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Association of Washington Business v. Washington State Department of Ecology

Supreme Court of Washington, En Banc

January 16, 2020

ASSOCIATION OF WASHINGTON BUSINESS, INDUSTRIAL CUSTOMERS OF NORTHWEST UTILITIES, NORTHWEST FOOD PROCESSORS ASSOCIATION, NORTHWEST INDUSTRIAL GAS USERS, NORTHWEST PULP AND PAPER ASSOCIATION, WASHINGTON TRUCKING ASSOCIATIONS, WASHINGTON FARM BUREAU, and WESTERN STATES PETROLEUM ASSOCIATION, Respondent,
v.
WASHINGTON STATE DEPARTMENT OF ECOLOGY, Appellant, and WASHINGTON ENVIRONMENTAL COUNCIL, CLIMATE SOLUTIONS, and NATURAL RESOURCES DEFENSE COUNCIL, Appellant-Intervenors. AVISTA CORPORATION, CASCADE NATURAL GAS CORPORATION, NORTHWEST NATURAL GAS COMPANY, and PUGET SOUND ENERGY, INC., Respondents,
v.
WASHINGTON STATE DEPARTMENT OF ECOLOGY, Appellant.

          STEPHENS, CJ.

         This case concerns a novel rule promulgated by the Department of Ecology to address the undeniable crisis of climate change. The issue is not whether man-made climate change is real-it is. See generally Intergovernmental Panel on Climate Change, Global Warming of 1.5° C (2019) [https://perma.cc/W2LS-DJQL]. Nor is the issue whether dramatic steps are needed to curb the worst effects of climate change-they are. Id. Instead, this case asks whether the Washington Clean Air Act (Act), ch. 70.94 RCW, grants Ecology the broad authority to establish and enforce greenhouse gas emission standards for businesses and utilities that do not directly emit greenhouse gases, but whose products ultimately do. Ecology claimed and exercised such authority in promulgating the challenged clean air rule (Rule), ch. 173-442 WAC.

         Today we hold that by its plain language and structure, the Act limits the applicability of emission standards to actual emitters. Ecology's attempt to expand the scope of emission standards to regulate nonemitters therefore exceeds the regulatory authority granted by the legislature. We invalidate the Rule to the extent it exceeds Ecology's regulatory authority, while recognizing that Ecology may continue to enforce the Rule in its authorized applications to actual emitters. Accordingly, we affirm in part and reverse in part the trial court's decision and remand for further proceedings consistent with this opinion.

         FACTS AND PROCEDURAL HISTORY

         I. The Legislature's Efforts To Reduce Air Pollution and Curb Greenhouse Gas Emissions

         The legislature created the Act in 1967. Laws of 1967, ch. 238. Recognizing air pollution as "the most serious environmental threat in Washington state," the legislature significantly revised the Act in 1991 to better "preserve, protect, and enhance the air quality for current and future generations." LAWS OF 1991, ch. 199, §§ 101, 102; RCW 70.94.011. The legislature continued to revise and expand Washington's efforts to combat air pollution, recognizing increasing evidence of humanity's role in climate change.

         In 2008, the legislature took its first direct step to combat climate change by enacting chapter 70.235 RCW, "Limiting Greenhouse Gas Emissions." That chapter established a timeline for specific emission reduction targets and directed Ecology to "submit a greenhouse gas reduction plan for review and approval to the legislature" by December 2008. RCW 70.235.020(1)(b). That same subsection encouraged Ecology to take swift action to address climate change, allowing "[a]ctions taken using existing statutory authority [to] proceed prior to approval of the greenhouse gas reduction plan." Id.

         In the years following this enactment, the legislature's progress in addressing climate change stalled. In 2009 and 2015, the legislature declined to pass two major bills designed to further regulate and reduce greenhouse gas emissions. See H.B. 1819, 61st Leg., Reg. Sess. (Wash. 2009); S.B. 5735, 61st Leg., Reg. Sess. (Wash. 2009); H.B. 1314, 64th Leg, Reg. Sess. (Wash. 2015); S.B. 5283, 64th Leg., Reg. Sess. (Wash. 2015). After the 2015 bill failed, Governor Jay Inslee directed Ecology to reexamine its existing statutory authority to curb greenhouse gas emissions by setting emission standards. In response, Ecology promulgated the Rule challenged here.

         II. The Clean Air Rule

         Relying on Ecology's authority under the Act, the Rule creates greenhouse gas emission standards for three types of businesses: (1) "[c]ertain stationary sources," (2) "[p]etroleum product producers and importers," and (3) "[n]atural gas distributors." WAC 173-442-010, -020(1)(k). The Rule requires most of these businesses to reduce their greenhouse gas emissions by 1.7 percent every year, using their emissions in 2017 as a baseline. WAC 173-442-060(1)(b).

         The Rule gives covered businesses two nonexclusive options for reducing their greenhouse gas emissions. First, and most obviously, businesses can modify operations at their facilities to lower their actual emissions. WAC 173-442-200(4)(a). Second, covered businesses can acquire and submit "emission reduction units," which are accounting units representing the reduction of one metric ton of carbon dioxide or its equivalent. WAC 173-442-020(1)(n), -200(4)(b). Covered businesses can obtain emission reduction units in three ways: (1) by reducing their actual greenhouse gas emissions below the reduction requirement for a given compliance period, (2) by undertaking recognized projects, programs, or activities that reduce emissions in real, specific, quantifiable, permanent, and verifiable ways, or (3) by purchasing emission reduction units in greenhouse gas emission markets outside of Washington. WAC 173-442-110. Once a business has obtained emission reduction units, it can either bank those units to save them for a later compliance period or exchange those units with other covered entities. WAC 173-442-130(1), -140.

