Key Takeaways
Ohio, Indiana, West Virginia and several industries have appealed to the Supreme Court to temporarily block EPA’s “good neighbor” rule while its legality is determined in a lower court.
Of the 23 states affected, EPA’s rule has been paused in 12 states while lower courts determine the outcome.
Industries in the remaining 11 states worry their businesses will be damaged by a rule that may be overturned later, and the states are worried they will lose jobs and economic activity.
EPA has a history of promoting rules forcing compliance that becomes unnecessary but irreversible after it is overruled.
SCOTUS is expected to rule by June.
EPA recently added another 5 states to the rule.
The U.S. Supreme Court appears sympathetic to a bid by three states and several energy companies to temporarily block an Environmental Protection Agency regulation aimed at reducing ozone emissions from neighboring states. Ohio, Indiana and West Virginia, as well as pipeline operators including Kinder Morgan, power producers and U.S. Steel Corp, are seeking to pause EPA’s “Good Neighbor” plan restricting emissions from upwind states while they contest its legality in a lower court.
The questions posed by some of the justices focused on whether the EPA’s rule should be enforceable against the challengers given that the regulation no longer regulates 23 upwind states as intended, but only 11 because of lower court actions pausing it in 12 states. The EPA has not explained how the regulation is enforceable for 11 states when it was devised for 23, given the huge costs that industry will incur to comply. It is believed that EPA will not look at the impact on the fewer states until after hundreds of millions of dollars of costs are incurred.
Background
Last June, Biden’s EPA finalized a rule regulating ozone, a component of smog, in 23 upwind states. EPA claimed these states’ plans did not satisfy the “Good Neighbor” provision of the Clean Air Act requiring steps to reduce emissions that drifts into states downwind, rejecting 21 state proposals as ineffective. Two states failed to submit a plan. EPA then implemented a federal program to reduce emissions from large industrial polluters in those 23 states, but separate challenges in lower courts have paused enforcement in 12 of them. Those states are separately challenging in circuit courts EPA’s rejection of their pollution control plans. They argue the “Good Neighbor Plan” requires an excessive amount of pollution control and will eventually be struck down by the courts. States are concerned the EPA is pushing the rule knowing that it can force actions even if its rule is later found illegal.
This is what happened in the case of EPA’s Mercury & Air Toxics Standards (MATS), which went into effect in 2015 under the Obama Administration. Although the Supreme Court later struck down the rule, the damage was so severe it was estimated to have led to 30 percent of the coal plant closures in that year. The EPA Administrator at the time, Gina McCarthy, dismissed the Supreme Court, and according to the Huffington Post, she said, “The mercury rule is still in effect while the agency awaits direction from the circuit court. McCarthy pointed out that the majority of power plants — 70 percent, according to agency estimates — have already invested in technology to reduce their emissions.”
The Current Case
Ohio, Indiana and West Virginia and others (pipeline operators, U.S. Steel, regional electricity generators and energy trade associations) brought the issue to the U.S. Supreme Court because the D.C. Circuit Court of Appeals declined to put the plan on hold while its legality was being challenged. In their suit in the U.S. Court of Appeals for the District of Columbia Circuit, the challengers argued that the EPA violated a federal law aimed at ensuring agency actions are reasonable. Industries are challenging the rule based on their mission. Kinder Morgan asked the justices to block the regulation as it applies to natural gas pipeline engines, while U.S. Steel sought to prevent its enforcement against iron and steel mill reheating furnaces and boilers.
The remaining 12 states are arguing that unless EPA’s plan is paused everywhere, they will have to spend too much time and money on compliance measures – including reporting requirements and issuing or updating permits – while waiting to see if the courts uphold the plan. They worry that the tighter pollution limits could leave states without sufficient power sources if power plants shut down because it is too expensive to comply. This has become more critical as intermittent and weather-driven renewable energy sources such as wind and solar have contributed to a weakening of the electric grid that requires electricity on demand.
The challengers may be taking the issue up with the Supreme Court because in 2022, the Supreme Court imposed limits on EPA’s authority to issue regulations to reduce carbon emissions from coal- and gas-fired power plants under the Clean Air Act. Some of the justices raised questions about whether it was the role of the Supreme Court to intervene on behalf of the challengers before a lower court has yet to resolve the underlying litigation.
The Supreme Court’s decision is expected by June. On January 16, the EPA issued a proposed rule to enforce the “Good Neighbor” plan in five more states: Arizona, Iowa, Kansas, New Mexico and Tennessee.
Conclusion
Several states and energy companies have asked the Supreme Court to pause an EPA ruling on ozone emissions until a lower court could address the case. The law at the center of the case is known as the “good neighbor” provision of the Clean Air Act. It requires “upwind” states to reduce emissions that affect the air quality in “downwind” states. A major issue is that lower courts have paused the ruling in 11 states, while the 12 remaining states must start implementation before the lower courts rule. Without all states participating, the 12 states argue that EPA should consider what the effect of less-than-full participation would have. EPA, however, does not currently plan to make that assessment.
A ruling halting the EPA plan by the Supreme Court would be provisional, as a challenge to it will continue to be litigated in an appeals court and could then return to the Supreme Court. But a positive decision would save companies money that would otherwise be passed onto consumers and help to keep the reliability of the electric system in those states intact.
