Decision Alert: Supreme Court Stays Federal Plan That Would Impose Emissions Standards on States

On June 27, 2024, in four consolidated cases (lead case: Ohio v. EPA), the Supreme Court held that states and other groups challenging a federal plan imposing emissions standards are likely to succeed in showing that the EPA failed to reasonably explain the rule. Justice Gorsuch authored the opinion for the Court. Justice Barrett wrote a dissenting opinion, joined by Justices Sotomayor, Kagan, and Jackson.

As summarized in Dykema’s March 2024 edition, the “good neighbor” rule is an environmental emission reductions rule that requires states “upwind” from other states to reduce emissions to increase the air quality in “downwind” states. After the EPA issued new air quality standards, states submitted plans for how they would reduce emissions affecting air quality in other states. The EPA rejected plans submitted by 23 upwind states and imposed a uniform federal plan requiring action by those states. After several successful court challenges to the federal plan, the EPA recognized that it could not apply its plan to 12 of the states. Three of the remaining states and several trade associations and companies challenged the federal plan. After the D.C. Circuit declined to temporarily block the plan, the challengers filed an emergency application to stay the EPA’s plan pending judicial review.

The Supreme Court granted the challengers’ stay application. Justice Gorsuch’s majority opinion found that both sides had strong arguments on certain factors applicable to stay applications—the harms the parties faced and the equities. The dispositive stay factor, according to the majority, was who is likely to win on the merits. The Court held that the challengers were likely to succeed in showing that the EPA’s federal plan was arbitrary or capricious. The basic problem with the plan, according to the Court, was that it was based on an assumption about uniform standards and application to all 23 upwind states, but once the plan no longer applied to several upwind states, the EPA persisted in seeking to enforce the plan against the remaining states. The EPA gave no reasoned response to commenters who presented this concern during the plan’s notice and comment period. The Court acknowledged the possibility that the number of state participants might not affect the calibration of the measures imposed by the plan, but no such explanation was given in the rulemaking process. So the challengers were likely to prevail in showing that the EPA’s plan was not reasonably explained.

In dissent, Justice Barrett argued that the challengers were unlikely to succeed. She first reasoned that the argument accepted by the Court is procedurally barred because, in her view, no commenter raised with reasonable specificity the concern that excluding some states from the federal plan would undermine the EPA’s methodology in creating the plan. Even if the challengers cleared this procedural hurdle, Justice Barrett argued, the EPA’s methodology for emissions standards appears not to depend on the number of states covered. She also argued that the EPA’s methodology for the plan was “state-agnostic” and that any procedural error was likely harmless.

Takeaways:

• The EPA cannot enforce its federal emissions plan against covered states while the case proceeds to a decision on the merits. However, because the Court did not find the plan substantively unreasonable, an argument can be made that the EPA may be able to adopt the same plan so long as it better explains why it does not matter that the plan no longer applies to some upwind states.
• The Court’s holding reinforces the importance of the notice and comment process in agency rulemaking. An agency must consider all arguments presented during that process and may not ignore arguments that raise alternatives to the proposed rule.

For more information, please contact Chantel Febus, James Azadian, Cory Webster, Christopher Sakauye, Monika Harris, Puja Valera, or A. Joseph Duffy, IV.