Judges signal more trouble ahead for EPA’s cross-state rule

By Jeremy P. Jacobs | 02/25/2015 12:55 PM EST

U.S. EPA’s effort to curb air pollution drifting across state lines was under siege in federal court again today, and it appeared vulnerable to the challenge from states and industry despite emerging victorious last year from the Supreme Court.

U.S. EPA’s effort to curb air pollution drifting across state lines was under siege in federal court again today, and it appeared vulnerable to the challenge from states and industry despite emerging victorious last year from the Supreme Court.

More than a dozen states are asking the U.S. Court of Appeals for the District of Columbia Circuit to throw out all or part of EPA’s Cross-State Air Pollution Rule, or CSAPR, a regulatory regime for 28 Eastern states.

The Supreme Court last April upheld the program’s reliance on costs for determining how much upwind states must reduce emissions of pollutants like nitrogen oxide and sulfur dioxide.


The justices remanded the case to the D.C. Circuit to resolve remaining issues, and the states as well as a large number of utilities and energy companies are pressing the appeals court to vacate major components of CSAPR that had been finalized in 2011.

In arguments that stretched to more than 90 minutes, energy, mining and labor groups made the principal argument that CSAPR sometimes requires an upwind state to cut its emissions by more than its contribution to a neighboring state exceeding air standards.

Peter Keisler of Sidley Austin, arguing for those industries, said EPA "doesn’t deny" that his clients’ data show that for more than 10 upwind states, their downwind neighbors would achieve compliance with EPA’s ozone standard without any CSAPR controls.

"What is striking," Keisler said, is EPA "had all this data … [and] they didn’t look at it. They didn’t do anything with it."

Keisler — who also argued the case before the Supreme Court last year — said today it’s "arbitrary" of EPA to reject the data without providing an adequate explanation.

That contention — that CSAPR could require a state to cut emissions by more than it contributes to a downwind state — gained traction with the same three-judge panel that vacated CSAPR in 2012 in a 2-1 vote.

In particular, the argument seemed to resonate with Judge Brett Kavanaugh, a Republican appointee, who criticized that aspect of the program in his opinion for the court in 2012.

"The transport rule includes or excludes an upwind state based on the amount of that upwind state’s significant contribution to a nonattainment area in a downwind state," Kavanaugh wrote then. "That much is fine. But under the rule, a state then may be required to reduce its emissions by an amount greater than the ‘significant contribution’ that brought it into the program in the first place. That much is not fine" (Greenwire, Aug. 21, 2012).

A major issue in the arguments was how to interpret the Supreme Court’s 6-2 ruling last April that revived the program. The high court, in an opinion by Justice Ruth Bader Ginsburg, upheld EPA’s decision to consider costs in determining how much a state must reduce its emissions (Greenwire, April 29, 2014).

But Keisler highlighted part of the opinion, saying it doesn’t jell with EPA’s insistence on uniform costs across the country — such as a reduction rate of $100 per ton of particulate matter, for example.

Ginsburg’s opinion, Keisler said, expressly says a state may bring an as-applied legal challenge if CSAPR requires it to cut pollution by too much. EPA can’t want uniform costs, he said, but also condone as-applied challenges that, if successful, would undercut those uniform costs.

Kavanaugh bit on that point in questioning Justice Department attorney Jessica O’Donnell, who represented EPA.

Referencing the transcript from the Supreme Court’s oral arguments, Kavanaugh said, "It seems to me you told the chief justice one thing … and now you are coming back with uniformity."

O’Donnell countered that nothing in the Supreme Court’s opinion says EPA has to set cost thresholds that are individualized for each state.

Judge Judith Rogers, a Democratic appointee who dissented from Kavanaugh’s opinion the first time the D.C. Circuit heard the case, also had issues with EPA’s data analysis and appeared open to remanding some aspects of the program back to EPA.

In particular, she said EPA didn’t seem to give a reasoned analysis of why it disregarded the data submitted by various states.

"All we have here is the data EPA produced," Rogers said, adding that it "may be a jump" from that to understanding the agency’s reasoning.

SIPs and FIPs

EPA has long struggled to implement a program for pollution that crosses state lines under the Clean Air Act’s "Good Neighbor Provision" until the Supreme Court upheld the regime last year.

The agency’s past two attempts have been thrown out in court, including the George W. Bush administration’s Clean Air Interstate Rule, or CAIR, which the D.C. Circuit tossed in 2008 for being insufficient to protect public health in North Carolina v. EPA.

CSAPR established a two-step process. First, EPA screened states to see if they contributed more than 1 percent to a downwind state’s pollution problems. If that state did, EPA used a cost allocation model to determine how much the upwind state must cut emissions.

The 14 states still challenging the regulations today took issue with EPA overruling their state implementation plans, or SIPs, in favor of federal plans, or FIPs.

Much of their argument hinged on how to read the D.C. Circuit’s 2008 decision that vacated CAIR. At EPA’s request, the court allowed CAIR to remain in effect while EPA drafted a new rule.

The states contend that EPA’s approval of their SIPs under CAIR remained valid during that time and the agency therefore had no authority to implement FIPs.

"EPA made the request, and the court granted it," said Bill Davis, an assistant solicitor general for Texas, representing the states.

The 14 states in the lawsuit are Alabama, Georgia, Florida, Indiana, Kansas, Louisiana, Michigan, Mississippi, Nebraska, Ohio, Oklahoma, South Carolina, Texas and Wisconsin.

The panel — which was missing a member because Judge Thomas Griffith, a Republican appointee, was listening to the arguments from home due to illness — seemed slightly less receptive to those arguments.

Rogers, for example, acknowledged that it was an "interesting situation" but asked whether EPA had to "return to ground zero."

She also indicated that the Clean Air Act isn’t clear on this issue, so perhaps the agency deserved deference.

That point was hammered home by Norman Rave of the Justice Department, also representing EPA.

He argued that EPA asked for CAIR to be left in place because of the environmental benefits it had already produced. But, he added, there is "simply no way" the court’s ruling in North Carolina can be interpreted as supporting any part of CAIR, including the SIPs.

"The court spoke very definitively that CAIR was in error," he said, "and therefore the CAIR SIPs were in error."

Ultimately, the complexity of the issues presented in the cases and whether to send some back to EPA for further consideration appeared overwhelming.

"I can only imagine," Kavanaugh joked, "the battles that would happen on remand."

A decision in the case is expected later this year.