The following article was originally published in the San Francisco Daily Journal on May 5, 2014. ©2014 Daily Journal Corporation. Reprinted with permission.

EPA Knows Which Way The Wind Blows

By R. Morgan Gilhuly and Christopher D. Jensen

The immediate impact of the U.S. Supreme Court's decision in EPA v. EME Homer City Generation LP, 2014 DJDAR (April 29, 5327), is that most power plants in the eastern half of the U.S. will face tighter limits on air pollutants. But more significantly, the case may signal the Supreme Court's willingness to defer to the Environmental Protection Agency's judgment in implementing the Clean Air Act and other technically complex environmental statutes - and that may augur well for the EPA's regulation of greenhouse gas emissions.

By a 6-2 margin, the court upheld EPA regulations requiring reductions in sulfur dioxide, nitrogen oxides, and fine particle emissions from power plants in 28 states stretching from Texas to New York. The regulations, known as the "cross-state air pollution rule" or "transport rule," were enacted under the "good neighbor provision" of the Clean Air Act, which requires states to avoid contributing "significantly" to nonattainment of air quality standards in other states.


The problem that the transport rule addresses is a complex one. Pollution from power plants in the Midwest (many burning coal) is carried by prevailing winds to the east, and causes air pollution in downwind states to exceed federal air quality standards. The good neighbor provision directs states to prohibit in-state sources of air pollution "from emitting any air pollutant in amounts which will ... contribute significantly" to pollution exceeding federal standards in downwind states. But when pollution in New York, for example, is caused by emissions in Michigan, Indiana and Ohio (and probably many other states), how much must each state, and each source in each state, reduce emissions? Justice Ruth Bader Ginsburg colorfully described the uncertainties the EPA faced with a quote from the King James Bible: "The wind bloweth where it listeth, and thou hearest the sound thereof, but canst not tell whence it cometh, and whither it goeth."

The EPA solved this problem by adopting a two-part solution. First, the EPA decided to ignore any state that contributed less than 1 percent of the regulated pollutants to a downwind state. Second, the EPA used models to predict how much pollution would be emitted if all sources within upwind states implemented control measures at specific cost thresholds. Based on those costs, the EPA set emissions "budgets" for each upwind state, and incorporated those budgets into federal implementation plans (FIPs).

The Court's Decision

A group of state and local governments joined industry and labor groups in a challenge to the transport rule in the U.S. Court of Appeals for the D.C. Circuit. In an opinion authored by Judge Brett Kavanaugh, the D.C. Circuit held that the EPA exceeded its authority in adopting the rule without first giving states the opportunity to revise their state implementation plans (SIPs) to adopt measures that would satisfy the good neighbor provision's requirements. In addition, the Court of Appeals interpreted the good neighbor provision as requiring upwind states to reduce emissions in "a manner proportional to their contributions to pollution in downwind States," and therefore concluded that the EPA's use of uniform cost thresholds to determine the amount of emissions reductions in each upwind state exceeded the agency's regulatory authority.

The Supreme Court reversed. The majority, in an opinion by Ginsburg, disagreed with the D.C. Circuit on both issues, and upheld the EPA's regulation. Citing the plain meaning of the Clean Air Act, the court rejected the argument that the EPA was required to provide the states with an opportunity to revise their SIPs before imposing federal plans. The court also upheld the EPA's decision to take cost into account in allocating emissions reductions among upwind states.

Addressing the lack of notice to the affected states, Ginsburg's majority opinion noted that the EPA has statutory authority to issue a FIP "at any time" within two years of the disapproval of a SIP, and characterized the D.C. Circuit's decision as creating an "unwritten exception to this strict time prescription for SIPs aimed at the Good Neighbor Provision" - an exception that the circuit court "had no warrant" to create.

With respect to the petitioners' second argument, the court rejected the "proportionality" requirement that the D.C. Circuit read into the statute and upheld the EPA's decision to consider costs in allocating emissions reductions among the upwind states. The majority concluded that the EPA could reasonably use costs to determine whether emissions in one state "contribute significantly" to nonattainment of air pollution standards in another. Ginsburg noted the practical difficulties of linking emissions in one upwind state to air pollution that occurs at a downwind location, given that most upwind states contribute pollution to multiple downwind states in varying amounts. The court concluded that the two-step process the EPA used to set caps on emissions in upwind states "makes good sense," and was a reasonable interpretation of the Clean Air Act.

The animating principle of much of Ginsburg's opinion is respect for the EPA's expertise in weighing various technical and economic factors in an attempt to craft a reasonable, cost-effective solution to a difficult problem. The court's observations that the process used to develop budgets for upwind state emissions was "efficient," "equitable" and "makes good sense" can only be read as an endorsement of giving the EPA discretion to resolve such technical issues.

Justice Scalia's Dissent

Justice Antonin Scalia's dissent, joined by Justice Clarence Thomas (Justice Samuel Alito recused himself), will likely be remembered more for an error that quickly went viral than for the views it expresses. In arguing that the EPA should not be allowed to consider costs, the dissent cited the EPA's position in Whitman v. American Trucking Associations Inc., 531 U.S. 457 (2001), in which - according to the dissent - the EPA argued that it should be able to take costs into account. But EPA took exactly the opposition position in American Trucking - arguing that costs should not be taken into account. The error was quickly pointed out on several blogs and in a letter to the court from Harvard Professor Richard Lazarus. By the next day, the dissent had been revised to correct the error.

Apart from this embarrassing error, the dissent is noteworthy only for Scalia's usual fiery prose. The dissent characterizes the transport rule as yet another example of an important decision made "by unelected agency officials exercising broad lawmaking authority, rather than by the people's representatives in Congress," and the majority's opinion as having "no pretended textual justification at all" and a "Look Ma, no hands!" approach. Scalia argues that the good neighbor provision unambiguously requires emissions reductions based on the "amounts" contributed to downwind pollution, and not the cost of control measures. He also takes issue with the EPA's failure to give states an opportunity to modify their SIPs to meet the requirements of the good neighbor provision, which he describes as an assault on the "cooperative federalism" that underlies the Clean Air Act.

Even for those concerned about the EPA's tendency to invoke its "expert judgment" to avoid judicial scrutiny of sloppy rulemaking, it is hard to argue with the EPA's decision to take cost into consideration in setting limits on upwind state emissions. Aside from the obvious virtue of reducing the overall cost of compliance, the EPA's decision to give priority to the least expensive emissions control measures avoids punishing states that had previously implemented stricter, relatively costly emissions controls and, conversely, avoids rewarding states that have failed to adopt even the most cost-effective measures. Indeed, even as he argues for overturning the rule, Scalia's dissent notes that the EPA's chosen methodology is "probably" efficient and "[p]erhaps" equitable.

Greenhouse Gas Emissions

Both Justices John Roberts and Anthony Kennedy joined the majority opinion. Their decision to side with the EPA in this case may have implications for an even more significant test of the EPA's rulemaking authority, in the challenge to EPA's "tailoring rule" for the regulation of greenhouse gas emissions from power plants and large industrial facilities. The EPA and its supporters are surely hoping that the same six justices will show similar deference to the EPA's attempt to use the machinery of the Clean Air Act, a statute that was enacted more than 40 years ago, long before "climate change" became a household word, to regulate greenhouse gas emissions. The court heard arguments in the tailoring rule case, Utility Air Regulatory Group v. EPA, No. 12-1146, in February, and a decision is anticipated before the end of the current term in June.