Setting Limits on Federal Rulemaking

A Federal Appeals Court for the District of Columbia threw out the US EPA Cross State Air pollution Rule (CSAPR) also commonly referred to as the Transport Rule telling the agency that it cannot create new law through the regulatory process but must live with the law the way Congress wrote it or go back to Congress to get them to change it.

What a concept!

Since the defeat of the Cap and Trade legislation in Congress, the Obama Administration has attempted to create by regulatory fiat the environmental restrictions it has been unable to get Congress to approve.  This same principal of regulatory assertiveness is also happening elsewhere in health care, financial services, and energy.  But the EPA was the first out of the box with new rules so EPA rules are hitting the fan first as they are challenged in court.

The Appeals Court decision upholds the role of the States.

Challenges of Federal Regulations generally happen in the DC Circuit and the Appeals Court is experienced and skilled at navigating the fine lines between substance and process.  This decision was just as precise and just as clear that in the 2-1 opinion of the three judge panel US EPA has exceeded its authority in adopting the Cross State Air Rule by failing to properly respect the role of the states in the clean air process set up by Congress.  But the opinion vacating CSAPR went further to very heart of the matter telling EPA it could not create by administrative rulemaking authority it was not specifically delegated by an act of Congress.

“To deal with that complex regulatory challenge, Congress did not authorize EPA to simply adopt limits on emissions as EPA deemed reasonable. Rather, Congress set up a federalism-based system of air pollution control. Under this cooperative federalism approach, both the Federal Government and the States play significant roles. The Federal Government sets air quality standards for pollutants. The States have the primary responsibility for determining how to meet those standards and regulating sources within their borders.

In addition, and of primary relevance here, upwind States must prevent sources within their borders from emitting federally determined “amounts” of pollution that travel across State lines and “contribute significantly” to a downwind State’s “nonattainment” of federal air quality standards. That requirement is sometimes called the “good neighbor” provision.

In August 2011, to implement the statutory good neighbor requirement, EPA promulgated the rule at issue in this case, the Transport Rule, also known as the Cross-State Air Pollution Rule. The Transport Rule defines emissions reduction responsibilities for 28 upwind States based on those States’ contributions to downwind States’ air quality problems. The Rule limits emissions from upwind States’ coal- and natural gas-fired power plants, among other sources. Those power plants generate the majority of electricity used in the United States, but they also emit pollutants that affect air quality. The Transport Rule targets two of those pollutants, sulfur dioxide (SO2) and nitrogen oxides (NOx).

Various States, local governments, industry groups, and labor organizations have petitioned for review of the Transport Rule. Although the facts here are complicated, the legal principles that govern this case are straightforward:

Absent a claim of constitutional authority (and there is none here), executive agencies may exercise only the authority conferred by statute, and agencies may not transgress statutory limits on that authority.

Here, EPA’s Transport Rule exceeds the agency’s statutory authority in two independent respects.

First, the statutory text grants EPA authority to require upwind States to reduce only their own significant contributions to a downwind State’s nonattainment. But under the Transport Rule, upwind States may be required to reduce emissions by more than their own significant contributions to a downwind State’s nonattainment. EPA has used the good neighbor provision to impose massive emissions reduction requirements on upwind States without regard to the limits imposed by the statutory text. Whatever its merits as a policy matter, EPA’s Transport Rule violates the statute.

Second, the Clean Air Act affords States the initial opportunity to implement reductions required by EPA under the good neighbor provision. But here, when EPA quantified States’ good neighbor obligations, it did not allow the States the initial opportunity to implement the required reductions with respect to sources within their borders. Instead, EPA quantified States’ good neighbor obligations and simultaneously set forth EPA-designed Federal Implementation Plans, or FIPs, to implement those obligations at the State level. By doing so, EPA departed from its consistent prior approach to implementing the good neighbor provision and violated the Act.

For each of those two independent reasons, EPA’s Transport Rule violates federal law. Therefore, the Rule must be vacated.”

“. . . In this case, however, we conclude that EPA has transgressed statutory boundaries. Congress could well decide to alter the statute to permit or require EPA’s preferred approach to the good neighbor issue. Unless and until Congress does so, we must apply and enforce the statute as it’s now written. Our decision today should not be interpreted as a comment on the wisdom or policy merits of EPA’s Transport Rule. It is not our job to set environmental policy. Our limited but important role is to independently ensure that the agency stays within the boundaries Congress has set. EPA did not do so here.”

—From the majority opinion of Judge Brett Kavanaugh in EME Homer City Generation LP v. EPA, D.C. Cir., No. 11-1302, 8/21/12.

And then there was both cheering and gnashing of teeth from the crowd.