Alaska Dept. of Environmental Conservation v. EPA
Alaska Department of Environmental Conservation v. Environmental Protection Agency, No. 02-658. Majority opinion by Justice Ginsburg, in which Justices Stevens, O'Connor, Souter, and Breyer joined. Dissent by Justice Kennedy, in which Chief Justice Rehnquist and Justices Scalia and Thomas joined.

Environmental policy has been a great success story for cooperative federalism. The federal government creates a large number of rules and policies but permits the states to implement those rules if they choose to, in which case the states retain primary enforcement authority. Everyone agrees that this arrangement is constitutional, because the states are voluntarily choosing to participate in the federal programs. This case presents a purely statutory question: does the EPA have the authority to overrule a judgment of a state environmental agency that is not supported by evidence or is it required to seek state court relief? While the question is purely statutory, the various justices' analyses depend heavily on their understandings of the constitutional issues of federalism implicated by Congress's statutory decisions. Their decision also has significant consequences for the effectiveness of the Clean Air Act, which is a tremendously successful act that is largely responsible for the enormous improvement in air quality during the time that it has been in force. The Supreme Court upheld the EPA's authority.

The Majority Opinion

Justice Ginsburg wrote the majority opinion. Justice Ginsburg began by describing the statutory regime at issue. The Clean Air Act includes a program called Prevention of Significant Deterioration ("PSD"). Under PSD, covered major air pollution emitting facilities cannot be built without emplying the Best Available Control Technology ("BACT"). The Clean Air Act defines BACT as "an emission limitation based on the maximum degree of [pollutant] reduction . . . which the permitting authority, on a case by-case basis, taking into account energy, environmental, and economic impacts and other costs, determines is achievable for [the] facility. . . ." The Act includes both a general statement of EPA authority and a specific statement. The EPA may respond to a state's failure to comply with the Act by issuing an order stopping construction, assessing an administrative penalty, or by seeking an injunction in court. The Act specifically authorizes the EPA to enforce the PSD program by taking measures necessary to stop construction of noncomplying facilities, whether by issuing an order or by seeking injunctive relief. This case deals with whether the EPA has the authority to stop construction of a facillity that the Alaskan environmental agency has deemed to use BACT, where the EPA considers that judgment unreasonable.

After her introduction, Justice Ginsburg described the Clean Air Act's history in more detail. Congress originally passed the Act in 1970. The Act required the EPA to define National Ambient Air Quality Standards, which set the levels of pollution that clean air could contain. Each state must submit a plan to achieve and maintain air that meets the quality standards, with the EPA required to step in if the state does not promulgate an adequate plan. The EPA approved Alaska's plan. One of the required measures is the PSD plan, which is intended to prevent areas with clean air from slipping. As of 2002, every area that once violated the NAAQS for nitrogen oxide, the pollutant at issue in this case, is now in compliance.

No major emitting facility may be modified or built without receiving a permit that may not be issued if the facility does not use the "best available control technology" to reduce emissions of the controlled pollutants. BACT must provide the most reduction in the amount of pollutants emitted, taking into account the specific circumstances of the facility, including economic practicality. Permits also can't be issued if they would increase the amount of the pollutant past the NAAQS, or would cause it to go up by too much. The Clean Air Act authorizes the EPA to issue an order prohibiting construction if a state is not enforcing the requirements of the EPA, and also requires the EPA to prevent the construction of any facility that violates the PSD requirements. Incidentally, in case you think that I'm making this more confusing than necessary with all the acronyms, the Court's opinion is much, much worse. Many sentences are little more than alphabet soup, which is largely a function of trying to write concisely about complicated regulatory structures.

The majority then turned to the facts of this case, which I'll condense a lot. A major zinc producer wanted to expand its mine in an impoverished area of Alaska 100 miles north of the Arctic Circle. The company, which is the economic mainstay of the region, wanted to build additional diesel power plants to run its operation. The Alaska Department of Environmental Conservation decided that BACT was a process that would reduce nitrogen oxide emissions by 90 %. The company proposed instead using a different technology that would reduce emissions by 30 %. The Alaska agency agreed in a draft permit, after applying the top-down method of identifying BACT, which is the straightforward, but not mandatory, process of considering the most effective technology, but if presented with evidence that that technology is infeasible, switching to the next best technology, and so forth until the best technology that can be implemented has been identified. The agency's staff had concluded that the superior technology was technically and economically feasible, relying on the average cost per ton of nitrogen oxide removed. But the agency overruled its staff, agreeing instead to a proposal by the company to retrofit some of its older generators with the second-best technology, for a total increase in polution that would be smaller, assuming that at least one of the generators was offline at all times.

