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D.C. Circuit Overturns EPA Rule on Cross-State Air Pollution

By: Jonathan Kalmuss-Katz

Four years after overturning a major Environmental Protection Agency (“EPA”) air pollution rule as inconsistent with the Clean Air Act, this week the D.C. Circuit Court of Appeals vacated the program that EPA had tailored to take its place, ruling that the replacement rule “exceeds the agency’s statutory authority” and imposes “impossible” burdens upon covered states.  As a result, hundreds of power plants in 28 states are once again subject to the very rule the same court rejected in 2008.  

The regulations in question implement the Clean Air Act’s “good neighbor” provisions, which prohibit states from significantly contributing to unsafe levels of air pollution, or interfering with Clean Air Act compliance, in downwind states.  In 2005, EPA finalized the Clean Air Interstate Rule (“CAIR”), establishing an emissions trading program for Eastern and Midwestern power plants aimed at reducing interstate air pollution transport.  However, in North Carolina v. EPA, the D.C. Circuit identified “more than several fatal flaws” in CAIR, including EPA’s failure to ensure emissions reductions from all covered upwind states.  Instead of striking the rule immediately, the Court granted a rare remand without vacatur, leaving CAIR in place while the agency developed a replacement.

In 2011, EPA issued the Cross-State Air Pollution Rule (“CSAPR”) as a substitute for CAIR.  In response to the Court’s concerns, EPA provided more details on what portion of upwind states’ emissions “significantly contribute” to cross-state air pollution problems and set state-specific emissions budgets.  To implement the rule, EPA issued Federal Implementation Plans (“FIPs”) for all of the covered states, which were to be subject to revision by the states as early as 2013.

In its recent 2-1 decision, however, the D.C. Circuit held that CSAPR too overstepped EPA’s Clean Air Act authority.  Specifically, the majority opinion faulted EPA for authorizing emissions limits in upwind states that were more stringent than the state’s contribution to specific downwind non-attainment.  The Court also disapproved of EPA’s issuance of FIPs, holding that the agency was required to first alert states of their new regulatory requirements and give them the chance to issue or revise their own State Implementation Plans.    Finding these deficiencies “too fundamental to permit us to ‘pick and choose portions’ of the rule to preserve,” EPA vacated the rule in its entirely, instructing EPA to “continue administering CAIR pending the promulgation of a valid replacement.”

In a 40-page dissent, Judge Judith Rogers wrote that the majority “disregards limits Congress placed on [the Court’s] jurisdiction, the plain text of the Clean Air Act, and this court’s settled precedent interpreting the same statutory provisions at issue today.”  In additional to disputing the claim that EPA could not set emissions limits more stringent than a state’s contribution to downwind nonattainment, Rogers argued that since none of the Petitioners had raised the complaint in their public comments on CSAPR, the Court did not have jurisdiction to even decide the issue.

EPA has said that it is “reviewing the court decision” on CSAPR, and it may seek leave to appeal the panel’s decision either to the entire D.C. Circuit or to the Supreme Court.  In the interim, the CAIR program remains in place.  For more information on the Court’s decision or Clean Air Act compliance, contact Jeffrey Gracer or Jonathan Kalmuss-Katz.

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