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D.C. Circuit Vacates EPA “Cross-State” Air Pollution Rule: Exceeds Statutory Authority

Posted in Agency Authority, Judicial Review & Remedies

In a major setback to the Obama Administration, the United States Court of Appeals for the District of Columbia Circuit today vacated the Environmental Protection Agency (EPA)’s “Cross-State” or “Transport” Federal Implementation Plans: Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals final rule because EPA yet again exceeded its statutory authority.  The decision in EME Homer City Generation, L.P., v. EPA (Kavanaugh, with Griffith; Rogers dissenting) is lengthy and detailed, but succinctly summarized to this:

Here, EPA’s Transport Rule exceeds the agency’s statutory authority in two independent respects. First, the statutory text grants EPA authority to require upwind States to reduce only their own significant contributions to a downwind State’s nonattainment. But under the Transport Rule, upwind States may be required to reduce emissions by more than their own significant contributions to a downwind State’s nonattainment. EPA has used the good neighbor provision to impose massive emissions reduction requirements on upwind States without regard to the limits imposed by the statutory text. Whatever its merits as a policy matter, EPA’s Transport Rule violates the statute. Second, the Clean Air Act affords States the initial opportunity to implement reductions required by EPA under the good neighbor provision. But here, when EPA quantified States’ good neighbor obligations, it did not allow the States the initial opportunity to implement the required reductions with respect to sources within their borders. Instead, EPA quantified States’ good neighbor obligations and simultaneously set forth EPA-designed Federal Implementation Plans, or FIPs, to implement those obligations at the State level. By doing so, EPA departed from its consistent prior approach to implementing the good neighbor provision and violated the Act.

This is not the first time the interstate air pollution issue under the Clean Air Act (CAA) has been before the court.  In 2008, the court found EPA’s analysis deficient and remanded EPA’s 2005 Clean Air Interstate Rule (CAIR) without vacatur, because EPA had both improperly calculated the costs applicable to individual states and required the States to share each other’s burdens, neither of which was authorized.  The court left CAIR in place “until it is replaced by a rule consistent with our opinion.”  The 2011 Transport Rule was EPA’s attempt to respond to the court’s 2008 decision.  Even while the current litigation was pending, the court stayed the 2011 rule and permitted EPA to continue to administer the defective 2008 rule.

Here, EPA’s Transport Rule violated the statute because it made no attempt to calculate upwind States’ required reductions on a proportional basis that took into account contributions of other upwind States to the downwind States’ nonattainment problems.

The court was required to return to well-worn injunctions because EPA has difficulty understanding:

It is axiomatic that an administrative agency’s power to promulgate legislative regulations is limited to the authority delegated by Congress.” Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988); see also Michigan v. EPA, 268 F.3d 1075, 1081 (D.C. Cir. 2001) (“EPA is a federal agency – a creature of statute,” and may exercise “only those authorities conferred upon it by Congress.”).

The court’s conclusion is straightforward, even if the calculus underlying it is complex:

States are obligated to prohibit only those “amounts” of pollution “which will . . . contribute significantly” to downwind attainment problems – and no more. Because the Transport Rule exceeds those limits, and indeed does not really try to meet those requirements, it cannot stand.

Independent of that conclusion, the court also found that the Transport Rule could not stand because EPA interposed a Federal Implementation Plans (FIP) before the States could develop State Improvement Plan (SIP) when the statute requires that EPA find that a SIP fails to contain a “required submission” or EPA disapproves a SIP because of a deficiency:

But EPA’s many SIP disapprovals and findings of failure to submit share one problematic feature: EPA made all of those findings before it told the States what emissions reductions their SIPs were supposed to achieve under the good neighbor provision.

Applying its standard Allied-Signal (but perhaps dubious) test for vacature, the court had no difficulty finding that the seriousness of EPA’s errors outweighed the potential disruptive effect of vacature, and vacated the 2011 Transport or Cross-State rule.  What then of the last, still in effect, but still in violation, rule?  The court applied the same logic to permit its continued use, but reminded EPA that it remains under the injunction to act quickly to resolve these problems.

EPA may someday understand that is must read statutes carefully with the understanding that the statutes are the source and limit of EPA’s authority.  Until then, the D.C. Circuit will be busy.