         Ecology projects that the Rule will reduce emissions by 20 million metric tons of carbon dioxide or its equivalent by 2035, or about two-thirds of the target established by the legislature in its 2008 enactment of chapter 70.235 RCW. As promulgated, the Rule covers approximately 68 percent of all the greenhouse gas emissions in Washington. Of those emissions covered by the Rule, approximately 74 percent are generated by the combustion of products sold by natural gas distributors and petroleum product producers and importers. Because these covered businesses sell products but "do not control the amount of fuel or gas burned," Ecology acknowledges these businesses "cannot make direct emissions reductions." Dep't of Ecology, Pub. No. 16-02-014, Concise Explanatory Statement: Chapter 173-442 WAC, Clean Air Rule; Chapter 173-441 WAC, Reporting of Emissions of Greenhouse Gases 273 (2016), https://fortress.wa.gov/ecy/ publications/documents/1602014.pdf [https://perma.cc/SA7Z-LFCA]. The emission reduction unit program therefore provides the sole mechanism through which natural gas distributors and petroleum product producers and importers can address the emissions generated by the products they sell. In other words, the Rule requires these businesses to pay to offset the emissions caused by third parties using their products.

         III. Procedural History

         Soon after the Rule was promulgated in 2016, the Association of Washington Business joined with seven other industry trade organizations (collectively AWB) and filed a petition for review of the Rule under the Washington Administrative Procedure Act (WAPA), ch. 34.05 RCW. Among other things, AWB argued Ecology lacked statutory authority under the Act to promulgate the Rule. Four utility companies that distribute natural gas throughout Washington also filed a petition for review. The two petitions were consolidated into a single challenge to the Rule. The trial court allowed the Washington Environmental Council and two other environmental organizations (collectively WEC) to intervene in defense of the Rule.

         In late 2017, the trial court ruled that Ecology's "authority under [the Act] is limited to entities who introduce contaminants into the air, not entities who sell commodities." Clerk's Papers (CP) 756. In its subsequent written order, the trial court held that the Rule was invalid under the WAPA because "the Clean Air Rule exceeds the statutory authority of the agency conferred by law." Id. at 801 (Conclusion of Law 12). Without discussion, the trial court denied Ecology's request to sever the portions of the Rule that were held invalid. Id. at 787-88.

         Ecology and WEC promptly filed notices of direct review with this court under RAP 4.2(a)(4). We granted review. We also granted the motion of the Puget Sound Clean Air Agency to file an amicus brief.

         ISSUES

         (1) Under the Act, may "emission standards" apply to businesses that do not directly emit greenhouse gases, but whose products ultimately do?

         (2) Is the Rule a valid exercise of Ecology's statutory authority?

         (3) Can the Rule be severed to strike only its invalid portions and allow those portions that apply to actual emitters to remain in effect?

         ANALYSIS

         We review this challenge to the validity of Ecology's Rule de novo under the WAPA. Wash. Pub. Ports Ass'n v. Dep't of Revenue, 148 Wn.2d 637, 645, 62 P.3d 462 (2003); Tapper v. Emp't Sec. Dep't, 122 Wn.2d 397, 402, 858 P.2d 494 (1993) ("In reviewing administrative action, this court sits in the same position as the superior court, applying the standards of the WAPA directly to the record before the agency."). We will "declare the rule invalid only if... the rule exceeds the statutory authority of the agency." RCW 34.05.570(2)(c). "Administrative '[r]ules must be written within the framework and policy of the applicable statutes,' and so long as the rule is 'reasonably consistent with the controlling statute[s],' an agency does not exceed its statutory authority." Swinomish Indian Tribal Cmty. v. Dep 't of Ecology, 178 Wn, 2d 571, 580, 311 P.3d 6 (2013) (alterations in original) (citation omitted) (quoting Dep't of Labor & Indus, v. Gongyin, 154 Wn.2d 38, 50, 109 P.3d 816 (2005); Wash. Pub. Ports Ass'n, 148 Wn.2d at 646). But "'[administrative rules or regulations cannot amend or change legislative enactments.'" Dep't of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1, 19, 43 P.3d 4 (2002) (quoting Dep't of Ecology v. Theodoratus, 135 Wn.2d 582, 600, 957 P.2d 1241 (1998)). "[R]ules that are inconsistent with the statutes they implement are invalid." Bostain v. Food Express, Inc., 159 Wn.2d 700, 715, 153 P.3d 846 (2007). And while "'we generally accord substantial deference to agency decisions, we do not defer to an agency the power to determine the scope of its own authority.'" Lenander v. Dep't of Ret. Sys., 186 Wn.2d 393, 409, 377 P.3d 199 (2016) (quoting In re Registration of Elec. Lightwave, Inc., 123 Wn.2d 530, 540, 869 P.2d 1045 (1994)).

         At the heart of this case is whether the plain meaning of the Act empowers Ecology to use emission standards to regulate businesses that do not emit greenhouse gases. Statutory interpretation presents a question of law we review de novo. Campbell & Gwinn, LLC, 146 Wn.2d at 9. Our fundamental objective is to determine and carry out the legislature's intent. Id. When "the statute's meaning is plain on its face, [we] must give effect to that plain meaning." Id. To determine plain meaning, we consider "all that the Legislature has said in the statute and related statutes which disclose legislative intent about the provision in question." Id. at 11. We also look to "the context of the statute in which that ...


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