Legal & Regulatory

Supreme Court Halts EPA’s ‘Good Neighbor Plan’

The U.S. Supreme Court in a 5–4 vote blocked enforcement of the Environmental Protection Agency’s (EPA’s) final “Good Neighbor Plan,” a rule intended to significantly cut smog-forming nitrogen oxide (NOx) pollution from power plants and other industrial facilities in 23 states. In the meantime, the applicants, which include the states of Ohio, Indiana, and West Virginia, among others petitioners, will not be required to comply with the rule, pending the disposition of their case filed in the U.S. Court of Appeals for the District of Columbia (D.C.) Circuit.

Basis for the ‘Good Neighbor Plan’

The Clean Air Act (CAA) promotes a collaborative effort between states and the federal government to regulate air quality. Yet, it directs the EPA to issue a federal plan to address pollution that significantly contributes to unhealthy levels of ground-level ozone, or smog, formed from NOx emissions traveling beyond certain states’ boundaries.

When the EPA sets standards for common air pollutants, states must submit a state implementation plan, or SIP, providing for the “implementation, maintenance, and enforcement” of those standards in their jurisdictions. Because air currents can carry pollution across state borders, states must also design their plans with neighboring states in mind.

Under the CAA’s “Good Neighbor Provision,” state plans must prohibit emissions in amounts that will “contribute significantly to nonattainment in, or interfere with maintenance by, any other State” of the relevant air-quality standard. If a SIP fails to satisfy the applicable requirements of the CAA, the EPA may issue a federal implementation plan, or FIP, for noncompliant states that fail to correct the deficiencies in their SIPs.

A Long-Running Clash

On Oct. 1, 2015, the EPA promulgated a new National Ambient Air Quality Standards (NAAQS) eight-hour ozone limit of 70 parts per billion (ppb), which is met at an ambient air quality monitoring site when the three-year average of the annual fourth-highest daily maximum eight-hour concentration does not exceed 70 ppb. Within three years of the promulgation of a new or revised NAAQS, the CAA requires all states to submit SIP elements containing adequate provisions prohibiting significant contribution to nonattainment or interference with maintenance of the NAAQS in other states. For the 2015 eight-hour ozone NAAQS, SIP submissions were due to the EPA by Oct. 1, 2018.

On Feb. 22, 2022, the EPA proposed to disapprove SIP submissions for 19 states. On May 24, 2022, the EPA proposed to disapprove an additional four SIP submissions. Furthermore, the EPA re-proposed disapproval of Alabama’s resubmitted SIP in October 2022. The disapprovals were based on failure to adequately address obligations under the Good Neighbor Provision.

During the public-comment period for the proposed SIP disapprovals, the EPA issued a single proposed FIP to bind all the states in question. The EPA designed its proposed FIP based on which emissions-control measures would maximize cost-effectiveness in improving ozone levels downwind and on the assumption the FIP would apply to all covered states. Some commenters, however, warned that the proposed SIP disapprovals were flawed and that a failure to achieve all the SIP disapprovals as the EPA envisioned would mean that the EPA would need to reassess the measures necessary to maximize cost-effective ozone-level improvements in light of a different set of states.

Rule Issued

The EPA announced its final Good Neighbor Plan on March 15, 2023. At the time, the agency said the action would reduce ozone-season NOx pollution by approximately 70,000 tons from power plants and industrial facilities in 2026. By 2027, the emissions budget for power plants was expected to reflect a 50% reduction from 2021 ozone-season NOx emissions levels.

However, lawsuits proceeded, with petitioners claiming the EPA had issued its final FIP without addressing commenters’ concerns. The EPA, meanwhile, announced that its plan was severable: Should any jurisdiction drop out, the plan would continue to apply unchanged to the remaining jurisdictions. Ongoing litigation over the SIP disapprovals soon vindicated at least some of the commenters’ concerns. Courts stayed 12 of the SIP disapprovals, which meant the EPA could not apply its FIP to those states.

A number of the remaining states and industry groups challenged the FIP in the D. C. Circuit. They argued that the EPA’s decision to apply the FIP after so many other states had dropped out was “arbitrary” or “capricious,” and they asked the court to stay any effort to enforce the FIP against them while their appeal unfolded. The D.C. Circuit denied relief, so the parties renewed their request in the Supreme Court.

Stay Granted

On June 27, 2024, the Supreme Court granted the stay in the case of Ohio et al. v. Environmental Protection Agency et al. In the majority opinion of the court, delivered by Justice Neil Gorsuch, the ruling was said to hinge on who is likely to prevail in the case before the D.C. Circuit. “Applicants are likely to prevail on their arbitrary-or-capricious claim,” the order says. “An agency action qualifies as ‘arbitrary’ or ‘capricious’ if it is not ‘reasonable and reasonably explained,’ ” it says.

The court opinion continues: “EPA’s plan rested on an assumption that all the upwind States would adopt emissions-reduction measures up to a uniform level of costs to the point of diminishing returns. Commenters posed their concerns that if upwind States fell out of the planned FIP, the point at which emissions-control measures maximize cost-effective downwind air-quality improvements might shift. To this question, EPA offered no reasoned response. As a result, the applicants are likely to prevail on their argument that EPA’s final rule was not ‘reasonably explained,’ Prometheus Radio Project, 592 U. S., at 423, and that it instead ignored ‘an important aspect of the problem’ before it, State Farm Mut. Automobile Ins. Co., 463 U. S., at 43. Pp. 11–13.”

Groups Weigh In

The National Rural Electric Cooperative Association (NRECA) issued a statement following the Supreme Court’s announcement. It said, “Today’s Court decision directly speaks to the gravity of EPA’s unlawful Ozone Transport Rule which directly threatens the American economy and way of life. This rule creates major threats to the reliability of the electric grid and will saddle Americans with higher energy bills while accelerating the retirement of always available generating resources. EPA’s approach to regulating the electric sector stretches well beyond the agency’s authority, and we thank the Court for listening to our concerns.”

NRECA claims the rule would lead to the early curtailment or retirement of 62 coal generating units as soon as 2026. It said the collective loss of these 32 GW of capacity “would further jeopardize the reliability of an already stressed electric grid.”

The American Petroleum Institute (API) also applauded the court’s decision. “While we support EPA’s goal of reducing emissions, API welcomes the Supreme Court’s decision to stay this flawed rule. Americans are looking for pragmatic energy solutions, not misguided policies,” it said. “The Court’s decision prevents the risk of electric power outages and crippling delays to industrial supply chains for now. Still more is needed from Washington to ensure long-term energy reliability for American consumers.”

Of course, some environmental organizations were disappointed in the action. “The Supreme Court today acted in haste, completely disregarding the public health benefits for communities that are impacted by smog from highly polluting upwind states. We are extremely disappointed to see the Court take this extraordinary and unnecessary step of intervening to stay the rule, which had been in effect for 11 states for nearly a year, while it remains before the lower courts. This critically important and legally required step to implement the Clean Air Act’s Good Neighbor provision will be paused while litigation proceeds, meaning coal-burning power plants and other highly polluting industrial sources in 11 upwind states will not have to take steps to protect residents of downwind states and communities from smog,” Hayden Hashimoto, attorney at Clean Air Task Force, who represents Citizens for Pennsylvania’s Future, Clean Air Council, and Clean Wisconsin in this litigation, said in a statement. “While this is a significant setback, we continue to believe EPA is on firm legal and factual ground in implementing the good neighbor provision and are optimistic that the rule will ultimately be upheld by the courts.”

Aaron Larson is POWER’s executive editor (@POWERmagazine).

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