The Long and Winding Rule: USEPA's Cross-State Air Pollution Rule the Latest to Address Interstate Air Pollution

This post was written by Steve Nolan.

In previous posts, we have reported the vacation of the Clean Air Interstate Rule (CAIR) in 2008, CAIR's subsequent, temporary resuscitation later that year, and the 2010 release of the draft Transport Rule which was proposed to replace CAIR. On July 7, 2011, the U.S. Environmental Protection Agency (USEPA) released the final version of this rule, now renamed the Cross-State Air Pollution Rule (Cross-State Rule).

The Cross-State Rule is specifically directed at emissions from electric generating units in classes 2211, 2212 and 2213 of the North American Industry Classification System. Like CAIR, the new rule is intended to help downwind states achieve USEPA's National Ambient Air Quality Standards (NAAQS) for fine particulate matter and ozone. Also like CAIR, the new Cross-State Rule actually regulates sulfur dioxide (a chemical precursor of fine particulate matter) and nitrogen oxides (a chemical precursor of both fine particulate matter and ozone) generated by upwind states.

By 2014, USEPA estimates that the Cross-State Rule will reduce emissions of sulfur dioxide by 6.4 million tons per year from covered states compared with emissions in 2005, the last year before CAIR came into effect. This represents a 73 percent reduction from 2005. The corresponding figures for nitrogen oxide are a reduction of 1.4 million tons, representing a 54% change. Less stringent reductions will be required by 2012.

The states are allocated initial emissions allowances, and the new rule, like CAIR, establishes a cap-and-trade marketing scheme. However, because of the circuit court's holding in which it vacated CAIR in 2008, out-of-state trading is only allowed to a limited extent.

Further details of the Cross-State Rule’s implementation will become apparent as USEPA issues federal implementation plans for each of the states impacted by the rule. It is intended that the federal implementation plans will ultimately be replaced by state implementation plans. Furthermore, the reductions required of electric generating units in the near future may be further increased by USEPA’s new fine particle NAAQS and reconsidered ozone NAAQS, both of which are proposed to be released later this summer.
 

USEPA Proposes Rule to Reduce Air Emissions from Utilities in the Eastern and Midwestern United States

This post was written by Larry Demase and Steve Nolan.

Last week, the U.S. Environmental Protection Agency proposed the Transport Rule to reduce sulfur dioxide and nitrogen oxide emissions from utilities in 31 eastern and midwestern states and in the District of Columbia. The proposed rule is in response to a 2008 court decision by the U.S. Court of Appeals for the D.C. Circuit, which vacated USEPA’s 2005 Clean Air Interstate Rule. In this Reed Smith client alert, we summarize the new rule and highlight issues for which USEPA is soliciting public comments.

In the US, the Clean Air Interstate Rule Lives Again

This post was written by Lawrence A. Demase, Mark A. Mustian, Steven M. Nolan and Christopher L. Rissetto.

The Clean Air Interstate Rule (CAIR), which had been vacated in its entirety by the Circuit Court for the District of Columbia Court of Appeals in July, was revived for an indefinite period on December 23. Upon rehearing, the Court agreed with the Environmental Protection Agency that the immediate effect of vacating CAIR was counterproductive to the environment. The Court therefore partly reversed its original decision by (i) remanding CAIR to the agency for revision and (ii) reinstating CAIR until a new rule is ready to replace it. The impact of this decision is discussed in the attached article.

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USEPA Petitions for Rehearing of CAIR Decision

This post was written by Lawrence A. Demase, Russell R. Eggert, Todd O. Maiden, Louis A. Naugle, Christopher L. Rissetto, Harley N. Trice, II, and Steven M. Nolan.

In an Environmental E-Flash in July, Reed Smith reported that the Court of Appeals for the District of Columbia Circuit had vacated the United States Environmental Protection Agency’s Clean Air Interstate Rule (“CAIR”), North Carolina v. Environmental Protection Agency, 531 F.3d 896 (D.C. Cir. 2008) (finding that CAIR had “more than several fatal flaws”).

