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Supreme Court Broadly Construes EPA's Clean Air Act Authority

Confounding its critics for the seeming intrusion of politics into all of its decisions, on April 29, 2014, the Supreme Court issued its decision in the EPA v. EME Homer City Generation and American Lung Assn. v. EME Homer City Generation matters. In a 6-to-2 decision, the Court ruled to uphold EPA's Cross-State Air Pollution Rule, which requires increased emissions reductions from 27 continental upwind states. This is a major victory for EPA, and reinforces its authority to act under the Clean Air Act ("CAA") to combat climate change.

Under the CAA, EPA is charged with setting National Ambient Air Quality Standards ("NAAQS") for all pollutants it considers harmful to human health and the environment. To date, EPA has set NAAQS for six criteria pollutants: carbon monoxide, lead, nitrogen dioxide, ozone, particulate matter, and sulfur dioxide. To comply with the CAA, each state is required to develop a State Implementation Plan ("SIP") for emissions reduction, which allows it to achieve the EPA-established NAAQS for each of these pollutants. Among other considerations, each SIP must take into account emissions released within the state that interfere with other states' attainment of the NAAQS. This addition to the CAA in the 1990 revisions is known as the "Good Neighbor Provision."

In 2011, EPA issued its Cross-State Air Pollution Rule, or Transport Rule, defining the terms of the Good Neighbor Provision. Recognizing that emissions released in upwind states substantially affect downwind states' ability to comply with the NAAQS, EPA determined that upwind states that both (1) produce one or more percent of any NAAQS in a downwind state, and (2) can eliminate the source of these emissions cost effectively, will be required to do. Under this rule, EPA determines the amount of upwind pollutants that must be reduced in order for downwind states to meet the NAAQS, and apportions the required reductions among qualifying upwind states.

In effect, this means that upwind states will be required to eliminate additional sources of nitrogen dioxide and sulfur dioxide emissions beyond what would be required for their own attainment of the NAAQS, and consistent with an allocation made by EPA. This is a cost-based analysis, in which EPA seeks to achieve balance between the upwind states' obligation to reduce pollution and the amount of spending required for downwind states to meet their obligations. Without the Transport Rule, these costs would be borne exclusively by downward states, whose ability to achieve NAAQS is hindered by the interstate pollution which infiltrates their borders.

The Transport Rule was challenged by 15 states, a number of energy companies, and several labor unions. In 2012, the D.C. Circuit vacated the rule. In 2013, the Supreme Court granted certiorari, to consider whether the D.C. Circuit had accurately construed the limits of EPA's authority under the CAA. The Court heard arguments on this issue in December 2013.

The challengers asserted that EPA's direct allocation of additional emission reductions among upwind states (beyond that required to comply with intrastate NAAQS attainment) was based on an impermissible interpretation of the Good Neighbor Provision, and exceeded its authority under the CAA. The Good Neighbor Provision, however, delegates to EPA the authority to reduce upwind pollution that contributes significantly to downwind state nonattainment. The Court found that EPA's decision to allocate responsibility for emissions reduction among the states using this cost-based calculus was a reasonable exercise of its authority, and an "efficient and equitable solution" to the problem of interstate effects on non-attainment.

This decision is a positive sign for EPA's continued efforts to use its regulatory authority under the Clean Air Act to tackle climate change. With the Supreme Court's decision on EPA's authority to regulate greenhouse gas emissions under the CAA pending, and further CAA regulations expected within the year on carbon dioxide emissions and emissions from coal-fired power plants, EPA can rest easier knowing that the Court has recognized its broad regulatory authority under the CAA.

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