D.C. Circuit Vacates Cross-State Rule, Orders EPA to Keep Bush-Era Rule in Place

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A federal appeals court Aug. 21 vacated the Environmental Protection Agency's Cross-State Air Pollution Rule, the latest setback for the agency in its effort to address air pollution that crosses state lines (EME Homer City Generation LP v. EPA, D.C. Cir., No. 11-1302, 8/21/12).

The U.S. Court of Appeals for the District of Columbia Circuit ruled that the Cross-State Air Pollution Rule, also called the transport rule, exceeds EPA's statutory authority under the Clean Air Act. It ordered EPA to continue administering the less-stringent 2005 Clean Air Interstate Rule while the agency promulgates a valid replacement.

“Our decision today should not be interpreted as a comment on the wisdom or policy merits of EPA's Transport Rule,” the court wrote. “It is not our job to set environmental policy. Our limited but important role is to independently ensure that the agency stays within the boundaries Congress has set. EPA did not do so here.”

A two-judge majority of the D.C. Circuit cited two reasons for vacating the rule. First, it said the rule may require upwind states to reduce their emissions by more than their “significant contributions” to a downwind state's nonattainment. Second, the court said EPA erroneously issued federal implementation plans when it should have allowed states the opportunity to issue state plans.


The decision is “an abject loss. … It's a devastating loss for Americans and air quality.”  
John Walke, Natural Resources Defense Council,

“The bottom line is that EPA really overreached here and came away with nothing,” Jeffrey Holmstead, a former EPA assistant administrator for air and radiation who represented GenOn Energy Inc. in the case, told BNA. “They got sent back to the drawing board.”

John Walke, clean air director for the Natural Resources Defense Council, which intervened on behalf of EPA, told BNA Aug. 21 that the decision is “an abject loss. … It's a devastating loss for Americans and air quality.”

EPA spokeswoman Alisha Johnson told BNA that the agency is reviewing the decision to “determine the appropriate course of action.”

'Significant Contribution' Decision

The cross-state rule, which EPA issued in July 2011, would have required 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).

The court said the rule is invalid, in part because it may require upwind states to reduce their emissions by more than their “significant contributions” to a downwind state's nonattainment.

The good neighbor provision of the Clean Air Act, Section 110(a)(2)(D), requires states to reduce emissions that “contribute significantly” to nonattainment of air quality standards in downwind states.

In determining each state's “significant contribution,” EPA first identified states that contributed an amount of ozone or particulate matter in downwind states that was more than 1 percent of the standard. For those states, the agency then determined the reductions that would be required by taking into account the cost of emissions controls.

Petitioners argued that EPA's methodology could push a state to reduce its emissions below the “significant contribution” threshold, and the D.C. Circuit agreed with the argument.

“The Transport Rule includes or excludes an upwind State based on the amount of that upwind State's significant contribution to a nonattainment area in a downwind State. That much is fine,” the court wrote. “But under the Rule, a State then may be required to reduce its emissions by an amount greater than the 'significant contribution' that brought it into the program in the first place. That much is not fine.”

State, Federal Implementation Plans

The court said it also vacated the rule because EPA erroneously promulgated the cross-state rule through federal implementation plans, rather than calling on states to submit state implementation plans for agency approval.

EPA said it either disapproved the state plans that states submitted, or it made findings that states never submitted their plans. In the absence of an approved state plan, the agency has an obligation under the Clean Air Act to issue federal plans.

However, the court agreed with petitioners, which argued it would not be appropriate for states to issue state plans without knowing what the cross-state standard would be.


“EPA really overreached here and came away with nothing.”  
Jeffrey Holmstead, Bracewell & Giuliani

“EPA's approach punishes the States for failing to meet a standard that EPA had not yet announced and the States did not yet know,” the court wrote.

Challengers to the rule include the coal industry and states. Industry petitioners include EME Homer City Generation LP and Luminant Generation Co. LLC. States challenging the rule include Texas, Michigan, and Ohio.

Rogers Writes Dissent

During oral arguments in the case April 13, Judge Judith Rogers's questions were more critical of the petitioners' arguments, and Judge Brett Kavanaugh appeared skeptical of EPA's regulation. Judge Thomas Griffith appeared to be a possible swing vote on the three-judge panel.

Kavanaugh wrote the majority opinion, and Griffith joined it. Rogers wrote a dissenting opinion.

Rogers said the court does not have the jurisdiction to reach the majority's conclusions.

She said EPA's two-step approach to defining “significant contribution” was not raised in public comments during the rulemaking process. Petitioners may only litigate issues they brought to the agency's attention in comments.

Rogers also said the federal implementation plan issue should have been raised in cases challenging final rules in which EPA disapproved state implementation plan submissions or found states failed to submit plans. In those rules, EPA made its interpretation that states must submit plans under the good neighbor provision, regardless of whether EPA had yet promulgated the cross-state standards.

The court's decision “is an unsettling of the consistent precedent of this court strictly enforcing jurisdictional limits, a redesign of Congress's vision of cooperative federalism between the States and the federal government in implementing the CAA based on the court's own notions of absurdity and logic that are unsupported by a factual record, and a trampling on this court's precedent on which the Environmental Protection Agency ('EPA') was entitled to rely in developing the Transport Rule rather than be blindsided by arguments raised for the first time in this court,” Rogers wrote.

Appeal Urged

Walke said Rogers's dissent “provides the road map for an appeal.” He said he is “far from giving up hope that the rule will be reinstated.”

Walke said the Natural Resources Defense Council will encourage the Obama administration to appeal the decision.

EPA's options would be to appeal the opinion to the same three-judge panel, to all of the D.C. Circuit judges, or to the Supreme Court. Walke said the dissenting opinion is “thorough and powerful,” and it is likely meant to appeal to the other judges on the court.

Holmstead was skeptical the government would prevail on an appeal, and he also questioned whether the solicitor general would support an appeal.

“I think this will be an interesting case because the environmental community and EPA will certainly push the SG's office,” Holmstead said. “The SG's office will see that this is not a good case for them. They don't like to use up their chips unless they think they have a good case.”

2005 Rule to Remain in Effect

EPA's first rule addressing the good neighbor provision was called the 1998 NOx SIP Call. Under that rule, EPA developed an emissions cap-and-trade program to address the interstate transport of nitrogen oxides.

EPA replaced the NOx SIP Call with the Clean Air Interstate Rule in 2005 during the Bush administration. The D.C. Circuit found several flaws with CAIR when it remanded the rule to EPA in 2008, saying the rule did not ensure that upwind emissions reductions would be sufficient to help downwind states meet air standards.

Although the court remanded CAIR to the agency, it allowed the program to remain in place until a replacement program is implemented.

EPA intended the cross-state rule to address the flaws the court found with CAIR. The first phase of the cross-state rule was set to take effect Jan. 1, 2012, but the D.C. Circuit on Dec. 30, 2011, stayed the rule while the legal challenges played out.

The Dec. 30, 2011, stay order allowed CAIR to remain in place, and the Aug. 21 decision ordered EPA to continue administering the CAIR.

By Jessica Coomes  

The Aug. 21 decision in EME Homer City Generation LP v. EPA is available at http://tinyurl.com/bpy4rhk.

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