US Supreme Court stays interstate smog plan for coal plants, pipelines

The US Supreme Court voted 5-4 to stay a Biden administration plan for curbing interstate smog emissions, indefinitely putting the final Clean Air Act rule on hold pending further judicial review.

The June 27 majority opinion, written by Justice Neil Gorsuch, held that the US Environmental Protection Agency failed to adequately explain whether and how its Good Neighbor Plan might change if it does not cover all of the 23 initially affected states.

Conservative Justice Amy Coney Barrett was joined by the court's three liberal justices in a dissent arguing that the majority based its opinion on an alleged procedural error that likely would have had no impact on the EPA's plan.

"Given the number of companies included and the timelines for review, the court's injunction leaves large swaths of upwind states free to keep contributing significantly to their downwind neighbors' ozone problems for the next several years," Barrett wrote.

The Good Neighbor Plan

The EPA finalized its Good Neighbor Plan in March 2023. The final rule originally established a federal implementation plan (FIP) for 23 states using the EPA's four-step interstate transport framework for smog-forming nitrogen oxide (NOx) emissions.

NOx, produced by fossil fuel-fired power plants and other industrial facilities such as gas pipelines, is a precursor to ground-level ozone, a criteria pollutant regulated by the EPA's National Ambient Air Quality Standards (NAAQS).

Under the framework, the EPA identified downwind air monitors expected to have trouble meeting the 2015 NAAQS for ground-level ozone. The EPA then identified upwind states expected to contribute at least 1% to a receptor's ozone levels and determined which sources in those states are "significant" contributors to downwind interference.

Then the EPA promulgated a FIP for the 23 states requiring cost-effective NOx emissions reductions within specific industries. In finalizing the Good Neighbor plan, the EPA proposed to disapprove all 23 states' implementation plans (SIPs) for the 2015 NAAQS because they failed to address obligations under the Good Neighbor plan.

The final rule, set to become effective in 2026, was projected to drive an incremental 14 GW of coal plant retirements nationwide by 2030. However, the Good Neighbor Plan quickly became ensnared in litigation by states challenging the EPA's SIP disapprovals.

Seven circuit courts had stayed the EPA's disapproval of 12 separate state plans by the time the Supreme Court held oral arguments in February in response to requests for an emergency stay from a red-state coalition led by Ohio, natural gas pipeline companies, and other industry trade groups.

5 justices find EPA failed to explain rule's approach

In the final rule, the EPA argued the Good Neighbor Plan is severable, meaning it will still apply in covered states if the agency's SIP disapprovals are struck down in other states.

Siding with petitioners, the high court's five-justice majority agreed that the EPA failed to adequately explain in the final rule how the pollution control requirements in the Good Neighbor Plan might change if some states are no longer subject to the regulation.

"Recall that EPA's plan rested on an assumption that all 23 upwind states would adopt emissions-reduction tools up to a 'uniform' level of 'costs' to the point of diminishing returns," Gorsuch said. "But as the applicants ask: What happens — as in fact did happen — when many of the upwind states fall out of the planned FIP and it may now cover only a fraction of the states and emissions EPA anticipated?"

"Nothing in the final rule's severability provision actually addressed whether and how measures found to maximize cost-effectiveness in achieving downwind ozone air-quality improvements with the participation of all the upwind states remain so when many fewer states might be subject to the agency's plan," Gorsuch wrote.

The majority therefore concluded that the EPA violated the Administrative Procedure Act by offering "no reasoned response" to concerns about such a scenario raised during the rule's notice-and-comment period.

"Perhaps there is some explanation why the number and identity of participating states does not affect what measures maximize cost-effective downwind air-quality improvements," Gorsuch said. "But if there is an explanation, it does not appear in the final rule."

In granting the requests for an emergency stay, the majority found that petitioners would likely succeed on the merits of the case and suffer irreparable injury without judicial intervention. The majority did not address why an emergency stay was necessary when the rule was not set to take effect until 2026.

The ruling stays the Good Neighbor Plan pending further judicial review at the US Court of Appeals for the District of Columbia. The stay will remain effective if petitioners seek certiorari before the Supreme Court, terminating when the justices either decline to hear the case or after any ensuing litigation before the high court.

Chief Justice John Roberts and Justices Clarence Thomas, Samuel Alito and Brett Kavanaugh joined in the majority opinion.

Petitioners unlikely to prevail on merits, dissent argues

Barrett, writing for the minority, argued that the court should have exercised restraint in reviewing the emergency petitions.

While 12 of the EPA's SIP disapprovals have been stayed, "no court yet has invalidated one," Barrett noted. "So EPA's replacement FIP — the Good Neighbor Plan — may yet apply to all 23 original states."

Moreover, the petitioners are unlikely to succeed on the merits, she argued. "What matters is whether the limits the FIP imposes on each emitter depend on the number of states the FIP covers," Barrett said.

And to Barrett, the EPA's final rule and supporting documents "suggest that EPA's methodology for setting emissions limits did not depend on the number of states in the plan, but on nationwide data for the relevant industries."

In addition, the EPA explained that its methodology for defining each covered state's emissions obligations is "independent of the number of states included in the plan" when it rejected several petitions for reconsideration in April, Barrett noted.

Furthermore, Barrett argued that the majority's "failure-to-explain" reasoning appears to rest on a single comment submitted by a group called the Air Stewardship Coalition. The group asserted that the EPA may need to undertake "a new assessment and modeling of contribution" if not all states are covered by the Good Neighbor Plan.

The issue was barely briefed before oral arguments, Barrett said.

"One can search diligently in the hundreds of pages of applicants' opening briefs for the court's theory — that EPA failed to explain in its final rule why the FIP's cost-effectiveness thresholds for imposing emissions limits do not shift with a different mix of states — and be left wondering where the court found it," Barrett said. "That theory appears not to have crystallized until oral argument."

The majority "justifies this decision based on an alleged procedural error that likely had no impact on the plan," Barrett continued. "So its theory would require EPA only to confirm what we already know: EPA would have promulgated the same plan even if fewer states were covered. Rather than require this years-long exercise in futility, the equities counsel restraint."

Justices Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson joined in the minority opinion (Ohio v. EPA; 23-349).

The stay was welcomed by the Interstate Natural Gas Association of America, which had argued the scope and timeframe of implementation of the rule would disrupt gas service during times of year when it was most needed.