Clean Air After the CAIR Decision: Multi-
Pollutant Approaches to Controlling
Powerplant Emissions
James E. McCarthy
Specialist in Environmental Policy
Larry Parker
Specialist in Energy and Environmental Policy
Robert Meltz
Legislative Attorney
March 4, 2010
Congressional Research Service
7-5700
www.crs.gov
RL34589
CRS Report for Congress
P
repared for Members and Committees of Congress
Clean Air After the CAIR Decision
Summary
In April 2010, the Environmental Protection Agency (EPA) expects to propose a new Clean Air
Transport Rule to control powerplant emissions of sulfur dioxide (SO2) and nitrogen oxides
(NOx). When finalized, this rule will replace the Clean Air Interstate Rule (CAIR); CAIR, which
was promulgated in May 2005, established a regional cap-and-trade program for SO2 and NOx
emissions from electric generating units (EGUs) in 28 eastern states and the District of Columbia.
On July 11, 2008, in North Carolina v. EPA, the U.S. Court of Appeals for the D.C. Circuit
vacated CAIR, saying that it had “more than several fatal flaws.” The court subsequently
modified its decision: on December 23, 2008, it reversed itself by allowing CAIR to remain in
effect until a new rule is promulgated by EPA.
From a policy standpoint, the court’s July 2008 decision seriously undermined EPA’s approach to
clean air over the previous eight years. CAIR was the lynchpin that held together the Bush
Administration’s strategy for attainment of the ozone and fine particulate National Ambient Air
Quality Standards (NAAQS), for achieving reductions in mercury emissions from coal-fired
powerplants, for addressing regional haze impacts from powerplants, and for responding to state
petitions to control upwind sources of ozone and fine particulates under Section 126 of the Clean
Air Act. As discussed in this report, the potential impact on communities attempting to achieve
NAAQS and the impact on mercury emissions could be substantial, and has prompted some to
call for congressional action to address the issue. On February 4, 2010, Senator Carper and 11
cosponsors introduced S. 2995, a multipollutant bill that would replace the CAIR requirements,
and require standards for powerplant emissions of mercury.
EPA’s only short-term option, other than letting the decision stand, was to seek further judicial
review, a step the agency took on September 24, 2008. This led to the aforementioned D.C.
Circuit ruling allowing CAIR to remain in effect until replaced. But the court’s July 2008 decision
strongly suggests that there is no simple “fix” that will make CAIR acceptable to the court. This
left EPA with three clear long-term options: (1) starting anew with a new strategy with respect to
mitigating transported air pollution based on the decision; (2) allowing the states to sort out the
issue through Section 126 petitions; and (3) seeking new legislation providing EPA with the
statutory authority to implement either CAIR in some form, or an alternative. The agency is
proceeding with the first of these options, but has indicated that it views congressional efforts to
address the issue as “mutually reinforcing.”
For Congress, the decision raises several issues:
• Should Congress consider providing EPA with the authority to implement CAIR
or other cost-based, market-oriented approaches to address NAAQS?
• Should Congress consider multi-pollutant legislation as a supplement or
substitute for the current regulatory regime, at least for electric generating units?
• Should Congress consider a more comprehensive revision to the Clean Air Act to
address the full scope of ozone and PM2.5 NAAQS non-attainment and related
issues, as well as mercury emissions from coal-fired powerplants, and emerging
environmental issues such as climate change?
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Clean Air After the CAIR Decision
Contents
Introduction ................................................................................................................................ 1
Importance of the CAIR Decision ............................................................................................... 1
Background ................................................................................................................................ 2
Significant Contribution........................................................................................................ 3
Regional Cap/State Budget.................................................................................................... 4
Interaction with the Title IV Program .................................................................................... 5
Interaction with the NOx SIP Call ......................................................................................... 5
The Court’s Decision .................................................................................................................. 7
Issues.......................................................................................................................................... 8
Problems Facing Nonattainment Areas .................................................................................. 8
Section 126 Petitions............................................................................................................. 9
Impetus for Multi-pollutant Legislation ............................................................................... 10
Conformity and Sanctions ................................................................................................... 10
Mercury Emissions ............................................................................................................. 11
Impact on Regional Haze Rule ............................................................................................ 12
Conclusion................................................................................................................................ 12
Tables
Table 1. Costs and Benefits of Reducing Emissions Under CAIR/CAMR/CAVR ......................... 2
Contacts
Author Contact Information ...................................................................................................... 13
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Clean Air After the CAIR Decision
Introduction
On July 11, 2008, in North Carolina v. EPA,1 the U.S. Court of Appeals for the D.C. Circuit
vacated what was widely regarded as the Bush Administration’s most significant environmental
measure: the Clean Air Interstate Rule (CAIR).2 CAIR, promulgated by EPA under the Clean Air
Act (CAA)3 in May 2005, established a regional cap-and-trade program for sulfur dioxide (SO2)
and nitrogen oxide (NOx) emissions from electric generating units (EGUs) in 28 eastern states
and the District of Columbia.4 The basic purpose of the rule was to protect downwind states from
pollution generated in other states located upwind. Subsequently, on December 23, 2008, the
court modified its decision to allow CAIR to remain in effect while EPA fashions a replacement
rule.5
For SO2, the CAIR program reduces emission allowances in the affected upwind states 50%
beginning in 2010 and 65% beginning in 2015.6 SO2 emissions cause acid precipitation, and SO2
is also among the pollutants that form fine particles (PM2.5) in the atmosphere. Reducing PM2.5
concentrations, as CAIR would do, was estimated by EPA to have significant health benefits,
eliminating 13,000-22,000 premature deaths annually.
