Regulatory Developments, Special Topics in Environmental Management

One Good Neighbor Provision Remanded; All Other Rule Challenges Denied

In a ruling that helps downwind states with areas in nonattainment with the 2008 National Ambient Air Quality Standards (NAAQS) for ozone, a panel of the U.S. Court of Appeals for the D.C. Circuit declined to vacate the EPA’s 2016 rule to update its Cross-State Air Pollution Rule (CSAPR). However, the court did remand one aspect of the update rule because it strayed from statutory deadlines. All other challenges to the update rule, most of which were filed by industry, were denied by the court.

Power Plant Fossil Fuel Ozone

Aleksey Zhilin /

The 2011 CSAPR is the EPA’s approach to meeting the Clean Air Act’s (CAA) Good Neighbor Provision, which prohibits states from emitting air pollutants in amounts that will contribute significantly to nonattainment or interfere with maintenance of air quality in other states. In the CSAPR, the EPA quantified the emissions reductions that 23 upwind states would need to make to satisfy the Good Neighbor Provision. The states were assigned emissions budgets based on emissions that would occur when sources spent $1,400 to control 1 ton of nitrogen oxides (NOx). States may emit more NOx than permitted by their budgets by acquiring allowances from other states; states may sell allowances to other states if they reduce their emissions by more than what is required by their budgets.

Focus on Power Plants

Environmental petitioners challenged the absence in the update rule of a concrete deadline for upwind states to eliminate their contributions to downwind nonattainment. The panel noted that under the CAA, areas in moderate nonattainment with the ozone NAAQS must be brought into attainment by July 2018. However, the update rule places no requirement on upwind states to eliminate their significant contributions in accordance with that deadline.

The EPA partly explained the deadline omission by noting that it had considered emissions only from electric power plants. Emissions from other sources were not brought into the equation. Therefore, said the Agency, the update rule should be viewed as the first step in a longer regulatory solution.

The panel responded that under this approach, downwind states would be forced to undertake more reductions than would be required if upwind states were held to the same deadline. The panel goes into considerable detail on this issue. Ultimately, the panel could not find any legal basis for giving upwind states an open-ended deadline exemption while downwind states have no choice but to meet their NAAQS obligations on time.

The court concluded: “[B]y issuing a Rule that does not call for upwind States to eliminate their substantial contributions to downwind nonattainment in concert with the attainment deadlines, EPA has strayed outside the bounds of its statutory authority under the Good Neighbor Provision.”

Effect of Remand

The panel decided that invalidation of the update rule exclusively because of the deadline infraction should not result in vacatur because such an action could also result in harm to human health and the environment and, furthermore, would disrupt the allowance trading markets that have developed. Accordingly, the rule was remanded without vacatur. The court also rejected the request by environmental petitioners to give the Agency a 6-month deadline to issue an amendment. “But of course, ‘we do not intend to grant an indefinite stay of the effectiveness of this court’s decision,’” emphasized the panel.

Other Challenges Denied

Additional challenges, which were largely technical, and the panel’s reasons for denial, are as follows:

  • The EPA’s selection of $1,400 in cost to control 1 ton of NOx provided insufficient benefits at too high a price. The panel disagreed, noting sources have already incorporated most of the control technology available at $1,400 or less.
  • The EPA improperly incorporated naturally occurring ozone in quantifying upwind emissions because the Agency may regulate only human-caused ozone. The panel said ozone formed from a mix of biogenic and anthropogenic precursors is a product of human-caused emissions.
  • The EPA failed to account for emissions floating into downwind states from international sources. The panel responded that this incorrectly assumes that an upwind state contributes significantly to downwind nonattainment only when its emissions are the sole cause of downwind nonattainment.
  • In designating downwind areas as in maintenance with the NAAQS, the EPA relied exclusively on projections, an unreasonable deviation from the Agency’s practice of relying on a combination of modeled and monitored data. (A downwind area has maintenance status if the highest of the three projected design values exceeds the NAAQS but the other two values do not.) The court responded that the agency’s projections were predicated directly upon monitored data.
  • The $1,400 control cost threshold applied to all upwind states led to overcontrol in the four states linked exclusively to maintenance receptors (rather than receptors showing nonattainment). The court answered that petitioners failed to identify a single instance of overcontrol.
  • The use of offshore monitors to measure attainment/nonattainment/maintenance artificially inflated projected ozone concentrations. The panel said that the EPA’s reliance on offshore monitors was reasonable given that over-water ozone often blows onto the land above coastal monitors; therefore, capturing that input is critical to accurately gauging air quality in the monitored area.
  • The Agency failed to consider the effect of a Pennsylvania rule designed to limit emissions of NOx and volatile organic compounds (VOCs). The court said this rule was issued a year after the EPA’s window for modeling had closed. The Agency undertook some consideration of the Pennsylvania rule’s effect on NOx emissions, but not VOC emissions, which industry said was impermissible. The court said the Agency was unable to do this because Pennsylvania made no effort to quantify VOC emissions.
  • Objections to the EPA’s method for calculating each state’s emissions budgets included:
    • Unrealistic time frames for installing emissions controls. The panel said the EPA reasonably based its deadline on a real-world example identified during an earlier rulemaking.
    • The EPA’s idling assumption—that is, the proposition that certain less efficient electric generating units temporarily cease operations when energy supply exceeds demand—included an unrealistically large number of units. Basically, industry contended that the EPA effectively treated idled units as if they were units that were permanently retired. The court responded that the Agency properly assessed the impact of idled units as functions of market mechanics and demand.
    • The EPA promised to treat 0.1 pounds (lb)/1 million (mm) British thermal units (Btu) as a ceiling on the emissions-reduction potential for units with selective catalytic reduction (SCR). Instead, the Agency sometimes assumed rates as low as .075 lb/mm Btu in its actual emissions-budget analysis. The court noted that the EPA had learned during the comment period that certain newer plants had a proven track record of achieving superior emissions rates; the court accepted this as a reasonable explanation for lowering the emissions ceiling when SCR is used.
    • The emissions budgets for Illinois, Indiana, Mississippi, and Oklahoma, as well as several allowance allocations to units in those states, were set too low. Apart from the technical merits of these complaints, the court found that the petitioners did not raise them in petitions for reconsideration. Until that happens and the EPA responds, the challenges are not ripe for the court’s review.
  • Ohio, Texas, and Wisconsin claimed that the EPA sat on their state implementation plan (SIP) submissions beyond the 12-month statutory deadline so that it could develop the data and methodology necessary to justify rejecting the SIPs and imposing federal implementation plans in their place. The panel said these arguments came too late. The states filed their petitions for review in November and December 2016, far outside the 60-day jurisdictional window for challenging SIP denials. “To the extent the States challenge these SIP denials, their untimely arguments lie beyond our jurisdiction,” wrote the panel.

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