D.C. Circuit Court Strikes Down CAIR Regulation

August 16, 2008
by BART CASSIDY
Client Alert Newsletter August 2008

In an opinion issued on July 18, 2008, the D.C. Circuit Court of Appeals issued a ruling striking down the U.S. Environmental Protection Agency's ("EPA's") Clean Air Interstate Rule ("CAIR"). EPA had promulgated CAIR to establish a cap-and-trade program for the reduction of sulfur dioxide ("SO2") and oxides of nitrogen ("NOx") from sources meeting the definition of electric generating unit ("EGUs") in 28 eastern states.

Certain industry petitioners challenged CAIR as imposing emission control requirements that are contrary to the provisions of the Clean Air Act. Other petitioners challenged the rule on the basis of its inclusion of certain states, or portions of states, within the CAIR-affected region. The court agreed with the arguments raised by many of these petitioners, and determined to vacate CAIR in its entirety.

A group of EGUs challenged EPA's determination to implement the SO2 provisions of CAIR through the separate acid rain requirements of Title IV of the Clean Air Act mandating that sources hold acid rain allowances as the basis for compliance demonstrations under CAIR. Attorneys for MGKF represented one of these petitioners, and presented the oral argument on a subset of these issues before the court. The court adopted the position of these SO2 petitioners that EPA had no authority to modify the implementation of the acid rain program in this manner, and had failed to establish the requisite connection between the acid rain program of 1990 and the current pollution control objectives of CAIR.

The court also agreed with petitioners contending that EPA's promulgation of specific NOx emission control provisions did not satisfy Clean Air Act requirements concerning the required connectedness between the established emission control program and the ambient air quality objectives of the regulation. The court observed that EPA had made certain judgments in the regulation based upon considerations of equity and practicality, rather than accepted statutory requirements. Finally, the court agreed that EPA had failed to justify its inclusion of Minnesota in the program.

The court determined to vacate the regulation in its entirety, based upon EPA's representation that the regulation constituted a complex, integrated program. Implementation of the court's decision awaits the court's issuance of its mandate. The implications of the court's decision have yet to be fully realized. Many states have adopted programs to implement CAIR, and have included CAIR provisions as elements of their state implementation plans ("SIPs") for achieving attainment with national ambient air quality standards. In addition, the NOx emission control requirements of EPA's separate Section 110 Call regulation had been supplanted by CAIR, and therefore will likely be resurrected in light of the court’s decision.