CAIR’s NOx cap reduces emissions in the affected states by similar percentages: a first phase in
2009 lowers the emissions cap by 53% and a second phase, in 2015, is to achieve a 61%
reduction compared to 2003 levels. NOx contributes to both PM2.5 and to the formation of
ground-level ozone. Ozone aggravates a variety of respiratory and cardiovascular conditions and
causes as many as 2,300 premature deaths annually. Concentrations of the pollutant need to be
reduced in most of the states east of the Mississippi, according to EPA.7
Importance of the CAIR Decision
From a policy standpoint, the court’s decision seriously undermined EPA’s approach to clean air
over the past eight years. CAIR was the lynchpin that held together the Bush Administration’s
strategy for attainment of the ozone and fine particulate National Ambient Air Quality Standards
(NAAQS), for achieving reductions in mercury emissions from coal-fired powerplants, for
addressing regional haze impacts from powerplants, and for responding to state petitions to
control upwind sources of ozone and fine particulate pollution under Section 126 of the Clean Air
Act. As discussed in this report, the potential impact of vacating CAIR on communities
1 531 F.3d 896 (D.C. Cir. 2008).
2 70 Federal Register 25162 (May 12, 2005).
3 42 U.S.C. § 7401 et seq.
4 While virtually all eastern states were affected by the rule, three were subject only to the SO2-NOx annual caps, and
five only to the seasonal NOx cap; the other 20 states and DC were subject to all three caps. See EPA Fact Sheet, p. 3,
at http://www.epa.gov/CAIR/pdfs/cair_final_fact.pdf.
5 550 F.3d 1176 (D.C. Cir. 2008).
6 Because EGUs have been using up banked allowances since 2000 and emitting more tons than the current SO2 cap
allows, the actual reduction in SO2 emissions would ultimately have been 73% below 2003 levels after 2015, according
to the agency.
7 For maps of the affected areas, see CRS Report R41062, Ozone Air Quality Standards: EPA’s Proposed January
2010 Revisions, by James E. McCarthy.
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attempting to achieve NAAQS and the impact on mercury emissions would be substantial, and
prompted some (including EPA, state environmental agencies, electric utilities, and
environmental organizations) to appeal the decision.
Even though it provides less-than-adequate reductions to achieve full compliance with the
NAAQS, CAIR would have substantial benefits for the communities affected. In 2005, EPA, in
response to congressional requests, conducted a multi-pollutant regulatory analysis, including the
estimated costs and benefits of CAIR, the Clean Air Mercury Rule (CAMR), and the Clean Air
Visibility Rule (CAVR).8 Although its analysis combined all three rules, the vast majority of the
costs and benefits quantified were for CAIR. Table 1 summarizes the results of that analysis. As
indicated, the benefit-to-cost ratio ranged from 20 to 1, to 27 to 1. The primary benefit identified
was the avoidance of premature mortality, but 10 other categories of health impacts were also
identified by the agency, including (annually in 2020) the avoidance of 29,000 non-fatal heart
attacks, 510,000 cases of respiratory symptoms, 360,000 cases of asthma exacerbation, 2 million
work loss days, 430,000 school absence days, and 12 million minor restricted activity days.
Table 1. Costs and Benefits of Reducing Emissions Under CAIR/CAMR/CAVR
2010 Estimate
2015 Estimate
2020 Estimate
Annual Costs (billions, 1999$)
$2.7
$4.4
$6.1
Annual Benefitsa (billions, 1999$) $62-$73
$91-$106
$120-$140
Annual premature mortality avoided (people)
13,000
18,000
22,000
Source: U.S. Environmental Protection Agency, Office of Air and Radiation, Multi-Pollutant Regulatory Analysis:
CAIR/CAMR/CAVR (The Clean Air Interstate Rule, the Clean Air Mercury Rule, and the Clean Air Visibility Rule), October
2005, p. 26.
a. Quantified benefits from SO2 and NOx reductions only; benefits from Hg or CO2 reductions not estimated
by EPA.
Background
The Clean Air Act envisions a mix of state and federal authorities to reduce air pollution. For
those pollutants subject to NAAQS,9 it established a partnership in which the federal government
sets uniform national air quality standards and the states develop State Implementation Plans
(SIPs) identifying the measures they will take to attain the standards.
In 1997, when EPA finalized new NAAQS for both PM2.5 and ozone,10 it set in motion the SIP
process under Section 110 of the act. Most states already had SIPs demonstrating how they would
attain less stringent ozone and PM standards, but the promulgation of the revised ozone NAAQS
8 U.S. Environmental Protection Agency, Office of Air and Radiation, Multi-Pollutant Regulatory Analysis:
CAIR/CAMR/CAVR (The Clean Air Interstate Rule, the Clean Air Mercury Rule, and the Clean Air Visibility Rule),
October 2005.
9 NAAQS pollutants (also called “criteria pollutants”) are pollutants that “may reasonably be anticipated to endanger
public health or welfare” in the EPA Administrator’s judgment, and whose “presence ... in the ambient air results from
numerous or diverse mobile or stationary sources.... ” CAA Section 108(a)(1); 42 U.S.C. § 7408(a)(1). EPA has
identified six such pollutants: ozone, particulate matter, carbon monoxide, sulfur dioxide, nitrogen dioxide, and lead.
10 62 Federal Register 38652-38896 (July 18, 1997). The standards became effective September 16, 1997.
