A federal appeals court vacated the Environmental Protection Agency's Clean Air Interstate Rule July 11, finding “more than several fatal flaws in the rule” (North Carolina v. EPA, D.C. Cir., No. 05-1244, 7/11/08).

The U.S. Court of Appeals for the District of Columbia Circuit struck down the agency's method for allocating emissions allowances for upwind states and its interpretation of protections for downwind states, leading the judges to vacate the entire rule.

The rule had been challenged by North Carolina, which advocated stricter protections for downwind states, as well as several energy companies that disputed EPA's authority to set new emissions caps under the provisions of CAIR during oral arguments March 25 (39 ER 597, 3/28/08).

CAIR, issued at 40 C.F.R. Parts 51-52, was intended to reduce ozone and fine particle pollution from power plants that is transported across state boundaries and to help so-called downwind states attain EPA air quality standards for ozone and fine particles.

The rule would have required 28 states and the District of Columbia to revise their state implementation plans to reduce emissions of sulfur dioxide and nitrogen oxides, which are precursors of particulate matter and ozone, respectively, through a trading scheme (70 Fed. Reg. 25,162). Nitrogen oxides reductions were scheduled to begin in 2009, with sulfur dioxide reductions to follow in 2010; secondary reductions for each were slated for 2015. EPA estimated that the rule would have prevented 17,000 premature deaths.

North Carolina Sought Tougher Rule.

North Carolina, which suffers from upwind pollution, argued that EPA could have crafted a more protective rule. The state argued that EPA's interpretation of CAIR and how the emissions trading was managed provided insufficient protection for downwind regions in danger of missing air quality attainment levels.

CAIR required EPA to verify that each state's implementation plan ensures pollution emissions sources within that state do not “contribute significantly to nonattainment … or interfere with maintenance” of national ambient air quality standards in another state.

North Carolina said EPA illegally ignored the “interference with maintenance” portion of the statute when it determined which states would be considered beneficiaries of CAIR, ignoring upwind states such as Georgia that allegedly contributed to neighboring states' air quality problems.

EPA's interpretation of the “interference with maintenance” language “unlawfully nullifies that aspect of the statute and provides no protection for downwind areas” that fail to meet the ambient air quality standards, the court ruled.

Pollutant Trading Struck Down.

The judges also ruled EPA improperly tied sulfur dioxide and nitrogen oxides emission reductions stipulated by CAIR to Title IV of the Clean Air Act, which was meant to combat acid rain.

Some utilities contended that EPA overstepped its statutory authority when it capped emissions under CAIR.

EPA had attempted to set limits on sulfur dioxide and nitrogen oxides through CAIR under Title IV, which created a cap-and-trade program for sulfur dioxide. EPA set the CAIR emissions limits as percentages of states' Title IV allowances, 50 percent in 2010 and 35 percent in 2015.

Though sulfur dioxide and nitrogen oxides are precursors to ozone and particulate matter pollution, that “does not give EPA plenary authority to reduce emissions of these substances,” judges wrote in the decision.

By Andrew Childers

Copyright 2008, The Bureau of National Affairs, Inc.