On December 10, 2013, the US Supreme Court heard oral argument in consolidated appeals by US EPA and the American Lung Association regarding the Cross-State Air Pollution Rule (CSAPR) in EPA v. EME Homer City Generation L. P.   CSAPR is US EPA’s second attempt at developing a rule to address the Clean Air Act’s “good neighbor” provision, which is designed to reduce the interstate transport of air pollutants affecting “downwind” states’ ability to attain their respective emissions standards.

As we reported earlier, the D.C. Circuit vacated CSAPR in August 2012 finding that US EPA exceeded its authority in requiring emissions reductions from upwind States without regard to the amount or proportion of a state’s contribution to downwind nonattainment.  The circuit court also found that CSAPR’s imposition of a federal implementation plan (FIP) violates principles of cooperative federalism.  Here, the statute provides that before US EPA can impose a FIP, it must first find that a state has failed to propose, or failed to adequately propose, its own plan to prohibit emissions in amounts that “contribute significantly” to nonattainment in another state.  Since US EPA failed to quantify specific emissions targets for the states, the circuit court reasoned that states could not develop plans to implement the good neighbor provisions.

The questions and comments elicited at argument suggest that the US Supreme Court may favor US EPA’s position, with some justices indicating that US EPA’s approach appears to be permissible within the applicable statutory language.  Several issues were addressed at argument including whether some states would be required to over-control emissions, the appropriateness of using costs in determining reduction strategies, and the meaning of “significant contribution.”  Notably, the question of whether the Court of Appeals lacked jurisdiction to consider the prior disapproval of state plans was not addressed at argument.  Several of the justices acknowledged the complexity of the problem US EPA was required to solve, to some degree giving recognition to the lack of “concrete alternatives” for a better option as suggested by counsel for the government when discussing the use of costs.  Justice Scalia was the most vocal critic of US EPA’s position, questioning the government on the issue of proportionality, as well as how a state could be expected to design a program that complies with the good neighbor provision when US EPA has “hidden the ball” in identifying a target to meet.  In response, Malcolm Stewart, the government’s counsel, responded that the statutory language places the burden on states to develop an adequate plan and that the states had access to the same data as US EPA and possess the technical expertise to develop an adequate plan.

Although it is notoriously difficult to predict how the Court will rule,  most Court observers have identified Chief Justice Roberts and Justice Kennedy as likely swing votes.  With Justice Alito having recused himself from the matter, a 4-4 decision would affirm the D.C. Circuit’s decision.  If the Court reverses the D.C. Circuit’s decision, one possible avenue it may explore is that states can still choose to develop state implementation plans (SIPs) to replace the FIP imposed by US EPA—a point considered several times during argument.  This “backstop” approach would essentially ameliorate a central concern of the upwind states—that they were not afforded an opportunity to develop their own plan.  However, the development and submittal of any state plan would have to present a compelling basis for supplanting what US EPA has already determined through CSAPR to be appropriate.  Given US EPA’s trend towards “FIP-first” implementation of emissions requirements and its increased willingness to overrule states’ SIP determinations, it would likely be no simple task for a state to develop a plan deemed suitable to an EPA that favors the exercise of its own top-down authority.