EPA’s Arguments in Petition for Rehearing

On Friday, Sept. 26, 2008, the EPA filed a Petition for Rehearing or Rehearing, en banc of the decision, contending that the panel committed four serious errors warranting withdrawal of the original panel and a new look at the issues either by the three-judge panel, or by the entire Circuit Court of Appeals en banc

First, the court had imposed a remedy unsought (and not briefed) by the parties. As we observed in our July E-flash, none of the petitioners had asked the court to vacate CAIR in its entirety. Accordingly, the EPA had not briefed the issue, and in the Petition for Rehearing, asks for the opportunity to do so now. The EPA hopes to show that remanding CAIR would be a preferred remedy.

Second, the court erred by finding CAIR inconsistent with the Act although it had affirmed other, similar programs.  The court had invalidated CAIR because the rule envisaged controlling the upwind generation of sulfur dioxide (SO2) and nitrogen oxides (NOx) – the chemical precursors of small particulates (PM2.5) and ozone – by a cap and trade scheme within multistate regions. The court found that this approach was inconsistent with the Clean Air Act (“Act”), because it failed to ensure that the proposed trading program would prohibit sources within a particular upwind state from contributing significantly to nonattainment or interfering with maintenance of attainment of National Ambient Air Quality Standards (NAAQS) in affected downwind states.

In its Petition for Rehearing, the EPA contends that the court had erred because the CAIR approach was consistent with the Act, and the court had approved a similar regional cap and trade approach in Michigan v. Environmental Protection Agency, 213 F.3d 663 (D.C. Cir. 2000), which addressed a challenge to the EPA’s NOx SIP call. 

Third, the court erred by holding that the EPA lacked authority to interfere with SO2 allowances. The EPA asks for reconsideration of the court’s determination that in mandating the retirement of SO2 allowances under the acid rain program established by Title IV of the Act, CAIR interfered with a congressionally mandated program. The EPA contends that the Act allows for further regulation of SO2 pursuant to other Titles of the Act. 

Fourth, the court erred by rejecting EPA’s approach to allocating NOx allowances. The EPA is asking the Court to reconsider its finding that CAIR’s approach to allocating initial state NOx allowances – in part based on the mix of fuels used by electrical generating facilities within a state – was based on impermissible considerations. 

Certain Holdings Not Challenged by EPA

Three aspects of the original North Carolina decision are unchallenged, although they could be changed if rehearing is granted. These are: (i) the court’s ruling that EPA must consider the effect of upwind SO2 and NOx on interference with the ability of downwind states to maintain compliance with NAAQS; (ii) the 2015 final date for implementation of CAIR, which the court found arbitrary because downwind states were required to meet their NAAQS targets by 2010; and (iii) reconsideration of the inclusion of Minnesota within CAIR. The EPA argues that the case should be remanded so that CAIR can be appropriately revised, but asserts that the original rule should be restored in the interim because of the effect that the vacation of CAIR will have on health, the environment and the economy. 

Rehearing Process

The great majority of petitions for panel rehearing and petitions for rehearing en banc are denied. Under the Federal Rules of Appellate Procedure, the opposing parties are not permitted to file a response to the petition unless it is requested by the court. The court does not normally grant rehearing without giving the parties who prevailed originally the opportunity to respond. 

The Possibility of a Legislative Solution

While there is substantial bipartisan support in Congress for a legislative solution, especially one that will authorize the first round of CAIR-mandated emission reductions to go forward, EPA’s representatives are pessimistic that any such legislation will emerge in this session of Congress or in the next. Meanwhile the Clean Air Act’s deadline for health-based standards is less than two years in the future, so it is possible – even likely – that in the absence of CAIR, the states will impose their own emission limits on electrical generating units.

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USEPA Petitions for Rehearing of CAIR Decision

This post was written by Lawrence A. Demase, Russell R. Eggert, Todd O. Maiden, Louis A. Naugle, Christopher L. Rissetto, Harley N. Trice, II, and Steven M. Nolan.

