In a 5-to-4 ruling delivered June 27, 2024, the U.S. Supreme Court (SCOTUS) delivered yet another blow to EPA authority when it placed the Agency’s “Good Neighbor” rule on hold.
The “Good Neighbor” rule, also known as the “Cross State Air Pollution Rule” (CSAPR), was designed to cut pollution from power plants and other industrial sources for millions of Americans living downwind of those sources.
The CSAPR update rule was issued in September 2016 to address the 2008 ozone National Ambient Air Quality Standards (NAAQS) Good Neighbor obligations. At that time, the EPA estimated that the revised CSAPR update would reduce nitrogen oxide (NOx) emissions from power plants in 12 states in the eastern United States by 17,000 tons in 2021 compared with projections without the rule, yielding public health and climate benefits that were valued, on average, at up to $2.8 billion each year from 2021 to 2040.
Under the Clean Air Act (CAA), each state is required to submit a state implementation plan (SIP) that provides for the implementation, maintenance, and enforcement of each primary or secondary NAAQS. Section 110(a)(1) requires each state to make this new SIP submission within 3 years after promulgation of a new or revised NAAQS. This type of SIP submission is commonly referred to as an “infrastructure SIP.”
The CAA was designed to create a collaboration between states and the federal government, with the primary goal of regulating the quality of air.
“Because air currents can carry pollution across state borders, States must also design their plans with neighboring States in mind. Under the Act’s ‘Good Neighbor Provision,’ state plans must prohibit emissions ‘in amounts which will … contribute significantly to nonattainment in, or interfere with maintenance by, any other State’ of the relevant air-quality standard,” the SCOTUS opinion states.
When a submitted SIP doesn’t meet the Good Neighbor provision and other requirements of the CAA, the EPA has the option of issuing a federal implementation plan (FIP).
While comments were being accepted for the proposed SIP disapprovals, the EPA issued a single proposed FIP to bind all those states, according to the SCOTUS opinion.
“Several States challenged the EPA’s plan in the D.C. Circuit and asked for a stay stopping the plan from taking effect during the litigation,” notes law firm Mayer Brown in a Lexology article. “The States contended that they were likely to succeed on the merits by arguing that the EPA’s plan was unreasonably based on the incorrect assumption that all 23 States would remain bound by the plan. The D.C. Circuit denied a stay and the challengers renewed their stay motion in the Supreme Court. While the litigation was pending, courts stayed eight more of the EPA’s rejections of state plans.”
The recent SCOTUS case was Ohio et al. v. EPA. Indiana and West Virginia joined Ohio (all energy-producing states) in challenging the Good Neighbor rule. These states were joined by industry and trade groups impacted by the regulation, arguing that the rule is too cost-prohibitive and ineffectual, says The Associated Press.
According to the SCOTUS opinion, when deciding an application for a stay, the Court must consider four questions:
- Whether the applicant is likely to succeed on the merits
- Whether it will suffer irreparable injury without a stay
- Whether the stay will substantially injure the other parties interested in the proceedings
- Where the public interest lies
“When States and other parties seek to stay the enforcement of a federal regulation against them, often ‘the harms and equities [will be] very weighty on both sides,’” the SCOTUS opinion continues. “Because that is true here, resolution of applicants’ stay request ultimately turns on the first question: Who is likely to prevail at the end. … Applicants are likely to prevail on their arbitrary-or-capricious claim. An agency action qualifies as ‘arbitrary’ or ‘capricious’ if it is not ‘reasonable and reasonably explained.’”
This means agencies must offer explanations for their actions, which must include “a rational connection between the facts found and the choice made” and can’t simply ignore “an important aspect of the problem.”
In attempting to enforce the Good Neighbor provision, the EPA FIP “rested on an assumption that all the upwind States would adopt emissions-reduction measures up to a uniform level of costs to the point of diminishing returns,” the SCOTUS opinion adds.
During the comment period on the proposed rule, concerns were raised “that if upwind States fell out of the planned FIP, the point at which emissions-control measures maximize cost-effective downwind air-quality improvements might shift. To this question, EPA offered no reasoned response,” according to the SCOTUS opinion. “As a result, the applicants are likely to prevail on their argument that EPA’s final rule was not ‘reasonably explained,’ … and that it instead ignored ‘an important aspect of the problem.’”
The high court also dismissed the EPA’s defense arguments:
- “First, EPA argues that adding a ‘severability’ provision to its final rule—i.e., providing the FIP would ‘continue to be implemented’ without regard to the number of States remaining—responded to commenters’ concerns. But EPA’s response did not address those concerns so much as it side- stepped them. Nothing in the final rule’s severability provision … addressed whether and how measures found to maximize cost-effectiveness in achieving downwind ozone air-quality improvements with the participation of all the upwind States remain so when many fewer States might be subject to the agency’s plan.
- EPA insists that no one raised that concern during the public comment period. The Act’s ‘reasonable specificity’ requirement, however, does not mean a party must rehearse the identical argument made before the agency. Here, EPA had notice of the objection, and its own statements and actions confirm the agency appreciated the concern.
- EPA argues that applicants must return to EPA and file a motion asking it to reconsider its final rule before presenting their objection in court because the ‘grounds for [their] objection arose after the period for public comment.’… Nothing requires the applicants to return to EPA to raise (again) a concern EPA already had a chance to address.”
In granting the stay, which prevents the EPA from enforcing the Good Neighbor provision until the litigation before the D.C. Circuit Court is finalized, the majority decision, authored by Justice Neil Gorsuch, offers the opinion that the states are likely to prevail in their litigation against the EPA.
“The Court held that the States were likely to succeed in the challenge because the EPA incorrectly assumed that all 23 States would be subject to the plan,” Mayer Brown says. “The Court reasoned that, in light of the orders staying the EPA’s rejections of 12 state plans, the EPA needed to perform additional analysis on the cost-effectiveness of emissions-control measures intended to minimize downwind air pollution. The Court therefore determined that the States were likely to succeed in arguing that the EPA’s plan was not reasonably explained and that the EPA ignored important issues.
“Justice Barrett authored a dissent, joined by Justices Kagan, Sotomayor, and Jackson. The dissenters would not have granted emergency relief in light of the fact-intensive and highly technical issues in the case. The dissent also reasoned that the States’ argument was ‘underdeveloped’ and ‘unlikely to succeed on the merits.’”
To move forward on the Good Neighbor provision, while awaiting the outcome of the D.C. Circuit Court litigation, the EPA will likely need to return to the drawing board to provide additional analysis and “a rational connection between the facts found and the choice made.”