On September 24, 2008 U.S EPA filed its petition to the D.C. Circuit Court of Appeals for rehearing En Banc on the vacatur of the Clean Air Interstate Rule (CAIR). While focus may be on EPA’s request for rehearing, a significant concession was made in EPA’s brief that has major implications regardless of whether rehearing is granted.
EPA Concedes CAIR Phase Two Reductions Are Not Aggressive Enough
EPA elected to not seek review of the Court’s holding that the 2015 deadline for Phase II reductions is unlawful because it is inconsistent with the shorter compliance deadlines for ozone and p.m. 2.5 contained in the Clean Air Act. The Court held EPA must require reductions as "expeditiously as practical" but no later than the deadlines established in the Clean Air Act (typically 2010). In the Court’s words:
EPA did not make any effort to harmonize CAIR’s Phase Two deadline for upwind contributors to eliminate their significant contribution with the attainment deadlines for downwind areas North Carolina v. EPA slip op. at 25
EPA’s concession on the Phase Two deadline runs counter to the Bush Administration’s position that a legislative fix of CAIR must preserve the entire program. To the extent EPA’s concedes this point in its rehearing is somewhat puzzling as it was unnecessary at this stage of legal maneuvering. Perhaps this concession paves the way for a Congressional compromise over a short term legislative fix that preserves Phase I of the program. Certainly this concession means a rewrite of CAIR that includes more aggressive reductions seems inevitable.
EPA’s Arguments in Support of Rehearing
EPA’s brief appears to try and lay a guilt trip on the Court as its justification for a rehearing. EPA rightfully points out the major benefits of CAIR that will be lost if at least Phase I of the program is not preserved:
Most significantly, vacatur will jeopardize massive emission reductions…and accompanying improvements in public health. EPA estimated that CAIR would prevent 13,000 deaths annually by 2010 and 17,000 premature deaths annually by 2015.
Vacatur will also destroy or reduce the value of banked allowances that companies generated through early emission reductions…6.9 million tons of banked Title IV allowances have lost over three billion dollars in value [since the Court’s decision]
There is no doubt the courts decision to throw out the CAIR program has resulted in chaos both in the trading markets and with State’s struggling to reach attainment with federal air quality standards. We will see if the Court agrees that these dire consequences satisfy the standard for review that the matter involve a question of "exceptional importance."
As a second basis justifying review of the decision, EPA argues that the Court has been inconsistent in its review of the NOx SIP Call and CAIR. The EPA argues the Court previously upheld the NOx SIP Call in Michigan v. EPA and CAIR uses the "same fundamental approach approved in Michigan." Both air pollution control programs use economic factors to determine the amount of contribution to downwind state nonattainment upwind states must eliminate. The economic factor being "highly cost effective controls."
This is the crux of the legal issue and has significant implications for the design of any cap and trade program to control air pollution. Does the Clean Air Act call for elimination of contribution to downwind air quality issues based upon cost of controls or does it require reductions based upon a State’s actual contribution to downwind nonattainment? If it is ultimately decided that actual contribution must be eliminated, it may prove very difficult to craft a valid cap and trade program without new legislative authority.
EPA’s strategy to argue inconsistency appears pretty risky given the fact the Court raises questions regarding legality of the NOx SIP Call. Specifically, the Court states: "In Michigan we never passed on the lawfulness of the NOx SIP Call’s trading program." The Court’s decision appears to suggest it would have thrown out the NOx SIP Call as well if proper challenges had been made.
The EPA appears to face a steep climb to ultimately win its appeal. The Court was unanimous in its finding that basing required reductions on cost effective controls does not comply with the Clean Air Act.
What’s Next For CAIR?
Through legal maneuvering, U.S. EPA can effectively delay the effectiveness of the Court’s decision to vacate CAIR. The rehearing petition will likely delay it for a couple months while the Court considers the petition including allowing comment by other parties. Even if the rehearing is denied, which appears likely given the original decision was unanimous, U.S. EPA can file a motion to stay the effectiveness of the decision while it seeks appeal to the Supreme Court. By Court rules a stay, if granted or not challenged by the other parties, is good for 90 days.
While EPA delays the effect of the Court’s vacatur of the program, efforts will focus on a legislative fix that can preserve at least the immediate future of the program. However, time is running out on this "quick fix" option as Congress adjourns for the election.