Supreme Court Takes on Emissions Case and Good Neighbor Rule

In the four consolidated EPA cases (Ohio; Kinder Morgan, Inc.; American Forest & Paper Assn.; U.S. Steel Corp. v. EPA), the Supreme Court assesses the “good neighbor” rule, a federal emission reductions rule. Specifically, the Court considers whether the emissions controls imposed by the rule are reasonable regardless of the number of states subject to the rule.

The four cases came to the Court as emergency appeals and were consolidated to be heard together. The challengers to the rule have asked the Court to temporarily block the Good Neighbor Plan as they consider it a “disaster” and, if the rule stays in effect, there would be an increase of electric-grid emergencies.

The “good neighbor” rule comes from the Clean Air Act, and it requires states that may be “upwind” from other states to reduce emissions to increase the air quality in “downwind” states. In October 2015, the EPA issued new air quality standards, which triggered an obligation for states to submit plans indicating how they would reduce emissions affecting air quality in other states. Last year, the EPA rejected plans submitted by 21 states that proposed no changes to their emissions plans and, instead, published a federal plan for those states. The federal plan requires power plants in those states to enforce the emissions rules already in place and to install additional controls in 2026. The federal plan went into effect in August 2023, but Ohio, Indiana, and West Virginia, along with several trade associations and companies, challenged the plan in the D.C. Circuit. The D.C. Circuit panel declined to temporarily block the plan, so the challengers urged the Supreme Court to do so. The Justices declined to block the plan and, instead, set the case up for oral argument.

During oral argument, the Justices appeared sympathetic to the group of states and companies challenging the EPA’s “good neighbor” rule. Arguing for the states, Ohio Deputy Solicitor General Mathura Sridharan contended that the development process of the EPA’s federal plan was flawed. Because the court of appeals put the rejections of the states’ plans on hold, she argued, that precluded the EPA from imposing its federal plan. Catherine Stetson, representing the companies, argued that the “good neighbor” rule’s purpose was to reduce the significant contribution that upwind states make to downwind states and that the EPA should have examined whether there would be a significant contribution to downwind air quality with only 11 states subject to the federal plan. U.S. Deputy Solicitor General Malcolm Stewart, representing the EPA, argued that the EPA anticipated from the beginning that the composition of states subject to the plan could change and that the plan was flexible enough to remain workable if the number of states subject to the plan changed. Justice Kavanaugh questioned the EPA’s development process and noted that the agency kept the federal plan in force even though the EPA had been told that the rejections of the state plans would be problematic for the federal plan. Justice Gorsuch agreed with Justice Kavanaugh and noted that no one had the opportunity to comment on the federal plan’s continuation as a federal law might require. Chief Justice John Roberts also questioned Stewart about when the EPA would address the effect of the change in the number of states covered by the plan. Justices Sotomayor and Jackson questioned the procedural posture of the case, with Justice Sotomayor noting that the challengers are trying to “bypass the very court who’s going to make the substantive decision.”

The case was argued on February 21, 2024. A decision is expected later in the term. Stay tuned for Dykema’s client alert discussing the Court’s opinion.

For more information, please contact Chantel Febus, James Azadian, Cory Webster, Christopher Sakauye, McKenna Crisp, Monika Harris, or Puja Valera.