New SCOTUS Case Involving Venue for Clean Air Act Challenges Matters to Your Business

This week, the Supreme Court agreed to review Oklahoma v. EPA and PacificCorp v. EPA, both arising out of the Tenth Circuit, and EPA v. Calumet Shreveport which originated in the Fifth Circuit. The three cases involve the CAAs venue provisions found at CAA Section 607, 42 U.S.C. § 7607, which require parties challenging “final actions” involving “nationally applicable regulations” to file them in the federal DC Circuit. By contrast, parties filing challenges to “locally or regionally applicable” actions file them in the regional circuit court of appeals.

Below, we briefly outline the history of these cases and issues that the regulated community should monitor.

Case Background

The CAA is cooperatively implemented by federal and state regulators. The CAA has been described as “an experiment in federalism” that establishes “an intergovernmental partnership to regulate air quality in the United States.”

Relevant to the Tenth Circuit matter, the law requires each state to adopt an implementation plan that is submitted to the US Environmental Protection Agency (EPA) for it to review whether the plan meets nationally set standards for CAA compliance. The current cases arise out of EPA’s 2023 disapproval of Oklahoma’s and Utah’s individual state air quality plans for ozone. Petitioners include state government officials as well as utilities whose original challenges were filed in the Tenth Circuit, which stayed their challenges pending a determination from the Supreme Court as to what forum in which they should proceed.

The Fifth Circuit case was brought by a group of petroleum refiners who argue that EPA improperly denied their requests for allocations from the CAA renewable fuel program requirements. After the Fifth Circuit sided with these groups last year, EPA and renewable fuel groups sought to have the ruling reviewed on the grounds that it should have been filed in the DC Circuit instead.

CAA’s Venue Provisions

It can be challenging to determine where to file regulatory challenges in the context of the CAA. CAA Section 607(b)(1) identifies three types of “final actions” and specifies which courts have jurisdiction to hear each of them:

• Actions that are “nationally applicable” are reviewable in the DC Circuit.
• Actions that are “locally or regionally applicable” are reviewable in the regional circuits.
• The third category is an exception to the second and provides that “locally or regionally applicable” actions must be reviewed in the DC Circuit if, and only if, the final action is based on “a determination of nationwide scope or effect” and the administrator publishes a finding to that effect.

The third category is where much of the dispute centers, i.e., when an EPA action considers locality-specific issues as it applies a purportedly national standard.

• In the Oklahoma and Utah challenges, even though EPA’s “final action” disapproved state implementation plans from 21 states, the data related to each of these disapprovals was state-specific and grew out of multiple prior regulatory actions by involved state regulators.
• In Calumet Shreveport, the parties that challenged EPA’s regulations were “typically claim[ing] disproportionate hardship by demonstrating that they face unique burdens related to their local circumstances and market conditions.” To evaluate these challenges, EPA necessarily had to review local facts and data and not just a single centralized record. Given that the disputes at the heart of Calumet Shreveport generally turn on local factual data and not generally applicable programmatic decisions made in Washington, there is no reason to think that the DC Circuit would have any more expertise in evaluating these issues than the regional circuit courts would.

Why This Matters

Three big-picture issues are at play here that have great impact on the regulated community.

Our constitutional system provides that courts, not agencies, are the primary (but not singular) interpreter of statutory law. Recent Supreme Court decisions — most notably Loper Bright v. Raimondo — have emphasized the formal distinction between technical areas, where agencies have expertise, and statutory construction, where courts have expertise. In these cases, agencies should be provided “respect” at best. (For more, see here.) Indeed, in prior cases interpreting CAA Section 607, EPA has explicitly relied on now-overruled “Chevron deference” as supporting its determination that an action has “national applicability.”

The procedural history of the now-overruled 1993 Seventh Circuit Madison Gas & Electric v. EPA case illustrates how this issue plays out in practice. The Madison Gas petitioners challenged EPA’s award of CAA emissions allowances to three electric generating plants in Wisconsin and Illinois on the grounds that EPA made location-specific factual errors, resulting in EPA miscalculating the number of allowances for each plant. Petitioners did not challenge the legality of the broader cap and trade program, the cumulative number of nationwide emissions credits, EPA’s application of the statutory allocation formulas, or the allocation of allowances to any of the more than 2,000 other facilities affected by the rule.

The court determined that petitioners’ allocation challenges were local in nature. Though the rule used a single “nationwide” table listing allocation, the Seventh Circuit found that the final action challenged was locally applicable. EPA’s final action — i.e., the specific award of acid rain allowances to the relevant electric generating units — dictated the scope and nature of the challenge, concluding that the challenge was accordingly local and could be filed in a regional court of appeals. The court determined that there is no basis for concluding that regional courts of appeals are any less capable of evaluating whether a regulation is “nationally applicable” than EPA.

A major concern of the regulated community is the fact that courts cannot review EPA’s determination that a challenged regulation is actually “nationally applicable,” which effectively allows EPA to choose its forum. Increasingly, regulated businesses choose to file non-CAA challenges in courts of appeals other than the DC Circuit, which is often viewed as giving EPA and other federal agencies a “home court” advantage. Other venues, most notably the Fifth Circuit, are viewed as more receptive to arguments from the regulated community.

Regulatory challenges in the DC Circuit that focus on rules of broad interest typically end up being consolidated with other cases arising from locations across the country. In these consolidations, parties with divergent challenges are forced to share space in briefs and time in arguments amongst “industry” or “state petitioners.” In this circumstance, parties often lack the space to meaningfully articulate the bases for their challenges, making it difficult for the reviewing court to effectively review them. While consolidations also happen in regional circuits, the number of entities involved in any consolidated regional circuit action would be lower, presumably allowing parties more freedom to meaningfully outline their concerns.

Moreover, it may often be easier for practitioners to focus EPA on site-specific concerns in single-petitioner cases proceeding in regional circuits than when issues unique to a single location are swept up in what EPA has deemed to be a “nationwide” issue pending in the DC Circuit.

Stay tuned for further developments.

Members of the firm’s Environmental team regularly advise clients on understanding the implications of new regulations and have broad experience in challenging regulations in federal and state courts.