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U.S. justices to hear challenge to Obama on climate change

By Valerie Volcovici and Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court agreed on Tuesday to hear a challenge to part of the Obama administration's first wave of regulations aimed at tackling climate change, accepting its biggest environmental case in six years.

The court said it would not review the underlying determination that greenhouse gases are a public health concern or a separate regulation that limits greenhouse gas emissions from motor vehicles.

The single question the court will consider is whether the U.S. Environmental Protection Agency correctly determined that its decision to regulate motor vehicle emissions automatically gave it the authority to regulate emissions from stationary sources such as power plants and oil refineries.

Industry groups applauded the high court for considering placing a check on what they call regulatory overreach while environmentalists took comfort from the narrowness of the question the court agreed to consider.

Oral arguments are likely to be heard early in the new year with a ruling issued by the end of June.

Gina McCarthy, the EPA administrator, said in a statement that the court was taking up a "very narrow legal question" that would not substantially weaken the Obama administration's climate-change agenda.

EPA regulations are among President Barack Obama's most significant measures to address climate change.

A federal appeals court in Washington upheld the rules, issued by the EPA under the Clean Air Act, in 2012. The regulations allowed for greenhouse-gas (GHG) emissions from a wide range of sources to be regulated for the first time.

By agreeing to hear a consolidated challenge from states and business groups, the court could be getting set to limit the reach of its groundbreaking 2007 ruling, Massachusetts v. EPA, in which it held on a 5-4 vote that carbon was a pollutant that could potentially be regulated under the Clean Air Act.

The court rejected outright three of the nine petitions that sought Supreme Court review, including one filed by Virginia Attorney General Ken Cuccinelli, a Republican, that questioned whether the EPA appropriately weighed climate change science.

The legal question, crafted by the court itself from those raised in the six petitions it agreed to review, indicates the court does not plan to revisit the underlying reasoning behind Massachusetts v. EPA but will weigh whether the EPA went further than allowed under the act.

Jonathan Adler, a law professor at Case Western Reserve University in Ohio, said the court did not dispute the scientific basis underpinning the EPA'S greenhouse gas regulations or its industry-backed vehicle emissions standards, but focused on the most legally shaky challenges buried in the various petitions.

The legal question is "appropriately limited," Adler said.

SOMETHING FOR BOTH SIDES

Tom Donohue, president and CEO of the U.S. Chamber of Commerce, which filed one of the petitions the court agreed to hear, said the group has from the beginning argued "that the Clean Air Act is the wrong vehicle to regulate greenhouse gases and that EPA exceeded its regulatory authority under the act."

Eric Groten, a partner at law firm Vinson and Elkins, which represents the industry-backed Coalition for Responsible Regulation, said the court's acceptance of some of the petitions raises the key question of how easily the EPA can use its authority to regulate greenhouse gases.

"This bodes well for efforts to cauterize the damage, as the court will consider whether EPA needs to legally and factually justify each action taken to regulate GHG, or whether it can just wave Massachusetts v. EPA as a magic wand and conjure what it wishes," Groten said. His client's petition was one of those rejected.

Environmental lawyers stressed that because the justices will assess only one of the many legal questions raised in the petitions, it will only have a limited impact on EPA's broader goal of reducing greenhouse gas emissions, the biggest contributor to climate change.

U.S. natural gas futures were little changed on Tuesday despite the news. Prices matched Monday's nearly four-month spot chart high of $3.855 per mmBtu in overnight trading before being hit by some profit-taking. The most current contract is up more than 9 percent in just over a week.

REGULATORY AGENDA

Tuesday's decision does not affect the agency's ability to require power plants to install the best available technology to reduce emissions. It could, though, impede the EPA's ability to require new or modified facilities, such as refineries or power plants, to obtain emissions permits.

Come June, the EPA is due to propose a major rule that would limit the amount of greenhouse gases the country's existing fleet of more than 1,000 power plants can emit.

The American Petroleum Institute, a lobbying group that along with manufacturing interests filed one of the petitions, said the fact that EPA regulations for cars automatically triggered further regulation of other sources of greenhouse gas emissions was an "overstep" of the agency's authority under the Clean Air Act.

"The EPA is seeking to regulate U.S. manufacturing in a way that Congress never planned and never intended," said Harry Ng, American Petroleum Institute vice president and general counsel.

Whatever the court eventually decides, the EPA's ability to use the Clean Air Act to regulate emissions from power plants and other stationary sources is not under threat, environmental lawyers say.

Even if the court ruled for petitioners, most power plants and refineries would still be required to install best available control technology to limit greenhouse gases, said Sean Donahue, a lawyer representing environmental groups at Donahue & Goldberg.

(Reporting by Lawrence Hurley and Valerie Volcovici, additional reporting by Eileen Houlihan; Editing by Ros Krasny, Howard Goller, Prudence Crowther and Lisa Shumaker)

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