Posted on May 9, 2013
The world’s biggest carbon permit market was left in disarray after the European Parliament on April 16, 2013 rejected an emergency plan that would have forced companies to pay more for polluting.
Permits are a key part of the EU Bloc’s cap-and-trade plan to tackle global warming. The European Parliament rejected a proposal to reduce the short-term supply of carbon permits as a way of pushing up the price. At the launch of permits in 2005, the cost of a permit was nearly €30 for each ton of carbon emitted. Following the vote on April 16, 2013, the price plummeted to a little over €2.5 a ton.
Making matters worse, following the vote, the European Parliament’s Environment Committee coordinators failed to set a date for a vote on an amended version.
Not only is the collapse of the cornerstone of its climate policy an embarrassment to the EU, but its failure resonates in other areas of the world. Australia has fixed a carbon price of $23 a ton until moving to a floating market price following the EU model in 2015. But, that is being reconsidered. The EU situation, coupled with the U. S. Senate’s rejection on March 22, 2013 of a bill to impose a fee on carbon, means that the Obama Administration will have an uphill battle for any future proposals for a fee or tax on carbon emissions.
Posted on May 3, 2013
After being taken to task by states and its own Inspector General for lack of final guidance on Vapor Intrusion, EPA has just released draft guidance documents for hazardous substances and petroleum products for comment. The guidance documents are already generating discussion on the blogosphere, with comments due to EPA by May 24th. Below are some of the issues EPA will have to address for its guidance for hazardous substances, and those of us addressing vapor intrusion for our clients.
Will the guidance collapse under its own weight? EPA’s recommended framework relies upon collecting and evaluating multiple lines of evidence to support risk management decisions, detailed investigation of vapor intrusion including rigorous data quality objectives and recognition of seasonal/temporal variability in levels, consideration of options for building mitigation and subsurface remediation, decisions on how institutional controls can be crafted and monitored, and how the public will be involved. The practical question is how much evidence and process is enough for a rational decision, and how costly and time-consuming an evaluation effort is justified? Rarely are actions taken quickly in the CERCLA or RCRA world, but if there are risks, then they should be acted upon, and applying the guidance in other contexts will be challenging. There already appears to be a consensus that EPA’s approach will be costly, and give vapor intrusion a life of its own in remedial decision-making. EPA will have to address this issue, or find its guidance bypassed or ignored, given the need for timely decisions.
Should we all buy stock in fan manufacturers and makers of synthetic vapor barriers? EPA offers (only on page 125 of 143) the question of weighing relative costs of characterization vs. engineered exposure controls. If EPA guidance is followed, the cost of implementing the guidance will at times greatly exceed the cost of engineering controls. Clients want the deal “done” and are not likely to wait for a lengthy deliberative process.
What role will EPA acknowledge for OSHA standards? EPA proposes guidance for residential and non-residential buildings, but as a practical daily matter, there are separate standards and approaches for workplace and non-workplace scenarios. EPA doesn’t directly address that issue in the 2013 guidance, even though the Agency had helpful statements in its 2002 proposal. The issue gets even more complicated given the unsurprising obligation to consider potential future land uses. If the default scenario is residential use, will the workplace vs. non-workplace distinction disappear?
Déjà vu all over again? Yogi Berra may have been commenting on repeats of the Mickey Mantle/Roger Maris back-to-back home runs, but it is pretty clear we will be reopening sites that may have had vapor intrusion issues, and assessing old sites at which the issue was never raised, or addressed following different procedures. EPA settled the question in November 2012 for CERCLA five-year reviews by declaring vapor intrusion a mandatory topic, and plans to adopt final Hazard Ranking System amendments for vapor intrusion. The guidance document applies to RCRA sites as well, but EPA knows that the guidance will surely find application at many types of sites where volatile chemicals may have been present. Although the document is limited to CERCLA/RCRA guidance, its general purpose is to be helpful, and EPA should probably re-emphasize that not only are all sites different, the recommended framework may not even be practical when applied through other state programs. At risk of over-generalizing, practitioners have learned to recognize the advantages of not following CERCLA and RCRA approaches.
