United States Supreme Court Upholds State Air Pollution Rule
In a ruling that will ripple through the electric utility industry for years to come, the United States Supreme Court has upheld the United States Environmental Protection Agency’s (“EPA”) Cross-State Air Pollution Rule, also known as the Transport Rule. The Supreme Court’s 6-2 decision, issued on Tuesday April 29, 2014, reinforces the EPA’s broad discretion under the Clean Air Act to devise strategies to control air pollution, and in this case, to require major improvements in emissions from sources that include coal-fired power plants.
The EPA adopted the Transport Rule in 2011 to address and prevent interstate air pollution from certain “upwind” states, mostly in the Midwest and South, into other “downwind” states, primarily along the East Coast. The Transport Rule also attempts to address pollutants such as sulfur dioxide and nitrogen oxides that cross state borders. Through a cost based formula and computer modeling, the Transport Rule requires twenty-eight states, including Nebraska, Iowa, Missouri and Kansas, to reduce emissions.
In August 2013, the U.S. Court of Appeals for the District of Columbia Circuit, struck down the Transport Rule. The District Court held that the EPA must apportion the source of pollution migration state-by-state and hold each state respectively accountable for its share of downwind impairment of air quality. The District Court further held that each state should adopt control methods rather than the EPA adopting a rule applicable to all.
The Supreme Court reversed. The Court held that courts must defer to EPA’s expertise and the EPA had no duty to allow affected states an opportunity to adopt individual pollution-control strategies before the EPA stepped in to develop and adopt the Transport Rule.
From a practical standpoint, the Supreme Court’s ruling will most likely result in significant increases in the cost of coal generated electricity. Many of the Midwestern states the ruling will most adversely affect, such as Nebraska, also rely heavily on coal for electricity. These cost increases will further tilt the playing field toward renewable sources of electricity such as wind and solar. This ruling, plus the increasing prevalence of regional transmission networks that allow a broader pool of sources to contribute to serving electricity demand at any one time, should encourage all electric utilities to review their generation mix and consider changes to accommodate the shift in cost structure among generation types.
