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EME Homer City Generation, L.P v. Environmental Protection Agency

United States Court of Appeals, District of Columbia Circuit

July 28, 2015

EME HOMER CITY GENERATION, L.P., PETITIONER
v.
ENVIRONMENTAL PROTECTION AGENCY, RESPONDENT SAN MIGUEL ELECTRIC COOPERATIVE, ET AL., INTERVENORS

Argued, February 25, 2015

On Petitions for Review of a Final Rule Promulgated by the United States Environmental Protection Agency.

Bill Davis, Assistant Solicitor General, Office of the Attorney General for the State of Texas, argued the cause for State and Local Petitioners. With him on the briefs on remand were Ken Paxton, Attorney General, Jon Niermann, Chief, Environmental Protection Division, Mark Walters, Assistant Attorney General, Derek Schmidt, Attorney General, Office of the Attorney General for the State of Kansas, Jeffrey A. Chanay, Chief Deputy Attorney General, Pamela Jo Bondi, Attorney General, Office of the Attorney General for the State of Florida, Jonathan A. Glogau, Chief, Complex Litigation, Henry V. Nickel, George P. Sibley III, Luther Strange, Attorney General, Office of the Attorney General for the State of Alabama, Robert D. Tambling, Assistant Attorney General, Greg Zoeller, Attorney General, Office of the Attorney General for the State of Indiana, Thomas M. Fisher, Solicitor General, David R. Taggart, Samuel S. Olens, Attorney General, Office of the Attorney of the State of Georgia, John E. Hennelly and James D. Coots, Senior Assistant Attorneys General, James D. " Buddy" Caldwell, Attorney General, Office of the Attorney General for the State of Louisiana, Megan K. Terrell, Assistant Attorney General, Herman Robinson, Jackie M. Marve, Elliott Vega, Donald Trahan, Deidra Johnson, Kathy M. Wright, Aaron D. Lindstrom, Solicitor General, Office of the Attorney General for the State of Michigan, Neil David Gordon, Assistant Attorney General, Sean Peter Manning, Chief, Environmental, Natural Resources, and Agriculture Division, Blake Johnson, Assistant Attorney General, Doug Peterson, Attorney General, Office of the Attorney General for the State of Nebraska, Harold E. Pizzetta III, Assistant Attorney General, Office of the Attorney General for the State of Mississippi, E. Scott Pruitt, Attorney General, Office of the Attorney General for the State of Oklahoma, Patrick Wyrick, Solicitor General, P. Clayton Eubanks, Deputy Solicitor General, J.B. Van Hollen, Attorney General at the time the brief was filed, Office of the Attorney General for the State of Wisconsin, Thomas J. Dawson, Assistant Attorney General, Michael DeWine, Attorney General, Office of the Attorney General for the State of Ohio, Dale T. Vitale, Gregg H. Bachmann and Elizabeth Ewing, Assistant Attorneys General, Alan Wilson, Attorney General, Office of the Attorney General for the State of South Carolina, James Emory Smith, Jr., Deputy Solicitor General, and Leslie Sue Ritts. William J. Cobb for the State of South Carolina entered an appearance.

Peter D. Keisler argued the cause for Industry and Labor Petitioners. With him on the briefs on remand were C. Frederick Beckner III, Roger R. Martella, Jr., Eric D. McArthur, Benjamin Beaton, F. William Brownell, P. Stephen Gidiere III, Grant Crandall, Arthur Traynor III, Eugene M. Trisko, Ann M. Seha, Daniel J. Kelly, William M. Bumpers, Joshua B. Frank, Megan H. Berge, Kelly M. McQueen, Janet J. Henry, Robert A. Manning, Joseph A. Brown, Mohammad O. Jazil, Bart E. Cassidy, Katherine L. Vaccaro, Todd E. Palmer, Jordan J. Hemaidan, Valerie L. Green, Jeffrey L. Landsman, Vincent M. Mele, Richard G. Stoll, Brian H. Potts, Steven G. McKinney, C. Grady Moore III, Ben H. Stone, Terese T. Wyly, Karl R. Moor, William L. Wehrum, Jr., Margaret Claiborne Campbell, Bryon W. Kirkpatrick, Hahnah Williams Gaines, James S. Alves, Gary V. Perko, David M. Flannery, Kathy G. Beckett, Laura M. Goldfarb, Peter S. Glaser, Andrea Bear Field, Norman W. Fichthorn, E. Carter Chandler Clements, David R. Tripp, Dennis Lane, William F. Lane, and Maureen Harbourt.

