CASE PREVIEW

Court to hear argument in appeals to halt “Good Neighbor” ozone regulation

The Supreme Court will hear oral arguments on Wednesday in a group of challenges to ozone regulation that came to the justices on their so-called “shadow docket” – that is, as emergency appeals. Three states, along with several companies and trade associations, have asked the court to temporarily block a rule issued by the Environmental Protection Agency to reduce air pollution from power plants and other industrial facilities in 23 states.

The challengers say that the federal rule is a “disaster” and, if allowed to remain in effect, could cause “electric-grid emergencies.” But the EPA, as well as states and environmental groups supporting the agency, dismiss that suggestion as mere speculation and emphasize that putting the rule on hold could mean that several years critical to environmental protection and public health would pass before cuts in emissions are implemented.

The dispute arises from a part of the Clean Air Act known as the “good neighbor” provision. High levels of ozone pollution can cause major health problems, including by triggering asthma and exacerbating bronchitis and emphysema. But efforts by one state to regulate power plants and other sources of emissions that can form ozone pollution are sometimes not enough, because pollution can move downwind to the state from somewhere else. This problem prompted Congress to enact the “good neighbor” provision, which requires “upwind” states to reduce emissions that affects the air quality in “downwind” states.

In Oct. 2015, the EPA issued new air-quality standards for ozone pollution. The new standards triggered an obligation for states to submit plans to indicate both how they would comply with the standards and, pursuant to the “good neighbor” provision, how they would reduce emissions that affect the air quality elsewhere.

Last February, the EPA rejected the plans submitted by 21 states that proposed no changes to their emissions plans. Instead, one month later, it published a federal plan for the states whose plans it had rejected, as well as two that had not submitted plans. The federal plan requires power plants in those states, beginning in 2023, to make better use of controls that were already in place. It also requires them, beginning in 2026, to install controls that are commonly used by other power generators, and it requires other sources of ozone pollution, such as cement kilns and industrial boilers, to install controls to reduce ozone pollution. The EPA also used a program, already in existence, that allowed power plants and other sources to trade emissions credits with sources in covered states.

A dozen states went to court to challenge the EPA’s rejection of their plans. Several courts of appeals put those rejections on hold last year, so that the EPA cannot impose its federal plan on the 12 states that filed those challenges. In July 2023, the EPA issued an interim rule that officially put the federal plan’s application to six states on hold. The agency later extended that hold to several more states.

The federal plan went into effect on Aug. 4, 2023. But before that, three states – Ohio, Indiana, and West Virginia – went to the U.S. Court of Appeals for the District of Columbia Circuit to challenge it, as did several trade associations and companies affected by the plan.

A divided panel of the D.C. Circuit declined to temporarily block the federal plan while litigation continued, finding that the challengers had not met the high bar necessary to do so. The challengers then came to the Supreme Court in mid-October, asking the justices to put the plan on hold while the dispute moves forward in the D.C. Circuit. 

Urging the justices to freeze the federal plan, the challengers insist that states have primary responsibility for air quality, including developing a plan to prevent their emissions from affecting the air quality in downwind states. The EPA should generally defer to a state’s plan, the challengers say, and approve it as long as it meets the requirements outlined in the Clean Air Act. And the EPA can only step in and impose a federal plan, the challengers add, if a state’s plan does not comply with the act.

The challengers contend that the EPA’s imposition of its federal plan also violates the federal law governing administrative agencies, which requires federal agencies to use “reasoned decisionmaking” when taking action. Specifically, the challengers contend, the EPA indicated that its plan was intended to provide a national solution to the problem of ozone movement among states, and the EPA’s federal plan relied on the assumption that all 23 upwind states would participate in the plan. But by the time the EPA finalized that plan, the challengers argue, it seemed very likely that only a portion of those states would be participating – the U.S. Court of Appeals for the 5th Circuit, for example, had already put the EPA’s rejection of Texas’s plan on hold. 

And indeed, the challengers suggest, “after just a few months, the federal plan is already a disaster.” Between the various rulings by courts of appeals blocking the EPA’s rejections of state plans and the EPA’s interim rules officially putting the application of the federal plan to those states on hold, they observe, the plan currently only applies to 11 states, and it does not apply more than three-quarters of the emissions that the plan originally intended to regulate.

If the plan is allowed to remain in effect, the states say, they will be “harmed by the time, money, and other resources spent on complying with an unlawful federal mandate.” Moreover, they say, they will be at a disadvantage in comparison with the other upwind states that do not have to comply with the plan.

