The Supreme Court today issued an important Clean Air Act decision in the EPA v. EME Homer Generation case, reversing the D.C. Circuit. No doubt hundreds of blogposts and newsletters will be written about the case, but I wanted to share my initial thoughts after reading the Court’s opinion.  There’s some jargon below that might be confusing for the Clean Air Act novice, but those references are not really critical to the points I want to make.

Briefly, there were two issues in this case, which challenged EPA’s Cross-State Air Pollution Rule (CSPAR).  This rule was intended to implement the “good neighbor” provisions of the Act, which requires upwind states to reduce their emissions to the extent those emissions prevent downwind states from attaining compliance with applicable National Ambient Air Quality Standards.  The D.C. Circuit had held, first, that EPA had erred by not allowing the upwind states to issue their own state implementation plans (SIPs) to comply with the rule before issuing a federal implementation plan (FIP) specifying the levels of emission reductions demanded of the upwind states.  The D.C. Circuit also held that EPA’s method for allocating the required reductions among the upwind states – by considering which reductions would be most “cost-effective” – violated the Act by not requiring reductions proportional to the upwind states’ actual contribution to pollution in downwind states.

The Supreme Court reversed on both grounds in a 6-2 opinion authored by Justice Ginsburg (with Justices Scalia and Thomas dissenting, and Justice Alito recused).  First, the Court held that nothing in the Act required EPA to give states an opportunity to issue SIPs (after their earlier SIPs had been rejected by EPA) before issuing its FIP.  Second, the Court found that the statute was ambiguous on how to allocate reductions from the upwind states and that EPA’s allocation approach was reasonable.  In other words, in the face of an ambiguous statute, the Court deferred to EPA’s interpretation, consistent with that other landmark Clean Air Act case, Chevron.

Several takeaways:

  • This is the first big win for both EPA and environmental groups in the Supreme Court in some time.  Even if environmental groups might have been pleased when the Court ruled in Massachusetts that the Clean Air Act required regulation of greenhouse gasses from automobiles, EPA lost that case on the grounds that the Agency’s interpretation of the statute conflicted with its plain terms.  Here, for the first time in a long time, the Court deferred to EPA’s interpretation of a law that the Agency is responsible for implementing.  And the win was resounding, with Justices Kennedy and Roberts siding with the more liberal wing of the Court.  This is good news for EPA, but it may be shortlived depending on how the Court rules in the Utility Air Regulatory Group case, in which industry and several states are challenging EPA’s PSD regulations for greenhouse gasses.  It is impossible to say whether the Court’s decision today represents a trend towards more deference to EPA, but it surely is a start in that direction.
  • The D.C. Circuit opinion was authored by Judge Kavanaugh, whose previous opinions and dissents had appeared to carry significant weight, at least among the more conservative justices.  The Supreme Court’s opinion today flatly rejected Judge Kavanaugh’s reasoning.  Again, it is unclear whether this represents a trend, but it does indicate that the Court will not simply adopt his views in all cases.
  • The decision also strikes a blow to the concept of “cooperative federalism” that industry and several states have been pushing with respect to the Clean Air Act.  The cooperative federalism argument is that EPA has too often stepped on the rights of states two whom the Act gives primacy to address pollution within their borders.  Here, the idea was that EPA should have allowed the states the opportunity first to determine how best to reduce emissions before EPA itself issued detailed plans for each state.  The Court clearly rejected this argument, finding that EPA has significant authority to act where states have failed to.
  • On a substantive level, this decision is a major victory for EPA.  The Agency has struggled for years trying to develop a workable solution to upwind pollution only to have its rules rejected by the D.C. Circuit.  EPA can be assured now that its approach is valid and the requirements of the CSAPR must now be implemented.  Downwind states and their environmental allies will be quite pleased.  It also is another body blow to coal-fired power plants, as the reductions in CSPAR are demanded from them.  The regulatory pressure encouraging a switch to natural gas and other “cleaner” forms of electricity continues.
  • As noted, there remains one more important Clean Air Act case for the Court to decide this term – whether EPA’s PSD rules for greenhouse gasses are lawful.  The Court’s decision in the EME case and the greenhouse gasses cases, however, will have no bearing on whether EPA moves ahead with its greenhouse gas New Source Performance Standards for new and existing electric generation units, expected to be issued before President Obama leaves office.  But, the Court’s decision in EME surely bolsters EPA’s confidence that the D.C. Circuit will need to show more deference to the Agency regardless of the approach it takes.