Fifth Circuit Stays EPA 2016 Final Rule in Favor of Texas and Oklahoma SIPs

Recently the U.S. Court of Appeals for the Fifth Circuit issued an important decision regarding the Clean Air Act (CAA) and the interactions between EPA and the states. On July 15, Fifth Circuit, in a unanimous ruling, granted a stay of the U.S. Environmental Protection Agency’s (EPA) Final Rule promulgated in 2016 (81 Fed. Reg. 296 (Jan. 5, 2016)). The Final Rule partially approved and partially disapproved the regional haze plans developed and submitted to EPA as a state implementation plan (SIP) by Texas and Oklahoma and replaced the disapproved SIP provisions with a Federal Implementation Plan. The EPA promulgated the Final Rule nearly seven years after Texas submitted its SIP and nearly six years after Oklahoma submitted its SIP. This decision, written by Judge Elrod, is a long and complex journey through the CAA, and is quite critical of EPA handling of these issues. The case is State of Texas, et al. v. EPA.

Of note, EPA argued that this case should have been transferred to the DC Circuit because the Final Rule had nationwide impact, and by law, such cases must be heard by the DC Circuit. However, the Fifth Circuit, after reviewing the statute and EPA’s arguments, determined that it would not defer to EPA’s interpretation of the venue provisions of the CAA. Of particular interest, the Court concluded:

“Section 7607(b)(1) directs that challenges to EPA’s assessment of a state implementation plan may only be filed in the appropriate regional circuit. Because the Final Rule is not based on a determination that has nationwide scope or effect, the narrow exception in Section 7607(b)(1) does not apply. Venue for this challenges is appropriate in this court. Petitioners have demonstrated a strong likelihood of success in establishing that EPA acted arbitrarily, capriciously, and in excess of its statutory authority when it disapproved the Texas and Oklahoma implementation plans and imposed a federal implementation plan. Petitioners have also shown a threat of irreparable injury if a stay is not granted. Finally, Petitioners have shown that the balance of public interest weigh in favor a stay.”

Also of note, the Court is especially critical of EPA’s summary dismissal of the arguments of the operators of the Texas Grid that imposing expensive new emissions controls on power plants in Texas could have a devastating impact on the region and many plants in Texas, particularly since EPA has no expertise in this area (FERC did not participate).