EPA will receive many comments, and there is some cleanup work to be done on the guidance documents, but look for the final documents to be completed in months, not years.
Thanks to Jeff Carnahan, LPG, EnviroForensics, for sharing with me his expertise on vapor intrusion. However, the thoughts expressed here are solely mine.
Posted on April 29, 2013
On September 14, 2011, I posted a blog piece that was entitled “A Tug of War: How Can the State Satisfy Its Burden of Proof?” This posting discussed the diametrically opposed decisions of an Ohio trial court and an appeals court on the important issue of the kind of evidence necessary to prove a violation of an air emission limitation in an operating permit. This closely watched case in Ohio eventually reached the Ohio Supreme Court, which finally announced its decision on December 6, 2012.
In State ex rel. Ohio Attorney General v. Shelly Holding Co. the Ohio Supreme Court sided with the appellate court and ruled that the civil penalty calculation started on the date of the violation, as demonstrated by the failure of a stack test, and continued until the permitted source demonstrated compliance with the emission limitations. Over the objections of Shelly and several industry amicus filings, the Ohio Supreme Court concluded that the state enforcement agency need not prove that the facility was operating out of compliance for each intervening day; such noncompliance can be presumed.
The issue arose, in part, because Shelly failed stack tests that were conducted under unrealistic, maximum-possible conditions when in fact day-to-day operations were likely to generate lower emissions. The state argued that Shelly should have discontinued operations until a subsequent stack test successfully demonstrated adherence to the permit’s emission limitations. Alternatively, the air pollution source could apply for and receive a new permit with different limits, or it could make intervening facility modifications that would enable it to pass the stack test. Shelly felt that it was improper to presume that the facility would exceed its emission limits unless the state makes a prima facie showing that the violation is likely to be ongoing or continuing.
After concluding that the burden is on the violator to prove by a preponderance of the evidence that there were intervening days on which no violation occurred or that the violation was not continuing in nature, the Ohio Supreme Court found no constitutional problem with extending the penalty to those subsequent days after the failed stack test. Thus, in Ohio, the beginning date for calculating a civil penalty for an air pollution control violation is the first date of demonstrated non-compliance (the failed stack test) and continues, even at lower operating rates, until the facility demonstrates a return to compliance.
While this decision arose in the context of an air permit, the State of Ohio is likely to cite it in other programs, such as NPDES permits.
Posted on April 12, 2013
The August 21, 2012 decision of the D.C. Circuit Court in EME Homer City Generation LP v. EPA, Case No. 11-1302, not only vacated the Cross State Air Pollution Rule (CSAPR), it also provided a detailed framework (including the math) for how future plans should be developed by States to implement national ambient air quality standards (NAAQS) through the “good neighbor” provisions of the Clean Air Act. This case has already been the subject of various posts to this Blog. This article will provide an update of activities that have occurred in recent weeks as state and federal agencies, NGOs and the regulated community respond to the decision and its implications for implementing the various NAAQS (past, present and future).
Let me begin by noting that on March 29, 2013, EPA and various environmental organizations filed for a writ of certiorari with the U.S. Supreme Court. Even as EPA was filing for such a writ, EPA has scheduled two meetings this month with states to obtain input on technical and policy decisions. In these meetings, EPA is offering its interpretation of the court decision and its views about various options that exist for conducting the required analyses through the shared responsibility of EPA and the states.
Finally, the Midwest Ozone Group (MOG), a coalition of electric power generation interests, has developed a position statement on how the court opinion might be implemented including the identification of the following seven rules taken from the court opinion.
1. Basic rule - An upwind State’s obligation is limited to its own significant contribution and it cannot be directed to reduce emissions to account for any other factors impacting a downwind State’s nonattainment.
2. Proportionality of Downwind States - A downwind State is responsible for above-NAAQS amounts that are not attributable to significant contributions from upwind States.
3. Proportionality of Upwind States - The ratio of an individual upwind State contribution to the total contribution of all upwind States should be used as scalar to determine how the total upwind contribution is allocated among upwind States.
4. The Role of Costs - EPA may reduce some or all of the obligations of upwind States to avoid the imposition of unreasonable costs.
