The U.S. Supreme Court will give the Environmental Protection Agency another chance to justify its rule targeting interstate air pollution. On June 24, 2013, the Court agreed to take up this issue by reviewing a case from the U.S. Court of Appeals for the D.C. Circuit: EME Homer City Generation, L.P. v. Environmental Protection Agency.
The case hinges on the validity of EPA's so-called "Transport Rule." The Clean Air Act authorizes EPA to set National Ambient Air Quality Standards (NAAQS) that states must satisfy. Each state is responsible for finding a way to comply with the NAAQS, but natural wind patterns often complicate these efforts by transporting pollution from one state to another. Accordingly, a "good neighbor" provision of the Clean Air Act makes upwind states responsible for addressing air pollution that travels downwind and prevents other states from meeting the NAAQS. In the Transport Rule, EPA required 28 upwind states to reduce specified levels of nitrogen oxide and sulfur oxide emissions. At the same time, EPA promulgated Federal Implementation Plans ("FIPs") specifying precisely what steps the upwind states must take to meet these targets.
EPA's actions prompted various state and local governments, industry groups, and labor organizations to challenge the legal validity of the Transport Rule. These groups argued that, by forcing upwind states to reduce more downwind pollution than their "significant contribution," the rule violates the Clean Air Act. Furthermore, the groups also challenged EPA's authority to issue FIPs without first giving upwind states an opportunity to create their own standards.
A divided three-member panel of the D.C. Circuit agreed and vacated the Transport Rule. According to the majority, the rule went beyond the authority that Congress delegated to EPA in the Clean Air Act. The decision included a vigorous dissent from Judge Judith Rogers, who argued that the court did not properly defer to EPA's interpretation of the Clean Air Act. Judge Rogers also thought the court lacked jurisdiction to decide the case in the first place because the challengers filed their suit too late and did not raise their objections in an earlier proceeding. EPA echoed many of Judge Rogers' arguments in its petition asking the Supreme Court to review the case, setting the stage for the three issues the Supreme Court will address:
Whether the Court of Appeals had jurisdiction and properly struck down the FIP rules;
The reasonableness of EPA's interpretation of the "good neighbor" provision of the Clean Air Act; and
Whether the Court of Appeals' reasoning disrupts EPA's approach to managing the Clean Air Act.
The fate of EPA's Transport Rule now lies with the Supreme Court. The case presents numerous complicated questions regarding the scope of EPA's authority, the proper interpretation of the Clean Air Act, the proper federalism role of the states, courts, and federal agencies in environmental regulation, and difficulties in addressing interstate air pollution.
The Court's decision will have major implications for the energy sector. EPA's interstate air pollution regulations require meaningful emissions reductions, primarily affecting coal- and natural gas-fired power plants—the source of most of the electricity in the United States. Moreover, the D.C. Circuit's decision to vacate the Transport Rule leaves the energy industry in a state of uncertainty. The Transport Rule is actually EPA's third attempt to regulate interstate air pollution. The Rule's immediate predecessor, a 2005 Clean Air Interstate Rule Program ("CAIR"), was also invalidated by the D.C. Circuit. However, CAIR remains in effect until the Court determines the validity of the Transport Rule.
The energy sector will have to wait until the Court's next term, which begins in October, to get a better picture of what the regulatory landscape regarding interstate air pollution will ultimately look like.