The Clean Air Act of 1970 (CAA)1 requires that states be “Good Neighbors” and regulate their in-state sources of pollution so that those sources do not “contribute significantly” to pollution in other states downwind.2 Congress assigned the Environmental Protection Agency (EPA) the unenviable task of orchestrating compliance through the cooperative federalism framework of the CAA, and over the last two decades, the EPA has made repeated, and highly controversial, attempts to implement the “Good Neighbor Provision.”3 The most recent of these efforts, the Cross-State Air Pollution Rule (CSAPR)4 received a stamp of approval from the Supreme Court on April 29, 2014 in EPA v. EME Homer City Generation.5 However, despite the EPA now having a regulatory framework that passes muster, increased neighborliness does not appear imminent.
CSAPR is designed to provide a solution to a seemingly intractable problem: “Most upwind States propel pollutants to more than one downwind State, many downwind States receive pollution from multiple upwind States, and some States qualify as both upwind and downwind.”6 The EPA found and evaluated nearly 2,500 such “linkages” between downwind and upwind states.7 The challenge, then, was to create a legal framework for reducing these streams of pollution, but only to the extent that they “contribute[d] significantly” to the non-attainment of National Ambient Air Quality Standards (NAAQs) by downwind states.
To solve this problem, the EPA first developed a procedure for determining when a state “contribute[s] significantly” to a downwind state’s non-attainment of a relevant NAAQs.8 First, the EPA excluded as de minimis any impacts that resulted in less than 1 percent of the NAAQs in any downwind state. States with only de minimis impacts were excluded from regulation under CSAPR. For the remaining 27 states, the EPA developed an “emissions budget” using a complex model. This model took into account not only the emissions produced by each state and its contribution to downwind pollution, but the amount of reduction that could be achieved at certain cost thresholds.
In EME Homer City Generation v. EPA,9 the D.C. Circuit vacated CSAPR on two primary grounds. First, it found that it was unfair to the states to expect that they would develop their State Implementation Plans (SIPs) without knowing what their obligations were under the Good Neighbor Provision. Under the CAA, a state must propose a SIP within three years of the EPA issuing new NAAQS.10 If the EPA judges that a SIP is inadequate, then within two years it must issue a Federal Implementation Plan (FIP) for that state. But CSAPR was promulgated after the states had submitted their SIPs. When the EPA promulgated CSAPR, it deemed those existing SIPs inadequate with regard to the Good Neighbor Provision, and simultaneously issued FIPs.
The second issue on which the D.C. Circuit vacated CSAPR was the allocation of emissions reductions among the upwind states. The D.C. Circuit concluded that the EPA’s method, which took into account the cost-effectiveness of reduction measures, was not supported by the statute. The D.C. Circuit held that the EPA must require that states reduce their emissions by an amount strictly proportional to the amount to which they contributed to their downwind neighbors’ non-attainment of NAAQS.
The Supreme Court, in a 6-2 opinion written by Justice Ginsburg, disagreed (Justices Scalia and Thomas dissented, and Justice Alito recused himself). With regard to the SIPs, the Court concluded that the plain text of the statute supported the EPA’s issuance of FIPs concurrently with CSAPR, because the EPA’s power to issue a FIP adheres when it finds a SIP inadequate. The EPA may have two years in which to issue a FIP, but it can do so immediately if it so chooses.
With regard to the allocation of the emissions budgets, the Supreme Court found that the EPA’s cost-based approach was a permissible reading of the statute. A strictly proportional approach would likely result in “over-control” of emissions, and would be more costly than the EPA’s approach. In particular, the Court was concerned that a strictly proportional approach would harm states that have higher emissions due to a higher population or more industry, but that have already implemented costly pollution control measures. In a proportional approach, those states would have to implement even more expensive measures to achieve incremental reductions in emissions, while a neighboring state that had not yet implemented less expensive measures could continue to “free-rid[e] on their neighbor’s efforts to reduce pollution.”11
The Court did agree, however, that there were limits. A state cannot be required to reduce its emissions below the de minimis threshold of a 1 percent contribution to the NAAQS of any downwind state, nor can it be required to reduce its emissions below that required to bring any downwind state into attainment. States are free to file as-applied challenges to CSAPR on that basis.
Although EPA v. EME Homer City Generation represents a victory for the EPA, it is unclear if the decision will have any practical effect in the near future. The Supreme Court remanded the case to the D.C. Circuit, where outstanding issues in the case remain to be resolved, including whether a FIP can be imposed on a state for which a SIP had been approved under CSAPR’s processor regulation. CSAPR will likely remain stayed until those issues are resolved. Moreover, there are multiple other outstanding legal challenges to aspects of CSAPR in the D.C. Circuit and elsewhere that have not been consolidated with Homer City and must also be resolved. The implementation schedule in CSAPR has also passed; the EPA will have to establish a new one prior to the regulation going into effect. Meanwhile, changes in the industry, including the increasing use of natural gas, have changed the amount and kind of emissions from that used in the EPA’s CSAPR model.
The EPA may have a regulatory framework, but it still lacks a functional cross-state air pollution regulation. Neighborliness will have to wait.