Ohio v EPA and the Future of the 'Good Neighbor' Rule

On 27 June 2024, the Supreme Court of the United States (SCOTUS) ruled in favor of a group of states and industry representatives against the U.S. Environmental Protection Agency (EPA) to issue a stay on the EPA's Good Neighbor Rule. The rule, which required 23 states to reduce emissions impacting downwind states, was intended to protect public health. However, a 5-4 majority of the court ruled that the EPA's plan was likely “arbitrary and capricious” and temporarily halted the rule's enforcement while suits against the rule proceed through lower courts.

Despite recent rulings in the current session by SCOTUS in favor of the EPA, the decision in Ohio v. EPA shows how the court has consistently limited the scope of federal regulatory authority, especially in relation to how the EPA regulates climate change-related factors. Just before this decision, SCOTUS ruled against federal regulators by overturning the precedent set by Chevron USA v. Natural Resources Defense Council, Inc.

The Good Neighbor Rule

The Good Neighbor Rule comes from the Clean Air Act's “good neighbor” provision, which mandates that “upwind” states take responsibility for pollutants that drift into “downwind” states. This provision aimed to mitigate the effects of transboundary ozone pollution, which has been shown to trigger or worsen conditions such as asthma, bronchitis, or emphysema.

In October 2015, the EPA updated the national ambient air quality standards (NAAQS) for ozone pollution and required individual states to submit plans for meeting the new standards. When 21 states submitted plans without proposing significant changes and two states failed to submit plans entirely, the EPA enacted a Federal Implementation Plan (FIP). This FIP required the 23 states to implement more efficient pollution controls by 2023 and apply widely used technologies by 2026. It also includes the Cross-State Air Pollution Rule Trading Program designed to balance compliance across state lines.

Following the EPA's order, 12 of the 23 states filed claims against the agency, and lower courts stayed the rule, effectively preventing the implementation of the Good Neighbor Rule in those states. This prompted three other states - Ohio, Indiana, and West Virginia - to file suit against the EPA, arguing that because the rule was not equally applied to all 23 states, it was “arbitrary and capricious” and should be struck down. Other challengers to the plan included representatives of the natural gas and oil industry, electrical power companies, a steel producer, and trade associations that represent mining and a variety of other fossil fuel interests. The U.S. Court of Appeals for the D.C. Circuit denied the plaintiff’s request to freeze the plan while the litigation is pending, leading the challengers to appeal to SCOTUS.

The Supreme Court's Decision

Writing for the majority, Supreme Court Justice Neil Gorsuch determined that the states' challenge to the FIP was likely to succeed on its merits in lower courts due to the EPA's lack of sufficient justification for the rule and granted the stay. The major issue highlighted by the majority opinion was the EPA's incorrect assumption that all 23 states would be subject to the FIP without adequately addressing what would happen if fewer states were included.

While the EPA did incorporate a “severability” clause to account for potential dropouts, Gorsuch argued that the provision did not resolve the underlying issue of whether the emissions requirements would be justified if some states were not involved. Because of this, SCOTUS argued that the plan was “arbitrary and capricious,” and that the EPA overstepped its authority by mandating the specific emissions controls without adequately demonstrating their cost-effectiveness across all states involved, an oversight that could have significant economic consequences.

Dissenting Voices

Supreme Court Justice Amy Coney Barrett authored the dissenting opinion, joined by Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson. Barrett's dissent offered a contrasting perspective on both the nature and necessity of the Good Neighbor rule, stating that the dissenters should not have granted emergency relief due to the fact-intensive and highly technical issues in the case.

The minority opinion held that the EPA's methodology for calculating emissions and reductions did not rely on the number of states participating, meaning that the agency's approach remained consistent regardless of the states involved. Barrett further argued that the EPA’s plan was a reasonable and necessary measure to address the complex issue of air pollution that crosses state lines and stressed the need for federal intervention when individual states’ actions are insufficient to protect public health and the environment. By focusing narrowly on a procedural critique rather than on the public health imperatives at play, the majority opinion, according to Barrett, overlooked the extensive evidence supporting the EPA's approach.

Her dissent reflects a broader defense of agency expertise in matters that demand technical and scientific knowledge, particularly in areas like environmental policy where the stakes are high for public health and safety. Organizations like the Center for American Progress and EarthJustice echo Barrett's concerns, insisting that by staying the rule, SCOTUS has taken away a vital tool to help prevent smog pollution, thereby putting public health at risk. According to EarthJustice, the plan could have “prevented approximately 1,300 premature deaths, averted over 2,300 hospital visits, and alleviated asthma symptoms for 1.3 million individuals,” and by blocking the rule, SCOTUS has ensured that “tens of millions of Americans will be immediately exposed to higher levels of dangerous smog.”

Impact of the Ruling and the Future of the Good Neighbor Rule

To learn more about the ramifications of this decision, 3E reached out to Michael Blumenthal, former state prosecutor for Ohio and current environmental attorney. According to Blumenthal, the SCOTUS decision restricts the EPA's ability to enforce the Good Neighbor Rule and may limit the EPA's power to impose similar regulations on states in the future.

Blumenthal went on further to state that SCOTUS's ruling is part of a broader trend where the court is reevaluating the scope of agency authority, and that future cases involving EPA regulations may see SCOTUS applying similar scrutiny, potentially leading to more limitations on federal agencies' powers. “The Ohio v. EPA decision marks a shift towards more stringent judicial oversight of federal agencies, which could have lasting effects on environmental regulation and administrative law,” said Blumenthal.

Fortunately for the EPA, there is a path forward for the agency to enforce the Good Neighbor Rule. By amending existing regulations to address the concerns raised by the Supreme Court and narrow the scope of the regulations or clarify the EPA's authority to regulate greenhouse gas emissions, the agency could protect the rule from further successful challenges. The EPA could also go through different regulatory avenues, such as the Clean Water Act or the Toxic Substances Control Act, to address greenhouse gas emissions from power plants or seek new legislation to explicitly grant the EPA the power it needs in this case. However, the latter would require significant political will and consensus among lawmakers, making it unlikely in the near future.

Either way, Blumenthal stresses, “It is important to note that any attempt by the EPA to change the 'Good Neighbor' provision would likely face significant opposition from industry groups and states opposed to stricter environmental regulations. The outcome of such an effort is uncertain and would depend on various factors, including the political climate, the strength of the EPA’s arguments, and the willingness of the courts to uphold the agency’s authority.”

For now, the EPA is moving forward with staying the FIP, while asking the U.S. Court of Appeals to partially remand the Good Neighbor Rule to enable them to address the deficiencies identified by SCOTUS. 3E will continue to watch for developments in this case.

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