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and the new PM2.5 NAAQS meant that the SIPs of most states were no longer adequate to bring
those states into attainment by the statutory deadlines. Under Section 110(k)(5) of the act, if EPA
finds a SIP inadequate, it must require the affected state to submit a revised SIP that includes
sufficient measures to bring that state into compliance. This is known as a “SIP Call.”
In the case of both the ozone and the PM2.5 NAAQS, the process of developing effective
compliance strategies is complicated by the problem of transported air pollutants. Many states
cannot attain the standards unless upwind states reduce their pollution. The act recognizes this
and requires that those upwind states control major sources of pollution that affect other states:
under Section 110(a)(2)(D), SIPs must include adequate provisions to prevent sources within a
state from contributing significantly to nonattainment in downwind states.
Finding that interstate transport of SO2 and NOx contributes significantly to ozone and PM2.5
nonattainment in the majority of eastern states, EPA issued the Clean Air Interstate Rule (CAIR)
in March 2005 to mitigate the problem. CAIR was based on a series of determinations by EPA
with respect to pollution transport, cost-effective pollution control, and compliance feasibility.
These determinations were made within the State Implementation Plan process of Sections
110(k)(5) and 110(a)(2)(D) of the Clean Air Act.
Significant Contribution
The pivotal finding by EPA in the rule is that SO2 and NOx emissions from 23 states and the
District of Columbia contribute to unhealthy levels of fine particles in downwind states, and NOx
emissions in 25 eastern states and the District of Columbia contribute to unhealthy levels of
ozone in downwind states. This determination defined the geographic scope of the rule.
EPA conducted a series of modeling runs to determine the contribution various upwind states are
projected to make to areas in the eastern United States projected by EPA to be in nonattainment in
2010 and 2015. For ozone nonattainment, a “significant contribution” was defined by EPA as the
product of three factors: (1) the actual amount of transported pollution from upwind states that
contributes to nonattainment in downwind states; (2) how often contributions over specific
thresholds occur; and (3) the comparative amount of the upwind transported contribution to the
total nonattainment situation in the downwind area.11 For the ozone NAAQS, EPA modeled the
emissions impact of the 31 states east of or bordering the Mississippi River on 40 eastern
downwind counties projected by EPA to be in nonattainment in 2010. States whose maximum
contribution was estimated at less than 2 parts per billion (ppb)12 and/or that contribute less than
1% to total nonattainment were screened out. After evaluating the remaining eastern states on the
three criteria, 25 states and the District of Columbia were found to make a significant contribution
to nonattainment.13 These states constitute the region covered under the CAIR seasonal NOx
cap.14
11 Environmental Protection Agency, Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean
Air Interstate Rule); Revisions to Acid Rain Program; Revisions to the NOx SIP Call; Final Rule, 70 Federal Register
25162-25405 (May 12, 2005), p. 25246 (hereinafter cited as Clean Air Interstate Rule).
12 The ozone NAAQS, at the time, was 0.08 parts per million, which, allowing for rounding, was 85 ppb. It was
reduced to 75 ppb by a rule promulgated in March 2008, but EPA agreed to reconsider that action in September 2009.
The agency subsequently proposed to reduce the primary ozone NAAQS to somewhere in the range of 60 to 70 ppb (75
Federal Register 2938, January 19, 2010).
13 For modeling purposes, the District of Columbia’s emissions were combined with those of Maryland. Clean Air
(continued...)
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For the PM2.5 NAAQS, EPA modeled the emissions impacts of 37 eastern states on 62 eastern
downwind counties projected by EPA to be in nonattainment in 2010.15 Because the controlling
1997 PM2.5 NAAQS is an annual standard, EPA considered only two of the three factors in
determining significant contribution: actual amount of transported pollution and comparative
amount.16 In the proposed rule, EPA suggested that the threshold for determining significant
contribution be 0.15 micrograms per cubic meter (µg/m3)—1% of the annual standard of 15
µg/m3. In the final rule, EPA settled on 0.2 µg/m3 as the threshold.17 Based on that threshold, EPA
found 23 states and the District of Columbia were projected to contribute significantly to 2010
PM2.5 nonattainment. These states constitute the region covered under CAIR’s annual NOx and
SO2 caps.
Regional Cap/State Budget
With a determination of significant contribution, CAIR moved toward developing a cost-effective
remedy. Arguing a need to base its remedy on “highly cost-effective reductions,” EPA examined
the potential balance of local control to interstate controls along with the availability and timing
of cost-effective pollution control measures in upwind states. Projecting nonattainment areas in
2010, EPA concluded in the proposed rule that for many PM2.5 nonattainment areas:
it would be difficult, if not impossible, to reach attainment unless transport is reduced to a
much greater degree and over a much broader regional area than by the simultaneous
adoption of local controls within specific nonattainment areas. In addition, we found that
much of the air quality improvement that did occur in downwind areas with this strategy was
due to reductions in transported sulfate attributable to upwind SO2 emissions.18
EPA conclusions with respect to ozone nonattainment areas were less dramatic, but still
significant enough for EPA to conclude that further regional reductions were warranted.19
Calling for a combination of local and interstate transport control, EPA’s CAIR rulemaking
developed criteria for determining “highly cost-effective” transport control levels. SO2 and NOx
are emitted by a variety of sources. Sulfur dioxide is primarily emitted by stationary sources,
particularly coal-fired electric generators (69% of the total SO2 emissions in 2003) and industrial
combustion (14% of the total in 2003).20 In the case of nitrogen oxides, mobile sources are the
(...continued)
Interstate Rule, p. 25249.
14 In addressing the effect of interstate transport on ozone pollution, CAIR established a summer season (“seasonal”)
cap on emissions, because ozone forms primarily through atmospheric reactions among NOx and other pollutants in the
presence of sunlight and warm temperatures.
