Consideration of Costs in Cross-State Rule Debated in U.S. Supreme Court Arguments

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By John Henry Stam

Dec. 10 --The U.S. Supreme Court on Dec. 10 considered whether a provision of the Clean Air Act allowed consideration of costs in establishing an Environmental Protection Agency rule that aimed to reduce pollution that crosses state lines (EPA v. EME Homer City Generation LP, U.S., No. 12-1182, oral arguments 12/10/13).

The federal government argued that the EPA had discretion to require the most economically efficient reductions from contributing upwind states, while certain states and industry groups argued that the act required upwind reductions based solely on the amounts individual states contribute to downwind nonattainment with requirements of the act.

The rule, which was vacated by the U.S. Court of Appeals for the District of Columbia Circuit in August 2012, would have required power plants in 28 upwind states in the East, Midwest and South to reduce emissions of nitrogen oxides and sulfur dioxide to help downwind states meet national ambient air quality standards for ozone and fine particulate matter (EME Homer City Generation LP v. EPA, 696 F.3d 7, 75 ERC 1776, 2013 BL 213202 (D.C. Cir. 2012).

The D.C. Circuit ruled that the EPA exceeded its authority under the act in requiring upwind state reductions beyond their significant contribution to downwind nonattainment and in not granting states the opportunity to implement reductions in state implementation plans (SIPs) before imposing federal implementation plans (FIPs).

Contribution to Nonattainment

Justice Antonin Scalia appeared skeptical that the act gave the EPA discretion to require upwind states to make emissions reductions based on anything other than their contributions to downwind states' nonattainment. He said that it might be a good idea for Congress to have required the EPA to limit as cross-state emissions by as much as economic efficiency allows, but that is not how Congress wrote the Clean Air Act.

Chief Justice John G. Roberts Jr. noted that at the time the states were required to submit SIPs, the EPA hadn't come up with the downwind budgets that states would need to meet their obligations under the good neighbor provision of the act, which requires reductions of emissions that significantly contribute to downwind states' nonattainment. When the EPA later found certain SIPs were noncompliant with their cross-state obligations, it imposed FIPs.

Deputy Solicitor General Malcolm L. Stewart said the act imposes a duty on states to comply with the good neighbor obligations within three years of the passage of new national ambient air quality standards. Stewart noted that states had the same information that the EPA had when they developed their SIPs; the EPA wasn't withholding any information from them.

Justice Scalia said the lack of information is crucial, saying it is impossible to sensibly design a program without knowing the target limits of the program.

Stewart argued that it is the act that placed the obligations on the states and that this lack of information is the flip side of the position of the downwind states, which must estimate what they need to do to comply without complete knowledge or any control over out-of-state sources.

Stewart said the EPA's cost methodology is one that it had used in the past for compliance purposes. He also said the only problem with requiring more control of emissions than is necessary, or overcontrol, is one of costs, and there are no health or safety risks associated with more stringent emissions controls.

Blind SIP Submissions

Jonathan F. Mitchell, the solicitor general of Texas who represented the respondent states and localities, argued that the EPA's approach required states to submit SIPs without knowing the reductions they were required to meet.

Justice Roberts said that while this creates a difficult situation for states, the act requires it.

The EPA's approach requires states to either accept loss of control of their in-state sources to FIPs or to overcontrol to assure retaining primary control of their programs.

Mitchell said a problem with the EPA's rule is that it is now adopting an approach that it rejected in 1998 when it issued the NOx SIP call when it asserted exclusive authority to establish what constitutes a significant contribution to downwind nonattainment.

The EPA said it was correcting its prior approval of SIPs in issuing the cross-state rule, but to make such a correction under the act, it must follow the same procedures it used in the approval, Mitchell said. In the EPA's approvals, it used notice and comment periods, but it didn't do so in its change of positions.

Peter Keisler of Sidley Austin LLP in Washington, D.C., who represented respondent industry and labor groups, argued that the Clean Air Act only authorizes proscribing significant contributions to downwind states. It does not authorize limits based on a state's economic ability to reduce emissions.

Cost Relationship

He argued that under the EPA's rule, there was no relationship between contribution and required reductions; the only factor between contributing upwind states was cost of reductions.

Justice Stephen G. Breyer said the EPA is trying to impose the least cost it can to fix the problem of contribution to downwind nonattainment.

Justice Elena Kagan said that everyone agrees that it is better to regulate with attention to costs.

Keisler argued, however, that the act's text is focused on downwind contributions of individual states. The entire act, he said, is focused on treating states as individual entities responsible for the emissions from within their own borders.

The EPA, he said, isn't a chancellor in equity that can make judgment calls on equity in allocations. The provisions of the act are about degrees of causal contribution by individual states, he said. Nothing in the act, he added, suggests comparative cost can be taken into account; the provisions only discuss causation.

Justice Kagan said there is no language prohibiting consideration of costs and no language limiting consideration to other considerations such as public health.

Keisler said costs can be used by a state in deciding how to come into compliance, but that is a different issue from using costs to determine what is a significant contribution.

Keisler argued that the EPA cannot regulate beyond the point needed to meet compliance and the EPA's rule does.

Rule Development, Implementation

Justice Sonia Sotomayor asked how long it would take for a new rule to be developed and implemented.

Stewart said this is unclear because no alternatives to the EPA's rule have been suggested and the EPA would need to start from scratch.

Stewart noted that if there were no Clean Air Act, then cross-state air pollution would be subject to federal common law nuisance claims and equitable factors would be considered in resolving claims. The EPA, he said, is acting as an honest broker for upwind and downwind states through the rule and seeking efficient solutions to the problems of cross-state pollution.

The oral arguments didn't address jurisdictional issues that the EPA had raised in its petition. The agency had said the D.C. Circuit lacked jurisdiction to hear the challenge in the first place.

Justice Samuel Alito took no part in the oral argument.

To contact the reporter on this story: John Henry Stam in Washington at

To contact the editor responsible for this story: Larry Pearl at

The U.S. Supreme Court oral argument transcript for EPA v. EME Homer City Generation LP is available at

Bloomberg BNA will be hosting a webinar discussing this case and related issues Dec. 17. More information is available at /supreme-court-takes-w17179880352/.

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