Market News

 December 11, 2013
US Supreme Court examines rule on cross-border pollution

 The US Supreme Court on Tuesday took up a case examining whether the Environmental Protection Agency exceeded its authority when it sought to impose strict federal clean air standards on states with industrial pollutants that drift downwind to other states.

The high court set aside an additional 30 minutes beyond the usual hour for oral argument, underscoring the importance -- and complexity -- of the dispute.

At issue in the case is an EPA-created mandate called the Transport Rule, in which the federal agency asserted authority under the Clean Air Act (CAA) to regulate air pollution that drifts from one state to other states.

The rule applied to 28 upwind states in the eastern half of the United States. It sought to reduce emissions of sulfur dioxide and nitrogen oxides primarily from power plants.

Regulated industries and states objected, with some charging that the federal agency was undertaking a power grab at the expense of state governments.

The CAA, as designed by Congress, includes provisions to address the problem of interstate downwind pollution. Under the statute's "good neighbor" provision the EPA was directed to work in concert with polluting states to help clean up and prevent air pollution in downwind states.

In the past, the EPA has interpreted the clean air statute to require the agency to set national standards for certain pollutants and then offer each state an opportunity to develop its own plan to achieve compliance with those standards.

Under the newly passed Transport Rule, that didn't happen. Instead of offering the states a chance to address the problems identified by the federal agency, the agency itself sought to impose strict compliance standards on the states.

Lawsuits ensued. State and local governments, industry groups, and labor organizations asked the courts to examine the new rule.

A federal appeals court panel in Washington, D.C., voted 2 to 1 to invalidate the Transport Rule. The appeals court said the EPA exceeded its authority under the Clean Air Act by undercutting and replacing the required role of the states in the cleanup process.

In some cases, upwind states could face a federal mandate that they reduce emissions by more than their contribution to downwind pollution. Such a requirement would violate the terms of the CAA, the appeals court ruled.

Not all states opposed the federal regulation. New York, Connecticut, Delaware, Illinois, Maryland, Rhode Island, Vermont, and the District of Columbia joined in a brief urging the Supreme Court to uphold the EPA's Transport Rule.

In contrast, Texas and 13 other states are arguing for the court to affirm the appeals court decision. And nine other states expressed their support for that outcome in a friend-of-the-court brief.

In his argument to the court, Texas Solicitor General Jonathan Mitchell told the justices that the EPA had put the regulated states in a no-win situation.

"EPA's actions in this case have written the states out of the Clean Air Act," he said. "EPA's approach requires the states to submit state cleanup plans that can only guess at how EPA will quantify their good neighbor obligations under" the Clean Air Act.

Chief Justice John Roberts acknowledged that it seemed to be a difficult circumstance, but that's what the CAA requires.

Mr. Mitchell responded that the EPA had interpreted the statute for 15 years in a manner more favorable to the states.

"EPA has now done a 180-degree shift and they have told the states that they are required to submit good neighbor state [cleanup plans] before EPA has quantified" the amount of emissions those plans must address, he said.

Deputy US Solicitor General Malcolm Stewart told the justices that the upwind states weren't the only states with a stake in the outcome.

"There are sovereign state interests on both sides of this case," Mr. Stewart said in his argument on behalf of the EPA. "This is not a matter of EPA versus the states. It's a matter of EPA trying to act as an honest broker between the upwind and downwind states."

Peter Keisler, a Washington appellate lawyer representing industry and labor groups opposed to the rule, focused his argument on challenging the EPA's reliance on the cost of the emission control plans, rather than the amount of pollutants to be addressed.

He said such a cost-based approach was unfair to upwind states with relatively minor emissions control issues.

"What EPA has done here is assert that it has the power to increase a state's reduction obligations beyond what a focus on the effects of its emissions would require, simply because EPA has decided that it would be reasonably affordable for that state to bear a higher burden," Mr. Keisler said.

"What that means is that states [that] are making only a very slight contribution to air-quality problems in downwind states are nonetheless required to make very substantial reductions, in many cases far more than states that are making far greater contributions to poor air quality in the same downwind locations," he said.

"There is no relationship at all under the EPA's methodology between the amount a state contributes and the amount it has to reduce, because the entire driver is cost," Keisler said. "It's not one component. It is the entire driver."

"Where in the statute does it say they can't do that," Justice Stephen Breyer asked.

Keisler responded that Congress did not intend to allow the EPA to force those causing smaller pollution problems to play a significantly larger role in addressing the problem.

"The whole structure of the Clean Air Act is focused on treating the states as separate entities which are responsible for the emissions that happen within their borders and the effect that those emissions have on other states," he said.