On July 28, 2015, the U.S. Court of Appeals for the District of Columbia Circuit remanded without vacatur several states’ maximum emission allowances, or “emissions budgets,” for sulfur dioxide (SO₂) and nitrogen oxides (NO_x) under the Cross-State Air Pollution Rule (CSAPR) back to the Environmental Protection Agency (EPA). EME Homer City Generation, L.P., v. EPA, No. 11-1302 (D.C. Cir.). CSAPR is EPA’s emissions trading program to curb interstate air pollution from power plants under the Clean Air Act’s good neighbor provision.

The D.C. Circuit previously vacated CSAPR in a 2012 decision on the grounds that EPA exceeded its authority by setting emissions budgets at levels that would require over-control of certain states’ emissions, and by imposing Federal Implementation Plans (FIPs) on various states without allowing those states an adequate opportunity to submit State Implementation Plans (SIPs) to address CSAPR. In 2014, the Supreme Court reversed that decision. The Supreme Court left open the door for “particularized, as-applied challenge[s]” based on concerns related to individual upwind states. Specifically, a state could challenge CSAPR to the extent that state has been “forced to regulate emissions … beyond the point necessary to bring all downwind States into attainment.” Additionally, the Supreme Court ruled that the plain language of the Clean Air Act did not prohibit EPA from issuing a FIP for CSAPR without first allowing the states the opportunity to review EPA’s calculated emission reduction requirements and develop their own SIPs to meet those requirements. The present decision addressed several “as-applied” challenges, along with other broad challenges to CSAPR that the court did not reach in its 2012 decision.

To determine whether EPA overstepped its authority when setting a state’s emissions budget, the D.C. Circuit considered whether the downwind locations linked to that state would achieve attainment even if less stringent emissions limits were imposed on that state. If the answer is yes as to all such downwind locations, then EPA exceeded its authority when setting that upwind state’s emissions budget. The court considered as-applied challenges to the 2014 SO₂ emissions budgets for Texas, Alabama, Georgia, and South Caroline, as well as as-applied challenges to the 2014 ozone-season NO_x emissions budgets for Florida, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia. The court found that all of those limits were more stringent than necessary. Accordingly, the court remanded each of those emissions budgets to EPA. The court did not vacate those emissions budgets in recognition of the “substantial disruption” the vacatur would cause, and because at least some level of emissions limits under the good neighbor provision were appropriate. However, the court urged EPA to promptly set new emissions limits, noting that Petitioners could file suit against EPA if it fails to do so.

The court also dismissed several pending challenges to CSAPR that were not addressed in its 2012 decision. Among those challenges was an argument that EPA did not have authority to promulgate CSAPR FIPs for 22 of the 27 states because those states already had approved “good neighbor” SIP provisions promulgated under the Clean Air Interstate Rule (“CAIR”). Petitioners argued that CAIR “good neighbor” SIP provisions were properly approved by EPA and, even if they were approved in error, the approvals could not be revised and replaced with the CSAPR FIPs without providing public notice and a having a public comment period. The court, however, held that EPA could revise the SIP approvals because, in an appeal challenging the rule, CAIR was held to contain “fatal flaws.” The CAIR SIP approvals were, therefore, “in error” and could be revised by EPA under the Clean Air Act. The court further held that EPA could revise the CAIR SIPs without notice and comment because the Clean Air Act allows EPA to undertake rulemakings without notice and comment when EPA has good cause to forgo that procedure.

While the court also dismissed all the other challenges raised by Petitioners, it did not foreclose the possibility of future challenges.

The court dismissed Petitioners’ objections to EPA’s methodology for identifying upwind states that would “interfere with maintenance” at downwind locations. Petitioners argued (1) that EPA’s methodology did not identify and analyze only those upwind emissions that might actually threaten continued attainment, (2) that EPA’s methodology did not take into account emission reductions accomplished through downwind state’s own maintenance plans, and (3) that EPA improperly focused on the utility sector for emission reductions, when other sectors could be producing the emissions interfering with maintenance in downwind locations. Ultimately, the court concluded that, while these arguments suggested the EPA methodology could lead to over-control, the arguments were too general. The court left open the ability to argue over-control through a more “particularized, as-applied” challenge.

Finally, Petitioners brought up what the court determined were three new issues that were not raised during the public comment period. First, Petitioners argued that EPA significantly revised CSAPR between the proposed and final versions of the rule, in violation of the Clean Air Act’s notice and comment requirements. Second, Petitioners argued that EPA did not have the authority to promulgate certain FIPs because they were signed by the EPA Administrator before EPA’s disapproval of the CAIR SIPs was published. Finally, Petitioners argued that EPA exceeded its authority by finding linkages based on upwind contributions to downwind locations designated as in attainment or unclassifiable.

The D.C. Circuit’s opinion did not address the merits of these arguments because they were not raised with reasonable specificity during the public comment period. However, the court left open the possibility that Petitioners may petition EPA for an administrative reconsideration, to the extent the grounds for these arguments arose after the public comment period or it was otherwise “impracticable” to raise them during that period. If EPA then fails to conduct a reconsideration hearing, then Petitioners may seek review of that decision to the D.C. Circuit.