United States: EPA Regulations To Reduce Cross-State Air Pollution Vacated Again

Last Updated: October 30 2012
Article by Christine A. Fazio and Ethan I. Strell

Previously published by New York Law Journal, October 25, 2012.

On Aug. 21, 2012, the U.S. Court of Appeals for the D.C. Circuit vacated the most recent regulation adopted by the U.S. Environmental Protection Agency (EPA) to reduce cross-state air pollution from the electric generating sector. The purpose of the regulation was to aid downwind states in achieving attainment of the National Ambient Air Quality Standards (NAAQS) for ozone and fine particulate matter under the Clean Air Act (CAA).

In a 2-1 decision, the D.C. Circuit held that EPA exceeded its statutory authority in adopting the Cross-State Air Pollution Rule (CSAPR or Transport Rule) because (a) the rule would require some upwind states to reduce emissions by more than the states' contribution to air quality exceedances—e.g., ambient air quality that exceeds National Ambient Air Quality Standards—in downwind states (the "good neighbor" provision)1 and (b) the rule denied states the first opportunity to develop regulations to be incorporated into State Implementation Plans (SIPs) to address precursors to ozone and fine particulate emissions in neighboring states prior to EPA's imposing Federal Implementation Plans (FIPs) on each state. See EME Homer City Generation v. EPA, 2012 WL 3570721 (D.C. Cir. Aug. 21, 2012).

The Transport Rule

On July 6, 2011, EPA adopted CSAPR to replace the Bush Administration's Clean Air Interstate Rule (CAIR), which the D.C. Circuit had found unlawful in 2008.2  CSAPR was intended to address the deficiencies identified by the D.C. Circuit in CAIR and would have required 27 states to improve air quality by reducing power plant emissions that contribute to ozone and fine particulates in other states (referred to as the CAA's "good neighbor" provision). Emission reductions were to take effect on Jan. 1, 2012, for sulfur dioxide and annual nitrogen oxide (NOx) emissions, and May 1, 2012, for ozone season NOx emissions.3

'EME Homer City Generation'

Judge Brett Kavanaugh, joined by Judge Thomas Griffith, found that CSAPR violated EPA's statutory authority to implement the good neighbor provision in three different ways. First, the court found that the emissions reduction requirement imposed on upwind states was disproportionate to each upwind state's actual contribution to downwind air quality. Under EPA's method, EPA would first determine if the upwind state was subject to the good neighbor provision by examining whether the state contributed at least a certain threshold amount to air pollution in the downwind state, which the court referred to as the "floor." Pollution below this threshold was not considered a "significant contribution" to the downwind state's nonattainment by EPA. The court believed that the absence of the state's floor would likely require an upwind state to reduce emissions by more than its actual contribution, violating the statute.4

Second, the court reiterated that EPA has no authority to require an upwind state to share the burden of reducing other upwind states' emissions. The court explained that its holding in Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000), permits EPA to consider cost-effectiveness factors to allow some upwind states to eliminate less than their fair share. However, the court warned that EPA has no authority to force an upwind state to clean up more than its own contribution. The court found that EPA should have taken into account the contributions from other upwind states to the downwind state's nonattainment problems. Similarly, the court observed that the Transport Rule also failed to account for the downwind state's contributions to its own nonattainment problem in calculating the upwind state's required reductions.5

Third, the court determined that EPA did not take any measures to limit unnecessary over-control in the downwind states. EPA's authority is limited to attaining the NAAQS in the downwind states, according to the court, and therefore EPA may not require upwind states to do more than necessary to help downwind states achieve the NAAQS. After examining the Transport Rule, the court ruled that EPA did not use any safeguards to ensure that upwind states were not cleaning up the air more than the amount required for the downwind state to achieve attainment.6

The second problem with the Transport Rule, according to the D.C. Circuit, is that EPA exceeded its authority by issuing FIPs for each state without giving each state an initial opportunity to implement the regulation through SIPs. The court explained that while the CAA requires the federal government to set clean air standards, the statute provides that the states themselves are responsible for determining how to achieve those standards.

The D.C. Circuit found that EPA required each state to account for its own good neighbor obligation before EPA quantified the state's good neighbor obligation, which the court deemed unacceptable. The court commented that in the past, EPA had allowed states the opportunity to revise their current SIPs or submit a new SIP once EPA had set the relevant emissions budgets for each state. According to the court, EPA's announcement of the state's emissions budget was the triggering event requiring the state to submit a new SIP or to revise its current SIP. Here, however, the court revealed that EPA disapproved state SIP submissions for good neighbor obligation "deficiencies" before EPA ever announced the states' good neighbor obligations, thereby allowing EPA to immediately implement the FIP.

Practically speaking, EPA's procedure removed the state's "first shot" to conform to EPA standards in the SIP, which allowed EPA to immediately impose the FIP. The court reminded EPA that it is the state, and not EPA, that bears primary responsibility for attaining, maintaining, and enforcing EPA standards. As a result, the court held that states must be given the opportunity to submit SIPs which include good neighbor obligation provisions before EPA can step in and implement its own FIP.7

The Dissent

In a lengthy dissent, Judge Judith Rogers argued that the court did not have jurisdiction under the CAA to hear the case on the merits. Rogers first pointed to the final FIPs, which were promulgated over a year before CSAPR was adopted.8  In the final FIPs, EPA published findings that 29 states had failed to submit SIPs containing the required "good neighbor" provisions. Pursuant to the CAA, those states' objecting to the final FIPs should have filed a petition for judicial review within 60 days. Those states were on notice that, not only had they failed to submit the appropriate SIP, but also that they had 60 days to object to EPA's final FIPs. Because that 60-day window had long passed, Rogers argued that the court lacked jurisdiction to hear the case on the merits.