Shannon L. Goessling and Michael J. Nasi were on the brief for intervenor San Miguel Electric Cooperative, Inc. and Amicus Southeastern Legal Foundation, Inc. in support of petitioners on remand. Robert M. Cohan entered an appearance.

Norman L. Rave, Jr. and Jessica O'Donnell, Attorneys, U.S. Department of Justice, argued the causes for respondents. With them on the brief were John C. Cruden, Assistant Attorney General, and Stephanie Hogan, Attorney, U.S. Environmental Protection Agency.

Andrew G. Frank, Assistant Attorney General, Office of the Attorney General for the State of New York, argued the cause for State and Local Intervenors in support of respondent. With him on the brief on remand were Eric T. Schneiderman, Attorney General, Barbara D. Underwood, Solicitor General, Steven C. Wu, Deputy Solicitor General, Michael J. Myers, Assistant Attorney General, Brian E. Frosh, Attorney General, Office of the Attorney General for the State of Maryland, Mary E. Raivel, Assistant Attorney General, Roy Cooper, Attorney General, Office of the Attorney General for the State of North Carolina, Marc Bernstein, Special Deputy Attorney General, Peter F. Kilmartin, Attorney General, Office of the Attorney General for the State of Rhode Island, Gregory S. Schultz, Assistant Attorney General, George Jepsen, Attorney General, Office of the Attorney General for the State of Connecticut, Kimberly P. Massicotte and Scott N. Koschwitz, Assistant Attorneys General, Matthew Denn, Attorney General, Office of the Attorney General for the State of Delaware, Valerie M. Edge, Deputy Attorney General, Lisa Madigan, Attorney General, Office of the Attorney General for the State of Illinois, Matthew J. Dunn and Gerald T. Karr, Assistant Attorneys General, William J. Moore III, Benna Ruth Solomon, Carrie Noteboom, William H. Sorrell, Attorney General, Office of the Attorney General for the State of Vermont, Thea Schwartz, Assistant Attorney General, Maura Healey, Attorney General, Office of the Attorney General for the Commonwealth of Massachusetts, Frederick D. Augenstern, Assistant Attorney General, Karl Racine, Attorney General, Office of the Attorney General for the District of Columbia, Todd Kim, Solicitor General, Scott J. Schwarz, and William R. Phelan, Jr.

Graham G. McCahan argued the cause for Public Health Respondent Intervenors. With him on the brief on remand were Howard I. Fox, David S. Baron, Josh Stebbins, Vickie L. Patton, Sean H. Donahue, David Marshall, John Walke, and Emily Davis. Ann B. Weeks entered an appearance.

Brendan K. Collins argued the cause for Industry Respondent Intervenors. With him on the brief on remand were Robert B. McKinstry, Jr., Lorene L. Boudreau, and James W. Rubin.

Before: ROGERS, GRIFFITH, and KAVANAUGH, Circuit Judges.

OPINION

Kavanaugh, Circuit Judge

The Clean Air Act requires EPA to set national ambient air quality standards, or NAAQS. Those standards limit the levels of common pollutants in the ambient air. See 42 U.S.C. § 7409(a). Under the Act, individual States are responsible for ensuring attainment within their States of federal air quality standards. But air pollution is " heedless of state boundaries." EPA v. EME Homer City Generation, L.P., 134 S.Ct. 1584, 1593, slip op. at 2 (2014). Emissions in upwind States therefore may affect air quality in downwind States. The Clean Air Act's " good neighbor" provision speaks to that problem by proscribing upwind States from " emitting any air pollutant in amounts" that will " contribute significantly to nonattainment" of a NAAQS in a downwind State. 42 U.S.C. § 7410(a)(2)(D)(i). This case concerns EPA's effort to regulate interstate air pollution pursuant to the good neighbor provision.

