Recent Developments in Regulating Greenhouse Gas EmissionsJun 28, 2013
The Supreme Court’s Grant of Certiorari Reviewing the DC Circuit’s Decision to Vacate EPA’s Transport Rule
On Monday, June 24, 2013, the U.S. Supreme Court granted the petition of the U.S. Environmental Protection Agency (“EPA”) for a writ of certiorari to review the decision of the United States Court of Appeals for the District of Columbia Circuit (the “DC Circuit”) in EME Homer City Generation, LLP v. EPA, 696 F. 3d 7 (D.C. Cir. 2012) striking down EPA’s Cross-State Air Pollution Rule (“CSAPR” or the “Transport Rule”). EME Homer City Generation, L.P. v. EPA, 696 F. 3d 7 (D.C. Cir. 2012), reh’g and reh’g en banc denied, No. 11-1302 (D.C. Cir. Jan. 24, 2013); EPA v. EME Homer City Generation, L.P.), petition for cert. granted (U.S. June 24, 2013) (No. 12-1182).1
Two groups of parties filed briefs in support of EPA’s petition: a group of 15 states and cities (the “State and City Petitioners”) and, in addition, Calpine Corporation and Exelon Corporation (the “Industry Petitioners”). The Court granted the petition over the objections of two groups of parties that filed opposition briefs: a group of 34 utilities, power generators, coal companies and labor organizations (the “Industry and Labor Respondents”) and a group of 17 states and cities (the “State and City Respondents”).
EPA issued CSAPR on July 6, 2011. As noted in our previous Clients & Friends articles on CSAPR and the ensuing litigation, CSAPR would have required significant reductions in emissions of sulfur dioxide and nitrogen oxide from power plants in 27 states in the eastern half of the U.S. that contribute to “downwind” ozone or fine particle pollution in other states. CSAPR was EPA’s attempt to replace the Clean Air Interstate Rule (“CAIR”), which the DC Circuit also struck down in 2008.2 See prior memoranda here: http://www.cadwalader.com/resources/clients-friends-memos/epa-finalizes-long-awaited-transport-rule-to-replace-cair; http://www.cadwalader.com/resources/clients-friends-memos/epa-petitions-dc-circuit-for-rehearing-of-eme-homer-city-generation-l.p.-decisi; http://www.cadwalader.com/resources/clients-friends-memos/the-dc-circuit-vacates-cross-state-air-pollution-rule
In vacating CSAPR, the DC Circuit ruled that EPA had exceeded its statutory authority under the Clean Air Act by: (1) requiring upwind states to reduce their emissions by more than their own significant contributions to a downwind state’s nonattainment; and (2) not giving states the opportunity to initially implement a system for reduction of emissions within their boundaries (i.e., by preparing a State Implementation Plan, or “SIP”) before issuing a federal implementation plan (“FIP”). See prior memorandum here: http://www.cadwalader.com/resources/clients-friends-memos/the-dc-circuit-vacates-cross-state-air-pollution-rule
In its petition for a writ of certiorari, EPA argued that the DC Circuit “committed a series of fundamental errors that, if left undisturbed, will gravely undermine EPA’s enforcement of the Clean Air Act.”3 The agency advanced three arguments (or sets of arguments) in support of its position that the Court should grant its petition.
EPA’s first set of arguments related to prior SIP orders that it had issued in 2010 and 2011. As a threshold matter, EPA argued that the DC Circuit exceeded its jurisdiction by addressing the CSAPR issue at all. The DC Circuit, EPA pointed out, determined in its decision that “EPA could not pass judgment on SIPs until it had quantified States’ good neighbor obligations.”4 EPA argued that this determination was, “in substance, a collateral invalidation of separate orders not before the court.”5 Prior to issuing the Transport Rule, EPA had issued separate orders in 2010 and 2011 finding that certain state-issued SIPs inadequately addressed the good neighbor provisions of the Clean Air Act.6 According to EPA’s petition, the proper avenue for challenging EPA’s “good neighbor” findings would have been through direct petitions for review of those orders (a course the states chose not to pursue) – not through a collateral attack mounted through challenging CSAPR.
EPA went on to argue that, even if the DC Circuit was authorized to review the 2010 and 2011 orders on the merits, its determination (in effect) that the orders were invalid conflicted with the text of the Clean Air Act itself. The statute provides that within three years of EPA issuing National Ambient Air Quality Standards (“NAAQS”), states must submit SIPs. If the states fail to do so or submit inadequate SIPs, then EPA must make a finding of such failure. Within two years of EPA’s finding, EPA must issue FIPs. Because EPA already had made a finding that the SIPs were inadequate, it was obligated to issue a FIP addressing the good neighbor provisions of the Clean Air Act. According to EPA, the DC Circuit’s analysis that EPA should not have promulgated FIPs because it was first obligated to define a state’s significant contribution (as a prerequisite to SIP issuance) contravenes the plain text of the statute. In addition, EPA argued that those challenging the Transport Rule had also waived their right to challenge EPA’s approach to “significant contribution” because they failed to raise that argument in the administrative proceedings below.