15 Clean Air Interstate Rule, p. 25247.
16 Environmental Protection Agency, Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone
(Interstate Air Quality Rule); Proposed Rule (69 Federal Register 4566-4650), p. 4608. (Hereafter cited as Proposed
Interstate Air Quality Rule.) Note: EPA changed the name of the rule from the Interstate Air Quality Rule (IAQR) to
the Clean Air Interstate Rule (CAIR) between the time of proposal and the rule’s promulgation.
17 Clean Air Interstate Rule, p. 25246.
18 Proposed Interstate Air Quality Rule, p. 4582.
19 Specifically, EPA modeling indicated that from 22% to 96% of projected 2010 nonattainment of the eight-hour
ozone NAAQS is due to transported pollution, depending on the specific area. Proposed Interstate Air Quality Rule, p.
4584.
20 Based on EPA data for 2003. See http://www.epa.gov/ttn,chief/trends/. The website provides data through 2008, but
(continued...)
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primary source (55% of the total in 2003), although stationary sources, particularly electric
generators (22% of the total in 2003) and industrial combustion (14% of the total in 2003), make
substantial contributions to the overall totals. Generally arguing that electric generators provided
the most cost-effective emission reduction source and that data were lacking on other stationary
sources, EPA focused on reductions from electric generators to determine emission caps. In
contrast, for an earlier regional cap-and-trade program (the NOx SIP Call, promulgated in the late
1990s), large industrial combustion sources were included in EPA’s cost-effectiveness
calculations.
Focusing on electric generators greater than 25 megawatts (MW), EPA developed a threshold for
controlling transported pollutants by comparing the average and marginal costs of other SO2 and
NOx regulatory actions, along with other factors. Finding the electric generating control
technologies to be “highly cost-effective,” EPA determined the final regionwide caps for affected
states by assuming these control technologies were installed on electric generators.
Based on the assumption that states would solely target electric generators for control, EPA
proceeded to determine the appropriate individual statewide emission budgets. Under the SIP
process, states are not required to adopt an electric-generator-only strategy in complying with
their emissions budgets; however, they must do so if they choose to participate in the EPA-
sponsored regional trading program set up under the model rule.
Interaction with the Title IV Program
Since 1990, EPA has been implementing a regional cap-and-trade program to control SO2
emissions that cause acid rain under Title IV of the Clean Air Act. Because the Title IV program
is both statutory and successful, EPA felt it needed to protect the program, thus limiting its ability
to suggest alternative allocation schemes for emission allowances under CAIR.21 Based on the
assumption that states would solely target electric generators for control, EPA proceeded to
determine CAIR’s appropriate statewide emission budgets by melding CAIR’s allocation scheme
into the existing Title IV acid rain program. With both programs based on electric generators, one
effect of this allocation scheme is to continue the grandfathering of pre-1990 existing plants under
CAIR.22 EPA recognized this, but argued that maintaining the integrity of the Title IV program
prevented it from pursuing alternative allocation schemes that might have provided relief to
newly constructed sources.
Interaction with the NOx SIP Call
EPA’s other regional cap-and-trade program, designed to control NOx emissions, is the Ozone
Transport Rule, which EPA finalized on October 27, 1998,23 and which the D.C. Circuit Court of
(...continued)
EPA’s CAIR decisions were based on earlier data.
21 Clean Air Interstate Rule, p. 25229.
22 Under Title IV, pre-1990 existing plants are allocated allowances to pollute based on a specified emission rate times
their historic average fuel consumption. New (post-1990) facilities are not allocated any allowances: they must
purchase allowances in EPA auctions or from pre-1990 plants that are using fewer allowances than they were allocated.
23 Environmental Protection Agency. Finding of Significant Contribution and Rulemaking for Certain States in the
Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone. Rule. 63 Federal
(continued...)
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Appeals upheld (with some modifications) on March 3, 2000.24 The rule required 21 eastern
states25 and the District of Columbia to submit state implementation plans (SIPs) to address
regional transport of ozone under the 1997 1-hour ozone standard, which is why the rule is known
as the NOx SIP Call. As issued, the rule called for increased controls on NOx, focusing
particularly on emissions from electric utilities and large combustion sources. To achieve the
necessary reductions, EPA stipulated emission budgets for each of the affected states, with each
state free to decide on what controls to use to maintain emissions within those budgets. EPA also
encouraged the formation of a regional cap and trade program to implement the NOx reductions
through a model program, which all participating states agreed to join.
Unlike EPA’s approach with the SO2 program and despite its emphasis on using NOx SIP
methodology in developing CAIR, the annual CAIR NOx cap-and-trade scheme differs
significantly from the NOx SIP Call in terms of the state budget determined and the scope of
participants. EPA’s choice of focusing only on electric generators runs counter to the cost-benefit
analysis, the recommendations of the Ozone Transport Assessment Group (OTAG), and EPA’s
NOx SIP Call.26 OTAG’s recommendations to EPA with respect to the NOx SIP Call called for
NOx controls on large and medium non-utility stationary sources in addition to controlling utility
sources. In the final NOx SIP Call, EPA calculated state emission budgets based on five sectors:
electric utility, nonutility sources, area sources, nonroad engines, and highway vehicles. Budgets
were based on cost-effective reductions, with substantial reductions required from electric
generators and from nonutility sources. Indeed, EPA used a 70% reduction requirement for large
industrial facilities and Reasonably Available Control Technology (RACT) control (generally
25%-50%) for smaller sources.27 In CAIR, arguing a lack of data, EPA generally released the
other stationary source components from the rule. EPA notes it had sufficient data in 1997 to
propose a NOx SIP Call that included these sources, but argues it didn’t have sufficient data in
2005 to include these sources in CAIR because of the increased geographic scope of CAIR and its
inclusion of SO2.28
(...continued)
Register 57356-57538 (October 27, 1998).
