Good Neighbor Plan Update

The U.S. Environmental Protection Agency (U.S. EPA) published the “Good Neighbor Plan” (GNP), also known as the Ozone Transport Federal Implementation Plan (FIP), in the Federal Register on June 5, 2023. The purpose of the rule is to establish restrictions on nitrogen oxides (NOx) emissions from electric utility and industrial combustion sources in states where U.S. EPA has determined that emissions from that state impact a downwind state’s ability to achieve the 2015 ozone National Ambient Air Quality Standard (NAAQS). The rule applies to states where U.S. EPA disapproved their State Implementation Plan (SIP) submitted to fulfil the “good neighbor” clause in the Clean Air Act. In 2023, 12 states (Alabama, Arkansas, Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Nevada, Oklahoma, Texas, Utah, and West Virginia) were awarded stays of U.S. EPA’s SIP disapprovals, pending the outcome of litigation, so the GNP did not go into effect in those states. In January 2024, U.S. EPA proposed to add five additional states (Arizona, Iowa, Kansas, New Mexico, and Tennessee) to the GNP. In March 2024, U.S. EPA denied petitions for reconsideration and associated requests for an administrative stay of the rule.

Several parties have challenged the GNP in the D.C. Circuit Court. Because the D.C. Circuit Court did not agree to stay the rule, an emergency stay was requested from the Supreme Court of the United States (SCOTUS). The petitioners argued that the GNP was no longer valid because it relied upon the participation of all the states included in the 2023 final rule, and that the SIP disapprovals and the GNP itself have various flaws. On June 27, 2024, SCOTUS issued a stay of the GNP pending the outcome of various petitions.

Although many thought the SCOTUS decision stayed the 2023 GNP for everyone, U.S. EPA’s interpretation of the decision was that it stayed the rule only for facilities that were covered by the parties involved in the litigation (e.g., located in a state that litigated, a member of an association that litigated, or part of a company that litigated¹) . U.S. EPA issued a memo on August 5, 2024, that laid out their interpretation of the current situation and their near-term plans related to the GNP.

First, to avoid the “administrative complexity” of determining the remaining sources subject to the GNP, they will issue a rule to implement an administrative stay of the GNP for all sources. That rule was sent to the White House Office of Management and Budget (OMB) for review on August 30, 2024, and has not yet been published.

Second, U.S. EPA asked the D.C. Circuit Court for a remand of the GNP rulemaking record to respond to the SCOTUS criticism that they failed to explain how the GNP could function effectively with only a fraction of the covered states participating. That remand was granted on September 12, 2024, and did not vacate the rule. U.S. EPA is now attempting to justify how the GNP should move forward even if it is only in effect in some states, as they believe it is needed to meet the schedule for achieving the 2015 ozone NAAQS in downwind states.

Third, in light of their pending administrative stay of the GNP, U.S. EPA indicated that they will not enforce procedural deadlines prior to substantive compliance dates. It is assumed that U.S. EPA would extend procedural and compliance deadlines under a future rulemaking after the legal situation plays out.

Fourth, U.S. EPA anticipates taking rulemaking action to clarify ongoing regulatory requirements and good neighbor obligations for states (e.g., ensure continued compliance with previous Cross State Air Pollution Rule [CSAPR] requirements). Meanwhile, the final rule to add five additional states to the GNP is also at OMB for review.

U.S. EPA’s position is that the GNP is not invalid simply because it has been “temporarily suspended” in some states. Industry’s position is that the SCOTUS decision should have resulted in a remand with vacatur and that there are many flaws that U.S. EPA must address with the rule itself. States are asking U.S. EPA to implement NOx controls on non-traditional sources like combustion in/on buildings and the transportation sector. With the remand of the record, litigation in the D.C. Circuit itself is on hold while other cases continue in regional appeals courts over issues related to U.S. EPA’s SIP denials. There is also a request pending for SCOTUS to decide whether the SIP disapprovals should only be heard in the D.C. Circuit because they are national and not local matters.

Questions about the GNP? Contact Amy Marshall at amarshall@all4inc.com.

[1] See Appendix to https://www.epa.gov/system/files/documents/2024-08/gnp-stay-policy-memo-08-05-2024-signed.pdf