The National Parks Service objected, arguing that the offset was not permissible, and that in any event the company's plan involved lifting use restrictions on the pre-existing generators that made them part of the expansion plan, and hence covered by the BACT requirement in their own right. The EPA agreed with the Parks Service on both points. The Alaska agency responded by abandoning the offset plan, but by concluding that the superior technology was not economically feasible, despite a lack of any evidence on its effects on the mine's ability to compete and relying on the costs of producing energy for typical rural power plants. The EPA objected again and suggested ways to analyze the question. The agency issued a final report and permit without demanding any financial data from the company, and largely basing its decision on the importance of the mine to the region's economic prosperity. The EPA issued a series of orders forbidding construction; while the Court lays out in some detail the sequence of orders, modified orders, and withdrawals of orders, suffice to say that the EPA ordered the company to not modify its facility, unless it uses the 90 % reduction technology as BACT. The company petitioned the Ninth Circuit Court of Appeals for relief from the EPA orders. The courts of appeals have original jurisdiction over certain orders from administrative agencies, including the orders issued by the EPA to the company. After dealing with some procedural matters, the Ninth Circuit upheld the EPA's orders. The Supreme Court granted certiorari to resolve the important question of federal law of the scope of the EPA's authority.

The majority opinion began its analysis by considering the procedural question of whether the EPA's order was final, allowing judicial review. After noting that the EPA did not contest the issue before the Supreme Court, Justice Ginsburg concluded that the order was, indeed, final and thus reached the merits. The central question is whether the EPA's supervisory authority extends to reviewing the decisions of state environmental agencies under the Clean Air Act. The statute expressly gives the EPA the authority to stop construction when a state is not complying with the Act's requirements. All parties agree that the EPA could stop construction if a permit did not include a BACT determination. The question is whether the EPA can issue an order when a state includes a BACT determination that does not comply with the Act's requirements. The Court agreed that that was a rational interpretation of the Act and thus upheld the EPA's interpretation. The EPA has a longstanding interpretation of the Act as allowing it to make determinations of whether a BACT finding was reasonable, and the Court noted that that interpretation was due deference, although not the "Chevron" deference that sometimes applies in administrative law cases and provides almost definitive weight to administrative rulemakings. The state agency argued that BACT determinations are subjective, weighing competing concerns, and are entrusted to the states to make. While the Court acknowledged that there may not be a single correct determination, it reasoned that some determinations could be unreasonable. The EPA did not claim the authority to determine BACT, but only to reject unreasonable determinations. The Court rejected the interpretation that Congress intended the EPA to ensure the formal inclusion of the term "BACT" but not to ensure that the term was used meaningfully. Justice Ginsburg emphasized the limited nature of the EPA's inquiry- not second-guessing the agency, but simply ensuring that the state agencies reasonably comply with the law.

The Court distinguished other requirements that the EPA expressly approve BACT determinations in certain cases, by noting that those were requirements, where this case is about whether the EPA is authorized to examine BACT determinations in other cases. Furthermore, when approval is required, the EPA is not required to defer to a reasonable state agency determination that it disagrees with. Finally, the agency argued that the only remedy was for the EPA to bring an action in state court challenging its determination. The majority noted that it would be very unusual to require a federal agency to seek review in state court. In the absence of clear textual language supporting that conclusion, the Court followed the EPA's more ordinary interpretation. The Court also rejected concerns about whether the record would be sufficiently developed for federal court review and whether the EPA would gain a tactical advantage by choosing the forum or manipulating the burden of proof. To foreclose that argument completely, the Court held that in either defending an order it issued or in bringing a civil action, the EPA bears the burden of persuasion that the state agency's decision was not reasonable. The Court decided that the Ninth Circuit's analysis was consistent with that burden of proof. The Court also rejected concerns about untimely stop-construction orders, noting that this case dealt with a preconstruction order and that the courts have previously rejected orders issued long after construction began.

The Court then analyzed the specific decision of the EPA. It concluded that the EPA acted properly in rejecting the agency's decision. Taking the record as a whole, the Court concluded that the EPA's decision was not "arbitrary or capricious," which is a standard test for administrative law decisions. The Court agreed that the Alaska agency had no evidence to support its conclusion and could not reasonably state that it was unable to analyze the financial consequences of a different conclusion while still using those consequences to adopt a less-stringent BACT. The Court carefully considered the evidence included in the permitting process, and agreed with the EPA's conclusion that the state agency's decision was unreasonable. The majority also noted that the agency could revisit the issue if it assembled more data to support a reasonable analysis.

