Today, in a 2-1
decision, the U.S. Court of Appeals for the D.C. Circuit issued
decision vacating the Environmental Protection Agency's
(EPA) Cross-State Air Pollution Rule (CSAPR), which requires
significant reductions in emissions from power plants in certain
states that contributed to "downwind" ozone or fine
particle pollution in other states. For more information on CSAPR,
please see our previous Clients and Friends Memo available
Judge Kavanaugh wrote the majority opinion, joined by Judge
Griffith (both appointed by President George W. Bush) ruling that
the EPA, in promulgating CSAPR, exceeded its statutory authority
under the Clean Air Act by: (1) requiring upwind states to reduce
their emissions by more than their own significant contributions to
a downwind state's nonattainment; and (2) not giving states the
opportunity to initially implement a system for reductions for
sources within their boundaries before imposing an EPA-designed
Federal Implementation Plan. The majority explicitly rules that EPA
must continue to administer CAIR pending EPA's issuance of a
new replacement rule in conformance with the court's
Judge Rogers (one of the "liberals" on the D.C.
Circuit, appointed by President Clinton) filed a lengthy and
impassioned dissenting opinion (45 pages). This split decision (as
well as the lineup of the various states for and against CSAPR)
evince the political overtones to the decision in this highly
charged area of environmental regulation, which could well play out
in the presidential election. At a minimum, the D.C. Circuit's
decision is likely to provide significant extensions for power
plants to continue operating status quo, albeit several other
environmental regulations affecting power plants remain in force
with compliance deadlines looming. For Texas, however, this could
represent a significant development as the Public Utility
Commission there grapples with resource adequacy issues.
EPA (and the Obama Administration) have several choices
regarding next steps. The decision can be appealed -- indeed, EPA
and the Obama Administration may petition for en banc review by the
full D.C. Circuit and/or file a petition for certiorari to the U.S.
Supreme Court. Notably, any new federal or state regulatory
responses are expected to take years to finalize before becoming
effective, which may be a further incentive to the EPA to seek
appellate review. The EPA could restructure CSAPR, but will
probably not be able to require equally significant reductions in
emissions unless this DC Circuit decision is modified. States might
act on the court's observations by revising their State
Implementation Plans to ratchet down permitted emissions.
This decision will obviously have significant impact on
electrical generators, coal miners, and other industries. To view
the DC Circuit decision,
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The Fifth Circuit recently handed down an important decision, Louisiana Generating LLC v. Illinois Union Insurance Company, clarifying the scope of coverage under a Premises Pollution Liability Insurance Policy.