DC COURT OF APPEALS STRIKES DOWN EPA’S CROSS STATE AIR POLLUTION RULES

On August 21, 2012, the Court of Appeals for the District of Columbia struck down the EPA’s Cross State Air Pollution Rules, also known as the Transport Rules, that governed the emissions reduction responsibility of 28 upwind states – including Pennsylvania -- under the “good neighbor” provisions of the Clean Air Act (“CAA”).  EME Homer City Generation L.P. v. EPA, No. 11-1302 (D.D.C. August 21, 2012)(Kavanaugh, J. on the opinion, joined by Judge Griffith).  The “good neighbor” provisions of the CAA require that upwind states prevent sources within their borders from emitting pollution that “contributes significantly” to downwind states’ nonattainment of federal air quality standards.  The EPA adopted the Transport Rules in August 2011 to define the “good neighbor” obligations for two emissions: sulfur dioxide (SO?) and nitrogen oxide (NO?).

The D.C Court of Appeals found that the Transport Rules exceeded the EPA’s authority on two independent bases.  First, the court found that the Transport Rules require states to reduce emissions by more than their own “significant contribution” to a downwind states’ nonattainment of air quality standards, thereby exceeding the authorization under the CAA.  The Court found that the EPA properly set specific numerical air quality threshold levels for each pollutant to determine if the upwind states “significantly contributed” to downward states’ failure to meet the federal air quality standards for each of the relevant emissions.  Slip op. at 15-16.  This enabled the EPA to identify the upwind states that were subject to the “good neighbor” obligations for each pollutant.  But then the EPA used regional, cost-based modeling to determine how much those upwind states would have to reduce pollutants to meet their “good neighbor” obligations.  This, the Court concluded, exceeded the EPA’s statutory authorization:

"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 downward state.  That much is fine.  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. . . . .[EPA] imposed restrictions based on region-wide air quality modeling projections; those restrictions could require upwind States to reduce emissions by more than the amount of that contribution." Slip op. at 34.

The Court also found that the Transport Rule exceeded the EPA’s statutory authority because it issued a Federal Implementation Plan (FIP) implementing the “good neighbor rule” without permitting the states to propose their own State Implementation Plans (SIPs).  The Court found that the cooperative federalism scheme of the Clean Air Act provides that the EPA sets air quality standards and the states then have the opportunity, in the first instance, to propose plans to implement those standards in their own states.  By issuing the standards and the FIPs simultaneously, without giving the states the chance to come up with their own implementation plans, the EPA exceeded its statutory authorization.

Judge Rogers dissented.  She concluded that the Court’s ruling ignored statutory limits on its jurisdiction and considered arguments waived and/or never raised below, so that EPA was “blindsided” by arguments raised for the first time on appeal.  She concluded that these jurisdictional limits on the court’s review were fatal.

This ruling is a setback for the EPA’s implementation of the “good neighbor” rules, and further delays implementation of air quality standards for sulfur dioxide and nitrogen oxide.