The US Supreme Court on Tuesday will hear arguments about the proper court venue for Clean Air Act lawsuits, which could be pivotal for future enforcement of federal air pollution rules.
The court is considering both a case involving the Environmental Protection Agency's (EPA) rejections of small refiners' requests for hardship exemptions from a biofuel blend mandate and the agency's separate denials of state plans for addressing ozone-forming NOx emissions. Judges are not expected to decide the legality of EPA's decisions, just the proper courts for settling the disputes.
But the cases are still significant: legal uncertainty to date has affected both EPA programs implicated by the Supreme Court's review and could upend enforcement of future rules if the court does not provide sufficient clarity. Federal ozone season NOx allowance prices essentially flatlined last year as participants were hesitant to trade due to risks from so many court cases. And small refinery exemptions are crucial for biofuel demand, so biofuel producers are wary of empowering more lower courts to reconsider denied exemption requests.
The Clean Air Act says that EPA actions that are "nationally applicable" or otherwise based on "nationwide scope or effect" should proceed before the US Court of Appeals for the District of Columbia Circuit, while "locally or regionally applicable" actions head to regional circuit courts instead. But judges have disagreed about how to apply those criteria, since many EPA rules have far-reaching effects but on their face target individual states or facilities.
Regulated industry fears that EPA could say a broad set of regulations have nationwide scope, centralizing review in the DC Circuit, which is seen as friendlier to federal regulators and where a majority of judges are Democratic appointees. Local conditions — such as a small refinery in Indiana serving local farmers that cannot handle higher biodiesel blends — get short-changed when various companies' concerns are assembled together, they argue.
But EPA under the prior administration and Democratic-led states argue that sending these cases to the DC Circuit, which is more experienced with the complexities of federal rulemaking, makes more sense than letting industry seek out favorable jurisdictions. And they highlight the possibility of courts leaving emitters in one part of the country with laxer rules.
"The fundamental risk is that you'll end up with decisions on the same point of law coming out differently in different places — and not an expedient way to resolve that," said Brian Bunger, a Holland & Knight partner and the former chief counsel at the Bay Area Air Quality Management District.
For instance, both the DC Circuit and the conservative-leaning 5th Circuit agreed that EPA erred when it denied some refiners exemptions from biofuel blend mandates — but they said so for slightly distinct reasons. The 5th Circuit, for instance, went further by saying refiners reasonably relied on past EPA practice and thus the agency incorporating new analysis into its review of waiver requests was unfair.
As a result, EPA recently used different criteria when weighing a waiver request from one refiner in the 5th Circuit's jurisdiction than it used for another refiner, according to partially redacted decisions obtained by Argus through a Freedom of Information Act request. The agency said it could not consider at all whether CVR Energy's 75,000 b/d refinery in Wynnewood, Oklahoma, is able to pass on the costs of program compliance to consumers because of the 5th Circuit decision but could weigh such information when deciding a similar petition from Calumet's 15,000 b/d refinery in Great Falls, Montana.
The agency issued those decisions in the waning days of former-president Joe Biden's term. While President Donald Trump has pledged a vastly different approach to environmental regulation, his administration for now has not signaled a different stance than the Biden administration on whether these types of disputes should proceed before the DC Circuit.
Schrodinger's case
It is still unclear whether the judges view the cases as a tricky technical dispute or part of a broader trend of federal agencies overstepping their authority. Tuesday's hearing could provide clues.
Of the court's nine justices, four previously served on the DC Circuit and could see value in sending more complex regulatory cases to the expert court, Bunger said.
But the court's conservative majority could also be wary of giving EPA too much authority to set venue. Refiners argue that the agency repackaged dozens of individual exemption denials into two larger regulatory actions as a strategy to get the cases before a friendlier court. The Supreme Court has looked skeptically at other EPA rulings and last year overturned a decades-old legal principle that gave agencies leeway when interpreting ambiguous laws.
Final Supreme Court decisions usually arrive by late June. However the court rules, businesses say that it should provide a clear enough explanation to prevent similar venue disputes from reemerging. The US Chamber of Commerce told the court it takes no position beyond urging the court to "adopt an interpretation that provides clarity and predictability to all stakeholders."
