The D.C. Circuit’s August 21, 2012 decision in Homer City raised significant questions about judicial review of agency rulemaking challenges.

This alert is the second part of a two-part series on this topic. Part I discussed the court’s August 21, 2012 opinion that, by a 2-1 vote, vacated and remanded the Environmental Protection Agency’s (“EPA’s”) “Transport Rule,” which addressed efforts to curb interstate air pollution. It focused on how the court reached its conclusions, and because it was a split decision with a significant dissent, suggested that it was possible that EPA would seek rehearing en banc. En banc review was sought on October 5, 2012. Part II focuses on the issues that are likely to be implicated in an en banc review, if it is granted. Either way, the Homer City decision may well impact future challenges to agency rulemakings.

As explained in detail in Part I of this alert, the D.C. Circuit’s majority opinion concluded that the Transport Rule exceeds EPA’s statutory authority to impose more stringent air quality requirements through the good neighbor provisions of the Clean Air Act (“CAA”). The majority concluded that EPA acted beyond its statutory authority to regulate interstate air pollution because (1) the Transport Rule did not account for the proportional amount each upwind State contributes to a downwind State’s nonattainment; and (2) the Rule failed to provide the States the first opportunity to implement the good neighbor reductions through their own State Implementation Plans (“SIPs”). The decision leaves in effect the 2005 Clean Air Interstate Rule of 2005 (“CAIR”), which was previously remanded by the court to EPA without vacatur.

Has the Court’s Decision Subtly Altered the Chevron “Step One” Analysis?

Under Chevron, courts follow a two-step process for determining whether an agency’s interpretation of a statute is permissible. The first step is determining whether Congress spoke directly to the question at issue. If Congress’ intent is clear, the court must give effect to the expressed intent of Congress. If Congress’ intent is silent or ambiguous, the court proceeds to step two of the Chevron analysis, and determines whether the agency’s interpretation of ambiguous statutory language “is based on a permissible construction of the statute.”