December 23, 2008
In a not completely shocking decision, the D.C. Circuit Court of Appeals
today granted the EPA’s request to modify its remand of the CAIR rules so that
it no longer vacates the existing rules. North Carolina v. EPA (05-1244,
December 23, 2008, slip op.). In the original decision, North Carolina v. EPA,
531 F. 3d 896 (D.C. Cir. 2008), the Court deemed the CAIR regulations so fatally
flawed, that it determined not only to send the rules back to the EPA for a
complete rewrite, but to vacate the rules in their entirety. This decision
opened an abyss of uncertainty and confusion. CAIR had been in place since 2005
and many states had adopted NOx and SO2 cap and trade programs to comply with CAIR requirements. Individual generating companies organized their long term
planning both around the existence of the cap and trade programs and the
financial landscape created by these new markets. The Court’s vacatur
invalidated most of these regulations and all but crashed the market in NOx and
SO2 credits. The decision also frustrated long term
planning for electric power, already stressed by the tottering financial markets
and now left with no real basis for evaluating future control strategies.
None of the parties had asked the Court to completely vacate the rules and
all them individually moved to ask the Court to reconsider its decision.
Industry, environmentalists and states had separate issues with portions of the
regulations but the overall regulations represented a difficult compromise among
those interests and the prospect of having no regulations at all was far worse
than the issues raised in each of the appeals.
As a result of the motions to reconsider, the Court today agreed to excise
the vacatur from its remand. It noted that vacating the rules would not serve
the larger environmental interest and that the EPA’s eventual revision would
better serve environmental values presented in the Clean Air Act. The Court
refused to set a deadline for the EPA to issue revised rules but noted the
parties could file a mandamus action if the EPA took too long.
At this point it’s not clear what will be involved in re-establishing the
CAIR rules five months after they were vacated. While the state regulatory
structure generally remains in place, many of the deadlines were premised on the
dates when the rules were issued. Similarly, re-establishing a market in
emissions credits may be dependant on when these issues are sorted out. The
court’s decision will obviate the need for legislation aimed at reinstating CAIR,
but will switch to the EPA the push to tighten Phase Two, 2015 CAIR limits. In
the end, it will be one more thorny Clean Air Act rulemaking for the new
administration.