeholders which challenged various climate-change regulations that the US Environmental Protection Agency has issued in the last several years.

The regulations at issue all stem from a landmark Supreme Court case from 2007 called Massachusetts v. EPA, in which a divided high court ruled by a narrow 5-4 margin that carbon dioxide is an "air pollutant" under the federal Clean Air Act. Armed with that decision, EPA proceeded to promulgate the first-ever GHG regulations for motor vehicles, with plans to expand that regulatory regime to power plants, oil refineries and other large industrial facilities.


Dozens of individual businesses, states and industry trade groups urged the Supreme Court to review and strike down some or all of the rules underpinning EPA's climate regime. Those challenges were organized in to nine separate petitions, and on Tuesday, the Supreme Court said it would consider all but two of them.

However, the court said it would limit its consideration of the seven petitions to just one legal question: Whether EPA was legally correct in determining that once it began regulating CO2 emissions from motor vehicles, it could then expand its regulatory reach to power plants, oil refineries and other stationary sources. Those types of stationary CO2 emitters, notably, were not a direct part of the 2007 Massachusetts v. EPA case, which served as the launching pad for the Obama administration's current climate-change initiatives.

Eric Groten, an industry attorney who wrote one of the petitions that the Supreme Court agreed to hear, said he was "delighted" that the justices agreed to take up at least one major challenge to EPA's climate regime. Groten, a partner at Vinson & Elkins' office in Austin, Texas, said he was not at all disappointed that the court limited the scope of its forthcoming review.

"It's one question, but it's a huge one," Groten said. "Does Clean Air Act regulation of greenhouse gases stop at car rules that the car industry for the most part agreed to, or does it extend to pretty much any manufacturing or commercial activity in the United States?"

The Supreme Court's announcement Tuesday appears to indicate that the justices will limit their upcoming deliberations to whether EPA is legally permitted to regulate stationary source GHG emissions under the Prevention of Significant Deterioration (PSD) program of the federal Clean Air Act. The PSD program was originally designed by Congress to regulate only so-called "criteria pollutants," such as sulfur dioxide and nitrogen oxide, but EPA expanded it to CO2 after the Supreme Court's landmark ruling in the 2007 climate-change case involving motor vehicles.

The American Petroleum Institute, the oil and natural gas industry's largest Washington-based trade group, lauded the Supreme Court for agreeing to consider the legality of EPA's move.

"EPA is seeking to regulate US manufacturing in a way that Congress never planned and never intended," Harry Ng, API's vice president and general counsel, said in a statement. "The Clean Air Act clearly only requires pre-construction permits for six specific emissions that impact national air quality -- not greenhouse gases."

Environmental groups, for their part, expressed disappointment over the Supreme Court's decision to review the legality of EPA's climate regime. But they sought to put a positive spin on the development by emphasizing that the court did not agree to consider several of the energy industry's most far-reaching legal challenges, such as one that could have struck down EPA's so-called "endangerment finding."

In that rule, EPA put forth scientific evidence that it said proves that GHG emissions from power plants and other stationary sources threaten human health and the environment, and must therefore be regulated.

"Obviously, I would have liked the Supreme Court to deny everything" that the industry asked for in its petitions, said Sean Donahue, a Washington-based attorney who is representing several private environmental groups in the case.

"But I'm pleased that they upheld the endangerment finding, and they limited their consideration to the PSD program," he said.

Donahue also said the Supreme Court's decision Tuesday does not threaten to undermine the first-ever federal CO2 limits on new, not-yet built power plants that EPA proposed last month, or the agency's plans to propose carbon limits for thousands of existing power plants next year. This is because those rules are based on a different part of the federal Clean Air Act that the court did not agree to review, Donahue said.

But Groten, the Texas-based industry attorney, said EPA's carbon rules for new and existing power plants could indeed be thrown into legal jeopardy, despite the narrowness of the question that the Supreme Court said it will consider.

"It's possible. I can postulate either way," Groten said.

The court will likely schedule oral arguments in the case in the next few months, with a decision coming before it adjourns next summer.

--Brian Hansen, brian_hansen@platts.com
--Edited by Derek Sands, derek.sands@platts.com