By Glen Hansen

The Clean Air Act (“CAA”) charges the United States Environmental Protection Agency (“EPA”) with setting National Ambient Air Quality Standards (“NAAQS”), which prescribe the maximum permissible levels of common pollutants in the ambient air. EPA designates “nonattainment” areas — that is, areas within each State where the level of the pollutant exceeds the NAAQS. Once EPA sets a NAAQS and designates nonattainment areas within the States, the lead role shifts to the States. The States implement the NAAQS within their borders through State Implementation Plans (“SIPs”). In their SIPs, States choose which individual sources within the State must reduce emissions, and by how much. States must submit SIPs to EPA within three years of each new or revised NAAQS. One of the required elements of a SIP submission is the “good neighbor” provision, which recognizes that emissions from “upwind” regions may pollute “downwind” regions. The good neighbor provision requires upwind States to bear responsibility for their fair share of the nonattainment in downwind States. EPA plays the critical role in gathering information about air quality in the downwind States, calculating each upwind State’s good neighbor obligation, and transmitting that information to the upwind State. With that information, the upwind State can then determine how to meet its good neighbor obligation in a new SIP or SIP revision. If a State does not timely submit an adequate SIP (or an adequate SIP revision) to take account of the good neighbor obligation as defined by EPA, responsibility shifts back to the Federal Government. Within two years of disapproving a State’s SIP submission or SIP revision, or determining that a State has failed to submit a SIP, EPA must promulgate a Federal Implementation Plan (“FIP”) to implement the NAAQS within that State.

In August 2011, the EPA promulgated the “Transport Rule” (also known as the “Cross-State Air Pollution Rule”) in order to implement the statutory good neighbor requirement. The Transport Rule defines emissions reduction responsibilities for 28 upwind States based on those States’ contributions to downwind States’ air quality problems. The Rule limits emissions from upwind States’ coal- and natural gas-fired power plants, among other sources. Those power plants generate the majority of electricity used in the United States, but they also emit pollutants that affect air quality. The Transport Rule targets two of those pollutants, sulfur dioxide (SO2) and nitrogen oxides (NOx).  

In EME Homer City Generation, L.P. v. U.S. Environmental Protection Agency, ___ Fed.3d ___, 2012 U.S. App. LEXIS 17535 (D.C.Cir. 2012), various States, local governments, industry groups, and labor organizations petitioned the United States Court of Appeals for the District of Columbia Circuit for review of the Transport Rule. The court held that the Transport Rule exceeds the EPA’s authority under CAA in two ways.

First, the Transport Rule violated the statutory text in the CAA that grants EPA authority only to require upwind States to reduce their own significant contributions to a downwind State’s nonattainment. Under the Transport Rule, upwind States may be required to reduce emissions by an amount greater that their own significant contributions to a downwind State’s nonattainment.  How much pollution each upwind State was required to eliminate was not tied to how much the upwind State contributed to downwind States’ air pollution problems. The court noted three legal requirements that EPA did not follow: (a) “The statute is not a blank check for EPA to address interstate pollution on a regional basis without regard to an individual upwind State’s actual contribution to downwind air quality;” (b) “the collective burden must be allocated among the upwind States in proportion to the size of their contributions to the downwind State’s nonattainment;” and (c) the combined obligations of the various upwind States must “not go beyond what is necessary for the downwind States to achieve the NAAQS.”

Second, the Transport Rule violated the statutory provision in the CAA that affords States the initial opportunity to implement reductions required by EPA under the good neighbor provision.  The Transport Rule is “unprecedented” in that the EPA did not allow the States a reasonable first opportunity to implement the required reductions through SIPs with respect to sources within their borders. EPA argued that the States could have submitted their SIPs before the EPA actually told the States what emissions reduction their SIPS were supposed to achieve under the good neighbor provision. But the court rejected that argument on the ground that it denies the States fair notice of what conduct is required: “EPA pursues its reading of the statutory text down the rabbit hole to a wonderland where EPA defines the target after the States’ chance to comply with the target has already passed.” The court concluded that EPA’s interpretation on the FIPs issue “is contrary to the text and context of the statute …, in the alternative is absurd …, and again in the alternative is unreasonable.”   

Therefore, the court vacated the Transport Rule rulemaking action and the Transport Rule FIPs, remanded the proceeding to the EPA, and ordered that EPA continue administering the Clean Air Interstate Rule of 2005 pending promulgation of a valid replacement.

In its decision, the Court of Appeals highlighted EPA’s overreach. According to the court, EPA used the good neighbor provision “to impose massive emissions reduction requirements on upwind States without regard to the limits imposed by the statutory text.” Indeed, the court was struck by the reality that “EPA seems reluctant to acknowledge any textual limits on its authority under the good neighbor provision.” The court explained that it is “inconceivable” that Congress buried in the good neighbor provision “an open-ended authorization for EPA to effectively force every power plant in the upwind States to install every emissions control technology EPA deems ‘cost-effective.’”

Glen Hansen is senior counsel at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.