On August 21, 2012, the Court of Appeals for the District of Columbia vacated and remanded the U.S. Environmental Protection Agency’s “Transport Rule” – an ambitious regulation that sought to impose new limits on sources of certain air pollutants in 28 States. In the 2-1 decision, the majority concluded that EPA went beyond its statutory authority in two separate ways. First, the Transport Rule required States to reduce cross-state emissions by more than was authorized by the Clean Air Act. Second, it violated the Clean Air Act by failing to first let each state implement the necessary emission reductions before implementing federal controls. As a result of this decision, the current 2005 Clean Air Interstate Rule of 2005 (“CAIR") remains in effect. Going forward, EPA faces the choice of seeking a rehearing or Supreme Court review, seeking legislative changes, or again revising the rule.

This alert is part one of a two part series on this topic. Part I discusses the Court’s opinion in Homer City, how it reached its conclusions, and some of the considerations that will influence whether EPA might seek rehearing en banc and whether the Circuit is likely to grant it if asked. Part II will address some of the broader administrative law issues addressed in the decision and how the decision may impact future challenges to agency rulemakings.

Background - Under the Clean Air Act (“CAA”), EPA sets National Ambient Air Quality Standards (“NAAQS”), which prescribe the maximum levels for common air pollutants. EPA relies on the NAAQS to designate “nonattainment” areas – i.e., areas within each State where the level of an air pollutant exceeds the NAAQS.