EPA Powers Before the Supreme Court Again

On Tuesday, the Supreme Court will hear the consolidated cases of EPA vs. EME Homer City Generation and American Lung Association vs. EME Homer City Generation. The Homer City coal electricity-producing plant is the focal point of a battle between the EPA and environmentalists on one side and the energy industry on the other side. The plant itself is located in Indiana County, Pennsylvania. First, this case is not about greenhouse gases, although the Court will take up that issue later this term. This is a case about traditional air pollution, particularly sulfur dioxide and oxides in nitrogen oxide emissions.

When these emissions exceed federal guidelines as promulgated by the EPA, the source of those emissions is generally provided an opportunity to reduce them. States are under an obligation to address air pollution sources within their borders, but even further, they must take into account the fact that pollution produced in their states drifts into other states, called downwind states. Because Pennsylvania failed to adequately address this problem and because air pollution does not recognize state boundaries, the EPA stepped in and created the Transport Rule.

The Clean Air Act requires states to regulate air pollution with respect their own contribution to pollution in downwind states. The Transport Rule imposes a one-size-fits-all solution to the problem of cross-state pollution without regard to any individual state’s contribution. In this case, coal-burning plants in 28 upwind states are affected. This particular plant is located in Pennsylvania and no one is disputing the fact that it is a major polluter. It has been cited numerous times not only the EPA, but also by Pennsylvania environmental authorities. Instead of just moving against the Homer City plant, however, the EPA’s Transport Rule ignores their individual contribution to downwind pollution. In fact, it ignores Pennsylvania’s contribution to downwind pollution. It is a simplistic rule that assumes that all 28 states affected contribute equally to downwind pollution and that, therefore, the EPA mandates apply to all coal-burning plants in the 28 states regardless of their individual contributions, or the relative contribution on a statewide basis.

To understand the problem, assume that there are only three states involved instead of 28- Pennsylvania, Ohio and New Jersey. New Jersey has taken steps through their environmental agency to reduce these emissions and they are in line with EPA standards, although sulfur dioxide and oxides are still emitted. Ohio has also taken steps, but their emissions are somewhere between those of Pennsylvania and New Jersey. Pennsylvania, despite their best efforts, is still the “worst” polluter in this example. In fact, we can determine that Pennsylvania is responsible for 60% of the downwind pollution, Ohio 25% and New Jersey 15%. Under the Transport Rule, there is no distinction and each state affected is assumed to contribute 33.3% of the pollution in downwind states. Instead of going after the primary polluting upwind states, it goes after all the states that have emissions whether those emissions are significant or not.

EME Homer City Generation sued the EPA in the DC Circuit and won a 2-1 decision striking down the Transport Rule. They reasoned that the EPA exceeded their statutory authority. The Clean Air Act authorizes the EPA to require states to reduce only their significant contributions to downwind pollution, but the Transport Rule requires the affected to states to reduce emissions below their significant contribution. Secondly, the Clean Air Act specifies that the EPA can act after states are first afforded the opportunity to control the emissions within their borders. This is a technicality within the law that the EPA may have violated here. Instead of allowing the states, Pennsylvania in this instance, to address the problem, the Transport Rule was promulgated and put into force thus denying that state the opportunity to act first. This is called the “good neighbor provision.” In effect, the EPA quantified the state’s obligations and then set forth an implementation plan on those states before the state could even act.

Regarding the first aspect of the DC Court’s decision, it is obvious in many respects that this rule simply ignores the relative contribution of upwind states to downwind state air pollution. Even though, in the example above, Pennsylvania may be the primary polluter, the other states are dragged into the regulatory scheme and, in effect, made co-defendants despite their attempts and success in reducing downwind pollution. In effect, the EPA imposed massive emission reductions on all the upwind states without respect to any state’s relative contribution. It “assumes” equal guilt among all 28 states when, in fact, the main culprits may be only a handful of states. Secondly, the Clean Air Act was designed as a cooperative state-federal effort to clean our Nation’s air. However, in recent years and especially under Obama, the states have been increasingly cut out of this equation. This stems from the belief that the federal EPA knows what is best.

