On April 29, the Supreme Court issued a 6-2 decision upholding EPA’s Cross-State Air Pollution Rule (often known as the “Transport Rule”)1 implementing the Clean Air Act’s “good neighbor” provision. That provision requires upwind States to address their significant contributions to downwind States’ air pollution problems and gives EPA the authority to step in when the States fail to meet this obligation.

In 2012, the D.C. Circuit had vacated the rule in a 2-1 decision, holding: (1) that EPA could not consider costs in determining significant contributions to downwind nonattainment from upwind States, but instead must consider only physically proportionate contributions from upwind States to downwind nonattainment; and (2) that EPA could not impose a federal implementation plan, or “FIP,” until it had first specified in a rulemaking each State’s specific contribution to downwind nonattainment and then given each upwind State up to three years to develop a state implementation plan to address that contribution. EPA and a number of States and environmental groups sought Supreme Court review.

In today’s decision, the majority (Ginsburg, J., joined by Roberts, C.J., Kennedy, Breyer, Sotomayor, and Kagan, JJ.) reversed that ruling. The Court first holds that once EPA has notified a State that it has failed to meet its obligations under the “good neighbor” provision, EPA may immediately promulgate a FIP to fill the gap. There is no requirement in the statute that EPA first promulgate a rule identifying the States’ individual significant contributions to downwind nonattainment. The Court also holds that EPA is not required to give the upwind States a further opportunity to remedy the failure by issuing a compliant SIP. Turning to the test that EPA applies in determining which States must reduce their emissions and by how much, the majority finds EPA’s approach reasonable and thus subject to the deferential review standard specified in Chevron U.S.A. Inc. v. NRDC. The Court notes that interstate air-pollution relationships are complex and that the D.C. Circuit’s strict proportionality approach would be neither mathematically nor practically feasible. It then finds that EPA’s approach – which first identifies a threshold concentration that is presumptively significant and then requires reductions according to which emissions are the least costly to eliminate – is both fair and efficient. The majority specifically notes that nothing in the statue prohibits EPA from considering costs in assessing the States’ significant contributions. The majority also rejects industry arguments that EPA’s approach could result in “over-control” of emissions in some upwind-downwind State relationships. The majority notes that such over-control may be a necessary incident of reducing an upwind State’s contribution to some other downwind State and that EPA must have some discretion to balance between the dual risks of over-control and under-control.

In a dissenting opinion, Justice Scalia, joined by Justice Thomas, argue that EPA has essentially usurped Congress’ legislative functions, giving the word “significant” a meaning never intended by Congress. The dissenting Justices would also have upheld the strict proportionality requirement imposed by the D.C. Circuit. Justice Alito did not participate in the case.

The case and the Transport Rule now return to the D.C. Circuit for further proceedings, which could include additional briefing and argument on issues that the D.C. Circuit did not reach in its first decision.

The opinion is available here.

For more information about the decision and its impact, please contact Thomas Lorenzen
(Lorenzen.thomas dorsey.com) or Andy Brown (Brown.andrew dorsey.com).

1   The Transport Rule applies to 28 States: Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Wisconsin.