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Challenges Remain Despite Supreme Court Decision Reinstating EPA Cross-State Rule

Wednesday, April 30, 2014

By Andrew Childers  

April 29 — The Environmental Protection Agency scored a victory when the U.S. Supreme Court reinstated its cross-state emissions rule for power plants, but changing market and compliance conditions may force the agency to rethink how the rule is implemented.

The Supreme Court's decision, which overturned a lower court's vacatur of the Cross-State Air Pollution Rule, could open the EPA up to significant new legal challenges as it considers options for implementing the rule, attorneys said. Many of the areas that were not in attainment of the national ambient air quality standards for ozone and fine particulate matter at the time the Cross-State Air Pollution Rule was issued in 2011 have since come into attainment. And while the Supreme Court upheld the structure of the EPA's rule, the majority still cautioned that states are free to challenge how it is implemented.

The Cross-State Air Pollution Rule (CSAPR) has not taken effect during the litigation, but now the rule's compliance dates have passed, making it unlikely that the EPA simply asks the U.S. Court of Appeals for the District of Columbia Circuit to lift a stay, attorneys said. Instead, the EPA likely will need to issue a new rulemaking addressing the cross-state rule's implementation. Additionally, the D.C. Circuit could call for a new round of briefing as it resolves challenges to the cross-state rule that have not yet been addressed, attorneys said.

What Obligations? What Time Frame?

“It's a very interesting situation we've got because even if the D.C. Circuit just lifted the stay, it is unclear what obligations would go into effect on what time frame,” Joshua Frank, a partner at Baker Botts LLP who represented power companies challenging the rule, told Bloomberg BNA April 29. “The compliance dates for CSAPR are now in the past, so EPA would need to explain how they propose to move forward.”

The rule as promulgated was set to go into effect Jan. 1, 2012, with additional requirements due to take effect Jan. 1, 2014, but implementation was put on hold while legal challenges played out. 

The Supreme Court upheld the EPA's cross-state rule in a 6-2 decision. That decision overturned a D.C. Circuit decision that struck down the rule in 2012.

The cross-state rule, which EPA issued in July 2011, requires 28 states in the East, Midwest and South to reduce power plant emissions of nitrogen oxides and sulfur dioxide that cross state lines. It is intended to help downwind states meet national ambient air quality standards for ozone and fine particulate matter (76 Fed. Reg. 48,208).

Clarification From EPA Needed

“Today's Supreme Court decision is a resounding victory for public health and a key component of EPA's efforts to make sure all Americans have clean air to breathe,” EPA Administrator Gina McCarthy said in an April 29 statement. “It serves to support the ongoing work to see that air quality in downwind states continues to improve.”

The EPA's Clean Air Interstate Rule, a predecessor to the cross-state rule that the D.C. Circuit also struck down, has remained in effect. Now the EPA needs to address how it will transition between the two programs, state air pollution regulators and attorneys said.

“Having this issue in legal limbo for so long, EPA should move as quickly as they can to implement,” Richard Revesz, director of the Institute for Policy Integrity, told Bloomberg BNA April 29.

Power industry attorneys said that changing market conditions, particularly low-cost natural gas, and other EPA regulations requiring power plants to control toxic emissions already have achieved many of the emissions reductions required by the cross-state rule. As a result, some of the regions that were not in compliance with the particulate matter and ozone air quality standards when the cross-state rule was issued are now in attainment. That could force the EPA to reexamine the cross-state rule's requirements.

“It's really become irrelevant because of the passage of time and the low cost of natural gas,” Jeff Holmstead, a partner with Bracewell & Giuliani LLP, told Bloomberg BNA April 29.

Air Standards Updated

The EPA may need to address how the cross-state rule will respond to updated air quality standards for ozone and fine particulate matter.

The cross state rule was intended to assist states in meeting the air quality standards for ozone and particulate matter issued in 1997 as well as the 2006 particulate matter standards. However, those standards since have been replaced by more stringent requirements.

The 1997 ozone standard permitted ambient concentrations as high as 84 parts per billion, and the EPA in 2008 set the ozone standard at 75 parts per billion. The agency now is considering an even more stringent standard as part of a periodic review.

The EPA in 2013 tightened the national ambient air quality standard for fine particulate matter to 12 micrograms per cubic meter (µg/m3), down from the previous standard of 15 µg/m3.

While the cross-state rule will provide states with a significant tool to reach compliance with the 1997 standards, it may not be enough to meet the latest air quality requirements, Bill Becker, executive director of the National Association of Clean Air Agencies, said.

“It presents a false sense of optimism because the goal post is not 84 [parts per billion] and may not be 75 [parts per billion] in a couple of years,” he told Bloomberg BNA April 29. “There may be more to come after this.”

However, Becker said the Supreme Court's decision to uphold the structure of the EPA's cross-state program is a significant victory for the agency.

Unresolved Challenges

Though the EPA's rule has been upheld by the Supreme Court, the D.C. Circuit may call for an additional round of briefing to determine how any remaining challenges to the cross-state rule should be addressed.

The EPA issued subsequent technical revisions to its cross-state rule, including revising emissions budgets for 13 states. Challenges to those revisions have been held in abeyance pending the Supreme Court's decision (Utility Air Regulatory Group v. EPA, D.C. Cir., No. 12-1346, 9/27/12; Wisconsin Public Service Corp. v. EPA, D.C. Cir., No. 12-1163, 4/6/12).

“There are many issues still pending at the D.C. Circuit, including on EPA's revision rules,” Frank of Baker Botts said. “There is so much uncertainty and questions about what arguments remain.”

States Can Bring New Lawsuits

Though the Supreme Court upheld the cross-state rule's structure, it also said states retain the right to bring new challenges to its application.

“If any upwind state concludes it has been forced to regulate emissions below the one-percent threshold or beyond the point necessary to bring all downwind states into attainment, that state may bring a particularized, as-applied challenge to the transport rule, along with any other as-applied challenges it may have,” the Supreme Court said.

That could open up opportunities for states such as Texas to bring lawsuits arguing they should not be included in the cross-state rule because they contribute less than 1 percent to the nonattainment problems in downwind areas, attorneys said.

“This decision was a clear victory for Texas,” Holmstead said.

To contact the reporter on this story: Andrew Childers in Washington at achilders@bna.com

To contact the editor responsible for this story: Larry Pearl in Washington at lpearl@bna.com

The U.S. Supreme Court's decision in EPA v. EME Homer City Generation LP is available at http://www.bloomberglaw.com/public/document/EPA_v_EME_Homer_City_Generation_L_P_No_121182_and_121183_2014_BL_/1.

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