MAJOR BREAKING NEWS: SCOTUS Just Killed Cooperative Federalism (see below the break: big implications for impending EPA climate plan)

by William Yeatman on May 27, 2014

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What the Court just did: At 9:30 AM this morning, the Supreme Court declined to review the 10th Circuit’s split 2-1 decision in Oklahoma, et al. v. EPA, et al., 723 F. 3d 1201 (2013).

Case background: Under the Regional Haze provision of the Clean Air Act, States are required to submit visibility improvement plans to the EPA for review. In 2010, the State of Oklahoma proposed Regional Haze controls for 6 power plants. In 2012, EPA rejected Oklahoma’s Regional Haze plan; the agency justified its disapproval based on a claim that the State’s cost estimates were erroneous, which (allegedly) led to the State undervaluing certain control options. Rather than allow Oklahoma to correct the alleged error, as is permitted by the Clean Air Act, EPA imposed a federal plan that cost $1.8 billion more than the State’s plan. Oklahoma sued in the 10th Circuit Court of Appeals, alleging that EPA acted outside its authority in rejecting the State’s plan. The Court sided in favor of EPA in July 2013, by a 2-1 split panel decision in Oklahoma, et al. v. EPA, et al., 723 F. 3d 1201 (2013). Oklahoma appealed the 10th Circuit’s ruling, but the Supreme Court today declined to hear the State’s case.

The BFD legal matter at issue: The Clean Air Act is a “cooperative federalism” arrangement, which establishes a State-Federal partnership to improve the nation’s air quality. Because both sovereigns carry a congressional grant of authority, both possess legitimate claims to judicial deference. Complicating matters further, the State, in exercising its share of congressionally delegated authority pursuant to the Clean Air Act, funds its own implementing agency, which establishes its own administrative code. As a result, each sovereign that is responsible for executing the Clean Air Act can claim a congressional delegation, agency expertise, and political accountability—i.e., all the trappings of deference. So what happens when State and Federal Governments, in the course of implementing their respective delegations of authority, disagree on factual findings, with billions of dollars in compliance costs at stake? Is a court supposed to review the reasonableness of the state’s determinations? Or is it supposed to review the reasonableness of the EPA’s review of the reasonableness of the state’s determination? Most simply put: To which sovereign should the courts defer? The 10th Circuit ruled that EPA is the proper recipient of deference when State and Federal governments disagree over factual findings, a decision that will not be disturbed by the highest court in the land.

Why did cooperative federalism just die?: Pursuant to the precedent established by the 10th Circuit’s decision, the States, as regulators with initial responsibility under the Clean Air Act, are denied the discretion to conduct reasonable fact-finding. In this scenario—which is now reality—cooperative federalism will cease to have any functional meaning, because the States would become a second class partner. I discuss this matter at length here.

What are the regulatory regimes that will be affected?:

1. Regional Haze: EPA has imposed federal Regional Haze plans on 10 States. All told, these plans would cost the States billions of dollars in compliance costs. Yet not a single one would actually improve visibility. (For more, see this study). A number of these States are challenging EPA in various federal circuit courts of appeals. (e.g., See, Utah v. United States Envtl. Prot. Agency et al., No. 13-9535 (10th Cir. Filed Mar. 21, 2013); Martinez et al. v. EPA., No. 11-9567 (10th Cir., filed Oct. 21, 2011) (New Mexico); Arizona v. EPA., No. 13-70366 (9th Cir., filed Jan. 31, 2013); Louisiana Dep’t of Env. Quality v. EPA, No. 12-60672 (5th Cir., filed September 4, 2012); Michigan v. EPA, No. 13-2130 (8th Cir., filed May 22, 2013); Nebraska v. EPA, No. 12-3084 (8th Cir., filed Sept. 4 2012)). All of these States can expect to lose, now that the 10th Circuit’s precedent in Oklahoma, et al. v. EPA, et al., 723 F. 3d 1201 (2013). As a result, these States will have to implement billions of dollars in compliance costs, despite the fact that there is no visibility improvement (i.e., there’s no benefit).

2. EPA’s Climate Plan for Existing Power Plants: EPA’s impending climate plan for existing power plants is authorized by §111(d) of the Clean Air Act. Under §111(d), EPA is required to create a procedure by which States—and not the EPA—establish “standards of performance” for a designated pollutant from existing sources. This is an unusual framework within the Clean Air Act; usually, it is EPA—rather than the States—that establishes the substance of air quality regulations. The upshot is that §111(d) affords States more discretion that other regulatory programs established by the Clean Air Act.

In fact, there is only one other provision of the statute that is comparable to §111(d) in both structure and also the degree of authority (vis a vis EPA) accorded to States. It is known as Regional Haze. Like the §111(d) provision, Regional Haze requires EPA to create a procedure by which States—and not the EPA—establish emissions limitations to improve visibility.

As a result, today’s decision by the Supreme Court bears heavily on EPA’s climate plan for existing power plants, which President Obama is expected to “personally” unveil next week. To be sure, the administration has been stressing the extent to which the power plant regulations will afford the States “flexibility.” However, under the Oklahoma, et al. v. EPA, et al., 723 F. 3d 1201 (2013) precedent, States would have virtually no recourse if the EPA disagreed with their implementation plans, and decided to impose a federal plan in their stead.

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