The method of volume averaging is used to derive the two-equation model for Maxwell's equations in a two-phase system. The analysis provides a set of macroscopic transport equations for the electric and magnetic fields that are completely coupled in terms of the closure problem. When the closure problem is quasi-steady, a formal solution is obtained and estimates are developed for the differences between the averaged fields in the individual phases. These estimates lead to constraints for the condition of local electrodynamic equilibrium.