Cooperative federalism: Is there a trend towards uniform national standards under the Clean Air Act?

Vol. 45 No. 5

Kurt Kastorf is a counsel in the Washington, DC, office of WilmerHale. Formerly, he was an appellate attorney in the Environment & Natural Resources Division of the United States Department of Justice.

The Clean Air Act (CAA) is structured around the principle of “cooperative federalism.” In enacting the CAA, Congress emphasized that “air pollution control at its source is the primary responsibility of States and local governments,” but that federal leadership “is essential for the development of cooperative Federal, State, regional, and local programs to prevent and control air pollution.” 42 U.S.C. § 7401. At the core of this cooperative framework are State Implementation Plans (SIPs) developed and enforced at the state level. The U.S. Environmental Protection Agency (EPA), which approves SIPs, may call for a state to revise its SIP if the agency finds it substantially inadequate to enforce the act. EPA has also exercised its authority by issuing Federal Implementation Plans (FIPs) that mandate emission cuts under CAA section 126(b).

Two recent decisions in the U.S. Courts of Appeals suggest a trend away from reliance on cooperative federalism and towards more uniform and stringent national standards.

U.S. Magnesium, LLC v. EPA

In U.S. Magnesium, LLC v. EPA, 690 F.3d 1157 (10th Cir. 2012), EPA determined that Utah’s SIP was substantially inadequate because it included an “unavoidable breakdown rule” permitting regulated facilities to avoid enforcement actions when they suffer unexpected and unavoidable equipment malfunctions. U.S. Magnesium petitioned for review, alleging that EPA’s SIP call was arbitrary and capricious.

The Tenth Circuit denied the petition, deferring to EPA’s three primary justifications for finding the Utah SIP substantially inadequate: (1) the unavoidable breakdown rule did not treat all exceedances of SIP and permit limits as violations of the CAA, potentially precluding injunctive relief, (2) the rule could be interpreted to grant Utah exclusive authority to decide whether excess emissions constitute a violation, and (3) the rule improperly applies to federal technology-based standards that already contain breakdown exemptions.

Although the U.S. Magnesium decision limits Utah’s flexibility in implementing its SIP, the result is not inherently contrary to the principles of cooperative federalism. One of EPA’s stated concerns in issuing the SIP call was to prevent language in a SIP from being erroneously read to limit EPA’s (or a private party’s) right to enforce the CAA. By preserving both state and federal enforcement rights, EPA’s approach arguably furthers federalism principles by preserving EPA’s role in implementing the program.

But the decision also suggests that EPA may and can continue to use SIP calls where states have approved alternative emissions regulations under procedures EPA had approved in a SIP. When EPA published the SIP call as a final rule, it cited to several cases where courts had interpreted provisions in a SIP to limit EPA’s enforcement authority in the face of more generous state standards. EPA, while disagreeing with those cases, explained that “we think the reasonable course is to eliminate any uncertainty about reserved enforcement authority.” This approach suggests that states should expect reduced flexibility to implement standards more permissive than those promulgated under federal law.

Texas v. EPA

In Texas v. EPA, 726 F.3d 180 (D.C. Cir. 2013), the D.C. Circuit affirmed EPA’s assertion of Prevention of Significant Deterioration (PSD) permitting jurisdiction in Texas and Wyoming after the states failed to prepare SIPs implementing EPA’s greenhouse gas rules. Following Massachusetts v. EPA, 549 U.S. 497 (2007), EPA determined that greenhouse gas emissions from motor vehicles may reasonably be anticipated to endanger public health and welfare by contributing to climate change. EPA concluded that this determination automatically triggered PSD permitting requirements for stationary sources of greenhouse gases, thereby requiring states to revise their SIPs.

Texas and Wyoming took the position that a provision of the PSD program’s implementing regulations gave the states three years to revise their SIPs after greenhouse gases became a regulated pollutant and that, during those three years, the states retain authority to issue valid PSD construction permits under their existing SIPs. EPA, however, read the provision to apply only to agency amendments to its regulation, not to automatically triggered permitting requirements. When Texas and Wyoming failed to revise their SIPs, EPA issued a FIP, allowing EPA to issue PSD permits for greenhouse gas emitting facilities.

The two states, along with industry petitioners, challenged EPA’s implementation of the new permitting requirements. EPA asserted that the petitioners lacked standing because they were not harmed by the rules. According to EPA, the CAA unambiguously prohibits construction of a major greenhouse gas emitting facility without a PSD permit, regardless of whether the applicable SIP had been updated. Because the states could not issue permits for greenhouse gas emitting facilities until they updated their SIPs, the FIP provided the only means of obtaining such permits and its existence therefore benefitted petitioners.

A divided panel of the D.C. Circuit agreed with EPA. Judge Rogers, writing for the majority, explained that CAA section 165(a) bars construction of a “major emitting facility” without a permit that includes emissions limitations for regulated pollutants and that CAA section 167 required EPA to take measures to prevent the construction of facilities not in compliance with the CAA. The court concluded that these provisions, read together, created self-executing permitting requirements. This conclusion, in turn, deprived petitioners of standing because their injury stemmed from automatic operation of the CAA, not from EPA’s rules enabling the issuance of permits, which, if anything, benefited petitioners. Judge Kavanaugh dissented, asserting that a relevant EPA regulation gave states three years to revise their SIPs and that section 165 applies only through the relevant SIP.

EPA would likely find that this decision is consistent with the CAA’s cooperative federalism regime, as the FIP left Texas able to fully implement its existing SIP for all pollutants other than greenhouse gases and merely allowed facilities to obtain permits that Texas had no ability to issue. But by adopting its interpretation of CAA sections 165(a) and 167, EPA appears to have cut back on flexibility states believed they were afforded under longstanding agency regulation.

In sum, these two decisions, read together, suggest that EPA may continue to restrict states’ flexibility where it views state action as delaying implementation of the CAA or potentially hampering federal enforcement efforts. Whether the agency will continue to have success in court may turn on something as simple as luck of the judicial draw. Less than a year before the D.C. Circuit decided Texas v. EPA, the same court invalidated EPA’s Cross-State Air Pollution Rule. In that case, Judge Rogers and Judge Kavanaugh’s roles were reversed, with Kavanaugh writing the majority opinion and citing heavily to cooperative federalism principles. These cases raise close enough legal issues that they may often come down to the individual perceptions of the jurists.

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