EPA v. EME Home City Generation How EPA Is Fighting Immigration . . .of Air Pollution

Industrial air pollution is a lawless vagabond.  It enters the atmosphere from a stationary source and is carried, sometimes hundreds of miles, by air currents and other windstreams to downwind locations. As the United Supreme Court recently observed in its decision, EPA v. EME Home City Generation, L.P., 572 U.S. ___ (2014), “[a]ir pollution is transient, heedless of state boundaries.”

Of course, we all know that pollution generated upwind may travel across state boundaries, but pressing issues emerge when we consider how EPA regulates migratory pollution. All too often, costs of pollution are born by downwind states, which while trying to achieve national ambient air quality standards (“NAAQS”) for their state, are being infiltrated by foreign, upwind pollution. To remedy that issue, Congress included a Good Neighbor Provision in the Clean Air Act (“CAA”), which as amended, requires that state implementation programs (“SIPs”), “contain adequate provisions . . . prohibiting any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will . . . contribute significantly to nonattainment, or interfere with maintenance by, any other state with respect to any [NAAQS”]. 42 U.S.C. § 7410(a)(2)(D)(i).

Until recently, the difficulty with the Good Neighbor Provision has been in measuring how upwind states “contribute significantly” to nonattainment.  Pollution generated upwind does not travel to a specific location in easily quantifiable amounts. Nor are downwind states polluted from a specific upwind locale; it’s a hodgepodge up there. At its heart,EME Home City Generation considered the legality of EPA’s most recent endeavor to identify when upwind pollutants “contribute significantly” to a downwind state’s NAAQS nonattainment. 1

The Transport Rule and Annual Emission Budgets

To determine what constitutes a significant contribution, EPA adopted what is known as the Transport Rule.  Under the Transport Rule, EPA first filtered out any upwind state that contributed less than one percent to a downwind state’s nonattainment. This determination is made from sophisticated computer models and historical NAAQS data. Upwind states falling below the one percent threshold were exempt from further scrutiny, as they did not contribute significantly to a downwind state’s nonattainment.

As a second step, EPA subjected any remaining states to what is called “a control analysis.”  For this analysis, EPA modeled the emissions that would occur in each remaining state according to ascending cost thresholds of emission control. First, EPA calculated the emission quantities an upwind state could eliminate at incremental cost thresholds by assuming that each State could prevent emissions by employing every control measure available at a cost of $500 per ton of prevented emissions. Plugging this data into another complex modeling program, the agency was able to identify significant cost thresholds “where a noticeable change occur[es] in downwind air . . . where large upwind emission reductions become available because a certain type of emissions control strategy becomes cost-effective.” After determining this threshold, EPA translated the data into the amount of emissions an upwind state must eliminate so as not to “contribute significantly” to a downwind state’s nonattainment by creating what is known as an “annual emissions budget.”  These budgets represent the amount of pollution a state would produce if it implemented all pollution controls available to it. To achieve downwind attainment, each state’s emissions could not exceed its budget.

Simplified, the Court described the Transport Rule this way: an upwind state contributes significantly to a downwind state’s nonattainment if “(1) [it] produced one percent or more of NAAQS in a least one downwind state and (2) [the downwind pollution] could be eliminated cost-effectively, as determined by EPA.” In effect, EPA developed a cost-based analysis for evaluating whether an upwind state contributes significantly to downwind nonattainment and developed a protocol based on this cost analysis. For each upwind state not in compliance, EPA issued Federal Implementation Programs.

(b) The Court upholds the Transport Rule through Chevron deference.

Critically, state governments and industries challenged the Transport Rule, arguing that the Good Neighbor Provision clearly required EPA to address migratory emissions on a proportional reduction basis. That is, each state must eliminate from its emissions that amount, and only that amount, of pollution which contributes to a downwind state’s down attainment. Whereas the Transport Rule required states to eliminate emissions based on cost thresholds that netted a reduction of pollution downwind.

Though citing Chevron and employing Chevron deference, the Court concluded that a proportional reduction would be unworkable, if not infeasible. An example used by the majority highlights its position. Suppose EPA imposes an NAAQS on State A of 100 parts per billion (“ppb”). State A has 130 ppb in its ambient atmosphere and is downwind of State X, State Y, and State Z-which are heavy industrial states.  Suppose further that EPA determines that States X,Y, and Z contribute 30 ppb to State A’s pollution. Thus, under the Good Neighbor Provision, States X,Y, and Z, must eliminate 30 ppb from their downwind emissions. A proportional reduction would require each state to reduce their emissions in proportion to what they each contribute to the 30 ppb. According to the majority of the U.S. Supreme Court, this is a near impossible task. The realities of interstate pollution do not allow EPA to determine what particulates emanate from which state. So instead, the Court upheld the Transport Rule, which circumvents the murkiness of proportional reduction.

Even though the Court viewed proportional reductions as nearly impossible, its decision ostensibly rested onChevron deference. Under Chevron deference, courts defer to an agency’s interpretation of an ambiguous statute and uphold that interpretation so long as it is not unreasonable, arbitrary, or capricious. Because the CAA, according to the majority, did not specify by what method EPA must evaluate whether upwind emissions “contribute significantly” to downwind nonattainment, the Court upheld EPA’s Transport Rule.

Dissenting, Justices Scalia and Thomas were quick to point out that the Good Neighbor Provision contains no ambiguity with respect to proportionality. According to them, the statutory language, which in pertinent part read: “prohibiting [upwind states] from emitting any air pollutant in amounts which will . . . contribute significantly to nonattainment” bears only one meaning: that upwind pollution must be eliminated proportionally according to each state’s contribution. The dissent heavily criticized the majority for ignoring text and for allowing a practical difficulty in enforcing the Good Neighbor Provision to influence their decision.

(c) Expansion of EPA Authority

The Supreme Court’s opinion grants EPA broad authority to take costs into consideration in determining what constitutes a significant contribution to another state’s air pollution. EPA argued in favor of using cost considerations in this case, although in the past it has argued against taking any costs into consideration unless Congress explicitly required it. Whitman v. American Trucking, Ass’n. This potentially presents a sea change in the Court’s thinking about the limitations of administrative authority.

The basic rule, as articulated by Justice Scalia in Whitman, was that agencies such as EPA are creatures of statute and therefore are only empowered to do what Congress has expressly delegated to them. Nowhere in EME Home City Generation is there an argument that Congress gave EPA the authority to use cost as a determining factor in regulating SIPs. Instead, the Court accepted the view that since precision is difficult, EPA must have broad authority to create the parameters for this type of regulation where Congress did not articulate those parameters.

The irony in this case is that the regulated community has traditionally been advocating for more cost/benefit analysis in EPA regulations and EPA has generally resisted those efforts. Now, in allowing for costs to be considered where they were not expressly required to, the regulated community is looking at whether there has been a wholesale shift in the Supreme Court’s thinking, and whether Whitman is still good law. Only time will tell.