In 2011, EPA promulgated its latest good neighbor regulation, the Transport Rule, also known as the Cross-State Air Pollution Rule. A number of States, localities, and industry groups promptly challenged the Rule. They argued, among other things, that the Rule's methodology for computing the upwind States' emissions reduction obligations under the good neighbor provision exceeded EPA's statutory authority. As relevant here, they contended that the Rule imposed uniform pollution reductions on upwind States regardless of the actual amounts of pollution that individual upwind States contributed to downwind States. According to petitioners, this methodology led to over-control of upwind States' emissions. Applying our precedents in North Carolina v. EPA, 531 F.3d 896, 382 U.S.App.D.C. 167 (D.C. Cir. 2008), and Michigan v. EPA, 213 F.3d 663, 341 U.S.App.D.C. 306 (D.C. Cir. 2000), this Court issued a 2-1 decision, with Judge Rogers dissenting, that agreed with petitioners and vacated the Rule. See EME Homer City Generation, L.P. v. EPA, 696 F.3d 7, 38, 402 U.S.App.D.C. 383 (D.C. Cir. 2012).

On review, the Supreme Court reversed in a 6-2 decision. The Court ruled that the over-control problem did not require invalidation of the Rule " on its face." EME Homer, 134 S.Ct. at 1609, slip op. at 31. In doing so, however, the Court stated that it " agree[d] with the Court of Appeals to this extent" : The Transport Rule requires " unnecessary" emissions reductions when EPA " requires an upwind State to reduce emissions by more than the amount necessary to achieve attainment in every downwind State to which it is linked." Id. at 1608-09, slip op. at 29-31. The Court stated that over-control of individual upwind States could be contested through " particularized, as-applied challenge[s]." Id. at 1609, slip op. at 31.

Now on remand, we consider several as-applied over-control challenges to EPA's 2014 emissions budgets. Petitioners challenge the 2014 SO2 emissions budgets for Texas, Alabama, Georgia, and South Carolina. Petitioners also challenge the 2014 ozone-season NOX emissions budgets for Florida, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia. On this record, petitioners' as-applied challenges are meritorious, and those 2014 emissions budgets are invalid. We therefore grant the petitions to that limited extent, and we remand without vacatur to EPA for it to reconsider those 2014 emissions budgets.

In this opinion, we also must address a number of petitioners' broader challenges to the Transport Rule that we did not have occasion to address in the prior case. We reject all of those claims and deny the petitions with respect to those issues.

I

The Transport Rule has been described in exhaustive detail in earlier phases of this litigation. See EPA v. EME Homer City Generation, L.P., 134 S.Ct. 1584, 1593-95, slip op. at 2-6 (2014). We summarize the main points here.

The Clean Air Act regulates air quality through a federal-state collaboration. First, EPA establishes air quality standards known as NAAQS. See 42 U.S.C. § 7409(a). Then, EPA identifies areas within the States that have not attained those NAAQS. See id. § 7407(d). Those are called " nonattainment" areas. Id. Next, the baton is passed to the States, which have the first opportunity to enact plans that provide for the " implementation, maintenance, and enforcement" of the NAAQS. Id. § 7410(a)(1). States typically must enact and submit their plans -- called State Implementation Plans or SIPs -- within three years of any new or revised NAAQS. Id. If a State declines to submit a SIP, or if EPA finds that the State's SIP fails to satisfy the minimum criteria of the Clean Air Act, EPA must promulgate a Federal Implementation Plan, or FIP, in its stead. See id. § 7410(c)(1).

Pollution emitted in upwind States can travel to downwind States. As a result, some " downwind States to which the pollution travels are unable to achieve clean air because of the influx of out-of-state pollution." EME Homer, 134 S.Ct. at 1593, slip op. at 1.

The Clean Air Act's good neighbor provision addresses the issue of interstate air pollution. That provision, as currently phrased, requires State SIPs to:

contain adequate provisions --
(i) prohibiting, consistent with the provisions of this subchapter, any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will --
(I) contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any such national primary or secondary ambient air quality standard . . . .

42 U.S.C. § 7410(a)(2)(D).[1]

The Transport Rule at issue here represents EPA's latest effort to implement the requirements of the good neighbor provision. The Rule focuses on three NAAQS. (NAAQS regulate individual pollutants measured over a specified time period.) The NAAQS covered by the Transport Rule are the 8-hour ozone NAAQS, the annual particulate matter (or PM2.5) NAAQS, and the 24-hour PM2.5 NAAQS. See Transport Rule, 76 Fed.Reg. 48,208, 48,209 (Aug. 8, 2011). The Transport Rule does not directly regulate ozone and PM2.5. As gases are " carried downwind, they are transformed, through various chemical processes, into altogether different pollutants." EME Homer, 134 S.Ct. at 1594, slip op. at 3. The pollutants that become ozone in downwind States start out in upwind States as emissions of nitrogen oxide (NOX). See Transport Rule, 76 Fed.Reg. at 48,209-10. The pollutants that become PM2.5 in downwind States start out in upwind States as emissions of NOX and sulfur dioxide (SO2). Id. Therefore, the Transport Rule promotes downwind attainment of ozone and PM2.5 NAAQS by limiting NOX and SO2 emissions in upwind States.

