EARL e-News: Supreme Court Reinstates EPA's Cross-State Air Pollution Rule

by Nexsen Pruet, PLLC

Updates on Environmental, Administrative and Regulatory Law -

On April 29th, the United States Supreme Court upheld EPA’s Cross-State Air Pollution Rule (CSAPR) regulations and reversed the 2012 decision by the U.S. Court of Appeals for the District of Columbia invalidating the rules. The decision in the case, Environmental Protection Agency Et Al, V. EME Homer City Generation, L.P., was by a 6-2 majority with the opinion written by Justice Ruth Bader Ginsburg. Chief Justice Roberts and Justices Kennedy, Breyer, Sotomayor and Kagan joined the majority opinion. Justices Scalia and Thomas dissented from the decision, and Justice Alito was recused.

CSAPR requires 27 up­wind States to reduce NOx and SO2 emissions in order for downwind States, primarily in the Northeast, to attain National Ambient Air Quality Standards (NAAQS). Currently, most urban areas in the Northeastern States are nonattainment, primarily for ozone. CSAPR is EPA’s replacement for an earlier interstate transport rule, the Clean Air Interstate Rule, promulgated by the Bush Administration in 2005. It was also overturned by the D.C. Circuit in 2008.  However, the Circuit left the CAIR program in place at the request of all parties in the case due to the investment already in place by electric utility companies, which are the primary facilities subject to CAIR and CSAPR. 

The CSAPR regulatory scheme requires upwind States that “contribute significantly” to downwind States’ nonattainment to reduce emissions to the extent they (1) produced one percent or more of a NAAQS in at least one down­wind State and (2) could be eliminated cost-effectively, the latter to be determined under the rules.  Based on this approach, EPA created an annual emissions budget for each upwind regulated State based on air dispersion modeling. Each budget is the total quantity of emissions each upwind State could produce annually.  As a part of CSAPR, EPA had determined the State Implementation Plan (SIP) of each upwind State to be inadequate to meet the interstate transport requirements of the Clean Air Act and promulgated a Federal Implementation Plan (FIP) for each State.  The FIPs allocated the annual budget among the air pollution sources in each upwind State.

CSAPR was challenged by many of the upwind States and industries in the D.C. Circuit.  Northeastern States and environmental advocacy groups intervened to support EPA’s position.  In 2012, the D.C. Circuit reversed and vacated CSAPR, holding that States deserved an opportunity to remedy excess pollution prior to EPA imposing a FIP, and that EPA’s approach applying across-the-board emissions reductions, based on the agency’s cost-effectiveness criteria, did not result in emissions reductions proportional to each State’s contribution to downwind air pollution problems. According to the court, this meant that upwind States could be required to reduce emissions to a greater degree than necessary to remedy the downwind nonattainment.

The Supreme Court reversed the D.C. Circuit decision in all respects.  First, the Court held that the Clean Air Act (“Act”) does not require States to be given an oppor­tunity to produce their own SIPs after EPA quantifies each State’s interstate pollution requirement. The Court held that EPA disapproval of a SIP triggers an immediate EPA obligation to issue a FIP to correct the situation, “at any time” within two years. The Court determined that while the DC Circuit’s approach requiring an opportunity for States to correct their SIPs to be “sensible” it violated a reviewing court’s task to apply the text of a statute and not try to improve upon it.  The Court noted that EPA had previously afforded upwind States an opportunity to allocate emission budgets among their in-State sources but held it was not arbitrary for the agency not to afford a similar opportunity under CSAPR (“EPA retained discretion to alter its course provided it gave a reasonable explanation for doing so”, citing Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mutual Automobile Insurance Co.)

Second, the Court held EPA’s cost-effectiveness approach to allocating emission reductions among up­wind States to be permissible under the Act.  In particular, the opinion stated the “Court routinely accords dispositive effect to an agency’s reasonable interpretation of ambiguous statutory language.” Noting EPA’s au­thority to reduce upwind pollution extends only to those “amounts” of pollution that “contribute significantly to nonattainment” in down­wind States, the Court decided that the agency’s allocation method is a “permissible construction of the statute” and that the agency had “chosen sen­sibly” to reduce the amount in a less costly manner.  In response to challengers’ argument that EPA cannot simply rely on costs without considering relative emissions contributions from each State, the Court held that nothing in the statutory text precluded the agency from making that choice as an “effi­cient and equitable solution to the allocation problem.”  The Court concluded that EPA’s chosen approach is:

Efficient because EPA can achieve the same levels of attainment, i.e., of emission re­ductions, the proportional approach aims to achieve, but at a much lower overall cost; and

Equitable because, by imposing uniform cost thresholds on regulated States, EPA’s rule “subjects to stricter regula­tion those States that have done less in the past to control their pollution.” (Unclear which States Justice Ginsburg has in mind)

The decision rejected the DC Circuit’s concern that some upwind States might be subjected to “over control” under EPA’s approach, for the following reasons.  First, over control in particular downwind locations may be incidental to reductions necessary to ensure attainment elsewhere. Since the statute required attainment of the NAAQS in every downwind State, exceeding the reductions necessary for attainment in one State is not over-control unless unnecessary to achieving attainment in any downwind State.  Sec­ond, EPA should have leeway to meet the statutory mandate to balance possibilities of either over control or under control. Third, the record – which includes thousands of upwind-to-downwind linkages – provides only a few instances of “unnecessary” emission reductions, which EPA disputes.

In conclusion, the judgment of the D.C. Circuit was reversed and CSAPR remanded for further proceedings.  EPA has already stated that the CAIR program remains in place for now.  The agency will likely act in the near term to replace CAIR with CSAPR.  The result will be much tighter restrictions and significantly increased control costs on powerplant air emissions in the affected States.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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