The U.S. Environmental Protection Agency was "unambiguously correct" in moving to set limits on industrial and automotive emissions of greenhouse gases including carbon dioxide, a federal appeals court said.

A three-judge panel of the U.S. Court of Appeals in Washington ruled today that the EPA properly concluded that greenhouse gases are pollutants that endanger human health and that opponents don’t have the legal right to challenge rules determining when states and industries must comply with regulations curtailing emissions of them.

“Today’s ruling is a setback for businesses facing damaging regulations from the EPA,” Jay Timmons, president of the National Association of Manufacturers, said in a statement. “The EPA’s decision to move forward with these regulations is one of the most costly, complex and burdensome regulations facing manufacturers. These regulations will harm their ability to hire, invest and grow.”

Companies such as Massey Energy Co., business groups including the U.S. Chamber of Commerce and states led by Texas and Virginia sought to stop the agency through more than 60 lawsuits. Some argued that the EPA relied on biased data from outside scientists. Automakers intervened in the lawsuit in support of the new standards. Through the Alliance of Automobile Manufacturers, the carmakers supported a national program, saying they wanted to avoid conflicting standards from state and federal regulators.

Supreme Court

Opponents said they’re considering whether to ask the full appeals court to hear the case or to petition the U.S. Supreme Court, according to Shannon Goessling, executive director and chief legal counsel at the Southeastern Legal Foundation, an Atlanta-based organization that sued the EPA on behalf of companies and lawmakers.

“This case is equaled only to the Obamacare case in terms of its effect on the citizens, the industries and the economy in the U.S.,” Goessling said in a phone interview.

In today’s ruling, the judges said the EPA had “substantial record evidence” that greenhouse gases probably caused the climate to warm over the past several decades.

“In the end, petitioners are asking us to re-weigh the scientific evidence before EPA and reach our own conclusion,” the panel wrote in its 82-page opinion. “This is not our role.”

Endangerment Finding

In 2007, the U.S. Supreme Court ruled that the EPA had authority to regulate greenhouse gases such as carbon dioxide and methane under the Clean Air Act if the agency declared them a public danger. The EPA issued an endangerment finding in December 2009, clearing the way for regulation of emissions from power plants, factories and other sources linked to global climate change.

Throughout today’s ruling, the judges refer to the Supreme Court decision in rejecting the challengers’ arguments that the EPA rules, which have been in effect since January 2011, are unlawful.

EPA Administrator Lisa Jackson called the ruling “a strong validation” of the agency’s approach in responding to the Supreme Court decision.

“I am pleased that the U.S. Court of Appeals for the D.C. Circuit found that EPA followed both the science and the law in taking common-sense, reasonable actions to address the very real threat of climate change by limiting greenhouse gas pollution from the largest sources,” Jackson said in an e-mailed statement.

‘Huge Victory’

“This is a huge victory for our children’s future,” David Doniger, senior attorney for the Climate and Clean Air Program at the Natural Resources Defense Council, said in a statement. “These rulings clear the way for EPA to keep moving forward under the Clean Air Act to limit carbon pollution from motor vehicles, new power plants and other big industrial sources.”

The lawsuits were consolidated, with arguments divided into three parts and held over two days in February. The parties argued over the agency finding that greenhouse gases are pollutants that endanger human health. The judges also heard arguments against a 2010 rule on motor-vehicle emissions that opponents said improperly sets standards for stationary sources, such as steel mills and power plants.

The court considered challenges to the EPA’s tailoring rule, which limits the businesses covered by carbon regulation and phases in controls. The agency plans to phase in industrial polluters covered by the carbon rules through 2016.

The EPA argued in court filings that the tailoring rule is acceptable under the Clean Air Act and necessary to keep states from being overrun with permit requests.

Carbon Permits

The regulations require only the biggest emitters, such as power plants and oil refiners, to obtain state carbon permits before building or upgrading facilities. State officials will determine pollution controls case by case.

Virginia and Texas said the endangerment finding should be rejected because the EPA refused to reconsider its decision after learning that some of the data it relied on may have been “manipulated,” referring to findings by the United Nations Intergovernmental Panel on Climate Change.

“This decision doesn’t change the fact that people aren’t building new plants in the U.S.,” said Jeffrey Holmstead, a lawyer at Bracewell & Giuliani LLP in Washington who wasn’t involved in the case.

Holmstead, who was an EPA official during the George W. Bush administration, said Congress will ultimately step in. How soon that happens will depend on the November elections, he said.

The ruling “delivers a devastating blow” to the economy and consumers said Representative Fred Upton, chairman of the House Energy and Commerce Committee.

Red Tape

“After enduring 40 consecutive months of higher than 8 percent unemployment, we cannot afford the EPA’s continued expansion of red tape that is slowing economic growth and threatening to entangle millions of small businesses,” the Michigan Republican said in a statement.

“EPA’s rules will impose billions of dollars in compliance and delay costs and represent an unprecedented expansion of EPA authority that has the potential to affect virtually every sector of the economy and touch every household,” Upton said.

The lead case is Coalition for Responsible Regulation Inc. v. Environmental Protection Agency, 09-1322, U.S. Court of Appeals, District of Columbia (Washington).

Copyright 2012 Bloomberg

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