Furthermore, Rogers contended that even if the court did have jurisdiction to hear this issue on the merits, it erred when reading the plain language of the statute. According to Rogers, the plain text of the CAA clearly required states to account for adequate good neighbor provisions in their SIPs, even prior to the release of EPA's good neighbor obligation calculations. Moreover, even if the statute was ambiguous, she argued that canons of statutory interpretation would require the court to defer to EPA's interpretation, which gave states an independent obligation to submit good neighbor SIPs regardless of EPA's good neighbor calculation efforts. She found that states themselves are fully capable of measuring interstate transport of emissions by conducting models, and remarked that no state suggested that it lacked the capability to measure its own interstate emission of pollutants.

The dissent also noted that the court was without jurisdiction to determine whether EPA's two-step approach to defining "significant contribution" violated the CAA because it was not raised in public comments during the rulemaking process. Rogers stated that while both Tennessee and Wisconsin raised comments during the applicable period, neither comment relating to this issue contained the requisite specificity that the court had required in the past.9

Impact of 'EME Homer City'

The D.C. Circuit's vacatur of the entire rule was unexpected and leaves businesses and states with uncertainty about how to plan for future reductions in air emissions. In the meantime, the Bush-era CAIR remains in effect (which itself requires a decrease in the annual budget for sulfur dioxide among the affected states starting in 2015).

On Oct. 5, 2012, EPA filed a petition for rehearing en banc with the D.C. Circuit.10  EPA's arguments echoed those initially raised by Rogers in her dissent. EPA argued that the panel lacked jurisdiction to decide that states were not required to submit transport SIPs because states did not bring the action within 60 days of Federal Register publication of the FIPs, as required by the CAA. EPA further argued that the panel erroneously rewrote an unambiguous provision of the CAA to exempt states from the clear requirement that states submit SIPs regardless of whether EPA had quantified the states' good neighbor obligations.

Additionally, EPA objected to the panel's "significant contribution" analysis, arguing that the panel premised its analysis on comments raised in the CAIR rulemaking years earlier, and not in comments raised during the Transport Rule rulemaking, violating the clear directives in the CAA. Finally, EPA argued that the panel's "proportionality" framework to significant contribution cannot be reconciled with any precedent, and that therefore, the court wrongly adopted its own construction of an ambiguous term rather than following its prior decisions upholding EPA's construction.

The impact of the vacatur of CSAPR will be felt by those states that had relied on CSAPR to achieve attainment of the ozone and fine particulate matter NAAQS. The D.C. Circuit's decision means that the necessary reductions needed by upwind neighboring states might not happen on the schedule provided by EPA, which could then delay EPA or state decisions to re-designate areas as meeting the ozone or fine particulate NAAQS. Such delay has economic ramifications because manufacturing and other businesses located in areas designated as nonattainment may not be able to expand.

For instance, because there are very few emission reduction credits for fine particulate, a facility in a nonattainment area is generally limited to expansions that do not exceed 10 tons per year of particulate emissions, a very small number that may result in plants foregoing decisions to expand or modernize. Also, businesses in non-attainment areas are subject to more stringent emissions controls than those in attainment areas. Without CSAPR and the mechanism that rule provided for helping downwind states to attain NAAQS, economic growth may be stifled in those eastern states that continue to be designated as nonattainment.

Footnotes

1 When an area within a state has existing ambient air quality that exceeds National Ambient Air Quality Standards, meaning the air quality does not meet public health standards, that area within the state is defined as nonattainment. Pollution generally disperses with the wind, and as wind streams often travel from west to east, states in the Midwest (referred to as "upwind") may add air pollutants to states on the east coast (referred to as "downwind"). However, for the Air Transport Rule's purpose, multiple states will generally contribute air pollutants with neighboring states located east or west, such that an upwind state is the state causing the air pollution in the downwind state and the downwind state is the state impacted by the neighboring state's air pollution.

2 North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008) (vacating CAIR, in part, because upwind states could purchase allowances and EPA's rule did not provide sufficient proof to ensure upwind emissions would not contribute to a neighboring state's non-attainment).

3 76 Fed. Reg. 48,208 (Aug. 8, 2011); EPA fact sheet is available at http://www.epa.gov/airtransport/pdfs/CSAPRFactsheet.pdf .

4 EME Homer City Generation v. EPA, 2012 WL 3570721, at *12-14 (D.C. Cir. Aug. 21, 2012).

5 Id. at *14.

6 Id. at *14-15.

7 Id. at *17-22.

8 75 Fed. Reg. 32,673 (June 9, 2010).

9 EME Homer City Generation, 2012 WL 3570721, at *24-44 (D.C. Cir. Aug. 21, 2012) (Rogers, J., dissenting).

10 Petition for Rehearing En Banc, EME Homer City Generation v. EPA, No. 11-1302 (D.C. Cir. Oct. 5, 2012).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Christine A. Fazio
 
In association with
Related Video
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Law Practice Management
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.