[co-author: Jessica Wright - Summer Associate]
The Clean Air Act (CAA) directs the Environmental Protection Agency (EPA) to set standards for common air pollutants. When the EPA sets these standards, States must submit a State Implementation Plan (SIP) showing how the State will implement, maintain, and enforce those standards. Under the CAA’s “Good Neighbor Provision,” States must also plan to prohibit emissions in amounts which will significantly contribute to nonattainment in another state. If an SIP fails to satisfy these requirements, the EPA may issue a Federal Implementation Plan (FIP) to correct the deficiencies. In 2015, the EPA revised its air quality standards for ozone, triggering States to submit new SIPs. Years later, the EPA announced its intention to disapprove 23 SIPs and proposed a single FIP to bind those States. Several States sought litigation over the SIP disapprovals, earning 12 stays from the lower courts. The remaining States challenged the FIP in the D.C. Circuit and ultimately asked the Supreme Court to stay the FIP’s enforcement pending their appeal. On June 27, 2024, in Ohio v. EPA, SCOTUS issued a 5-4 decision in favor of the States, granting the stay pending litigation on whether the EPA’s decision to apply the FIP to the remaining States is arbitrary or capricious.
Instead of issuing an FIP for every SIP disapproval, the EPA issued one single FIP that relied on all the upwind States adopting emission reduction measures up to a uniform level of cost to the point of diminishing returns. It determined this cost using nationwide data from power plants and other industries. When the FIP went out for its notice-and-comment period, commenters posed concerns about what would happen if the FIP did not cover all 23 original States. The EPA replied to this concern by adopting a severability provision in the final rule, which says that the FIP will continue to be implemented without regard to the number of states remaining under its control. Beyond that, the EPA did not explain how the FIP’s methodology would remain unaffected even if fewer states were governed by the plan.
After a flurry of litigation, only 11 of the original 23 states remained under the EPA’s FIP. The remaining States argued that the EPA’s decision to apply the FIP even after so many other states dropped out is arbitrary or capricious. The Court granted certiorari to determine whether a stay should be granted. When deciding if it will issue an emergency stay, the Court considers four factors: (1) whether the applicant is likely to succeed on the merits, (2) whether it will suffer irreparable injury without the stay, (3) whether the stay will substantially injure the other parties interested in the proceedings, and (4) where the public interest lies. In their argument, the States raised significant evidence of the financial burden the States and other industries will incur to come into compliance with the FIP. The EPA argued that if the upwind states fail to comply with the FIP, the burden then falls on downwind states to cope with ozone issues exacerbated by their upwind neighbors’ emissions. The Court recognized that there were substantial interests in all four of the questions for whether to issue a stay, but ultimately chose to focus on the first question—whether the applicant will succeed on the merits in the lower court.
The majority said yes—the States are likely to prevail on the merits. Under the applicable law, an agency action qualifies as arbitrary or capricious if it is not reasonable and reasonably explained. The agency action at issue here is the EPA’s final FIP and whether the EPA sufficiently addressed concerns raised in comments to the proposed rule. The EPA put forward three unsuccessful arguments: (1) the comments do not raise the same concerns the States do in their briefs; (2) if a concern was raised, the EPA addressed it by adopting the severability provision; and (3) the States should file a motion to reconsider the final rule rather than seek a stay from the Court. The majority rejected these arguments, finding that the severability provision acknowledged that the EPA understood the commenters’ concerns about the effectiveness of the FIP methodology, even if it applied to fewer states, but its explanation fell short of addressing it. The Court also pointed to the CAA provision that allows for immediate challenge when an objection is raised with reasonable specificity during the period of public comment and is not reasonably addressed in the final rule. Thus, the majority found that the EPA’s final rule was not reasonably explained, and the States would likely succeed at the end of litigation.
The dissent was highly critical of the majority’s ruling, calling the States’ argument “an underdeveloped theory” and “unlikely to succeed on the merits.” The four minority justices would have ruled in favor of the EPA, finding that the EPA fulfilled its obligation to address the commentors when it adopted the severability provision. Further, the dissent critiqued the comments themselves, stating the commenters never raised their concerns with enough specificity and instead, the Court put those concerns in the commenters’ mouths rather than found them in the record. Lastly, when looking at the injuries to the upwind states from complying with the FIP, the dissent found no evidence that the FIP emission limits would have been different if imposed on a different set of states. Regardless of the outcome in this case, the dissent stressed the importance of remaining cautious when deciding emergency stay requests where the Court does not benefit from a full briefing and a reasoned lower court decision.
For now, power plants and other emission sources will not need to invest hundreds of millions of dollars to reduce their emissions, as this may ultimately not be necessary if a final decision is made in their favor. However, industries may still face uncertainty ahead. In response to SCOTUS decisions this term, agencies are likely to change the way they issue and enforce their regulations, making it increasingly less predictable for businesses in regulated industries to anticipate when and how they must comply. Particularly, this decision emphasizes the need for agencies to provide a reasoned response to concerns raised during the public comment period as an agency’s failure to do so can invalidate the entire rule.
Taken alone, this decision will have significant ramifications for the states and industries directly affected by the stay. But taken in context of the other decisions made this term, particularly Loper Bright Enterprises v. Raimondo, which overturned the longstanding “Chevron deference” afforded to agencies, the Court continues to show a willingness to question agency decisions and increase judicial oversight. One Justice whose vote is less predictable in these administrative cases is Justice Barrett, who notably dissented in this decision. Where she stands with agency discretion and decisions seems fact-specific and could be a significant swing vote in the future.
Now, all eyes are on the D.C. Circuit and the various States to see what the next moves are in this contentious litigation and on all federal agencies to see how the various administrative decisions this term will affect their rulemaking.