5. Insignificance - Once contributions are determined, a State is not required to address more than that contribution amount minus the significance threshold.
6. NAAQS Attainment - Once an area meets the NAAQS, no additional upwind emission reductions are required.
7. Over-Control - When multiple downwind areas are concerned, reductions associated with one downwind area should be reviewed in other areas to ensure unnecessary over control is not achieved
The full position statement can be found here.
The MOG position statement is accompanied by a presentation prepared by Alpine Geophysics which applies an example set of modeling data to these rules to illustrate how the rules might be applied as well as the significant technical and policy questions that remain. The Alpine Geophysics presentation can be found here.
Posted on February 13, 2013
The current Clean Air Act retains the premise in the Clean Air Act of 1963 that "the prevention and control of air pollution at its source is the primary responsibility of States and local governments." Among the many balancing acts embedded in the text of the Clean Air Act, the balance between federal and State prerogatives is one of the more challenging.
Over time, the accumulation of requirements, and the multiplication of more requirements at a faster and faster pace, puts strains on the Clean Air Act's ideal of "cooperative federalism." In the present era of divided government and increasing political polarization, tensions between EPA and the States, and between certain States, are on the rise. For example, EPA has been sued by some States to force more aggressive regulation of greenhouse gas emissions, and by other States to force less aggressive regulation of criteria pollutants that cross State boundaries. The "turbulence inherent in [the Clean Air Act's] divided relationship" was noted in William Session's December 14, 2012 post.
While sharp contrasts on energy policy get most of the publicity, it is the small things – the finer details of regulation of sources classified as "minor" or "insignificant" under the statute and regulations – that account for a disproportionate share of the friction with regard to federal versus State prerogatives. Tensions over State discretion – particularly with regard to environmentally inconsequential mandates, land use, and small businesses – are not new to the Clean Air Act. Soon after her transition from head of the Florida Department of Environmental Regulation to Administrator of EPA twenty years ago, Carol Browner said:
When I worked at the state level, I was constantly faced with rigid rules that made doing something 100 times more difficult and expensive than it needed to be. It makes no sense to have a program that raises costs while doing nothing to reduce environmental threats.
A new Association of Air Pollution Control Agencies, launched in January 2013, holds promise for enhancing the State-federal partnership basic to the design of the Clean Air Act. The primary goals of the new association are to help the States assist each other in carrying out their responsibilities under the Clean Air Act, and to better understand EPA requirements as they evolve.
The AAPCA selected Battelle Memorial Institute, the world's largest non-profit research and development organization, to provide technical assistance and organization and staffing support. The initial seventeen participants in the AAPCA are: Alabama, Florida, Indiana, Kentucky, Louisiana, Mississippi, Nebraska, New Mexico, Nevada, North Dakota, Ohio, Pennsylvania, Tennessee, Texas, Virginia, West Virginia, and Wyoming. If the new AAPCA improves the technical proficiency of State air pollution control agencies, and increases the level of cooperation and collaboration between EPA and State air agencies, it will well serve the design of Congress and the interests of the nation.
Posted on February 1, 2013
Rose Acre Farms, Inc. et al. vs. NC Department of Environment and Natural Resources, et al., decided January 4, 2013
On January 4, 2013, a North Carolina court held that an egg production facility could be required to obtain a National Pollutant Discharge Elimination System (NPDES) permit solely on the basis that feathers and dust carrying ammonia nitrogen and fecal coliform, expelled from henhouses by ventilation fans, can be “pollutants” from a point source for which an NPDES permit is required if those pollutants reach waters of the State. This is a case of first impression in which a court held that the impact of air emissions on water bodies could be regulated under the Clean Water Act (CWA).
North Carolina egg producer Rose Acre Farms (RAF) appealed a decision by the NC Department of Water Quality (DWQ) that an NPDES Permit renewal required stringent new BMPs on the grounds that: 1) the DWQ had no authority to require an NPDES permit for a “no discharge” facility; and 2) even if DWQ had authority to require an NPDES permit, the DWQ had no authority to impose new BMPs because: a) the feathers, dust and litter expelled into the air from ventilation fans are not “pollutants” as defined in 33 U.S.C. §1362(6); and b) even if ammonia nitrogen, total inorganic nitrogen, total phosphorus and fecal coliform associated with the feathers, dust and litter are “pollutants” that enter waters of the State, that activity would be exempt under the agricultural storm water discharge exemption in 33 U.S.C. §1362(14).
