EPA v. Eme Homer City Generation, L.P.

Facts

Congress set up a federalism-based system of air pollution control. Under this cooperative federalism approach, both the Federal Government and the States play significant roles. The Federal Government sets air quality standards for pollutants. The States have the primary responsibility for determining how to meet those standards and regulating sources within their borders. Upwind States must prevent sources within their borders from emitting federally determined 'amounts' of pollution that travel across State lines and 'contribute significantly' to a downwind State's 'nonattainment' of federal air quality standards. That requirement is sometimes called the 'good neighbor' provision. D promulgated the Transport Rule, also known as the Cross-State Air Pollution Rule. It defines emissions reduction responsibilities for 28 upwind States based on those States' contributions to downwind States' air quality problems. The Rule limits emissions from upwind States' coal- and natural gas-fired power plants, among other sources. The Transport Rule targets two pollutants, sulfur dioxide (SO2) and nitrogen oxides (NOx). The statutory text grants D authority to require upwind States to reduce only their own significant contributions to a downwind State's nonattainment. Under the Rule, upwind States may be required to reduce emissions by more than their own significant contributions to a downwind State's nonattainment. D has attempted to delineate the Good Neighbor Provision’s scope by identifying when upwind States “contribute significantly” to nonattainment downwind. It issued a rule known as the “NOX SIP Call.” The D. C. Circuit upheld the NOX SIP Call, specifically affirming EPA’s use of costs to determine when an upwind State’s contribution was “significant” within the meaning of the statute. D issued the Clean Air Interstate Rule, or CAIR. It regulated both NOX and SO2 emissions, insofar as such emissions contributed to downwind nonattainment of two NAAQS. The court decided to leave the rule in place while encouraging D to act with dispatch in dealing with problems the court had identified. In dispute here is the Transport Rule. The Transport Rule curtails NOX and SO2 emissions of 27 upwind States to achieve downwind attainment of three different NAAQS. D used a two step rule. At step one D excluded as de minimis any upwind State that contributed less than one percent of the three NAAQS to any downwind State “receptor,” a location at which EPA measures air quality. If all of an upwind State’s contributions fell below the one-percent threshold, that State would be considered not to have “contributed significantly” to the nonattainment of any downwind State. Those states were exempted from regulation under the rule. The losers went to a second inquiry, called the “control” analysis. D sought to generate a cost-effective allocation of emission reductions among those upwind States “screened in” at step one. D then took the results from different costs and conducted complex modeling to establish the combined effect the upwind reductions projected at each cost threshold would have on air quality in downwind States. It then identified where large upwind emission reductions become available because a certain type of emissions control strategy becomes cost-effective. For each regulated upwind State, D created an annual emissions “budget.” These budgets represented the quantity of pollution an upwind State would produce in a given year if its in-state sources implemented all pollution controls available at the chosen cost thresholds. The screening and control inquiries defined D’s understanding of which upwind emissions were within the Good Neighbor Provision’s ambit. An upwind State “contributed significantly” to downwind nonattainment to the extent its exported pollution both (1) produced one percent or more of a NAAQS in at least one downwind State (step one) and (2) could be eliminated cost-effectively, as determined by D (step two). Upwind States would be obliged to eliminate all and only emissions meeting both of these criteria. A group of state and local governments (State respondents), joined by industry and labor groups (Industry respondents), petitioned for review of the Transport Rule in the U.S. Court of Appeals for the D. C. Circuit. Over the dissent of Judge Rogers, the Court of Appeals vacated the rule in its entirety. Ps challenged this use of the good neighbor provision to impose massive emissions reduction requirements on upwind Ps without regard to the limits imposed by the statutory text. Ps appealed. Ps prevailed on appeal. The appeals court held that the Federal Government sets air quality standards, but Ps retain the primary responsibility (if the Ps want it) for choosing how to attain those standards within their borders. Executive agencies may exercise only the authority conferred by statute, and agencies may not transgress statutory limits on that authority. The Clean Air Act charges EPA with setting National Ambient Air Quality Standards, or NAAQS, which prescribe the maximum permissible levels of common pollutants in the ambient air. Here, when EPA quantified Ps' good neighbor obligations, it did not allow Ps the initial opportunity to implement the required reductions with respect to sources within their borders. D quantified good neighbor obligations and simultaneously set forth D-designed Federal Implementation Plans, or FIPs, to implement those obligations at the State level. D departed from its consistent prior approach to implementing the good neighbor provision and violated the Act. It held that the Transport Rule contains two basic components. First, the Rule defines each P's emissions reduction obligations under the good neighbor provision. Second, the Rule prescribes Federal Implementation Plans to implement those obligations at the State level. D may not force a State to eliminate more than its own 'significant' contribution to a downwind State's nonattainment area - that is, to 'exceed the mark.'  D appealed, and the Supreme Court granted certiorari. Congress amended the Good Neighbor Provision in 1990. It now requires SIPs to “contain adequate provisions . . . prohibiting . . . any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will . . . contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any . . . [NAAQS].”

Issues

Rule of Law

Holding and Decision

Legal Analysis

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