The Dissent

Justice Kennedy wrote the dissent, in which the Chief Justice and Justices Scalia and Thomas joined. Justice Kennedy argued that the Court should have rejected the EPA's decision based on the language of the Clean Air Act, general principles of administrative law, and the background principles of federalism. He began by analyzing the statute, which orders the EPA to enforce the requirements of the Act. He argued that the state agency is vested with the power to "determine" the BACT for the permitting process. Relying on a dictionary definition, he concluded that "determine" means to authoritatively settle a question. The BACT definition inherently requires discretion and leaves it to the state agency to balance the various policy concerns the Act addresses. Under Justice Kennedy's analysis, the EPA can ensure that the state agency follows the BACT process, but has no authority to review the results of that process, regardless of how much it disagrees with them. Because the state agency followed a process and reached a conclusion about what was BACT, the EPA lacked the authority to block construction that the state agency issued a permit for.

Justice Kennedy argued that when Congress intended EPA oversight, it said so in clear language, such as the BACT approval requirements in other cases that do not apply here. He rejected any concerns about a "race to the bottom" by stating that the Act placed responsibility in the hands of the states. In his analysis, both the Congressional policy and the factual record demonstrate that the states overwhelmingly carry out their duties in good faith.

The dissent also argued that EPA oversight is not necessary, because the statute requires that a state plan include the option of judicial review. The EPA can participate in the state administrative proceeding and can seek review through the state courts if it disagrees with the results. In Justice Kennedy's analysis, the remedy of allowing a federal agency to set aside a state administrative decision is even more unusual than requiring the agency to sue in state court. The statute clearly envisions the EPA participating in the comment process in the state administrative proceeding. The dissent reasoned that it follows that the EPA could also participate in the judicial review of the state agency's decision. The state courts, not the EPA, have the responsibility for ensuring that state agency's respect due process requirements and do not make arbitrary and capricious decisions. Justice Kennedy also noted that the majority approves a scheme that separates the burden of persuasion, which is on the EPA, from the burden of pleading the claim, which is on the state agency, an unusual and burdensome arrangement.

The dissent also argued that it would be unseemly and contrary to the federal structure to allow the EPA to enjoin a permit that has already been approved by the state courts, as could happen under the majority's system. In his analysis, judicial decisions cannot be reopened by administrative agencies. Reopening a federal courts decision would violate Article III and a similar respect should be accorded to state courts. He would thus apply, at a minimum, a clear statement rule before "insulting" the state courts by subjecting their decisions to federal agency review. Aditionally, Justice Kennedy raised the concern of a late decision by the EPA, sweeping away prior practices and unsettling the expectations of both the states and private parties. Justice Kennedy also noted the potential "Zeno's Paradox" of requiring the state agency to layer on further procedure in order to satisfy the EPA that its conclusion is reasonable, arguing that this could lead to cycles of worthless procedural process. The dissent also worried that this outcome was bad policy, leading to a long and expensive permitting process while undercutting the federal balance at the discretion of a single agency official. Finally, Justice Kennedy complained that the majority provided Chevron like deference, even though it acknowledged that the EPA was only entitled to less deference, while failing to appreciate the deference that the states are owed as coequal sovereigns entitled to equal dignity and respect.

Analysis

The majority has the better of this argument. The argument is really about statutory interpretation, and the interpretation that complying with the requirements of the Clean Air Act means going through the motions but permits unreasonable decisions is inherently silly. Of course, laws sometimes are silly, but there's no reason to think that Congress intended that perverse result. Fears of a race to the bottom are real, and this case presents precisely the worst danger, where a state makes a judgment that enforcing the law as it reads threatens its economic welfare, without even making a showing that the economic worries are justified. The Clean Air Act is not primarily a procedural act requiring certain dance steps from state agencies. It is an important act of substantive regulation, carried out through cooperative federalism. Forbidding Congress from setting up systems like this one, or even requiring Congress to use magic words to do so, encourages laws that simply rely on federal power directly. That result is far more harmful to the legitimate concerns of federalism such as the principle of subsidiarity, which is the idea that government typically governs best by addressing problems at the lowest level that is competent to deal with them.

While this decision is fundamentally about a statute, the justices are all wrapped up in the broader struggle over our federal system. As I've said before, I reject Justice Kennedy's expansive, non-textually based notions of sovereign immunity and overblown deference to states. I think the core statement about federalism in the Constitution is contained in Article VI: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." The Thirteenth to Seventeenth Amendments were all also intended to shift the balance towards the federal government. Where Congress has decided to act in a field of law, within its enumerated powers, giving its acts full force even though they constrain the action of states is fully consistent with our federal system, properly understood. So even sliding into the underlying constitutional fight, the majority gets it right.