E.P.A. v. EME Homer City Generation, L.P.

Background

The dispute involved the Environmental Protection Agency and a group of state and local governments joined by industry and labor groups. EPA adopted the Transport Rule under the Clean Air Act’s Good Neighbor Provision to limit nitrogen oxides and sulfur dioxide from upwind States that cross borders and worsen downwind air quality. The rule used a two-step method: a one-percent screening threshold and a second step that set emission budgets using uniform cost-effectiveness thresholds. A divided D.C. Circuit vacated the rule, saying EPA must allocate reductions strictly in proportion to each State’s physical contribution and must give States a new chance to craft their plans after budgets were set.

Reasoning

The Supreme Court considered whether the statute required proportional allocation or barred use of costs, and whether EPA had to provide an extra opportunity for States before issuing federal plans. Relying on the Act’s text and longstanding deference to reasonable agency interpretations, the Court held EPA reasonably filled the statutory gap by adopting a cost-based, two-step method and that the Act’s deadlines allow EPA to promulgate federal plans within the two-year window without first giving States a new budgeting opportunity. The Court therefore reversed the D.C. Circuit and upheld the Transport Rule on its face.

Real world impact

The decision lets EPA impose state-by-state emission budgets based on cost thresholds, affecting power plants, industries, and state regulators in many upwind and downwind States. States that believe a specific budget forces unnecessary reductions can still bring targeted legal challenges. The cases are remanded for further proceedings consistent with the opinion.

Dissents or concurrances

A dissent argued EPA overstepped, that the statute requires amounts-based, proportional reductions, and warned the majority weakens state primacy by allowing broad agency discretion.