Supreme Court Validates EPA’s Interpretation of Clean Air Act Authority

In an April 29 decision, the Supreme Court of the United States (SCOTUS) ruled in favor of the U.S. Environmental Protection Agency (EPA) and overturned the lower court’s decision on the power sector air quality rule known as the Cross State Air Pollution Rule (CSAPR) — which implements the “good neighbor provisions” of the Clean Air Act and deals with pollution that blows across state lines and causes downwind states to exceed air quality standards.

Although some have charged that EPA was heavy-handed in the joint federal-state relationship established under the Act, the 6-2 Supreme Court decision found that EPA was not only within its authority, but was equitable in crafting a means of interpreting the ambiguous text of the authorizing law that Congress directed EPA and the states to implement.

The D.C. Circuit Court of Appeals had previously invalidated CSAPR in an August 2012 split decision, where the dissenting judge claimed “the court rewrites a decades old statute” in order to rule against the EPA regulation. Apparently the Supreme Court agreed. In reversing and remanding the D.C. Circuit decision, the SCOTUS ruled on two key issues.

1. On whether EPA overstepped its authority by issuing a federal implementation plan (FIP) without giving states another opportunity to propose their own plan, the SCOTUS held that:The [Clean Air Act] does not command that States be given a second opportunity to file a [state implementation plan (SIP)] after EPA has quantified the State’s interstate pollution obligations. … By altering Congress’ SIP and FIP schedule, the D. C. Circuit allowed a delay Congress did not order and placed an information submission obligation on EPA Congress did not impose.
2. On whether EPA used an appropriate methodology to apportion to states the responsibility to reduce emissions that blow across state lines, the SCOTUS held that:EPA’s cost-effective allocation of emission reductions among up-wind States is a permissible, workable, and equitable interpretation of the Good Neighbor Provision.

Today’s decision marks a milestone in a long saga that began in 2005 when the Bush Administration’s EPA promulgated the Clean Air Interstate Rule (CAIR) — a cap-and-trade program for sulfur dioxide (SO2) and nitrogen oxide (NOX) emissions in 27 eastern states and the District of Columbia to help downwind states unable to meet national air quality standards for particulates and ozone due to emissions carried on the wind from out of state power plants. In 2008, the D.C. Circuit overturned CAIR as fatally flawed but, nonetheless, left the rule in place until EPA could issue a replacement. EPA issued CSAPR as a replacement, but again was rebuked by the D.C. Circuit Court. With those earlier decisions, the D.C. Circuit invalidated two of EPA’s attempts at implementing the Clean Air Act’s good neighbor provisions by finding, in part, that EPA had asked too little and then had asked too much of upwind states. (Hence, my previous reference to Goldilocks and the Three Bears).

The earlier multi-state NOx Budget Trading Program provided the model for CAIR and CSAPR. It was promulgated by EPA in 1998 and upheld by the DC Circuit Court in 2000 — the same court that later rejected CAIR in 2008 and CSAPR in 2011. Because of the success of the Acid Rain and NOX Budget Trading Programs, most states and industries both supported CAIR as the best way to address multi-state emissions of SO2 and NOX and expected the basic premise of the rule to be upheld by the DC Circuit Court. In fact, for three years the power sector invested billions of dollars in controlling those pollutants, until the surprise decision in 2008.

So the latest April 29, 2014 Supreme Court decision follows a roller coaster ride of twists and turns with a definitive ruling that sides with EPA’s authority under the Clean Air Act to, within reason, interpret the law and develop an approach to resolve technically complex issues. This follows the trend of a lower court decision three weeks ago on the Mercury and Air Toxics Standards (MATS), which also gave deference to EPA’s interpretation on complex issues within the Agency’s technical expertise.

Looking back at the trail of legal texts and proceedings regarding power sector regulation, it is tempting to remember the various attempts at multi-pollutant power sector legislation that were introduced on both sides of the aisle in the 108th through 110th Congresses to more directly speak to these issues. For example, the Clear Skies Act was introduced by Senators Inhofe and/or Voinovich between 2003 and 2005 with support from the Bush Administration, and various versions of the Clean Air Planning Act were introduced by Senator Carper. (Senators Alexander, Jeffords, Sanders, and Collins also introduced multi-pollutant power sector bills). However, none of these bills became law, and instead EPA promulgated multiple regulations interpreting the Clean Air Act authority to address each of the pollutants (with CO2 coming next). Had a multi-pollutant power sector bill with clear direction and a firm schedule for the suite of power plant pollutants became law, it could have provided certainty, as well as a consistent trajectory, to address the concerns underlying various power sector regulations that have been through fits and starts in a cumbersome process toward resolution. This includes CAIR, CSAPR, MATS, as well as the upcoming carbon pollution standards for power plants.

The Clean Air Act was passed in 1963 and amended several times (in 1967, 1970, 1977, and 1990) with strong bipartisan support. In fact, the 1990 amendments, which gave rise to the current rules and judgments, passed the House by 401 to 21 and the Senate by 89 to 10 with a level of bipartisan support one does not even dream of today. However, we have not had constructive legislative action on clean air issues in over 23 years.

So is there relevance to the next power sector rules on EPA’s agenda?

In just about a month, EPA is expected to propose carbon pollution standards for power plants under Clean Air Act authority with somewhat similarly vague statutory language and complex technical issues as with the CSAPR. For these carbon pollution standards under section 111(d) of the Act, EPA is tasked with issuing guidance to states on how it will review state plans regulating carbon dioxide emissions from existing power plants. In doing so, EPA is expected to define what it will deem “adequately demonstrated” as the “best system of emission reduction” that takes account of cost and other factors. As with CSAPR, MATS, and other regulations that came before them, there are different opinions as to the extent and boundaries of EPA’s authority to establish benchmark emission levels, in this case for carbon dioxide from power plants under section 111(d) of the Clean Air Act. In response to an earlier lawsuit, SCOTUS ruled in 2007 that EPA should be addressing regulation of GHG emissions through the Clean Air Act. So section 111(d) presents another case where the Clean Air Act puts EPA, in coordination with the states, in a position to make technical decisions related to emission reduction at electric generating units in states with varying circumstances.

And in that vein, the recent SCOTUS ruling on CSAPR and latest MATS ruling from the D.C. Circuit might have relevance in terms of how the Court will weigh EPA’s interpretation of statutory text that is not specific and leaves some discretion to the Executive Branch to apply the basic principles of the law as new situations arise.

As EPA and the interagency review process puts the final touches on the proposal, many observers are sharpening their pencils for a drawn out process that is expected to involve a proposal, comment period, final rulemaking, lawsuits, a Congressional Review Act vote, submission of state plans, EPA review of plans, potential for plan disapprovals and a federal implementation plan, more lawsuits, D.C. Circuit Court decision(s), and the potential for SCOTUS to weigh in again. Time will tell whether this trend of deference to EPA’s approach will continue for the next wave of power sector air regulations, but one thing we can expect is that the courts will have their chance to weigh in … unless and until Congress passes more specific legislation regarding carbon dioxide emissions from power plants.

For information on BPC’s work on section 111(d) of the Clean Air Act regulations, please visit: https://bipartisanpolicy.org/projects/energy/ghg-regulation.