Washington (Platts)--5Oct2012/1154 am EDT/1554 GMT

The US Environmental Protection Agency on Friday asked a federal court to rehear its case for the Cross-State Air Pollution Rule after a three-judge panel this summer issued a split decision vacating the regulation, which is aimed at cutting interstate emissions from coal-fired power plants.

The EPA is seeking a rehearing en banc that would involve eight judges serving on the US Court of Appeals for the District of Columbia Circuit.

EPA, in its petition to the full court, said the three-judge panel's decision against CSAPR was "inconsistent with circuit precedent" in terms of the agency's authority under the Clean Air Act to issue federal implementation plans to states to carry out the rule.

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The panel's "significant contribution" analysis also "misapplies" certain requirements of the law in its rejection of how EPA determined the proportion of upwind states' contribution to downwind states' failure to meet national ambient air quality standards and the decision ignored "settled circuit precedent" in doing so, the agency said.

Overall, the panel's decision against the CSAPR "upends the appropriate relationship of the judicial, legislative, and executive branches of government by rewriting clear legislation, ignoring explicit statutory jurisdictional limits, and stepping into the realm of matters reserved by Congress and the courts to the technical expertise of administrative agencies," EPA said in its petition for rehearing.

The panel August 21 ruled 2-1 to vacate and remand the cross-state rule, which attracted dozens of challenges from industry and states. In its decision, EME Homer City v EPA, the court further directed that the 2005 Clean Air Interstate Rule remain in force until the agency came up with a suitable replacement.

It was anticipated that EPA would seek a rehearing given the lengthy and detailed dissent written by Judge Judith Rogers, who noted that the majority opinion ruled on issues not properly brought before the court and on the federal implementation plan issue since its 60-day period for filing suit had long expired.

The majority opinion concluded CSAPR violated the Clean Air Act in two key areas -- the "good neighbor" provisions to address upwind states' air pollution affecting downwind states, and EPA's installation of federal implementation plans before allowing states to develop their own plans for carrying out the new rule. Judge Brett Kavanaugh wrote the majority opinion with Judge Thomas Griffith siding.

The cross-state rule, which never took effect, would have covered coal and oil plants in 28 states in the East, South and Midwest. EPA used a region-wide cost-per-ton threshold for the three pollutants under the rule: sulfur dioxide, annual nitrogen oxide and ozone-season NOx. Both NOx thresholds were set at $500/ton. SO2 states were divided into two groups: Group 1 had a $2,300/ton threshold and Group 2 had a $500/ton threshold.

The cross-state rule was crafted to replace CAIR, an interstate emissions rule with more flexible trading that was developed during the George W. Bush administration. The DC Circuit remanded CAIR in 2008 after it was challenged by industry and states, but allowed that rule to stay in place until EPA worked on a successor.

--Cathy Cash, cathy_cash@platts.com
--Edited by Valarie Jackson, valarie_jackson@platts.com

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