On April 5, the U.S. Court of Appeals for the D.C. Circuit vacated a Trump-era rule that would have prevented the Environmental Protection Agency (EPA) from setting greenhouse gas (GHG) emissions standards for almost any class of stationary sources, except for fossil fuel-fired electric generating units. The court’s decision, issued at the request of the new Biden EPA, clears the way for new sector-by-sector GHG regulations should the new administration seek to set new GHG standards under Section 111 of the Clean Air Act (CAA).

Finalized in January 2021, the rule was one of the last promulgated by the previous administration and sets forth a new framework for determining what level of GHG pollution constitutes a “significant contribution” under Section 111(b) under the CAA — a prerequisite for setting a “New Source Performance Standard,” as well as any related standard for existing sources. Under the new test, specific industry sectors would have been subject to regulation of GHG emissions under Section 111(b) only if “the amount of those emissions exceeds 3% of total U.S. GHG emissions.” However, only electric utilities would meet that test — EPA indicated utilities emit 25% of total GHG emissions, whereas the next highest emitting category (oil and gas production) emits just under 3%.

The prior administration also had another reason for issuing its new “significant contribution” test. As noted in a prior post, the Trump EPA had previously issued inconsistent findings for the electric utility and the oil and gas production industries. For electric utilities, EPA had said a GHG-specific significant contribution finding wasn’t necessary, but for oil and gas, EPA determined that the lack of such a finding required a repeal of the methane standards for that industry. By issuing the significant contribution finding for electric utilities, EPA resolved that inconsistency in a way that was intended to favor oil and gas interests — confirming that a significant contribution finding was needed to support the vacatur of the oil and gas methane standards, but then defining significant contribution in a way that precludes any future efforts to reestablish those standards. For utilities, the new significant contribution finding was intended to support the existing GHG standards adopted in the Affordable Clean Energy (ACE) rule. Notably, EPA issued the finding just days before the D.C. Circuit vacated that rule.

Given that the significant contribution finding was issued well after election results confirmed Biden had won the presidency, it was expected to be short-lived. As anticipated, the rule was quickly challenged in the D.C. Circuit by environmental and public health groups who viewed the 3% threshold as “arbitrary” and inadequate to address GHG emissions, one of the key drivers of global climate change. Not wanting to defend the rule, the Biden EPA asked the court for a voluntary vacatur, and the court granted that request.

The question that now remains is whether EPA will issue another such finding as it seeks to regulate GHG emissions from the utility sector, the oil and gas sector, and perhaps others. The vacatur of the significant contribution finding, combined with the D.C. Circuit’s decision to vacate ACE, could pave the way for the Biden EPA to more aggressively regulate GHG emissions from both new and existing stationary sources in many different sectors under Section 111. However, the recent political and legal battles over EPA’s authority under Section 111 have confirmed that the CAA remains an imperfect vehicle for the kind of large-scale climate change regulation that many environmental groups would like to see from the Biden administration.