The case1 centres on the third attempt of the Environmental Protection Agency (EPA) to interpret the Good Neighbour Provision of the Clean Air Act (CAA) of 1963. The CAA requires EPA to establish National Ambient Air Quality Standards (NAAQS) for pollutants at levels that will protect public health. After establishing a NAAQS, EPA determines “non-attainment” areas, i e, locations where the concentration of a regulated pollutant exceeds the NAAQS. Each state is required to submit a state implementation plan (SIP) to EPA within three years of the NAAQS. From the date EPA determines that an SIP is inadequate, EPA has two years to announce a federal implementation plan (FIP). The CAA mandates SIP compliance with its Good Neighbour Provision, which requires SIPs to
…contain adequate provisions… prohibiting…. any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will…contribute significantly to non-attainment in, or interfere with maintenance by, any other State with respect to any…. (NAAQS).2
Under the EPA’s rule challenged here – the Transport Rule – an upwind state “contribute[d] significantly” to downwind non-attainment to the extent its exported pollution both produced at least 1% of a NAAQS in at least one downwind state and could be eliminated cost-effectively, as determined by EPA. Upon challenge by a group of states, and local governments, industry and labour groups, the DC Circuit Court by a margin of 2-1 vacated the Transport Rule in 2012 in favour of the industry and certain states on the main ground that EPA exceeded its authority under the Good Neighbour Provision which requires EPA to consider only each upwind state’s physically proportionate responsibility for each downwind state’s air quality problem.
While admitting that the CAA does not answer the question how should EPA allocate among multiple pollution contributing upwind states responsibility for a downwind state’s excess pollution,3 the US Supreme Court found that the Good Neighbour Provision delegates authority to EPA to select from among reasonable options for Congress’s silence on the method of allocation of the multiple states’ responsibility for a downwind state’s pollution.4 The opinion did not believe that the text of the Good Neighbour Provision supports that the Act requires EPA to allocate responsibility for reducing emissions in “a manner proportional to” each state’s “contributio[n]” to the problem.5 The opinion rather believed that a proportional-reduction approach would be costly over-regulation unnecessary to and in conflict with the Good Neighbour Provision’s goal of attainment.6
The opinion noted that EPA found decisive the difficulty of eliminating each “amount”, i e, the cost incurred in doing so. The opinion found that the text of the Good Neighbour Provision supports rather than precludes EPA to reduce the amount easier, i e, less costly, to eradicate. And in the absence of a dispositive CAA instruction to guide it, the opinion concluded that EPA’s cost-based methodology is its “reasonable interpretation of ambiguous statutory language” 7 and upheld the Transport Rule on the score of Chevron USA Inc vs Natural Resources Defense Council, Inc,8 and United States vs Mead Corp.9 The opinion, therefore, found that the DC Circuit Court was not allowed to substitute its own interpretation for EPA’s reasonable interpretation. The opinion, however, clarified that if any upwind state concludes that it has been forced to regulate emissions below the 1% threshold or beyond the point necessary to bring all downwind states into attainment, that state may bring an applied challenge to the Transport Rule.
The DC Circuit Court expressly advanced two further justifications for upholding EPA’s interpretation: efficiency and equity. It considered that eliminating those amounts which can cost-effectively be reduced is an efficient and equitable solution to the allocation problem the Good Neighbour Provision requires EPA to address. Efficient, the opinion reasoned, because EPA can achieve the levels of emission reductions at a much lower overall cost. Equitable, the opinion explained, because, by imposing uniform cost thresholds on regulated states, EPA’s rule subjects to stricter regulation those states that have done relatively less in the past to control their pollution. Equity has an important role also in the resolution of interstate river water disputes.10
The dissent claimed that the majority transforms the CAA from a programme based on cooperative federalism to one of centralised federal control.11 The dissent believes that EPA abused its discretion by failing to give states an additional opportunity to submit SIPs in satisfaction of the Good Neighbour Provision. Under the Act, once EPA issues any new or revised NAAQS, a state has three years to adopt a SIP adequate for compliance with the Act’s requirements. The DC Circuit Court, however, found an exception to this strict time prescription for SIPs aimed at implementing the Good Neighbour Provision. It required EPA, after promulgating each state’s emission budget, to give the State a “reasonable” period of time to propose SIPs implementing its budget. Federalism under a written constitution has evolved judicially.12
The opinion found that EPA retained discretion to alter its course as it gave a reasonable explanation for doing so.13 It further found that the plain text of the CAA grants EPA authority to issue a FIP “at anytime” within the two-year period that begins the moment EPA determines a SIP to be inadequate.14
Indeed, the statute does not condition the EPA’s duty to promulgate a FIP only after its quantifying an upwind state’s statutory obligations. Nor does it declare that air pollution prevention and air pollution control at its source is the exclusive responsibility of states and local governments. In other words, the opinion declined to accommodate cooperative federalism in disregard of a precise statutory text15 adopted by the federal legislature competent under a written constitution. And only a week later did the Supreme Court of India underscore the Constitution for federalism in an interstate water dispute.16
The dissent also contended that the opinion approves an undemocratic revision of the Clean Air Act in that EPA personnel thought it more efficient to require reductions not in proportion to the amounts of pollutants for which each upwind state is responsible, but on the basis of how cost-effectively each can decrease emissions.17 Those who note that the judiciary in a democracy is a “countermajoritarian”18 organ can discern a theory of democracy in every statutory interpretation.19 Every, because a judicial determination of what should be is no more an interpretation than a judicial determination of what is.20 The democratic legitimacy of the opinion is both implicit in its deference to Chevron if only EPA consists of “democratically accountable officials”21 and evident in that it is based on a statutory text enacted by only a democratically-constituted legislature. In a rule of law-governed democracy, the legislature exercises the power to make and amend the law.22
The opinion is clearly a win for public health and the environment while somewhat contestably preserving the political values of democracy and federalism. The opinion has at least two important implications for India. First, it is likely to generate further pressure on India for providing greater access to US markets for renewable energy technologies as it greatly boosts the Obama administration’s climate change strategy, but not without incurring considerable estimated costs.23 A World Trade Organization panel has already been established on 23 May 2014 to examine a US complaint against the domestic content requirements of India’s solar energy programme.24
Second, the opinion’s treatment of democracy and federalism has in it the elements of relevance for the resolution of India’s interstate disputes, such as India’s interstate river water disputes, particularly the apportionment of construction costs and benefits of a jointly-developed project and dispute settlement concerning interpretation of agreements. While assuming jurisdiction to adjudicate interstate disputes in a federal democracy, the adjudicatory body must reasonably accord a functionally-dictated degree of deference to experts and expert agency when acting within the authority of law.
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