The Court held that ammonia nitrogen and fecal coliform carried by feathers and dust expelled by ventilation fans in the henhouses are “biological materials”, a term included in the definition of a “pollutant” in the CWA. In addition, the Court relied on EPA guidance letters to determine that feathers, dust and litter expelled from a henhouse by ventilation fans are discharges from a point source that could reach waters of the State. Finally, the Court held that the agricultural storm water discharge exemption in 33 U.S.C. §1362(14) applies only to land application in accordance with site specific nutrient management practices and does not apply to pollutants from feathers, manure, litter or dust that are expelled from the RAF henhouses but are not entrained in irrigation water.
If courts in other jurisdictions follow suit, other sources of air emissions with the potential to reach a receiving water, such as power plants and industrial facilities, may be required to address the impacts of their emissions on those receiving waters in future NPDES permits, independent of required air permits.
Posted on January 30, 2013
Four California GHG offset protocols survived an important court test last week in Citizens Climate Lobby et al vs. California Air Resources Board (Superior Court of California, County of San Francisco).
In his January 25, 2013, Statement of Decision, Judge Goldsmith described GHG offsets:
“An offset credit represents a reduction of GHG emissions from an approved uncapped source …Each offset credit represents an emission reduction of one CO2e… An uncapped source is an entity that is not regulated by the cap-and-trade program. Not every reduction is eligible for offset credit. Credits are only awarded to GHG emission reductions carried out pursuant to one of four Protocols promulgated by Respondent [CARB].”
So far, CARB has only approved GHG offset projects in four categories:
1. Forest Projects
2. Urban Forest Projects
3. Livestock Projects
4. Ozone Depleting Substance Projects
CARB also limited the locations of qualifying GHG offset projects and capped the amount of GHG offset credits entities could use to comply with the state’s GHG cap-and-trade program.
Last year, two environmental groups sued CARB in San Francisco Superior Court to block even this limited offset program, claiming that CARB’s approach to satisfying the “additionality” test for GHG offsets conflicted with the California Global Warming Solution Act of 2006 (aka “AB32”). The court described the “additionality” test as follows:
“Additionality is the linchpin of an offset program. A reduction is additional if it would not have occurred without the financial incentive provided by the offset credit. Additionality is essential to the environmental integrity of an offset program because if reductions are not additional, then the cap-and-trade program will not reduce GHG emissions beyond what would have occurred anyway. . . .”
For its four GHG offset Protocols, CARB adopted a “standard-based approach,” relying on information about the additionality of categories of prospects. The petitioners preferred that CARB evaluate each offset project’s additionality individually, project-by-project, based on site-specific data and parameters.
CARB vigorously defended its approach to additionality and its GHG offset Protocols in this case. Several California utilities and coalitions intervened on CARB’s side. Very significantly, the Environmental Defense Fund and the Nature Conservancy also sided with CARB in this case.
In his January 25 Statement of Decision Judge Goldsmith upheld CARB’s offset Protocols on all issues. In particular, he found that:
1. “… as to the Livestock Protocol, the Ozone Depleting Substances Protocol, the Urban Forests Protocol, and the U.S. Forests Protocol, that [CARB] has adequately considered all relevant factors and has demonstrated a rational connection between these factors, the policy implemented, and the purpose of the enabling statutes …the Protocols are not arbitrary and capricious.”
2. “… Health and Safety Code section 38562, subdivision (d)(2) does not foreclose [CARB] from using standardized mechanisms [for additionality] and it is within the [CARB’s] legislatively delegated lawmaking authority to choose standardized mechanisms …”
3. “… [CARB’s] use of standardized mechanisms is supported by evidence contained in the administrative record.”
