In a Procedural Ruling, Supreme Court Stays EPA Ozone Rule for 23 States

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--It may not have the cachet of its decision to overturn the Chevron case, or some of the other decisions to come out in the last days of the U.S. Supreme Court's just-ended term, but the high court's ruling June 27 in Ohio v. Environmental Protection Agency, et al., was nonetheless welcomed by a variety of industries, particularly electric generators, natural gas pipelines, cement makers, iron and steel mills and paper mills that operate in 23 states.

By a 5-4 margin, the court stayed the EPA's ability to impose a federal implementation plan (FIP) for 23 so-called "upwind" states, such as Illinois, Indiana and Michigan, whose ozone was being transported across state lines by weather patterns. That ozone from "upwind" states made it harder for "downwind" states, such as New York and New Jersey, to meet federal ozone standards. The provision of the Clean Air Act that covered ozone crossing state borders is known as the Good Neighbor Rule. For more on the Supreme Court oral arguments of this case, see March 1, 2024, article - Energy Industry May Benefit from Supreme Court's Skepticism of Government Overreach.

Ohio v. EPA consolidated several cases, including Kinder Morgan, Inc., et al. v. Environmental Protection Agency et al.; American Forest & Paper Assn. et al. v. Environmental Protection Agency; and United States Steel Corp. v. Environmental Protection Agency et al.

One ozone precursor in particular, nitrous oxide, was targeted by the EPA. In the presence of sunlight and other chemicals, nitrous oxide becomes ground-level ozone, which creates or worsens public health.

The high court's stay last Thursday was procedural; in issuing it, the court allowed a lawsuit on the merits to continue at the U.S. Court of Appeals for the D.C. Circuit.

Once known as the Ozone Transport Rule, this litigation has been unfolding for years. In 2015, EPA revised the Clean Air Act's National Ambient Air Quality Standards (NAAQS) for levels of certain air pollutants such as ozone, thus triggering a requirement for states to submit new State Implementation Plans (SIPs). Most but not all states prepared SIPs. Years later, in 2022, EPA announced its intention to disapprove over 20 SIPs because the agency believed they had failed to address adequately obligations under the Clean Air Act "Good Neighbor" rule. In place of a SIP from each state, tailored around their contribution to downwind ozone, the EPA promulgated one FIP for all 23 states.

In summarizing the issue, the high court said that 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. Parties opposing the EPA FIP noted that lower courts stayed the regulation for several states, which meant that the agency should go back to the drawing board and craft a new FIP, or reconsider some of the rejected SIPs. Instead, the agency issued its final FIP with the new wrinkle, a severability provision: Should any jurisdiction drop out, the plan would continue to apply unchanged to the remaining jurisdictions.

In challenging the rule at the D.C. Circuit Court of Appeals, those opposing the FIP said EPA's reasoning about the severability of jurisdictions was "arbitrary" or "capricious." The D.C. court denied those appeals, which is why the case ended up at the Supreme Court when a trial on the merits was still underway.

Writing for the majority, Associate Justice Neil Gorsuch said both sides had presented compelling arguments about irreparable harms and the public interest, but that those opposing the EPA FIP were entitled to a stay because they were more likely to succeed on the merits.

The majority held that those opposing the EPA FIP were more likely to win on the merits because the agency acted in an arbitrary or capricious manner in not fully explaining its decision that the FIP should remain in place even if one or more of the states originally included in the rule dropped out.

The majority observed: "EPA had determined which emissions-control measures were cost effective at addressing downwind ozone levels based on an assumption that the FIP would apply to all covered states." But the severability offered to the states by the EPA meant that the cost-effectiveness calculations of the remaining states would change. After all, the Court reasoned, "each state differs in its mix of industries, in its pre-existing emissions-control measures, and in the impact those measures may have on emissions and downwind air quality."

Ultimately, the majority ruled against the EPA because the agency failed to give a "reasoned response" to these objections, as required by the Administrative Procedure Act.

Four members of the court dissented. Their opinion, written by Associate Justice Amy Coney Barrett and joined by Associate Justices Elena Kagan, Sonia Sotomayor and Ketanji Brown Jackson, disagreed with the majority that the EPA was unlikely to win on the merits. They chided the majority: "The Court grants emergency relief in a fact-intensive and highly technical case without fully engaging with both the relevant law and the voluminous record."

The dissent noted that 21 of the 23 upwind states "proposed to do nothing to reduce their ozone-precursor (i.e., NOx) emissions -- arguing that they did not actually contribute to downwind nonattainment or that there were no other cost-effective emissions-reduction measures they could impose. The other two States failed to submit a SIP at all."

The minority, clearly aching for a fight on the substantive merits of the case, further wrote that, "Try as it might, the Court identifies no (factual) evidence that the FIP's emissions limits would have been different for a different set of States or that EPA's consideration of state-specific inputs was any-thing but confirmatory of the limits it calculated based on nationwide data."

Finally, the dissenting justices cited the case where the "arbitrary and capricious" standard was first developed: "The scope of review under the 'arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency. ... A rule is arbitrary and capricious if the agency 'entirely failed to consider an important aspect of the problem.' But we will " 'uphold a decision of less-than-ideal clarity if the agency's path may reasonably be discerned.' "

"And on the merits," the dissent continued, "EPA expressly argued that the FIP's 'viability and validity do not depend on the number of jurisdictions it covers'; the 'rule need not apply to any minimum number of States in order to operate coherently'."

Finally, Justice Barrett's dissent takes a swipe at the court's decision to hear this case on an "emergency" basis, even though litigation is proceeding in the D.C. Circuit Court. "Our emergency docket requires us to evaluate quickly the merits of applications without the benefit of full briefing and reasoned lower court opinions. Given those limitations, we should proceed all the more cautiously in cases like this one with voluminous, technical records and thorny legal questions."

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