In an Environmental E-Flash in July, Reed Smith reported that the Court of Appeals for the District of Columbia Circuit had vacated the United States Environmental Protection Agency’s Clean Air Interstate Rule (“CAIR”), North Carolina v. Environmental Protection Agency, 531 F.3d 896 (D.C. Cir. 2008) (finding that CAIR had “more than several fatal flaws”). 

EPA’s Arguments in Petition for Rehearing

On Friday, Sept. 26, 2008, the EPA filed a Petition for Rehearing or Rehearing, en banc of the decision, contending that the panel committed four serious errors warranting withdrawal of the original panel and a new look at the issues either by the three-judge panel, or by the entire Circuit Court of Appeals en banc

First, the court had imposed a remedy unsought (and not briefed) by the parties. As we observed in our July E-flash, none of the petitioners had asked the court to vacate CAIR in its entirety. Accordingly, the EPA had not briefed the issue, and in the Petition for Rehearing, asks for the opportunity to do so now. The EPA hopes to show that remanding CAIR would be a preferred remedy.

Second, the court erred by finding CAIR inconsistent with the Act although it had affirmed other, similar programs.  The court had invalidated CAIR because the rule envisaged controlling the upwind generation of sulfur dioxide (SO2) and nitrogen oxides (NOx) – the chemical precursors of small particulates (PM2.5) and ozone – by a cap and trade scheme within multistate regions. The court found that this approach was inconsistent with the Clean Air Act (“Act”), because it failed to ensure that the proposed trading program would prohibit sources within a particular upwind state from contributing significantly to nonattainment or interfering with maintenance of attainment of National Ambient Air Quality Standards (NAAQS) in affected downwind states.

In its Petition for Rehearing, the EPA contends that the court had erred because the CAIR approach was consistent with the Act, and the court had approved a similar regional cap and trade approach in Michigan v. Environmental Protection Agency, 213 F.3d 663 (D.C. Cir. 2000), which addressed a challenge to the EPA’s NOx SIP call. 

Third, the court erred by holding that the EPA lacked authority to interfere with SO2 allowances. The EPA asks for reconsideration of the court’s determination that in mandating the retirement of SO2 allowances under the acid rain program established by Title IV of the Act, CAIR interfered with a congressionally mandated program. The EPA contends that the Act allows for further regulation of SO2 pursuant to other Titles of the Act. 

Fourth, the court erred by rejecting EPA’s approach to allocating NOx allowances. The EPA is asking the Court to reconsider its finding that CAIR’s approach to allocating initial state NOx allowances – in part based on the mix of fuels used by electrical generating facilities within a state – was based on impermissible considerations. 

Certain Holdings Not Challenged by EPA

Three aspects of the original North Carolina decision are unchallenged, although they could be changed if rehearing is granted. These are: (i) the court’s ruling that EPA must consider the effect of upwind SO2 and NOx on interference with the ability of downwind states to maintain compliance with NAAQS; (ii) the 2015 final date for implementation of CAIR, which the court found arbitrary because downwind states were required to meet their NAAQS targets by 2010; and (iii) reconsideration of the inclusion of Minnesota within CAIR. The EPA argues that the case should be remanded so that CAIR can be appropriately revised, but asserts that the original rule should be restored in the interim because of the effect that the vacation of CAIR will have on health, the environment and the economy. 

Rehearing Process

The great majority of petitions for panel rehearing and petitions for rehearing en banc are denied. Under the Federal Rules of Appellate Procedure, the opposing parties are not permitted to file a response to the petition unless it is requested by the court. The court does not normally grant rehearing without giving the parties who prevailed originally the opportunity to respond. 

The Possibility of a Legislative Solution

While there is substantial bipartisan support in Congress for a legislative solution, especially one that will authorize the first round of CAIR-mandated emission reductions to go forward, EPA’s representatives are pessimistic that any such legislation will emerge in this session of Congress or in the next. Meanwhile the Clean Air Act’s deadline for health-based standards is less than two years in the future, so it is possible – even likely – that in the absence of CAIR, the states will impose their own emission limits on electrical generating units.

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