Ohio v. Environmental Protection Agency
603 U.S. 279 (2024)
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Rule of Law:
An agency's final rule may be deemed arbitrary and capricious if the agency fails to provide a satisfactory and reasoned explanation for its action, particularly when it ignores an important aspect of a problem raised by public comments and its chosen solution does not address the core concern.
Facts:
- The Clean Air Act requires the Environmental Protection Agency (EPA) to set air quality standards, after which states must submit State Implementation Plans (SIPs) to meet those standards, including a "Good Neighbor Provision" to prohibit emissions that significantly contribute to pollution in other states.
- In 2015, EPA revised its air-quality standards for ozone, triggering a requirement for states to submit new SIPs.
- Years later, EPA announced its intention to disapprove over 20 state SIPs, believing they had failed to adequately address obligations under the Good Neighbor Provision.
- During the public comment period for these proposed SIP disapprovals, EPA also proposed a single Federal Implementation Plan (FIP) to bind all 23 states, designing it based on which emissions-control measures would maximize cost-effectiveness assuming all states would be covered.
- Commenters warned EPA that if some of the proposed SIP disapprovals were flawed and did not materialize, EPA would need to reassess the measures necessary to maximize cost-effective ozone-level improvements in light of a different set of participating states.
- EPA subsequently issued its final FIP with a severability provision, stating it would continue to apply to remaining jurisdictions if some dropped out, but without addressing whether the initial cost-effectiveness analysis remained valid for a reduced set of states.
- Following the FIP's issuance, ongoing litigation over the SIP disapprovals resulted in courts staying 12 of the 23 original SIP disapprovals, meaning EPA could not apply its FIP to those states, which together accounted for over 70% of the emissions EPA had planned to address.
Procedural Posture:
- The Environmental Protection Agency (EPA) announced its intention to disapprove over 20 State Implementation Plans (SIPs) for failing to meet Good Neighbor obligations.
- EPA proposed a single Federal Implementation Plan (FIP) to apply to all 23 states that were expected to have their SIPs disapproved.
- EPA issued its final FIP.
- Courts issued stays on 12 of the 23 SIP disapprovals, meaning EPA could not apply its FIP to those states.
- A number of the remaining states and industry groups challenged the FIP in the United States Court of Appeals for the D.C. Circuit, arguing it was "arbitrary or capricious" and asking for a stay of enforcement.
- The D.C. Circuit denied the requested relief.
- The applicants renewed their request for a stay in the Supreme Court of the United States.
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Issue:
Does the Environmental Protection Agency's final Federal Implementation Plan, which applies uniform emissions controls based on an initial assumption that all covered states would participate, qualify as arbitrary or capricious when the agency failed to provide a reasoned explanation for applying the plan to a significantly smaller subset of states after many were excluded by court stays?
Opinions:
Majority - Justice Gorsuch
Yes, the Environmental Protection Agency's final Federal Implementation Plan is likely arbitrary or capricious because the agency failed to provide a satisfactory explanation for its action, ignoring an important aspect of the problem presented by public comments. EPA's plan for emissions-reduction measures, based on maximizing cost-effectiveness, rested on the assumption that all 23 upwind states would participate up to a uniform level of costs. Commenters specifically raised concerns that if many of these states fell out of the planned FIP, the optimal point (the "knee in the curve") at which emissions-control measures maximize cost-effective downwind air-quality improvements might shift, requiring reassessment. However, EPA offered no reasoned response to this concern, merely adding a severability provision that sidestepped the issue rather than explaining how the cost-effectiveness analysis remained valid for a significantly reduced number of participating states. The Court emphasized that EPA had notice of this objection during the comment period, confirming its awareness of the problem. Therefore, the applicants are likely to prevail on their claim that EPA's final rule was not "reasonably explained" and thus arbitrary and capricious under the standards of FCC v. Prometheus Radio Project and Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co. The Court grants the stay, noting that its decision does not need to consider arguments forfeited by the government, such as the dissent's claim that the issue was unimportant or harmless.
Dissenting - Justice Barrett
No, the applicants are unlikely to succeed on the merits, and the stay should not be granted. Justice Barrett argued that the Court's "failure-to-explain" theory faces significant procedural obstacles and is unlikely to prevail. First, under the Clean Air Act's procedural bar (§ 7607(d)(7)(B)), an objection that the final rule was not reasonably explained must first be raised in a petition for reconsideration to EPA, which was not the posture of this case. Second, commenters did not raise the specific substantive issue—that the FIP's cost-effectiveness analysis and emissions limits would be undermined if fewer states participated—with "reasonable specificity" during the public comment period. The comments cited were either general criticisms of SIP disapprovals or related to specific industrial sources, not the FIP's dependence on the number of states. Third, even if there was a procedural error, it would likely be harmless under the Act's stringent harmless-error rule (§ 7607(d)(8)). EPA's methodology for determining cost-effectiveness thresholds and imposing emissions controls appears to be state-agnostic, relying on nationwide, industry-wide data, not on the number of covered states. Therefore, there is no substantial likelihood that the rule would have been significantly changed even if EPA had offered a more thorough explanation. The FIP's severability provision and EPA's justifications for it aligned with its statutory obligation to address pollution expeditiously.
Analysis:
This decision reinforces the "arbitrary and capricious" standard of review for agency actions, particularly emphasizing the administrative law principle that agencies must provide a reasoned explanation for their decisions and adequately respond to significant public comments. It underscores the importance of agencies demonstrating a rational connection between their factual findings and the chosen regulatory approach, especially in complex, multi-jurisdictional schemes like the Clean Air Act. The ruling signals that agencies cannot simply adopt "severability" clauses to bypass the need to re-evaluate their underlying rationale when key assumptions of their regulatory framework change. This case will likely encourage more rigorous agency responsiveness during notice-and-comment periods and could impact future federal-state collaborative environmental regulations, potentially leading to increased litigation over the validity of agency plans when state participation is uncertain.
