Today, the U.S. Supreme Court overturned the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”), ruling 6 to 2 that the U.S. Environmental Protection Agency’s (“EPA”) Cross-State Air Pollution Rule (“CSAPR”) did not violate the Clean Air Act (“CAA”).

In August 2011, EPA promulgated the CSAPR, to target emissions of sulfur dioxide and nitrogen oxides, two pollutants produced at coal and natural gas-fired power plants in 28 upwind states. The rule aimed to reduce air quality impacts to downwind states from upwind state emissions.

In the August 21, 2012 decision that was overturned, the D.C. Circuit Panel found that CSAPR exceeded the EPA’s statutory authority under the Clean Air Act in two ways. First, EPA imposed “massive emissions reduction requirements on upwind States without regard to the limits imposed by the statutory text,” which exclusively requires a consideration of an upwind State’s proportionate contribution, not costs. Second, because EPA failed to implement the so called “Good Neighbor Provision” by denying the States “the initial opportunity to implement the required reductions with respect to sources within their borders,” and imposed Federal Implementation Plans (“FIPs”) to require those obligations.

After the D.C. Circuit vacated CSAPR, EPA’s 2005 Clean Air Interstate Rule (“CAIR”) remained in place pending a valid replacement. The EPA, some states, and public health and environmental groups appealed the D.C. Circuit’s decision to the U.S. Supreme Court.

Today, the U.S. Supreme Court held that EPA reasonably interpreted the Good Neighbor Provision of the Clean Air Act when it issued CSAPR. In particular, the Supreme Court held that: (1) “EPA’s cost-effective allocation of emission reductions among upwind States is a permissible, workable, and equitable interpretation of the Good Neighbor Provision;” and (2) “The CAA does not command that States be given a second opportunity to file a SIP after EPA has quantified the States’ interstate pollution obligations.”

The cases are U.S. Environmental Protection Agency et al. v. EME Homer City Generation LP et al., case number 12-1182, and American Lung Association et al. v. EME Homer City Generation LP et al., case number 12-1183, in the U.S. Supreme Court.

If you have questions regarding this decision and the impacts that it may have for you or your company, please contact Jeffrey Talbert of Preti Flaherty's Environmental Practice Group.