4. “… Petitioners have failed to demonstrate that the Legislature foreclosed the use of standardized additionality mechanisms or demonstrate that [CARB] acted arbitrarily or capriciously in promulgating additionality standards."
Prompted by CARB and the Intervenors, the court recognized the important roles that GHG offsets play in reducing the cost of GHG emission reductions and promoting innovation. The court’s 34 page opinion thoroughly analyzes complex legal issues, including the “additionality” issue. Along the way, the court also accepted CARB’s rejection of the Kyoto Protocols’ Clean Development Mechanism (“CDM”), finding as follows:
“The Court finds the factors which have rendered the CDM problematic in terms of administrative complexity, delay, and cost, to be highly persuasive in concluding that [CARB’s] rejection of the CDM project-by-project approach was justified programmatically and consistent with its legislative grant of discretion.” (Statement, p. 11)
This finding, and much of this court decision, may be of interest to climate practitioners here in the U.S. and overseas.
Posted on December 14, 2012
Although the still-divided Congress is unlikely to pass significant new environmental legislation over the next four years, the second-term Obama administration has an opportunity to pursue its environmental agenda through the EPA with diminished fear of impacts on the next election.
The current term saw a period of strong leadership at EPA, but there is a feeling that the agency has not allowed the other regulatory shoe to drop. EPA stalled on several important regulations, as if anticipating the Romney complaint that excessive regulation was a cause of the recession. Having escaped the prospect of a president hostile to its mission, EPA is now prepared to roll out a queue of pending air pollution regulations in the coming weeks. The regulations will include final national ambient air quality standards, revised power plant emission standards, and expanded boiler emission rules.
Since the election, articles and opinion pieces have abounded that speculate on the Obama administration’s second-term approach to climate change. On November 12, 2012, the New York Times published an op-ed article suggesting that the administration could tackle both climate change and the recession by imposing a carbon tax. A similar suggestion was made in the New Yorker on December 12, 2012. This is undoubtedly a worthwhile concept, but it is probably a regulation too far.
The second Obama term could be an opportune time to revisit old chestnuts and resolve issues that have bedeviled both the regulated community and environmental advocates. For example, the EPA and the Army Corps of Engineers have been muddling through a proposed guidance document that aims to clarify the Supreme Court’s murky definition of “waters of the United States” subject to EPA jurisdiction under the Clean Water Act. But why should EPA and the Corps issue mere guidance rather than promptly promulgate binding regulations, which are subject to judicial review? As a result of adopting binding standards the agencies could gain, in addition to regulatory certainty, a strong basis to resist efforts to make the federal government the national waterfront rezoning authority.
Another stalled national environmental initiative that would benefit from robust leadership in the Obama II administration is EPA’s effort to update its regulations for industrial cooling water intake structures. EPA proposed regulations, designed to protect aquatic organisms, have remained in draft form since March 2011; additional data has been collected and is being analyzed in the interim. Pending final federal regulations, states have been left to adopt varying approaches to this important issue.
Finally, this period of relative freedom from election concerns might allow the administration to address a significant example of environmental unfairness, CERCLA’s scheme of sticking certain liable parties with the “orphan share” of environmental remediation costs that arise from contamination, generated over the last two centuries of industrial development, for which no financially solvent responsible party can be identified. The orphan share is often laid at the doorstep of a financially solvent polluter that caused some, but not all, of the pollution at a Superfund site. Fairness dictates that the public fund the orphan share, as opposed to the party that is prepared to step forward and clean up its own portion of the mess. Perhaps such a policy might have a sobering effect on the members of the public who clamor for a return to pristine conditions, so long as they don’t have to pay for it.
Posted on December 14, 2012
All of us know that enforcement of the Clean Air Act’s (CAA) proscriptions against pollutant air emissions is premised on the concept of Acooperative federalism. We know that the CAA’s policy development and enforcement regime is based upon a division of state and federal regulatory responsibility. Stated simply, the concept is that the federal government, through the EPA, sets standards for permissible emissions of substances affecting ambient air quality while individual states retain responsibility for implementing programs to enforce these standards.
