On July 28, 2015, the United States Court of Appeals for the D.C. Circuit held that EPA’s Cross State Air Pollution Rule (“CSAPR”) over-regulates over a dozen states.  Although the rule was generally upheld by the U.S. Supreme Court in 2014, the Court remanded the case to the D.C. Circuit for further review in light of the Supreme Court’s decision.  In particular, the Supreme Court’s remand to the D.C. Circuit allowed petitioners the opportunity to bring as-applied challenges to CSAPR to demonstrate that the rule regulated emissions beyond the point necessary to bring all downwind states into attainment with the national ambient air quality standards (“NAAQS”).

On remand, industry and the petitioning States argued that certain of EPA’s Phase II emission budgets (which now take effect in 2017) exceeded EPA’s authority because they required more emissions reduction than necessary to attain and maintain the NAAQS in all of the relevant downwind states. The D.C. Circuit agreed. Handing a win to industry and the states on all of the over-control issues, the D.C. Circuit held that the challenged EPA emission budgets were unnecessarily stringent..  Specifically, the court concluded that EPA’s rule resulted in the over-control of SO2 emissions in four states (Alabama, Georgia, South Carolina, and Texas) and the over-control of ozone-season NOx emissions in eleven states (Florida, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia).

Although the court found EPA’s budgets unlawful, it did not vacate them, but instead left them in effect while EPA revises the rule .  Industry petitioners in the case specifically requested that the court leave the budgets in place pending remand of the rule to avoid disruption of the trading markets and other Clean Air Act compliance programs.  Thus, even though the CSAPR emission budgets are unlawful, they will remain in place until EPA completes a new rulemaking.  The court did not set a  deadline for EPA action, but instead instructed EPA “to move promptly on remand,” warning that petitioners may bring a new lawsuit against EPA for any unreasonable delays.  On remand, industry and the petitioning states also asked the D.C. Circuit to reconsider other challenges to CSAPR that had been raised in the original case but not addressed by the court in its previous decision.  The court rejected those  remaining challenges to the final rule.

The D.C. Circuit’s decision in this case will have implications for EPA’s future interstate transport rules.  The next rule, designed to address interstate transport of NOx emissions under the 2008 ozone standard, is scheduled to be proposed later this year.  The D.C. Circuit’s decision will limit EPA’s authority to use the availability of cost-effective controls to require emission reductions beyond those necessary to achieve attainment and maintenance of the 2008 ozone standard.