For the rule as proposed, see Environmental Protection Agency. Finding of Significant Contribution and Rulemaking
for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of
Ozone. Notice of proposed rulemaking. 62 Federal Register 60317-60421 (November 7, 1997).
24 Michigan v. U.S. EPA, 213 F.3d 663 (D.C. Cir. 2000).
25 There were 22 states included in the original rule: Alabama, Connecticut, Delaware, Georgia, Illinois, Indiana,
Kentucky, Massachusetts, Maryland, Michigan, Missouri, North Carolina, New Jersey, New York, Ohio, Pennsylvania,
Rhode Island, South Carolina, Tennessee, Virginia, Wisconsin, and West Virginia. In ruling on the applicability of the
Ozone Transport Rule under the 1-hour ozone standard, the court removed one state (Wisconsin) and parts of two
others (Missouri and Georgia) from the scope of the rule, but left its requirements in place for the other 19 states.
26 OTAG was created by EPA and the 37 easternmost states under the 1990 Clean Air Act Amendments to recommend
ways of reducing ozone transport in the northeastern part of the country. Final recommendations were made in 1997.
27 Specifically, for utility sources, EPA used a NOx emission rate of 0.15 lb. NOx/mmBtu to determine budget
allocations. For area sources, EPA assumed no new controls. For nonutility sources, EPA used a 70% reduction
requirement for large sources, and RACT controls (generally 25%-50%) for smaller sources. EPA calculated the
highway vehicle budget by assuming implementation of existing SIPs, along with the following federal measures:
national low emission vehicle standards, 2004 heavy-duty engine standards, and revisions to emissions test procedures.
Finally, EPA calculated the budget for nonroad engines assuming implementation of existing SIPs, along with the
following federal measures: federal small engine standards (Phase II), and 1997 proposed nonroad diesel engine
standards. See proposed Ozone Transport Rule and Appendix B (OTAG Recommendations), 62 Federal Register
60318-60420 (November 7, 1997).
28 Clean Air Interstate Rule, p. 25214.
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The Court’s Decision
No fewer than 32 petitions for review of CAIR were consolidated in North Carolina v. EPA. On
July 11, 2008, the D.C. Circuit found several of the key challenges valid. Noting that EPA regards
CAIR as one integrated action, the court decided against voiding only the successfully challenged
portions. Rather, it vacated the entire rule (and its associated Federal Implementation Plan) and
remanded it to EPA.
With regard to North Carolina’s challenges, the court ruled that CAIR’s emissions trading
program for SO2 and NOx violates CAA Section 110(a)(2)(D)(i)(I). This provision addresses
downwind states, such as North Carolina, whose achievement of NAAQS is interfered with by
emission sources in upwind states. It requires SIPs to—
prohibit[], consistent with the provisions of [CAA Title I, governing stationary sources of
emissions], any source or other type of emissions activity within the State from emitting any
air pollutants in amounts which will ... contribute significantly to nonattainment in, or
interference with maintenance by, any other State with respect to any [NAAQS].
The court found the CAIR trading program unlawful in assuring only that no entire region will
“contribute significantly,” while Section 110(a)(2)(D)(i)(I) requires that each state’s sources not
“contribute significantly.” (For similar reasons, the court noted that the NOx SIP Call’s emissions
trading program might have been judicially invalidated, had this argument been raised in the case
challenging the program.29) The court also found unacceptable that CAIR attributed no
significance to the “interference with maintenance” prong of Section 110(a)(2)(D)(i)(I)
independent of the “contribute significantly to nonattainment” prong. As CAIR would have it,
only states that satisfy the nonattainment prong can also satisfy the maintenance prong, rendering
the latter a nullity. North Carolina’s final successful argument was that CAIR’s 2015 deadline for
upwind states to eliminate their “significant contribution” to downwind nonattainment again
ignores Section 110(a)(2)(D)(i)(I). That provision requires compliance “consistent with ... [Title
I],” which imposes compliance deadlines for downwind states in 2010. Finally, the court elected
not to pass judgment on the lawfulness of the NOx Compliance Supplement Pool (200,000 extra
allowances as a reward for early reductions), though suggesting that EPA would need to revise it
on remand.
As to the challenges by electric utility companies, the court agreed first that EPA had improperly
set states’ budgets for SO2 and NOx in the CAIR emissions trading program. For example, in
basing the budgets on the number of allowances that a state’s EGUs receive under the CAA’s acid
rain program (Title IV), the budgets fail to track the requirements of Section 110(a)(2)(D)(i)(I)
above. Second, the court found EPA’s use of adjustment factors that gave smaller budgets to states
with mostly natural-gas- or oil-fired EGUs to be inconsistent with Section 110(a)(2)(D)(i)(I) as
well, and thus arbitrary and capricious. Third, the court agreed with the utilities that EPA’s effort
to reconcile CAIR’s regulation of SO2 with the existing program for trading SO2 allowances
under Title IV was unlawful. The court found nothing in Section 110(a)(2)(D)(i)(I) or other law
giving EPA authority to, as CAIR proposed, remove some Title IV allowances created by CAIR
from the Title IV market. Fourth, the court approved Minnesota Power’s argument that EPA had
29 Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000). It is too late now to challenge the 1998 NOx SIP Call rule. CAA
Section 307(b), 42 U.S.C. Section 7607(b), requires that petitions for review of the rule be filed within 60 days after the
rule is promulgated in the Federal Register.