The States’ implementation mechanisms are aptly titled State Implementation Plans or SIPs. SIPs are employed to demonstrate that federal and state air pollution regulations will allow counties in a particular state to meet federally mandated ambient air quality standards (NAAQS). The SIP process approval results in pollution control requirements which govern and often times unduly complicate compliance efforts of state regulators. They can also increase compliance costs borne by the regulated community. One aspect of that conundrum is the fact that when States fail to meet deadlines for attaining these standards, the regulators themselves can face sanctions from EPA and even suits by the public. Litigation and its costs complicate matters further.
As some regulators in Pennsylvania recently observed . . . [T]he current aggressive schedules for NAAQS reviews, State Implementation Plan (SIP) development and promulgation of Maximum Achievable Control Technology (MACT) standards are significant problems. Taken together, these inefficiencies are a resource drain on EPA, the states, the regulated community and the economy as a whole. The messy situation described in this quote is the subject of this blog.
The turbulence inherent in this divided relationship has escalated in recent times fraying the long-standing statutory regulatory compact between the federal government and the States.
An instructive example of the conflict of enforcement concept and reality engendered by the CAA’s cooperative federalism scheme was clearly highlighted in the recent case WildEarth Guardians v. Jackson. This case dealt with EPA’s delays in approving SIPs or pollution control plans affecting discharges of fine particulate matter or PM2.5. The plaintiffs in Wild Earth alleged that EPA failed to take final action under section 110(k)(2) and (3) of the CAA to approve SIP submittals in twenty (20) states meeting applicable requirements respecting the 2006 PM2.5NAAQS.
In 2006, the U.S. Court of Appeals for the District of Columbia had found that EPA’s PM2.5 NAAQS had to change because it failed to adequately protect human health. A change in this NAAQS required a change in States SIPs. SIPs were proposed but languished at EPA. Five years later, the plaintiffs in Wild Earth alleged that . . . [W]ithout infrastructure plans, citizens are not afforded full protection against the harmful effects of PM2.5 while seeking declaratory and injunctive relief.
Shortly after the suit was filed the plaintiffs and the EPA entered into a settlement. A consent decree called for the EPA to approve or disapprove SIP submittals for the 2006 PM2.5 standard as early as September 12, 2012 for some of the states involved and as late as February 13, 2013 for others. The Consent Decree was entered and the case dismissed in May of 2012. Case closed and compliance efforts back on track?
Unfortunately, many of the underlying issues raised in Wild Earth, specifically, the lack of cooperation between the States and the federal government on implementation of the PM2.5 NAAQS have raged on unabated. For example, eleven (11) states sued the EPA over the agency’s alleged failure to promulgate final NAAQS for PM2.5. In New York v. Jackson the plaintiffs are seeking a declaration that EPA is in violation of Section 109(d)(1) requesting that EPA review, propose and promulgate a new PM2.5 NAAQS. On June 14, 2012, EPA announced a proposal to strengthen the NAAQS PM2.5. Almost simultaneously, the D.C. Circuit issued an order refusing to set a schedule for EPA to issue a new PM2.5 NAAQS. Am.Farm Bureau v. EPA.
These developments will inevitably spawn additional delays in PM2.5 related SIP modifications and EPA approvals. That is the point of these comments on this small corner of CAA regulation and enforcement. Is the cooperative federalism underpinning of the CAA still workable? Can court’s recognize and respect the concept when regulatory policy, administrative lethargy and real human health concerns collide? These comments and observations have focused on the PM2.5 issue mainly because it has come up in some recent work in our office.
Without doubt other and more far-reaching examples of regulatory and judicial “turbulence abound, i.e., the raging fight over the EPA’s Cross State Air Pollution Rule (CSAPR). In a dissenting opinion on the CSAPR case, on the concept of cooperative federalism, Judge Rogers had this to say. . . [T] he result is an unsettling of the consistent precedent of this court strictly enforcing jurisdictional limits, a redesign of Congress’s vision of cooperative federalism between the states and the federal government in implementing the Clean Air Act based on the court’s own notions of absurdity and logic that are unsupported by a factual record, and a trampling on this court’s precedent on which the Environmental Protection Agency was entitled to rely . . . . Whew!
