On Aug. 21, 2012, a D.C. Circuit panel decided EME Homer City Generation, L.P. v. EPA, which vacated the EPA’s 2011 Cross-State Air Pollution Rule (“CSAPR”).[1]  The rule, formulated after a 2008 D.C. Circuit decision remanded a prior incarnation of the rule,[2] sought to reduce pollution emitted from upwind states that impairs air quality in downwind states.[3]  It was promulgated under the authority of the “good neighbor” provision of the Clean Air Act (“CAA”), section 110(a)(2)(D), which requires states to have “adequate provisions” in their State Implementation Plans (“SIPs”) to eliminate pollution that “contribute[s] significantly” to the inability of downwind states to meet CAA air quality standards.[4]

The rule selected the states that were contributing to excessively poor air quality impairment downwind by using a computer model that detected contributions above a certain threshold.[5]  For each of those states, it established pollution reduction requirements through a “multi-factor assessment” that considered the cost per ton of pollution reduced as well as air quality modeling data.[6]  The rule also contained a Federal Implementation Plan (“FIP”) that set pollution allowances for polluters within each state, which each state could modify within certain bounds starting in 2014. [7] The EPA estimated that CSAPR would avoid 13,000 to 34,000 premature deaths per year and create $120 to $280 billion per year in health and environmental benefits while costing just $2.4 billion per year.[8]

Judge Kavanaugh’s majority opinion found that CSAPR violated the CAA by using different methods for determining which states must make reductions and for determining emissions reduction targets.[9]  First, the use of cost and air quality modeling “could require upwind states to reduce emissions” below the threshold for falling within CSAPR.[10]  Second, the majority concluded that the EPA had to create state reductions “on a proportional basis,” which its cost and modeling approach did not do.[11] Finally, according to Kavanaugh, the EPA had not factored in whatever emissions reductions downwind states would have to make nor did it ensure that the states on the whole avoid “unnecessary over-control.”[12]

The majority also determined that imposing a FIP contemporaneously with an emissions reduction requirement was impermissible under the CAA.[13]  Its opinion cited the general cooperative federalism structure of the CAA, and analogized CSAPR’s state targets to the setting of air quality standards that states must attempt to meet in their SIPs.[14]  By the majority’s interpretation of the CAA, the EPA had to afford states the opportunity to satisfactorily incorporate their required CSAPR emissions reductions into their SIPs prior to the EPA stepping in with a FIP.[15]

The dissenting opinion by Judge Rogers comprehensively criticized the majority for overreaching in reversing the EPA to this extent.[16]  Perhaps its biggest concern was that the court lacked jurisdiction to consider many of the arguments that won the day because they should have been litigated at an earlier time or else were not made during the rule-making process.[17]

The dissent also found that the majority’s interpretation of the “good neighbor” provision was contrary to precedent and that it left out important facts.  The Rogers opinion pointed out that the EPA’s two-step method of determining “significant” contributions was explicitly “left undisturbed” in North Carolina v. EPA, and that North Carolina expressly stated that each upwind state’s emissions reduction did not have to “directly correlate . . . relative to other upwind states.”[18]  It noted that the majority ignored that the EPA’s modeling found that CSAPR would not eliminate the cross-state pollution at issue and thus would not “over-control.”[19]  Finally, Rogers stated that the majority “rewrites” the statute by mandating that the EPA wait to impose a FIP because section 110(c) plainly requires a FIP to be issued once a SIP is rejected on a “good neighbor” basis.[20]

Judge Kavanaugh’s decision was prominently criticized in a Washington Post column by Steven Pearlstein.[21]  Pearlstein linked Kavanaugh’s aggressive reversal of federal regulation with that of fellow D.C. Circuit conservative and George W. Bush-appointee Judge Janice Rogers Brown, and characterized their approach as “ a determined and largely successful war on federal regulatory agencies.”[22]

Pearlstein expressed the hope that other judges on the D.C. Circuit would act to bring back some “judicial restraint” to the court’s review of agency actions.[23]  They may have an opportunity to do so sooner than Pearlstein expected.  The EPA has petitioned the D.C. Circuit for en banc review of EME Homer City Generation.[24]  Especially in light of Judge Rogers’s strong dissent,[25] the petition affords the Circuit a chance to not only refrain from vacating a life-saving air pollution rule but also to return to a more limited and impartial role in reviewing new environmental regulations.