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overstated the state’s downwind contribution to PM2.5 (thereby pushing the state over the
threshold for inclusion in CAIR). The argument, said the court, requires a response from EPA on
remand.
North Carolina v. EPA is an immersion in regulatory program detail involving little in the way of
broad legal principles. The court simply juxtaposed what the CAA (chiefly, Section
110(a)(2)(D)(i)(I)) requires and what CAIR said, and in several key respects found the latter
deficient. Nor did the court feel obliged to defer to EPA’s views, possibly because it saw the CAA
(chiefly, Section 110(a)(2)(D)(i)(I)) as speaking unambiguously to many of the issues raised by
petitioners.
In response to the court’s decision, EPA requested reconsideration. Alternatively, EPA requested
that the CAIR rule be allowed to continue in effect while the agency developed a replacement
program that satisfied the court’s July 2008 decision. On December 23, 2008, the court adopted
the latter, leave-the-rule-in-effect course, noting that vacating the old rule would defeat protection
of the environmental values that the rule was designed to preserve.30 The court did not impose a
specific deadline on EPA’s development of the replacement rule. But it did say that it was not
granting an indefinite stay of its July 2008 decision—that in the event EPA does not modify
CAIR consistently with that decision, petitioners may sue again. The agency has, since then,
begun development of a Clean Air Transport Rule to replace CAIR. The replacement rule is
scheduled to be proposed in April 2010.
Issues
Problems Facing Nonattainment Areas
Whatever path EPA chose to follow, the areas designated nonattainment for ozone and PM2.5—a
significant portion of the eastern United States—face choices of their own. As of June 2008, 132
million people in 293 counties lived in areas designated nonattainment for the ozone standard.
Seventy percent of the total (about 93 million people) lived in the eastern half of the country,
where EPA had identified CAIR as a key step toward improving ozone air quality.
Under the fine particle (PM2.5) standard, 208 counties with a combined population of more than
90 million were designated nonattainment. Except for Los Angeles and the San Joaquin Valley in
California, virtually all of these people and counties were in areas where air quality will be
improved by implementation of CAIR. As with ozone, EPA identified CAIR as a key component
of State Implementation Plans to attain the PM2.5 standard. EPA estimated that about half of the
SIPs had been submitted by July 2008, with the remainder expected in the months to follow.31
The court decision added uncertainty to this process, causing states to reconsider plans already
submitted and those pending submission.
Further complicating issues associated with achieving attainment of the PM2.5 NAAQS
promulgated in 1997, the EPA promulgated revisions to the NAAQS for particulate matter on
30 550 F.3d 1176 (D.C. Cir. 2008).
31 States were required to submit SIPs for the 1997 PM2.5 NAAQS by April 2008 (three years after the effective date for
the final geographic nonattainment designations).
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October 17, 2006,32 primarily a tightening of the 1997 standard for PM2.5. The tightening of the
PM2.5 standards33 increased the number of areas in nonattainment, and will likely mean that areas
already designated nonattainment under the 1997 standard will need to adopt more stringent
control measures to reach attainment. SIPs for the new 2006 PM NAAQS will be due in April of
2012; under the CAA, states are required to meet the new standard “as expeditiously as
practicable,” but no later than five years from the date of final nonattainment designations—April
2014. Given the historical delays in implementing the 1997 standards, some stakeholders have
advocated leapfrogging to implementation of the 2006 standards instead.
Similarly, for ozone, EPA strengthened the NAAQS in March 2008. This set in motion a new
round of nonattainment area designations and SIP revisions, even though 293 counties had not
attained the old standard, with most SIPs to attain that old standard still under review by EPA.
States are required to submit SIPs to EPA outlining their strategy for complying with the PM2.5
and ozone NAAQS, including provisions to prevent sources within their states from contributing
significantly to nonattainment in downwind states. Under the Administration’s approach to the
SIPs, implementation of CAIR would have met the interstate transport (downwind state)
provision of Section 110(a)(2)(D). The remand of CAIR could mean that SIPs from downwind
states would be inadequate if they assumed the CAIR reductions in interstate transport of
pollutants. SIPs from upwind states, on the other hand, could be inadequate if they don’t prevent
downwind nonattainment: the Clean Air Act makes clear that states are to impose controls on
stationary sources of pollution that contribute significantly to downwind nonattainment or
interfere with the maintenance of air quality standards in other states. This provision of the statute
has been widely disregarded in the past, with little EPA effort (other than regional cap-and-trade
programs) to address it. This reluctance to act can be challenged through Section 126 petitions.
Section 126 Petitions
Under Section 126 of the Clean Air Act,34 which addresses interstate pollution abatement, any
state or political subdivision may petition the EPA Administrator for a finding that a major source
or group of sources is violating the act’s prohibition of emissions contributing significantly to
nonattainment or interfering with the maintenance of attainment in another state.35 EPA has 60
days to make a finding in response to such a petition. If the Administrator found that out-of-state
sources were significantly contributing to an area’s nonattainment, the out-of-state sources would
have to shut down within three months unless EPA imposed emission limits and a compliance
schedule of not more than three years.
EPA has never granted a Section 126 petition in the manner outlined by the statute. Most recently,
it denied a 2004 petition from the State of North Carolina, arguing in part that CAIR was a better
mechanism for addressing the interstate transport of pollution to which North Carolina was
subject than was the state’s petition under Section 126. North Carolina challenged this denial in
32 71 Federal Register 61143-61233 (October 17, 2006). See CRS Report RL34762, The National Ambient Air Quality
Standards (NAAQS) for Particulate Matter (PM): EPA’s 2006 Revisions and Associated Issues, by Robert Esworthy
and James E. McCarthy.