Power companies and industry trade groups that own and operate natural gas pipelines are seeking to have the rule stayed as it applies to gas-fired engines used to transport natural gas through pipelines in the United States. They say that the May 1, 2026, deadline for them to achieve emissions targets is “flat-out impossible” for them to achieve, noting that there are over 3,000 pipeline engines in the United States, each of which will require between one and two-and-a-half years to retrofit. If the federal rule is not put on hold, they argue, it will lead to interruptions in the country’s natural gas supply.

And U.S. Steel, which is seeking a stay of the federal plan as it applies to furnaces and boilers at iron and steel mills, complains that the plan “imposes millions of dollars in preparation and compliance costs on” the company. Particularly when “combined with several other regulations EPA has imposed or proposed recently for the domestic steel industry,” the company tells the court, the federal plan “is having a compounding impact that places unnecessary strain on domestic steel production. This has both national economic and national security implications.”

Calling on the court to allow the plan to remain in effect, the EPA emphasizes that the standard for the relief that the challengers are seeking is high, because they are effectively asking the Supreme Court to block the implementation of the plan when the lower court has declined to step in. “Such an injunction,” the EPA stresses, “should be granted sparingly and only in the most critical and exigent circumstances.”

The EPA acknowledges that the Clean Air Act gives each state a chance to come up with its own plan. But if its plan is not adequate, the EPA notes, then the agency is obligated to formulate a federal plan to reduce emissions instead. That is what happened here, the agency explains. The EPA had concluded that the 23 states covered by the federal plan are making substantial contributions to air pollution in downwind states. However, the plans submitted by 21 of those states did not propose any action to limit emissions to their neighbors, while two other states did not submit any plans at all. The EPA therefore issued the federal plan, which is “based on the same core methodology that this Court has approved and that the EPA has used for decades.”

Decisions by other courts of appeals putting EPA’s rejection of state plans on hold should not, EPA insists, have any bearing on whether the federal plan can remain in effect now. First, the EPA argues, the Supreme Court does not have the power to weigh in on this question because the Clean Air Act only allows courts to review objections to a rule when they were first raised during the public-comment period. If it is not possible to raise objections then, the EPA continues, the proper course of action is to seek reconsideration of the rule, but the challengers here failed to do either of those.

Second, the EPA contends, there is no reason to believe that the plan was not valid when EPA originally issued it. The rulings by other courts of appeals putting the EPA’s rejections of state plans on hold did not come until after the EPA had finalized the federal plan, so they have no weight in the determination of whether the plan was valid when it was initially enacted. Indeed, the EPA observes, the Supreme Court has made clear that whether an agency’s action is valid hinges on the agency’s rationale when it acted, so “it would make little sense to evaluate the reasonableness of those justifications by reference to circumstances that did not yet exist.” And when the EPA issued the final plan, it indicated that it could be applied even to a subset of the states that would be covered.

Third, and in any event, the EPA concludes, the focus of the proceeding in the D.C. Circuit is the federal plan, rather than the EPA’s rejection of several state plans, which no court has made a final determination about. In fact, the EPA notes, the agency has argued in those cases that the D.C. Circuit, rather than various courts of appeals around the country, should make those decisions.  

The EPA and its supporters push back against the challengers’ contention that they will suffer irreversible harm if the federal rule remains in place while litigation continues. Many of the rule’s requirements, they point out, particularly those that apply to emissions sources other than power plants, do not go into effect until 2026 or later, with the prospect of extensions of up to three years after that to comply.

By contrast, they say, if the federal rule is put on hold, then power plants and other sources in upwind states will be able to continue to emit pollution that helps to cause high ozone levels in downwind states, leading to health problems in those states. It would also allow upwind states like Ohio to shift the economic costs of controlling pollution to downwind states like New York, which has already taken action to reduce its own pollution and will be at a competitive disadvantage if other states do not have to do so.

The EPA and its supporters also dismiss any suggestion that the federal rule will lead to “electric-grid emergencies.” In other states, both up- and downwind, they say, power plants and other sources of emissions have installed pollution-control equipment without any problems with reliability.

Two months later, the justices declined to do so, instead setting the case for oral argument in the court’s February argument session. The court instructed both sides to also be prepared to address whether the emissions limits imposed by the federal plan are reasonable regardless of the number of states subject to the plan.

Four different lawyers will argue on Wednesday: Mathura Sidharan, Ohio’s solicitor general; Catherine Stetson, representing the industry challengers; Deputy U.S. Solicitor General Malcolm Stewart, representing the EPA; and Judith Vale, New York’s deputy solicitor general. The court has officially allotted one hour for the case, but – especially with four advocates appearing – the oral argument is likely to last much longer.

This article was originally published at Howe on the Court.