EPA Inspector General Releases Report on Greenhouse Gas Endangerment Finding
Update: Great Lakes Week — October 11-14, 2011

States and Private Industry Challenge EPA’s Cross-State Air Pollution Rule

Torrence_Allison_COLORBy Allison A. Torrence


The states of Alabama, Florida, Kansas, Nebraska, Oklahoma, South Carolina, Texas and Virginia, along with several private companies, have sued the United States Environmental Protection Agency ("EPA") in federal court, seeking to halt implementation of EPA's Cross-State Air Pollution Rule ("Transport Rule"). The states and private companies have filed seven separate cases, which have been consolidated under the first-filed case, EME Homer City Generation, L.P. v. Envtl. Prot. Agency, No. 11-1302 (D.C. Cir. filed Aug. 23, 2011).

The Transport Rule regulation at issue was published by EPA on August 8, 2011, pursuant to its authority under the Clean Air Act ("CAA"). Federal Implementation Plans: Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals, 76 Fed. Reg. 48,208 (Aug. 8, 2011) (to be codified at 40 C.F.R. pts. 51, 52, 72, 78, and 97). The Transport Rule requires certain states to reduce sulfur dioxide ("SO2") and nitrogen oxide ("NOx") emissions in an effort to reduce down-wind air quality impacts in other states. The Transport Rule's compliance period is set to begin on January 1, 2012, and will impact a total of 27 states. One of the more controversial aspects of the Transport Rule is that it will implement the SO2 and NOx emissions reductions through Federal Implementation Plans ("FIPs") that target electric generating units (e.g., coal-fired power plants) in each of the 27 states. Typically, EPA sets air quality standards under the CAA, and allows states to decide how to best reach the air quality goals through State Implementation Plans ("SIPs"). Under the Transport Rule, states can eventually apply for a SIP, but initial enforcement will be through the FIPs.

EPA's attempts to control interstate transport of air pollution have long faced legal challenges. In 2008, the D.C. Circuit Court of Appeals determined that EPA's previous interstate pollution rule, the Clean Air Interstate Rule, was fundamentally flawed and thus vacated and remanded the rule to EPA. North Carolina v. Envtl. Prot. Agency, 531 F.3d 896 (D.C. Cir. 2008). The current Transport Rule is the result of EPA's efforts to implement an interstate pollution rule in light of the D.C. Circuit Court's remand.

Several parties have now filed motions to stay the implementation of the Transport Rule pending the D.C. Circuit Court's full review of the legal challenges brought by the various plaintiffs. The first such motion was filed by EME Homer City Generation, L.P. on August 25, 2011. Several other private companies filed motions to stay, and most recently, on September 23, 2011, Florida and Nebraska also filed a motion for a stay.

All of the motions argue similarly that plaintiffs are entitled to a stay pending review by the court because they can demonstrate the four factors necessary to grant a stay. First, plaintiffs argue that they are likely to prevail on the merits because (a) EPA's final Transport Rule is significantly different than the proposed rule published one year prior; (b) the promulgation of the FIPs is improper without providing states the chance to create SIPs; and (c) EPA's actions were arbitrary and capricious. Second, plaintiffs argue that they will suffer irreparable harm if a stay is not granted due to the damage the Transport Rule will cause to the states' economies and their ability to ensure that affordable, reliable power is available for their citizens as well as the significant costs the Transport Rule will impose on energy generators. Third, plaintiffs argue that there is no possibility of substantial harm to other parties if a stay is granted because existing CAA rules will remain in place until EPA can promulgate a legally valid rule to replace the Transport Rule. Finally, plaintiffs argue that the public interest favors granting the motion to stay because a stay will protect consumers from electricity rate increases that would occur as soon as 2012.

To date, EPA has only responded to EME Homer City Generation's motion to stay. In its response in opposition to the motion to stay, EPA argues that it had sufficient authority under the CAA to promulgate the Transport Rule and the corresponding FIPs. EPA has authority to promulgate a FIP if it has made a finding of failure to submit and/or disapproved a SIP submission from the state. 42 U.S.C. § 7410(c)(1). EPA asserts that it had made such findings with regard to each state covered by the Transport Rule and none of the states had corrected the deficiencies identified by EPA. EPA also argues that the Transport Rule approach is reasonable and will not result in irreparable harms. Finally, EPA argues that a stay would harm third parties and be contrary to the public interest because a stay will delay significant public health and environmental benefits while implementation of the Transport Rule will cause less than a 1 percent increase in consumer energy bills. EPA has until October 16, 2011 to respond to the other motions to stay. Several environmental groups, including the Sierra Club, as well as Exelon Corporation, have also filed responses in opposition to EME Homer City Generation's motion to stay.