On April 29, 2014, the U.S. Supreme Court issued a 6-2 opinion reversing the D.C. Circuit Court of Appeals and reinstating the U.S. EPA’s promulgation of the Cross-State Air Pollution Rule (“CSAPR”), which regulates the inter-state transport of NOx and SO2 emissions in implementing the “Good Neighbor Provision” in the Clean Air Act.  A centerpiece of the majority opinion, authored by Justice Ginsberg, was the “dispositive effect” of Chevron U.S.A. v. Natural Resources Defense Council, the U.S. Supreme Court’s 1984 decision that sets forth the analysis for determining the reasonableness of an agency’s interpretation of ambiguous language.  Here, the Court found that Congress’ silence in the Good Neighbor Provision regarding how to allocate responsibility for reducing NOx and SO2 emissions contributions to ”downwind” states among multiple contributing “upwind” states effectively delegates authority to EPA to select a reasonable option—in this case, choosing to impose uniform emission reduction cost thresholds on the upwind states.  

This allocation method was a key area of dispute between the majority and the dissent, authored by Justice Scalia.  Whereas EPA’s rule imposes greater regulation on contributing upwind states that had previously done less to control pollution, the dissent argued that this allocation method would effectively require “over-control” in some circumstances beyond the one-percent “significant contribution” threshold.  The majority dismissed this argument, noting that the Good Neighbor Provision seeks to ensure National Ambient Air Quality Standard (“NAAQS”) attainment in every downwind state.  Therefore, even though controls may exceed the level necessary to ensure NAAQS attainment in a given state, the inquiry must focus on whether the controls are adequate to control emissions to any impacted downwind state.  In justifying its analysis, the majority cited the difficulty of crafting a workable regulatory solution, observing that the “transient” nature of air pollution and the complex linkages between the various states precludes a simple one-to-one impact evaluation.  To put the complexity of the technical challenge in perspective, the majority noted that EPA evaluated 2,479 separate emission linkages between downwind and upwind states.  Further, the majority observed that “particularized, as applied” challenges remain available for instances where a state has been forced to regulate emissions below the significance threshold.  Texas has argued, for instance, that its downwind impact is insignificant (less than 1%) and the Supreme Court decision expressly preserves future legal challenges by Texas and others as to how EPA applies CSAPR to a particular state.

The decision also addressed a variety of other arguments raised by the parties, including a rejection of EPA’s argument that the respondents failed to raise objections with reasonable specificity during the public comment period, which the dissent joined the majority in finding was not “jurisdictional.”  As such, the Court retains discretion to consider objections not specifically addressed in the public comment record.

The decision will be felt in a number of ways in the near future.  Pending challenges to CSAPR-related rules, such as the rule allowing CSAPR to qualify as a suitable control for regional haze, may begin to proceed towards resolution.  Ohio, Kansas and Georgia have legal challenges to the CSAPR federal implementation plans (“FIPs”) pending for their states.   The Supreme Court remanded CSAPR to the D.C. Circuit where a stay remains in place on the rule.  EPA will need to decide whether it wants an opportunity to amend the rule to reset compliance dates that have already passed and to bolster the rule against potential as-applied challenges before asking the D.C. Circuit to lift the stay.  Once the stay is lifted, states will again be “on the clock” for meeting CSAPR implementation dates.  The Clean Air Interstate Rule (“CAIR”) – EPA’s previous rule addressing interstate transport of air pollution – was also temporarily held in place pending resolution of the CSAPR appeals.  Although EPA released a brief statement that “[a]t this time, CAIR remains in place and no immediate action from States or affected sources is expected,” presumably EPA will take action at some point to withdraw CAIR once CSAPR is in place.

The return of CSAPR will also surely impact EPA’s other highly-anticipated rulemakings, such as the revised ozone NAAQS (likely to be issued in Oct. 2015) and greenhouse gas standards for existing power plants.  Regarding the latter, Administrator McCarthy has already noted the importance of this decision as precedent for the upcoming rulemaking in terms of the degree of deference due EPA.  Concerns related to principles of cooperative federalism have been widely noted, as the Court’s decision affirmed EPA’s  ”FIP-first” approach whereby it imposes a federal plan before a state has the opportunity to develop its own state implementation plan for meeting a rule’s requirements.  Many observers have questioned whether EPA will continue the trend of imposing requirements without providing states a reasonable opportunity to act.

CSAPR will also have an economic impact on power plants located in upwind states, who will be forced to shutter facilities, install expensive pollution control equipment, or seek other means of reducing NOx and SO2 emissions.  The degree of impact going forward, however, is unclear since industry has already begun implementing reduction strategies during the intervening years as the challenge worked its way through the courts, and in response to the requirements of both CSAPR and the Mercury and Air Toxics Standards (MATS).  Further, the abundance and relatively low-cost of natural gas has already prompted a switch from coal at many facilities.  Although coal remains a necessary and integral part of the nation’s energy structure, EPA’s victory emboldens the Agency to continue imposing ever tighter requirements on coal-fired utilities.