33 The new daily standard averaged over 24-hour periods is reduced from 65 µg/m3 to 35 µg/m3. 71 Federal Register
61143-61233 (October 17, 2006).
34 42 U.S.C. § 7426, or visit http://www.epa.gov/air/caa/caa126.txt.
35 The prohibition is found in CAA Section 110(a)(2)(D)(i).
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court.36 Its challenge was initially stayed pending the outcome of the CAIR suit, but with the
decision in that suit, the challenge was reactivated. Oral argument was scheduled for March 12,
2009, but as that date approached, EPA asked the D.C. Circuit to remand the North Carolina
petition to the agency for reconsideration, a step the court agreed to on March 5, 2009.
A decision in favor of North Carolina’s Section 126 petition might be expected to bring on
additional Section 126 petitions from other states. Indeed, in December 2008, Delaware
petitioned the agency under Section 126 to impose emission controls on electric generating units
in nine other states.
Impetus for Multi-pollutant Legislation
The remand of CAIR and the vacating and remand of a companion rule targeting mercury (the
Clean Air Mercury Rule, CAMR)37 have raised again the argument for a multi-pollutant strategy
with respect to the electric utility industry—a framework based on a consistent set of emissions
caps, implemented through emission trading. Such an approach would not resolve all the issues
surrounding CAIR, particularly if limited to the electric utility industry, and would raise issues of
its own: How stringent should the emission caps be? What is an appropriate schedule for their
introduction? How should they relate to existing CAA provisions? Should carbon dioxide be
included with SO2, NOx, and mercury control programs?
In the 110th Congress, there were several bills introduced in Congress to impose emission caps on
electric utility emissions of these four pollutants.38 The vacating of CAIR increased the focus on
this legislation, but the court’s December 23, 2008, ruling eliminating the vacatur lessened
interest in such an approach.
Further complicating the matter, particularly in 2009, was the decision of the Obama
Administration and the congressional leadership to move forward with legislation to control
greenhouse gas (GHG) emissions economy-wide. Since electric generating units account for
about 40% of U.S. emissions of carbon dioxide, the principal GHG, legislation separately
addressing three other pollutants from the same category of sources seemed unlikely.
In 2010, with greenhouse gas legislation bogged down in the Senate, however, the idea of
legislation addressing the other three pollutants acquired new life. On February 4, 2010, Senator
Carper and a bipartisan group of cosponsors (13 as of early March) introduced S. 2995, a bill to
establish cap-and-trade programs for SO2 and NOx from electric powerplants and to establish
Maximum Achievable Control Technology limits for their emissions of mercury. A hearing on the
bill was held March 4.
Conformity and Sanctions
The Clean Air Act does not impose formal penalties on nonattainment areas for failing to attain
air quality standards. Rather, it penalizes areas that fail to submit and implement adequate
36 Sierra Club v. EPA, No. 06-1221 (D.C. Cir. filed June 23, 2006).
37 New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008).
38 For a comparison of legislation, see CRS Report RL34018, Air Quality: Multi-Pollutant Legislation in the 110th
Congress, by Larry Parker and John Blodgett.
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plans—plans that identify emission control measures that, when modeled, show that the area will
have reduced emissions sufficiently to reach the standards. Many of the most recent SIPs have,
with EPA’s approval, counted on the reductions projected from implementation of CAIR. As
noted earlier, in the CAIR proposal, EPA stated: “(I)t would be difficult, if not impossible, to
reach attainment unless transport is reduced to a much greater degree and over a much broader
regional area than by the simultaneous adoption of local controls within specific nonattainment
areas.”39 Without CAIR, these SIPs would no longer have demonstrated attainment.
Thus, as EPA began work on a CAIR replacement rule (now dubbed the “Clean Air Transport
Rule” by the agency) a major consideration has been whether the reductions it requires will be
sufficient for most ozone and particulate matter nonattainment areas to reach attainment. Further
complicating this question, EPA agreed over the course of 2009 to reconsider the NAAQS for
ozone, proposing to further strengthen it in a Federal Register notice January 19, 2010.40 Also, as
a result of decisions by the D.C. Circuit Court of Appeals, the agency is reconsidering both the
SO2 and particulate matter NAAQS, with final decisions expected in June 2010 and April 2011,
respectively.41 A strengthening of any of these standards has implications for the Clean Air
Transport Rule.
Mercury Emissions
Although CAIR applied only to SO2 and NOx, EPA has made clear since it proposed the rule in
2003 that it expected the scrubbers and NOx controls installed for CAIR compliance to be the
means by which most electric utilities would reduce mercury emissions. The agency did
promulgate a Clean Air Mercury Rule (CAMR) at the same time as CAIR, through which it
would have established a cap-and-trade program for EGU mercury emissions. But CAMR was
vacated by the D.C. Circuit in February 2008.42 Without CAIR, the agency would be left with no
controls on mercury emissions from powerplants.
