Vermont Law Top 10 Environmental Watch List 2015

EPA v. EME Homer City Generation

Good Neighbors Under the Clean Air Act? So Long as the Price is Right

In 2014, a six-member majority of the Supreme Court upheld the Environmental Protection Agency’s broad authority to resolve the difficult problem of allocating responsibility for downwind air pollution. At issue in the case of EPA v. EME Homer City Generation was the EPA’s “Transport Rule,” which interpreted the Clean Air Act’s Good Neighbor Provision. This provision recognizes that airborne pollutants are highly mobile and can travel easily across state boundaries. In turn, it requires states to prohibit in-state sources from generating pollution that “contribute[s] significantly” to downwind states’ ability to meet their obligations under the Clean Air Act. For the past decade, the EPA has struggled with how to fairly allocate responsibility given the fact that multiple upwind states may be responsible for downwind pollution.

With the Transport Rule, the agency created a two-step process to determine when an upwind state had “contribute[d] significantly” to a downwind state’s inability to meet its obligations under the Clean Air Act. Controversially, the EPA’s process involved a cost-based formula that, in part, allocated upwind states’ responsibility based on the feasibility of the mitigation measures. In addition, the agency created a Federal Implementation Plan (FIP) for each of the states regulated by the Transport Rule. The plan distributed the state’s emissions budget among the in-state sources. This action was also contentious because the act clearly gives the states the ability to develop their own implementation plans before the EPA imposes one. After a state submits its draft plan to the EPA, it has an additional two years to fix it if the agency finds the plan inadequate. In this instance, the EPA failed to give the states an opportunity to develop their own implementation plans before imposing its own.

The decision in Homer is groundbreaking for a couple of reasons. First, the majority reached its conclusion by finding a gap in the Clean Air Act and affirming the EPA’s authority to fill that gap. Specifically, the majority determined that the act does not specify how the agency is meant to formulate its control strategies. Consequently, the court found it appropriate to give the EPA broad discretion to do so. This result is particularly confusing to some given the fact that the court has previously declined to read the Clean Air Act in this manner. In a prior decision, the court did not permit the EPA to engage in a costbenefit analysis where the language of the Clean Air Act did not explicitly say such a consideration was appropriate. Second, the opinion appears to upset the balance of state and federal authority contemplated by the act because it upholds the EPA’s imposition of federal emissions obligations without first giving states the opportunity to revise their own.

So, what does this mean going forward? The decision clearly signals a victory for the EPA. However, one question left from Homer is whether the EPA will now be permitted to engage in cost-benefit analysis under the Clean Air Act in all cases without Congress’ express authority to do so, upending the court’s precedent. If so, the effects could be far reaching for other greenhouse gas cases currently pending before the court. Moreover, such wide latitude for agency decision-making and the imposition of federal requirements without state input may ultimately turn the cooperative scheme contemplated by the Clean Air Act on its head.