On August 17, 1982, a three-judge panel of the Court of Appeals for the District of Columbia Circuit overturned the Environmental Protection Agency's (EPA's) October 14, 1981, redefinition of "source" for nonattainment area programs in Natural Resources Defense Council, Inc. v. Gorsuch.¹ The court found a surprisingly simple solution for what has been a difficult and recurring problem of statutory interpretation, but, as a result created perhaps unintended problems for EPA's energetic, but still emerging, emissions trading program. At issue was the question of whether emissions trading could be used to exempt from Clean Air Act new source review requirements major modifications of industrial plants located in "nonattainment areas," i.e., those areas that have not attained the national ambient air quality standards (NAAQS). The court answered this limited question in the negative, but also stated its rationale so broadly that it will raise questions about the legality of other, very different components of the program that is EPA's most important substantive regulatory reform.

Emissions trading is a modification to the basic regulatory programs of the Clean Air Act that offers the promise of making them more flexible and less expensive without interfering with their effectiveness in cleaning up the air. Several different applications of the trading concept have been developed over the last half-dozen years. With EPA's issuance last spring of comprehensive proposed guidance spelling out consistent rules for all the applications and making them easier to use, especially in nonattainment areas, the program seemed on the verge of a significant expansion. This prospect dismayed environmental groups, who feared that the expansion was being achieved by sacrificing constraints necessary for attainment of air quality standards.The result in NRDC, if it survives the likely petition for rehearing and any subsequent appeal, will give them heart. It will, at a minimum, make it more difficult for EPA and states to defand other potentially widespread nonattainment area uses of emissions trading. While there are good reasons to limit the decision to its holding, the court's broad language nevertheless creates uncertainty about EPA's authority to carry out this reform program, uncertainty that could best be resolved by congressional action to delineate the proper scope of Clean Air Act emission trading.