The downfall of the Transport Rule may very well rest on this federalism issue. It may very well be true that certain states will drag their feet in implementing rules designed to decrease downwind pollution under the good neighbor provision. However, in this case, Pennsylvania was never even afforded that opportunity before the EPA stepped in. In effect, they usurped state authority which is designed to be the first source of recourse to decreasing emissions.

As many authorities have noted, the DC Court took great pains to note that they have in recent years taken great pains to uphold EPA rules and guidelines in this area. They also noted that it would be in the best interests of the country to continue the effort to decrease air pollution. They did not comment on the legitimacy of the Clean Air Act which has been upheld on numerous occasions. What they were ruling on was in this particular instance, the EPA violated the statutory text of the Clean Air Act when they created the Transport Rule.

This case further illustrates the importance of the DC Circuit Court which hears a plethora of federal regulatory cases every year. This is the battle over Obama appointees writ specifically. In the DC Court’s decision, the majority two judges were Bush appointees while the dissenter was a Clinton appointee. The decision reflects the differences between liberals and conservatives regarding the role and scope of the federal government in the area of regulations. Not only do they hear cases from the EPA, but also OSHA, the NLRB, the IRS, HHS and other federal agencies.

Before anyone gets excited about this case before the Supreme Court, it needs to be noted that had they rejected the case, the decision of the DC Court would have stood and the Transport Rule would be negated. That is not the case. It takes four Justices to take the case and it is likely those four were the liberal wing of the Court which have no reservations about an expansive regulatory state dictated from Washington. Furthermore, on the very day they accepted this case, they denied three companion cases in which the EPA prevailed in the lower courts. Those cases involved new ethanol blending rules and they were contested by three major industry groups. Thus, the denial of three cases the EPA won coupled with acceptance of the one case the EPA lost should not give conservatives reason for jubilation. If anything, their acceptance of this case is a victory for environmentalists. Of course, we will have to wait for the final decision in the case to see who gets the last laugh here. It may very well be that the Court will decide the EPA has the authority to implement the Transport Rule after a showing of cause that the states failed to act after a certain period of time. That may be the compromise solution that would retain the spirit of the Clean Air Act.

In conclusion, it is no secret that the Obama administration, through the EPA, is attempting to decrease through any means necessary the use of coal electricity-generating plants. This is part and parcel of his “war on coal.” However, it needs to be noted that not only coal plants, but also plants that burn natural gas produce these pollutants, although at a considerably lower level. Still, they would be the collateral damage in this war on coal.

As a long-time watcher of the Supreme Court, it would be very surprising if this Court upholds the decision of the lower DC Court, especially given the fact this is basically the same Court that ruled in expanding the EPA’s powers in Massachusetts vs. EPA. Stevens and Souter are gone only to be replaced by two more liberal Justices in Kagan and Sotomayor. There is one side issue and that is the possibility that Kagan should recuse herself from this case. When this rule was being considered- it was officially posted as a proposal on July 6, 2010- Kagan was still the Solicitor General technically, although nominated to the Supreme Court on May 10th. Prior to that posting, it is inconceivable that the issue was not first discussed. Kagan may have technically been out of the loop by two months, but it is doubtful she or her office was not consulted beforehand. Just playing devil’s advocate, should she recuse herself and if the coalition in the minority in the Massachusetts vs. EPA case holds, the the resulting 4-4 decision would leave the DC Court ruling intact as a loss for the EPA. However, this is all speculation. If Kagan did not recuse herself in the Obamacare cases, she isn’t doing so now. Whether she should is a whole other story.

Prediction: The Supreme Court reverses the DC Circuit Court in a 5-4 decision with Kennedy casting the deciding vote in favor of the EPA.