In an opinion issued April 29, 2014, the Supreme Court of the United States settled the long standing dispute over cross state air pollution requirements in EPA v E.M.E. Homer. In a 6-2 decision (J. Alito took no part in it) the Court upheld EPA's Cross-State Air Pollution Rule ("Transport Rule"). The Transport Rule was an interpretation of the "Good Neighbor Provision" in the Clean Air Act which requires states to prohibit in-state sources "from emitting any air pollutant in amounts which will...contribute significantly" to downwind States' "nonattainment..., or interfere with maintenance," of any EPA-promulgated National air quality standards. States are given the first bite at the apple to implement required reductions under the good neighbor provision in their State Implementation Plans ("SIPs"). Where a state has not provided a SIP, EPA may issue a Federal Implementation Plan ("FIP").
The issue with the Transport Rule was that the calculation of emissions reductions was not on the amount of pollutants attributable to the upwind states, but on the cost-effectiveness of the reductions. The Transport Rule established allocations based on "significant cost thresholds" rather than the actual contribution from that upwind state's contribution to nonattainment. In effect, EPA determined that the cost-effectiveness of certain emission reductions should be applicable at the point where a noticeable change occurred in the downwind air quality. These allocations are not dependent on the actual cost to achieve those reductions. The Court used as an example reductions in NOx where at a cost threshold of $500 per ton applied uniformly to upwind states would significantly reduce downwind air quality problems. More than that resulted in only minimal reductions. Thus technology that would be priced at $5,000 and capable of eliminating two tons of pollution would be stated to "cost" $2,500 per ton.
EPA promulgated the Transport Rule and then issued a FIP to implement it without giving states the authority to first submit an acceptable SIP. States had argued that they could not develop a SIP until EPA identified the amount of pollutants for which each upwind state was responsible. The Court found EPA had authority to do so under the plain reading of the Statute.
The Court afforded EPA Chevron deference on its cost-effectiveness approach after finding that the Clean Air Act did not state how the reduction in amounts of pollutants would be divided. Justice Scalia, in dissent stated that the Court should have relied on the textual interpretation of "amounts" of air pollutants. Instead, he stated the majority accepted EPA's position that it was "more efficient to require reductions not in proportion to the amounts of pollutants for which each upwind State is responsible, but on the basis of how cost-effectively each can decrease emissions."
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