So what are CAA practitioners to make of the mess Judge Rogers eloquently describes? This blog entry offers no practical guidance for those laboring for an aggrieved client nor laments a bad result impairing enforcement prerogatives of the regulators. Instead, I only point out that it may be time for a concerted effort to step back and reconsider whether the CAA’s cooperative federalism’s bifurcation of rule promulgation and enforcement continues to make scientific, policy or common sense in today’s world.
Posted on December 12, 2012
The regulation of vapor intrusion is becoming more prevalent on both the federal and state level. In addition, although not strictly required as part of a Phase I ESA under ASTM 05 and AAI, many consultants take the position that this issue must be addressed at this first level of environmental due diligence.
One of the troubling issues at the state level is whether background concentrations should be taken into account in the establishment of indoor air quality standards. Many household products and building materials contain or release VOCs. However, not all states take background concentrations into account in the regulation of vapor intrusion.
EPA is expected to release its own vapor intrusion guidelines shortly. EPA appears to acknowledge the importance of background data in the process of formulating its guidelines. It remains to be seen whether such guidelines will impose stricter standards than those on the state level.
Posted on November 30, 2012
The following post is essentially a sequel to this morning’s post, which was originally intended to be posted in September.
Last week, EPA announced that it had reached yet one more – its 24th – settlement under as a result of its NSR enforcement initiative. This time, it was Louisiana Generating’s Big Cajun II plant, in New Roads, Louisiana. By now, the contours are familiar, including a penalty of $14 million and injunctive relief estimated to cost approximately $250 million. Changes will include:
- Installation of SNCR (not SCR) on all units to control NOx.
- Installation of dry sorbent injection as a short term SO2 reduction measure
- Retirement, refueling, repowering, or retrofitting of Unit 1 in the long-term
- Refueling of Unit 2 to natural gas
- Limitations on sulfur content
- Plant-wide limits on SO2 emissions
- Installation of electrostatic precipitators to control PM on units 1 and 3
It sure sounds great. EPA estimates reductions of 20,000 tpy in SO2 emissions and 3,000 tpy in NOx emissions. Still, I question the value of this settlement in the big picture. I sense some double-counting here. EPA is predicting significant reductions in emissions as a result of its industry-wide rules, including the transport rule (last known as CSAPR, but presumably awaiting a new acronym for its replacement) and the air toxics rule.
Add to that the cost pressures on coal resulting from the lower natural gas prices caused by the fracking boom, and it is quite possible that Louisiana Generating would have ended up in the same place even absent a settlement. Throw in concerns about whether individual units were in fact violating the rather ambiguous NSR provisions or were engaging in what they truly considered routine maintenance, and the obvious economic issues raised by trying to implement command and control regulations on a plant-by-plant basis pursuant to litigation, rather than through nationwide market-based caps, and I say again that, to me, the NSR program is still spinach, and I say, to heck with it.
Posted on November 30, 2012
This past September, in United States v. Louisiana Generating, EPA won a ruling regarding what type of projects fall within the routine maintenance, repair or replacement exception from the rule that facility modifications are subject to PSD/NSR requirements. The decision is thorough in that it carefully reviews the so-called “WEPCO Factors” – the nature, extent, purpose, frequency, and cost of the work, and applied them to the work at issue in this case, i.e., reheater replacements.
Notwithstanding the thoroughness of the court’s analysis, I don’t find it completely convincing. As the court acknowledged, while all of the WEPCO factors are relevant, the crux of the issue is whether, in order to qualify for the exception, maintenance work must be routine for the units at issue, or only routine in the industry. In other words, should the question be whether all similar generating units at some point in their life undergo reheater replacement, or whether each individual unit in question must undergo reheater replacement multiple times in order for such work to be considered routine.
Personally, I think that the former is probably the better interpretation. Of course, as the decision discussed, since the regulations are not crystal-clear, EPA has significant discretion in interpreting its own regulations, and EPA takes the position that maintenance work must be routine with respect to individual units to qualify for the exception. End of story, no? No. The problem is that EPA does not have discretion to change its interpretation whenever it feels like doing so. In 1992, EPA stated, in a preamble to NSR regulation revisions, that
EPA is today clarifying that the determination of whether the repair or replacement of a particular item of equipment is “routine” under the NSR regulations, while made on a case-by-case basis, must be based on the evaluation of whether that type of equipment has been repaired or replaced by sources within the relevant industrial category.