Coal-fired powerplants are responsible for 42% of total U.S. emissions of mercury, according to
EPA, and are, by far, the largest uncontrolled mercury emission source. Mercury pollution is
widespread; it deposits in water bodies where it is converted to methylmercury and is taken up in
the food chain.43 The Clean Air Act requires that major sources of mercury meet standards based
on EPA’s determination of the Maximum Achievable Control Technology (MACT) available to
such sources. EPA sought to avoid imposing MACT on coal-fired powerplants by substituting the
39 Proposed Interstate Air Quality Rule, p. 4582.
40 75 Federal Register 2938. In this January Federal Register notice, EPA proposed to set the primary NAAQS
somewhere in a range of 60 to 70 parts per billion, versus the 2008 standard of 75 ppb. When CAIR was promulgated
in 2005, the ozone NAAQS was 0.08 parts per million, which, due to rounding, allowed areas with readings as high as
84 ppb to be considered in attainment of the standard. For additional information on the ozone NAAQS, see CRS
Report R41062, Ozone Air Quality Standards: EPA’s Proposed January 2010 Revisions, by James E. McCarthy.
41 For additional information on these standards, see CRS Report R40145, Clean Air Issues in the 111th Congress, by
James E. McCarthy, Table 1.
42 New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008).
43 Forty-eight states have fish-consumption advisories for mercury in their freshwater lakes and/or rivers (23 of these
advisories cover every water body in the state); and 13 states have statewide mercury advisories in their coastal waters.
About 60% of the U.S. coastline (excluding Alaska) is under fish consumption advisories for mercury. See U.S. EPA,
Office of Water, “Fact Sheet: 2005/2006 National Listing of Fish Advisories,” July 2007, pp. 4-5, at
http://www.epa.gov/waterscience/fish/advisories/2006/tech.pdf.
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CAIR and CAMR control programs, which it argued would produce more cost-effective
controls.44
EPA could have appealed the court’s ruling: under the Bush Administration, on October 17, 2008,
it petitioned for certiorari to the Supreme Court.45 But the Obama Administration withdrew the
petition in early February 2009 and announced that it will proceed with the development of
MACT standards,46 and subsequently reached a consent agreement under which it will propose
MACT standards for electric generating units (EGUs) by March 2011 and finalize them by
November of that year.
Impact on Regional Haze Rule
Section 169A(a)(1) of the CAA sets “as a national goal the prevention of any future, and the
remedying of any existing, impairment to visibility” in designated “class I areas” (e.g., national
parks and wilderness areas).47 It requires 26 categories of major stationary sources of pollution—
including EGUs—in existence on the date of the section’s enactment (1977), but not more than 15
years old as of that date, to install “best available retrofit technology” (BART) if the state
determines the source may reasonably be anticipated to cause or contribute to any impairment of
visibility in any class I area. In 2005, EPA made a final determination to exempt EGUs subject to
the CAIR trading program from the Section 169A visibility BART program.48 With the CAIR rule
in limbo, states have had to submit proposed SIPs to EPA without knowing the ultimate
disposition of CAIR. On January 9, 2009, the EPA published a notice finding that 37 states, the
District of Columbia, and the Virgin Islands failed to submit all or a portion of their regional haze
SIP.49 Failure to make BART determinations was one of the requirements some states failed to
include.
Conclusion
The North Carolina v. EPA decision left EPA’s strategy for achieving attainment of the ozone and
PM2.5 NAAQS in serious disarray. CAIR was the lynchpin that held together EPA’s strategy for
attainment of the ozone and fine particulate NAAQS, for achieving reductions in mercury
emissions from coal-fired powerplants, for addressing regional haze impacts from powerplants,
and for responding to state petitions under Section 126 of the Clean Air Act with respect to the
ozone and fine particulate NAAQS.
The D.C. Circuit, on EPA’s motion, reversed its decision to vacate CAIR while EPA is developing
a replacement rule. The Circuit, however, left the substantive requirements of its July 2008
44 For additional information on CAMR, see CRS Report RS22817, The D.C. Circuit Rejects EPA’s Mercury Rules:
New Jersey v. EPA, by Robert Meltz and James E. McCarthy.
45 77 U.S.LW 3253 (No. 08-512).
46 Withdrawal of EPA’s petition for certiorari left a separate petition filed by the Utility Air Regulatory Group before
the Court. The Court denied that petition, February 23, 2009.
47 42 U.S.C. § 7491(a)(1).
48 70 Federal Register 39137 (July 6, 2005).
49 Environmental Protection Agency, “Finding of Failure to Submit State Implementation plans Required by the 1999
Regional Haze Rule,” 74 Federal Register 2392 (January 15, 2009).
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decision fully intact. That decision strongly suggests that there is no simple “fix” that would make
CAIR acceptable to the court. This left EPA with three clear options: (1) starting over with a new
strategy to mitigate transported air pollutants based on the decision; (2) allowing the states to sort
out the issue through Section 126 petitions; or (3) seeking new legislation providing EPA with the
statutory authority to either implement CAIR in some form, or an alternative. EPA is proceeding
with the first of these options and expects to propose a new Clean Air Transport Rule in April
2010. Meanwhile, a bipartisan group of Senators has introduced legislation to address the issue
(S. 2995).
For Congress, the decision raises several issues:
• Should Congress consider providing EPA with the authority to implement CAIR
or other cost-based, market-oriented approaches to address NAAQS?
• Should Congress consider multi-pollutant legislation as a supplement or
substitute for the current regulatory regime, at least for electric generating units?
• Should Congress consider a more comprehensive revision to the Clean Air Act to
address not only ozone and PM2.5 NAAQS non-attainment, but also mercury
emissions from coal-fired powerplants, and emerging environmental issues such
as climate change?
Author Contact Information
James E. McCarthy
Robert Meltz
Specialist in Environmental Policy
Legislative Attorney
jmccarthy@crs.loc.gov, 7-7225
rmeltz@crs.loc.gov, 7-7891
Larry Parker
Specialist in Energy and Environmental Policy
lparker@crs.loc.gov, 7-7238
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