US Supreme Court Grants Stay, Temporarily Blocks Implementation of EPA’s Good Neighbor Plan

The US Supreme Court issued on June 27, 2024 an opinion in Ohio v. EPA staying enforcement of the US Environmental Protection Agency’s (EPA’s) Federal Implementation Plan (FIP). The FIP sought to impose more stringent standards for emissions of nitrogen oxides (NOx) from power plants and certain other industrial facilities in 23 states.

The FIP, also known as the Good Neighbor Plan (the Plan), which EPA finalized in March 2023, addressed 23 states’ obligations to eliminate significant contributions to nonattainment or interference with maintenance of the 2015 ozone National Ambient Air Quality Standards (NAAQS) in downwind states. The Plan sought to impose an allowance-based trading program to reduce NOx emissions associated with fossil-fuel-fired power plants in 22 states beginning in the 2023 ozone season. It also set NOx emission control requirements for certain specified industrial sources in 20 states beginning in the 2026 ozone season.

A Closer Look at the Plan

Following promulgation of the Plan, a number of challenges were brought in lower courts, and implementation was stayed in 12 out of the 23 affected states. Subsequently, industry groups and a number of the states in which the Plan was not stayed challenged the FIP in the DC Circuit. They argued that EPA’s decision to enforce the Plan even though it was stayed in more than half of the affected states was arbitrary and capricious, and thus they sought a stay of any effort to enforce the Plan during the pendency of an appeal. The DC Circuit denied the applications for a stay, and the parties appealed that denial to the Supreme Court.

Writing for a 5-4 majority, Justice Neil Gorsuch granted petitioners’ applications for a stay, stopping EPA from enforcing the Plan in the 11 states in which implementation had not already been stayed pending the disposition of the petition for review in the DC Circuit which will likely take a number of months, at a minimum. Those 11 states are California, Illinois, Indiana, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, Virginia, and Wisconsin. According to Justice Gorsuch, the analysis regarding whether a stay should be granted ultimately turns on the question of who is likely to prevail at the end of the litigation, and the Plan “likely runs afoul” of the standards that define when an agency action is arbitrary and capricious.

The decision points to the fact that EPA’s plan rested on the assumption that all 23 upwind states would adopt emissions-reduction tools, and because the Plan no longer applies to all 23 states, EPA “failed to address an important problem the public could and did raise during the comment period.” Accordingly, Justice Gorsuch found “one reason for caution after another,” and granted the petitioners’ applications for a stay, pending the disposition of the petitions for review currently pending in the DC Circuit and any timely petition for writ of certiorari. Justice Amy Coney Barrett, who drafted the dissenting opinion, joined by Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson, disagreed with the majority as to the petitioners’ likelihood of success on the merits, writing that in granting the stay, the Court “grants emergency relief in a fact-intensive and highly technical case without engaging with both the relevant law and the voluminous record.”

Impact

While the Court’s decision does not strike down the Plan, this stay in implementation means that the more stringent NOx standards contemplated by the Plan will not be imposed on the 11 states for which the Plan has not already been stayed.

In their emergency application for the Court to grant a stay, the state applicants argued that allowing EPA to enforce the Plan during the pendency of the DC Circuit litigation would have required the states to assume significant compliance burdens, including lengthy and expensive permitting processes; costly measures to ensure that sources are satisfying their monitoring, recordkeeping, and reporting obligations; and diversion of resources from other infrastructure projects. Additionally, they argued that it would have undermined electricity-generation capacity and destabilized state power grids. The underlying DC Circuit litigation is in a relatively early stage, and accordingly, the stay imposed by the Court’s decision is likely to be lengthy.

The majority also took a more favorable view than the dissent toward staying a major environmental rule pending review in a couple of ways. First, it expressed less concern with the prospect of staying a rule based on an agency’s lack of reasoned explanation, whereas the dissent would have applied a higher burden for prevailing on that type of argument when considering a stay. Second, the majority took a more permissive view of key procedural issues under the Clean Air Act, concluding that petitioners’ comments had been close enough to preserve their issue for legal challenge and that they had no obligation to raise the issue first through an administrative petition for reconsideration. Taken together, those holdings may make litigants more likely to pursue preliminary relief in environmental cases, particularly those under the Clean Air Act.