The Transport Rule employed a " two-step approach" to determine whether and to what extent a State must reduce its NOX and SO2 emissions pursuant to the good neighbor provision. EME Homer, 134 S.Ct. at 1596, slip op. at 7.

In the first step, EPA identified the upwind States that " contribute significantly" to nonattainment of NAAQS in one or more downwind States. See id. If a downwind State's receptor site is not in attainment and if an upwind State caused more than 1% of the pollution at that site, then that upwind State was deemed to have " contributed significantly." See id. (Receptor sites are locations in downwind States where EPA measures ambient air quality for pollutants regulated by the Clean Air Act. See id. )

When an upwind State was found to contribute 1% or more of the relevant pollution at a downwind receptor, that upwind State was deemed to have a " linkage" to that downwind location. See Transport Rule, 76 Fed.Reg. at 48,236. Any State with no such linkages was " screened out and exempted from regulation under the rule." EME Homer, 134 S.Ct. at 1596, slip op. at 7. Any State that had at least one linkage was subject to the Transport Rule. See id. EPA found 27 upwind States to have one or more linkages in downwind States. See id. Those 27 States were then subject to the second step of the Transport Rule.

In the second step, EPA calculated the pollution reductions necessary for those 27 upwind States to comply with their good neighbor obligations. Recall that the good neighbor provision of the Act prohibits upwind States from emitting " amounts" of pollution that " contribute significantly" to nonattainment in downwind States. 42 U.S.C. § 7410(a)(2)(D). EPA's task at this second step was to decide what " amounts" of pollution each upwind State needed to reduce.

But given what it described as the complexity of trying to assess the relative amount that each upwind State contributes to nonattainment in each downwind State, EPA decided to impose uniform emissions reductions on the upwind States covered by the Rule. See EME Homer, 134 S.Ct. at 1607, slip op. at 26-27. In other words, once a State was deemed subject to the Transport Rule, its obligation to reduce emissions would no longer depend on the actual amounts it emitted into individual downwind States.

Using its uniform approach, EPA calculated how much pollution each upwind State could eliminate if all of its sources applied pollution control technologies available at particular cost thresholds. See id. at 1596, slip op. at 7-8. Those cost thresholds were expressed in terms of cost per ton of emissions reduced.

In the end, EPA adopted four cost thresholds for the 27 upwind States subject to the Transport Rule. For all States subject to the Rule for annual NOX, EPA set a $500/ton cost threshold. See Transport Rule, 76 Fed.Reg. at 48,250. For States subject to the Rule for ozone-season NOX, EPA also set a $500/ton cost threshold. See id. For States subject to the Rule for SO2, EPA divided the States into two groups. For Group 1 States, EPA set a $2,300/ton cost threshold. See id. at 48,259.[2] For Group 2 States, EPA set a $500/ton cost threshold. See id. [3]

In the prior round of litigation, petitioners disputed EPA's method of calculating emissions budgets for upwind States, and this Court found three main problems with EPA's approach. First, the Rule could lead to over-control of upwind States -- that is, emissions reductions beyond those necessary to achieve attainment in downwind States. Second, the Rule could require States to reduce even insignificant contributions to pollution in downwind States. Third, the Rule did not purport to try to assess each upwind State's relative contribution to nonattainment in downwind States. We therefore concluded that EPA's methodology violated the Clean Air Act, and vacated the Transport Rule.

The Supreme Court largely agreed with this Court on the first two issues but not on the third. The Court concluded, moreover, that those first two issues did not support " wholesale invalidation" of the Transport Rule. EME Homer, 134 S.Ct. at 1608, slip op. at 29.

Most important for present purposes is the first issue, over-control. The Supreme Court " agree[d] with the Court of Appeals to this extent" : The Transport Rule violates the statute when it " requires an upwind State to reduce emissions by more than the amount necessary to achieve ...


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