EPA’s Struggle To Regulate Interstate Pollution

The recent D.C. Circuit decision (August 21, 2012) in EME Homer City Generation v. EPA was the latest in a string of cases addressing the EPA’s efforts to regulate interstate air pollution.  It overturned the EPA’s Cross-State Air Pollution Rule (colloquially known as the Transport Rule) based on two aspects: it could require upwind states to reduce their emissions by more than their own significant contributions to a downwind state’s nonattainment, and it prescribed a federal implementation program (FIP) to achieve interstate pollution reductions for all states before allowing them the chance to implement these obligations at the state level.

The court has previously allowed some flexibility in the state created by the EPA, but this opinion made it clear that the EPA could not increase state burdens because of cost concerns or other efficient methods.  The EPA Transport Rule also allowed states to submit their own modifications to the FIP, but these modifications could not satisfy the cooperative federalism structure of the CAA, which gives states primary authority to reduce their emissions under the Clean Air Act (CAA).  The D.C. Circuit vacated the Transport Rule and mandated a return to the previous interstate pollution rule promulgated by the EPA, the Clean Air Interstate Rule (CAIR).

EME Homer City Generations v. EPA is the latest in a series of opinions from the D.C. Circuit on EPA’s regulation of interstate pollution.  The primary section of the Clean Air Act at issue in these decisions is CAA § 110(a)(2)(D)(i)(I), the good neighbor provision, which requires the EPA to act when an upwind state contributes significantly to a downwind state’s pollution.

The EPA has promulgated several rules controlling interstate pollution that contributes significantly to another state’s nonattainment.  Many of these have been challenged by states reluctant to assume extra emission reduction obligations.
The NOx State Implementation Plan Call for the Mid-Atlantic States, promulgated in 1998, required twenty-two states (and the District of Columbia) to submit State Implementation Plans (SIPs) providing Nitrogen Oxide (NOx) emission reductions to mitigate ozone transport in the eastern United States.  It was an EPA-administered trading program for NOx.  Several states challenged this aspect of the rule, asserting that it was an impermissible consideration of cost in regulating a National Ambient Air Quality Standard (NAAQS).  In Michigan v. EPA, the D.C. Circuit held that there was no conflict with the Clean Air Act – EPA could use cost considerations to lower an upwind state’s obligation under the good neighbor provision.

The next interstate pollution rule, the Clean Air Interstate Rule (enacted in 2005), was a more comprehensive version of the NOx SIP Call that created a cap-and-trade program for power plants in 28 upwind states, allowing states to opt out of the program if emissions were curtailed stringently enough.  The case North Carolina v. EPA vacated the Clean Air Interstate Rule for flaws including: the use of region-wide caps with no state-specific determination of contribution, a lack of connection between states’ emissions reductions to their significant contributions, and the arbitrarily assignment of state budgets from the region-wide NOx cap.  These flaws were to be fixed in EPA’s next rule, but CAIR would stay in place until EPA created a replacement.

In response, the EPA created the Transport Rule, which retained the basic structure of CAIR and only included states that contributed significantly to another state’s nonattainment for any NAAQS, and determined the amount each state had to decrease its emissions.  In EME Homer City Generation v. EPA, the D.C. Circuit vacated the Transport Rule because it could possibly lead to states reducing their emissions by more than they contributed to another state’s nonattainment and because it had the practical effect of mandating a FIP for states before they had the chance to submit a SIP.

With the most recent D.C. Circuit decision, the parameters for EPA’s next rule become unclear.  The D.C. Circuit is strongly championing the rights of the states to regulate air pollution.  Furthermore, the limits imposed on the EPA will be difficult to fulfill, as air quality models will likely not have the ability to determine the precise degree of emissions limitation necessary to represent a state’s proportionate share of contribution to a downwind state’s nonattainment.

The EPA has petitioned for the case to be reheard on October 5th, 2012.

Written by Jamie Bowers, GIELR staff