EPA’s second set of arguments had to do with the agency rulemaking process for the Transport Rule. EPA argued that the DC Circuit should not have ruled that EPA’s significant contribution analysis was foreclosed by the language of the Clean Air Act because this argument was not raised during the public comment period of the administrative proceeding. In addition to the procedural argument, EPA argued that the DC Circuit read into the statute a statutory requirement that the emission reductions required for each state be proportional to its modeled amount of downwind air quality contribution. However, EPA asserted that the Clean Air Act does not set forth such a standard and that EPA’s construction of the ambiguous term “significant contribution” was reasonable. According to EPA, under these circumstances the court was required to defer to EPA’s judgment: “[t]his is a classic delegation of gap-filling authority warranting Chevron deference in a highly technical area that demands specialized expertise.”7
Finally, EPA made policy arguments that the DC Circuit’s decision would disrupt EPA’s implementation of the Clean Air Act and threaten serious harm to the public health.
The Industry and Labor Respondents argued that the Supreme Court should not grant certiorari for several reasons. First, they asserted that the DC Circuit’s decision does not conflict with other circuit court decisions and does not present any broadly recurring legal issues. Moreover, the Industry and Labor Respondents argued that the Transport Rule requires upwind states to make emissions reductions that are reasonable and cost effective without regard to whether those amounts contributed significantly to nonattainment in downwind states. They asserted that EPA’s petition does not address the DC Circuit’s ruling that the Transport Rule imposed emission reductions greater than necessary for downwind states to attain NAAQS. The Industry and Labor Respondents also argued that EPA exaggerates the effects of vacating the Transport Rule because downwind states have attained NAAQS under current standards that are enforced under CAIR, which has less stringent requirements than the Transport Rule. Therefore, according to the Industry and Labor Respondents, the Transport Rule is not necessary to achieve NAAQS in downwind states.
The State and City Respondents’ opposition brief focused on EPA’s FIP authority. They argued that EPA’s untimeliness argument fails because it assumed a different question than the one these Respondents were asking. The State and City Respondents argued that they did not challenge EPA’s SIP finding in the Transport Rule; instead they challenged the simultaneous identification of states that are subject to the Transport Rule, the determination of their significant contribution, and implementation of FIPs. According to these Respondents, the issue is not whether EPA can issue FIPs if states fail to submit SIPs, but rather that EPA was only authorized to issue FIPs to address requirements of the older programs (CAIR), not requirements of the new Transport Rule. Furthermore, they argued that even if EPA’s analysis was right, for at least eight states the first SIP disapproval determination came in the Transport Rule itself.
In its reply brief, EPA rebutted the “no circuit split” argument by pointing out that because the DC Circuit has exclusive jurisdiction to review nationally significant rules (like CSAPR) under the Clean Air Act, it is highly unlikely that there would be a circuit split. In response to the argument that the DC Circuit’s decision does not present broadly recurring legal issues, EPA argued that the DC Circuit misconstrued core provisions of the Clean Air Act that apply broadly to every state. Finally, EPA responded that it is true that many areas have achieved attainment with 1997 8-hour ozone NAAQS and the 1997 annual PM2.5 NAAQS (the standards addressed in CAIR and two standards addressed in the Transport Rule). However, according to EPA, there are multiple regions under the Transport Rule Regions with ozone levels above the 1997 8-hour ozone NAAQS. In addition, EPA has issued more stringent NAAQS than those under the 1997 NAAQS. Furthermore, EPA reasoned that attainment by downwind states does not relieve upwind states from their good neighbor obligations because the statute also requires states to regulate emissions that interfere with maintenance by states that are currently in attainment.
Although EPA and its allies are celebrating the Supreme Court’s grant of certiorari on the CSAPR challenge, it only takes four justices to grant a writ of certiorari. It remains to be seen how this unpredictable Court (which, as we have seen in several landmark rulings issued this month, is prone to 5-4 decisions) will ultimately rule on the merits of the Transport Rule and the DC Circuit’s decision to vacate it.
President Obama’s Memorandum Regarding the Power Sector Carbon Pollution Standards
On June 25, 2013, President Obama issued a directive to EPA entitled “Presidential Memorandum – Power Sector Carbon Pollution Standards.” The Memorandum directs EPA to take actions to reduce carbon emissions from both new power plants and modified, reconstructed, and existing power plants. For new plants, the President ordered EPA to issue, by September 20, 2013, a new proposed rule to address information contained in the millions of comments submitted in response to EPA’s April 13, 2012 Notice of Proposed Rulemaking entitled “Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources: Electric Utility Generating Units.” The President then directed the agency “to issue a final rule in a timely fashion” following the public comment period. As to plants already in existence, the President’s directive calls for EPA to issue “standards, regulations, or guidelines, as appropriate, that address carbon pollution from modified, reconstructed, and existing power plants.”8 According to the Presidential Memorandum, EPA should issue proposed rules by June 1, 2014, final rules by June 1, 2015, and include a requirement that states issue implementation plans by June 30, 2016.
1 The Court granted two separately filed petitions for writs of certiorari (EPA v. EME Homer City, No. 12-1182 and American Lung Assn. v. EME Homer City, No. 12-1183) limited to the questions presented by EPA’s petition in No. 12-1182. The Court consolidated the cases and allotted a total of one hour for oral argument.
6 These provisions require states to adopt implementation plans that assure the state will not emit pollutants in amounts that “contribute significantly” to other states’ NAAQS nonattainment or inability to maintain compliance with NAAQS.
8 Presidential Memorandum—Power Sector Carbon Pollution Standards, June 25, 2013, available at http://m.whitehouse.gov/the-press-office/2013/06/25/presidential-memorandum-power-sector-carbon-pollution-standards (“Presidential Memorandum”).