Homer’s Odyssey Redux in the DC Circuit

Posted on August 3, 2015 by Paul Seals

In the latest chapter of Homer’s Odyssey, the DC Circuit, on remand from the Supreme Court, determined that EPA had exceeded its statutory authority by imposing uniform emissions reductions under the Transport Rule also known as the Cross-State Air Pollution Rule.  On July 28, 2015, the DC Circuit held in EME Homer City Generation, L.P v. EPA that the 2014 sulfur dioxide (SO2) emissions budgets for Alabama, Georgia, South Carolina, and Texas, as well as the 2014 ozone-season nitrogen oxide (NOx) budgets for Florida, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia are invalid.  The court remanded without vacatur to EPA for reconsideration.

A brief history of Homer’s voyage so far.

In 2011, EPA promulgated the Transport Rule to address emissions from upwind States that contribute to nonattainment of National Ambient Air Quality Standards (NAAQS) in a downwind State under the Clean Air Act’s “good neighbor provision”.  42 U.S.C. Sec. 7410(a)(2)(D)(i).  Upwind States challenged the Rule, contending that it would lead to over-control of emissions in the upwind States.  The Rule imposed uniform pollution reductions on upwind States regardless of the actual amount of pollution that individual upwind States contributed to the downwind States.

In 2012, the DC Circuit considered these over-control challenges, agreed with the petitioners, and vacated the Rule.   See EME Homer City Generation, L.P. v. EPA, 696 F/3d 7 (D.C. Cir. 2012)

On review, the Supreme Court reversed, holding that the potential for over-control did not require invalidation of the Rule on its face.  To address potential over-control in an upwind State, the Court recognized that requiring emissions reductions by more than is necessary to achieve attainment in every downwind State to which it is linked would be impermissible.  The Court explicitly authorized an upwind State to contest the emissions reductions under the Rule through “particularized, as-applied challenges.”  EPA v. EME Homer City Generation, L.P., 134 S.Ct. 1584 (2014).

On remand, the DC Circuit considered the “as-applied challenges” as informed by the Supreme Court decision.   The DC Circuit evaluated the challenges by determining whether a downwind location would still attain its NAAQS if linked upwind States were subject to less stringent emissions limits.   Based on the record, the Court determined that EPA’s uniform cost thresholds have required States to reduce pollutants beyond the point necessary to achieve downwind attainment, which violated the Supreme Court’s clear mandate.

Although invalidating the 2014 emissions budgets, the DC Circuit remanded without vacatur.   The Court stated that on remand, the parties may provide new evidence, data, or calculations for EPA to consider in establishing emissions budgets.

What will be the next chapter in this Odyssey?  What effect will the decision have on the emissions trading market developed around the 2014 emissions budget?  Will there be further appeals?  How and when will EPA reconsider the emissions budgets?

The voyage is not over!