“Our decision today should not be interpreted as a comment on the wisdom or policy merits of EPA’s Transport Rule. It is not our job to set environmental policy. Our limited but important role is to independently ensure that the agency stays within the boundaries Congress has set. EPA did not do so here.” EME Homer City Generation, L.P v. E.P.A., ---F.3d --- (2012).
On August 21, 2012, the United States Court of Appeals for the District of Columbia Circuit ruled in Homer City that the United States Environmental Protection Agency (“EPA”) overstepped its bounds when it promulgated the controversial Transport Rule. The Transport Rule, a/k/a the Cross-State Air Pollution Rule, was enacted for the EPA to implement the statutory “good neighbor” provision of the Clean Air Act (“CAA”). The Rule was proposed in August 2010, and finalized in August 2011 at 76 Fed.Reg. 48,208 (August 8, 2011). The Rule defines emissions reduction responsibilities for 28 upwind States based on those States’ contributions to downwind States’ air quality problems.
To completely understand the decision in Homer City, it is important to understand the “why” behind EPA’s promulgation of the Transport Rule. Under the CAA, the EPA sets National Ambient Air Quality Standards (“NAAQS”), which outline the maximum permissible levels of common pollutants in the ambient air. The EPA uses this information to designate “nonattainment” areas in the States. After this is done, each State is responsible for implementing the NAAQS in their State through State Implementation Plans (“SIPs”). The SIPs must include provisions to address the “good neighbor” provision, i.e., how is each State going to protect its down-wind neighbors from pollutants which may contribute significantly to the downwind States’ nonattainment areas. The EPA can reject a State’s SIP, or find that a State has failed to submit a SIP and issue a Federal Implementation Plan to implement the NAAQS within a State. The “good neighbor” provision has been before the D.C. Circuit before. Notably, this issue was addressed in North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008), when the EPA’s 2005 Clean Air Interstate Rule (“CAIR”) was challenged. In North Carolina, the Court emphasized that States should only be required to eliminate their own significant contribution to downwind pollution, and should not be required to share the burden of reducing other upwind States’ emissions. In North Carolina, CAIR was remanded, but left in place pending the development of a valid replacement. The EPA promulgated the Transport Rule as its replacement for CAIR.
The Transport Rule 1) defines each State’s emissions reduction obligations under the “good neighbor” provision; and, 2) prescribes Federal Implementation Plans to implement those obligations at the State level. In Homer City, the Court finds that the Rule violates federal law. The Court cited “at least three independent but intertwined legal flaws in EPA’s approach to the good neighbor provision.” First, the requirements imposed on upwind States is not based on pollution from upwind States that “contribute significantly to nonattainment” in downwind States - as required by the Statute, and the Court’s prior decision in North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). Second, the Rule does not take into account the proportionality requirement, i.e., it does not look at the contributions of other upwind States to the downwind States’ nonattainment issues, and fails to take into account the downwind States’ fair share of pollution contributing to its nonattainment. Finally, the Rule does not protect the upwind States from unnecessary over-protection, or over-control in the downwind States. The Court also took serious issue with the EPA’s issuance of Federal Implementation Plans without giving the States a chance to implement the obligations themselves through their own SIPs.
In the end, the Court found that the EPA’s authority comes from statute and is limited by statute. The Court summarized that the Transport Rule, as promulgated, stands on an unsound foundation, and vacated the Transport Rule and the Transport Rule FIPs. Much like the decision in North Carolina, the matter has been remanded to the EPA to develop a valid replacement that can sustain a legal challenge. In the meantime, the EPA will continue to administer CAIR.
