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In EME Homer City Generation, L.P. v.
EPA, two judges of a divided three-judge panel of the
United States Court of Appeals for the D.C. Circuit vacated the
Environmental Protection Agency's (EPA) 2011 Cross-State Air
Pollution Rule (Transport Rule), which implemented the so-called
"good-neighbor" provision of § 110 of the
four-decade-old Clean Air Act (CAA). Recognizing that upwind
emissions pollute downwind regions, the good-neighbor provision
requires CAA implementation plans (federal or state) to prohibit
upwind sources of air emissions from contributing significantly to
a downwind state's inability to attain or maintain
compliance with national ambient air quality standards
(NAAQS). Had it not been stayed and later vacated, the
Transport Rule would have put 28 upwind states on emission
"budgets" for sulfur dioxides (SO2) and
nitrogen oxide (NOx) — both NAAQS criteria
pollutants — requiring emission reductions primarily from
upwind coal-fired electric generating stations.
Coal-burning power companies, coal companies, labor unions,
associated trade associations, states and local governments
petitioned for review of EPA's Transport Rule. On December
30, 2011, the court stayed the Transport Rule and instructed EPA,
pending a decision on the merits, to continue administering the
agency's predecessor Clean Air Interstate Rule (CAIR). The
Transport Rule was EPA's attempt to develop a rule that cured
problems with CAIR, which a different panel of the D.C. Circuit in
2008 found to violate the CAA in North Carolina v. EPA.
The majority's August 21, 2012 opinion ruled in favor of the
petitioners and vacated EPA's Transport Rule on the ground that
the EPA exceeded its CAA authority in two
respects. First, the majority held that, under the
Transport Rule, upwind states may be required, in
violation of the CAA good-neighbor requirement, to reduce emissions
by more than their proportional share of significant upwind
contributions to a downwind state's inability to
attain or maintain NAAQS compliance. Second, EPA
simultaneously set a Federal Implementation Plan (FIP),
according to the majority, that ran afoul of the federalism
embedded in the CAA, which requires that states be given the first
opportunity to devise a compliance strategy in the form of a State
Implementation Plan (SIP).
The dissent opinion is excoriating. It accuses the majority
of creating and deciding straw-man issues that the majority wanted
to decide, but which were not raised before the agency and were
therefore not properly before the court. With respect to
EPA's calculation of the emissions reductions that the
Transport Rule would impose on upwind states, the dissent accuses
the majority of intentionally misreading North Carolina as
requiring the agency to use the same metrics to determine
which upwind sources are subject to good-neighbor emissions
reductions, on the one hand, and the emissions reductions budget
for each such state, on the other hand. According to the
dissent, North Carolina ruled to the contrary that
EPA's measure of a state's "significant
contribution" to downstream non-attainment or non-maintenance
of NAAQS did not have to correlate directly with the state's
air quality impact relative to other upwind states or with its
emissions budget. Further, the majority's conclusion that
the use of a different measure "might" require
over-compliance by some upwind states, was judicial speculation
that could not provide a legitimate basis for overturning a complex
decision of an expert agency.
As to the second basis for the majority's vacatur
— the concurrent imposition of a FIP without first
affording affected states the opportunity to submit a plan
— the dissent contends that the agency was required by
the statute to impose a FIP. Within three years of a new or
changed NAAQS, the dissent explained, states are required to submit
to the EPA SIPs that satisfy NAAQS requirements, including the
good-neighbor requirement. Here, the NAAQS in question were
adopted in 1997 and 2006 and the affected states had not submitted
compliant SIPs as of the date of the Transport
Rule. Consequently, the statute required the EPA to impose its
own FIPs implementing the good-neighbor requirement.
Whether EPA will appeal the majority ruling is not yet known,
but, given the tone of the dissent, an appeal seems likely. In
the interim, CAIR will remain in effect even though the North
Carolina panel ruled several of CAIR's central provisions
unlawful, including its measure of "significant
contribution" on a regional and not state-specific basis and
its allowance trading program.
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