Opinion ID: 187215
Heading Depth: 2
Heading Rank: 3

Heading: Title IV Allowances

Text: SO2 Petitioners and a trade association of waste-coal EGUs (together SO2 Petitioners) also challenge EPA's effort to harmonize CAIR's regulation of SO2 with the existing program for trading SO2 emissions allowances under Title IV of the CAA. Since EPA set states' SO2 budgets for 2010 to 50% (35% in 2015) of the allowances the states' EGUs receive under Title IV, EGUs in the region would emit significantly less SO2 under CAIR and could be expected to have substantial numbers of excess Title IV allowances to emit SO2. Concerned about this sudden excess, EPA structured CAIR so that EGUs in states electing to trade give up 2 allowances per ton in 2010, and 2.68 allowances per ton in 2015. (Recall, a Title IV allowance gives the holder the right to emit one ton of SO2 within the Title IV program.) States electing not to trade must have SIP provisions for retiring excess allowances. In addition, CAIR regulates waste-coal EGUs that do not receive Title IV allowances because they are exempt from Title IV. Thus, waste-coal EGUs in trading states must acquire Title IV allowances by purchasing allowances from EGUs in the Title IV program, or, as EPA suggests, by opting into the program. SO2 Petitioners argue EPA lacks authority to terminate or limit Title IV allowances, either through a trading program under section 110(a)(2)(D), 42 U.S.C. § 7410(a)(2)(D), or by requiring that SIPs have allowance retirement provisions. We agree and grant the petition on this issue. We do not, however, consider whether CAIR unlawfully forces waste-coal EGUs into the Title IV program, or irrationally includes waste-coal units while excluding other waste-burning units. That argument assumes EPA has the authority to terminate or limit Title IV allowances. In demonstrating EPA's absence of authority, the SO2 Petitioners cite a variety of Title IV provisions supposedly showing that Title IV allowances are fixed currency, the value of which EPA may not manipulate. However, the allowances are limited authorization[s] to emit sulfur dioxide and [n]othing ... in any ... provision of law shall be construed to limit the authority of the United States to terminate or limit such authorizations. 42 U.S.C. § 7651b(f). While EPA and petitioners quibble over whether EPA is the United States to which § 7651b(f) applies, both agree that this section does not grant EPA any authority. [4] Thus, EPA claims section 110(a)(2)(D)(i)(I) gives it authority to set up a program for trading SO2 emissions allowances, and to require EGUs to use Title IV allowances as currency. Once EGUs spend Title IV allowances in the CAIR market, EPA says it can terminate the authorization the allowances provide within the Title IV market. CAIR, 70 Fed.Reg. at 25,292. But whatever authority EPA may have to establish such a trading program, we find nothing in section 110(a)(2)(D)(i)(I) granting EPA authority to remove Title IV allowances from circulation in the Title IV market. Environmental groups, intervening in support of EPA, argue section 301(a) of the CAA also provides EPA authority. That provision authorizes EPA to prescribe such regulations as are necessary to carry out [its] functions under the CAA. 42 U.S.C. § 7601(a). EPA does not rely on section 301(a), and for good reason: EPA cannot claim retiring excess Title IV allowances is necessary for EPA to ensure SIPs comply with section 110(a)(2)(D)(i)(I). Nor does section 301(a), 42 U.S.C. § 7601(a), provide [EPA] Carte blanche authority to promulgate any rules, on any matter relating to the Clean Air Act, in any manner that the [EPA] wishes. Citizens to Save Spencer County v. EPA, 600 F.2d 844, 873 (D.C.Cir.1979). Lacking a statutory foundation, EPA appeals to logic. Logically, says EPA, it was not required to structure CAIR as a stand-alone program without taking account whatsoever of the effect this might have on the pre-existing Title IV program. Resp't's Br. 82. Environmental intervenors add some legal flavoring here, analogizing EPA's action to a court's interpretative obligation to fit, if possible, all parts of a statute into a harmonious whole, FTC v. Mandel Bros., 359 U.S. 385, 389, 79 S.Ct. 818, 3 L.Ed.2d 893 (1959). Although it may be reasonable for EPA, in structuring a program under section 110(a)(2)(D)(i)(I), to consider the impact on the Title IV market, it does not follow that EPA has the authority to remove allowances from that market. Nor can EPA cure its absence of authority by foisting onto SO2 Petitioners the burden of explaining why two independent programs... would produce a better result. Resp't's Br. 87. Lest EPA forget, it is a creature of statute, and has only those authorities conferred upon it by Congress; if there is no statute conferring authority, a federal agency has none. Michigan v. EPA, 268 F.3d 1075, 1081 (D.C.Cir.2001). So too here: no statute confers authority on EPA to terminate or limit Title IV allowances, and EPA thus has none. Similarly, EPA cannot require non-trading states to have SIP provisions for retiring excess Title IV allowances. Although such provisions are related to harmonizing a State's choice of reduction requirements with the Title IV program, Resp't's Br. 92, the CAA gives [EPA] no authority to question the wisdom of a State's choices of emission limitations if they are part of a plan which satisfies the standards of § 110(a)(2). Train v. Natural Res. Def. Council, 421 U.S. 60, 79, 95 S.Ct. 1470, 43 L.Ed.2d 731 (1975) (emphasis added). SIPs prohibiting emissions within a state from contributing significantly to downwind nonattainment satisfy section 110(a)(2)(D)(i)(I). Because provisions retiring Title IV allowances are unrelated to achieving that goal, EPA cannot require states to adopt them.