The Nickel Report

In response to judicial remand of its Cross-State Air Pollution Rule (CSAPR) Update, EPA published a revised CSAPR Update – the latest of EPA’s interstate transport rules using its CSAPR methodology – at the end of April 2021, slashing ozone-season budgets for emissions of nitrogen oxides (NOx) for a dozen states.[1]  By the end of the 60-day period for filing petitions for judicial review on June 29, a single petition for judicial review had been filed in the US Court of Appeals for the DC Circuit.

CSAPR Update Remanded to EPA

As we reported previously (view here and here), the DC Circuit issued a pair of rulings in 2019 that required EPA to consider changes to its 2016 CSAPR Update on the basis that it did not provide a “full remedy” for downwind air quality problems caused by interstate transport of pollutants.  EPA promulgated the CSAPR Update, as well as the original 2011 CSAPR and the revised CSAPR Update, pursuant to its authority under the Clean Air Act’s “Good Neighbor” provision.  That provision – found in section 110(a)(2)(D)(i)(l) of the Act – requires upwind states to prevent sources located within their borders from contributing significantly to nonattainment or interfering with maintenance of the national ambient air quality standards (NAAQS) in downwind states.  The CSAPR Update amended the ozone-season cap-and-trade program included in EPA’s original CSAPR, which was based on the 1997 ozone NAAQS, to address the 2008 ozone NAAQS, resulting in more stringent ozone-season NOx budgets for states included in that program.[2]  A number of stakeholders filed petitions for judicial review of the CSAPR Update at the end of 2016, including upwind states and industry parties, which challenged the CSAPR Update as overly stringent, and environmental organizations and the State of Delaware, which challenged the rule as not stringent enough.  The DC Circuit issued a decision in September 2019 (Wisconsin v. EPA, 938 F.3d 303) in which it largely upheld the CSAPR Update, but found the rule to be unlawful in one respect and remanded it to EPA for further proceedings.  Specifically, the court held that the CSAPR Update did not require upwind states to eliminate their significant contributions to “downwind” nonattainment and maintenance problems by the attainment deadlines that apply to downwind states for the 2008 ozone NAAQS, and therefore provided only a partial remedy to the regulated states’ Good Neighbor obligations.  Less than a month later, in October 2019, the DC Circuit vacated and remanded EPA’s 2018 CSAPR Close-Out Rule – in which EPA had determined that the CSAPR Update was a “full remedy” – based on the court’s reasoning in its CSAPR Update decision. 781 Fed. App’x 4 (D.C. Cir. 2019).

EPA Issues the Revised CSAPR Update

EPA Administrator Michael Regan signed a final rule revising the CSAPR Update on March 15, 2021, a court-ordered deadline established in a lawsuit filed by the States of New Jersey, New York, Delaware, and Connecticut, the Commonwealth of Massachusetts, and the City of New York that was designed to ensure additional NOx emission reductions by the July 2021 attainment deadline for areas classified as serious nonattainment for the 2008 ozone NAAQS.  The final revised CSAPR Update was published in the Federal Register on April 30, 2021.  In the final rule, EPA established more stringent ozone-season NOx emission budgets for 12 of the 22 states subject to the CSAPR Update (Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, Virginia, and West Virginia) effective for the 2021 ozone season, with budgets for many of these states set to become even more stringent for ozone seasons 2022, 2023, and/or 2024 (and remain at the 2024 budget levels for subsequent ozone seasons).  The revised CSAPR Update budget for each of these states is much smaller than the budget established in the 2016 CSAPR Update, with budgets for several states cut by more than half in 2021.  For 9 other CSAPR Update states (Alabama, Arkansas, Iowa, Kansas, Mississippi, Missouri, Oklahoma, Texas, and Wisconsin), EPA concluded that these upwind states’ emissions (as limited by their existing CSAPR Update budgets) do not contribute significantly to projected downwind nonattainment or maintenance problems for the 2008 ozone NAAQS in 2021 and therefore did not make any emission budget revisions in the rule.[3]  The final revised CSAPR Update was based on EPA’s four-step analytical framework, which it used in the original 2011 CSAPR and in the CSAPR Update.  That framework has been subject to judicial review in the DC Circuit and the US Supreme Court and those courts have held to generally be lawful.  Any successful challenge to the revised CSAPR Update therefore would likely need to be based on application of that framework in the revised CSAPR Update.

Petition for Judicial Review

The 60-day period for filing petitions for judicial review of the revised CSAPR Update closed on June 29, 2021.  Although over 65 stakeholders filed comments on the proposed version of the revised CSAPR Update, only one party – the Midwest Ozone Group (MOG) – filed a petition for review of the final rule in the DC Circuit by the filing deadline.  Notably, environmental groups and downwind states – including the northeastern states that filed the deadline suit to force EPA to take final action by the start of the 2021 ozone season – elected not to seek judicial review.  This marks a departure from EPA’s previous interstate transport rules, including CSAPR and the CSAPR Update, and CSAPR’s predecessors, the Clean Air Interstate Rule (CAIR) and the NOx SIP Call, which were subject to petitions for review filed by numerous parties with diverse interests.  The reason for this departure is unclear.  Possible reasons why other industry parties chose not to challenge the rule include the thought that petitions for review are unlikely to be granted by the DC Circuit, particularly given the previous review of EPA’s CSAPR framework, or the possibility that owners and operators of electric generating units in the 12 CSAPR Update states with reduced emission budgets believe they will be capable of meeting the smaller budgets, given factors including previous or planned unit retirements or increased reliance on other sources of energy.  Environmental groups and downwind states may be satisfied with the increased emission reduction requirements imposed by the revised version of the rule, or may anticipate additional requirements from future EPA action.  It is also possible that parties on both sides anticipate a more sweeping interstate transport rule in the coming years, addressing the 2015 ozone NAAQS, and do not consider challenging this more limited regulatory action to be worthwhile.

According to the court’s docket, MOG’s initial filings, including its statement of issues, are due on July 28.  Under the DC Circuit Rules, any motions to intervene in the litigation must be filed by July 26.

[1] The rule limits NOx emissions from electric generating units, targeting NOx because it is an ozone precursor.

[2] Under the Clean Air Act, the regulatory “ozone season” runs from May 1 through September 30 each year.

[3] EPA also did not change the emission budget of the remaining CSAPR Update state – Tennessee – because EPA concluded in the CSAPR Update itself that Tennessee’s CSAPR Update budget fully addressed its significant contribution to downwind nonattainment and maintenance problems for the 2008 ozone NAAQS, and that determination was not challenged in litigation.