U.S. Supreme Court Gives Downwind States Breathing Room Under the Clean Air Act

On April 29, 2014, in EPA, et al v. EME Homer City Generation, LP, the United States Supreme Court ruled in favor of the US Environmental Protection Agency (“EPA”) and its controversial “Transport Rule” which curbed nitrous oxide and sulfur dioxide emissions in 27 upwind states. The Supreme Court held it was appropriate to defer to EPA’s expertise in crafting a method of implementing the Clean Air Act’s (“CAA”) “Good Neighbor” provision to reduce pollution from upwind states onto their downwind neighbors.

EPA has defined ambient air quality standards and has determined certain areas that do not attain the required level to protect the public health. Those states in which the air quality does not provide the required level of protection have to submit a State Implementation Plan (SIP). In the SIP, the state must consider the effect of its emissions on downwind states’ ability to meet attainment standards, 42 U.S.C. 7401 et seq. This is the so-called Good Neighbor Provision of the CAA. Id. at 7410(a)(2). EPA rejected the SIPs for 27 upwind states under the Good Neighbor Provision of the CAA.

EPA drafted the Cross-State Air Pollution Rule, also called the Transport Rule, to curb nitrous oxide and sulfur dioxide in 27 upwind states in terms of their effect on downwind states. Upwind States and industries filed suit against the EPA alleging that the EPA’s action exceeded its authority. The DC Circuit agreed with the plaintiffs. The Supreme Court reversed agreeing with the EPA. EPA v. EME Homer City Generation, LP.

EPA issued the Transport Rule with the Federal Implementation Plan (FIP) for the states with rejected SIPs. The FIPs required an upwind state that contributes significantly to a downwind state’s nonattainment to comply with the Transport Rule, 76 Fed. Reg. 48208-48209, if it contributes more than 1 percent of the 5 CAA pollutants. EPA’s Transport Rule requires an analysis of each upwind state’s contribution en mass to determine if more than 1% of any three CAA pollutants contribute to the nonattainment of the downwind state receptor. The second step is a cost analysis based on a cost of $500 per ton or less for each parameter, which generates an allocation of emission reductions. Although not in the statute, the DC Circuit interpreted the CAA to provide upwind states with the opportunity to allocate emissions before an FIP is issued and rejected EPA’s two step approach in favor of proportionality, i.e. how many pollutants, in what amounts and to what degree does it contribute to the downwind state’s pollutants.

Oddly only 3 of the 27 states challenged EPA’s SIP rejection. As to the other 24, the Court held that the SIP rejection triggered EPA’s FIP authority. Issuing the FIP was an obligation of the EPA to do. Since EPA had a reasonable explanation for the Transport Rule, the authority was entitled to deference. EPA chose the approach of “less costly to remediate” the offending CAA pollutant. The Court concurred as it concluded it was likely to lead to less over-control of constituents.

Needless to say that in the forty years since the passage of the CAA, approval of a measure to assist states downwind which have struggled to reach attainment at great cost, over upwind states that have in varying measures not been good neighbors, is a breath of fresh air.

John H. Klock is a Director in the Gibbons Real Property & Environmental Department.