The court in Louisiana Generating acknowledged that this language favored Louisiana Generating’s position that one must look to whether a maintenance activity is routine in the industry, rather than routine with respect to the individual units in question. However, the court then did not discuss this issue in evaluating the WEPCO factors, and separately found that no reasonable jury could conclude that the project was routine.
I don’t think that this issue is going to be finally resolved at least until a number of appellate courts have had an opportunity to review it and I could imagine it ultimately making its way to the Supreme Court.
As I have previously noted, while I tend to side with the defendants in these cases, I think that the larger point is that these types of arguments are borderline silly. More than anything else, they illustrate that the entire NSR/PSD program is fundamentally flawed. Instead of such outdated technology-based regulation, power plant emissions should be regulated pursuant to trading programs that allow needed emissions reductions to be attained in the most cost-effective way possible. I still dream of a grand bargain which would lower emissions limits, utilize trading to attain them, and completely eliminate the NSR/PSD program. Where is the radical center in Congress when one needs it?
Posted on November 29, 2012
Author's Note: I wrote this piece at the request of my firm earlier this year. It appeared in the "Diversity Blog" on our firm's website around "earth Day" in April, 2012. After attending the ACOEL Annual Meeting in Washington, D.C. this past week, I know that many other College Fellows share my sentiments about the field we have been fortunate enough to practice law in during our careers.
I have been practicing environmental law at Quarles & Brady (in Milwaukee WI), in one form or another, since I joined the firm as a brand new attorney in 1977. Charlie Kamps was kind enough to be my mentor in the early days, and he gave me many opportunities to work with him on Clean Air Act issues. Over the years, I have been heavily involved in virtually all aspects of environmental law, but my work under the federal Clean Air Act became a real specialty. Among colleagues around the country who specialize in this area of the law, we often (somewhat sarcastically) refer to ourselves as "Air-Heads."
Working in environmental law has been very exciting. When I started out, Charlie and I were really the only two attorneys in the firm who devoted most of our practice time to environmental law. [There were many others in the firm who handled environmental litigation cases, such as the important Illinois v. Milwaukee Clean Water Act case which Quarles & Brady won in the U.S. Supreme Court in 1981. But those lawyers did not normally do environmental work on a day-to-day basis for a large number of firm clients.] In the early 1980's, the environmental practice area exploded with the passage of the federal Superfund Law and its eventual impact on virtually all corporate transactions, lending work and real estate ventures. Quarles & Brady's Environmental Practice Group grew to nearly thirty lawyers (in seven offices and four states) by the late 1990's.
For most of those years (from 1986 to 2007), I rode the wild, environmental-law-growth "roller coaster" as Chair of the firm's Environmental Law Group. At the same time, I was involved in many high stakes cases and transactions. Most of my work centered on air permitting and in defending Clean Air Act enforcement cases. I grew accustomed to living my professional life going at 100 mph on a regular basis. The issues were complex and novel, and I derived immense satisfaction from helping to steer difficult matters to a successful resolution.
The real stakes in environmental law could not be more important -- the protection of human health and welfare and the safeguarding of our natural resources for future generations. Many people think that it should be relatively easy to do all that -- just "follow the law." However, our environmental laws do not give precise directions on how this is to be accomplished. The laws set overall goals and prescribe processes by which those goals are to be achieved. But most often, the real requirements of our environmental statutes must be worked out on a case-by-case basis. This requires a complicated balancing of scientific, economic, engineering, legal and political factors. It is this balancing process which I have found exhilarating to be involved in throughout my career.
I am grateful for the opportunity to be involved in this important work. It has given meaning and a sense of real accomplishment to my professional life.
Posted on November 16, 2012
Massachusetts’ ambitious plan to address greenhouse gas emissions on a state-wide basis attracted private money last month to measure its success and costs. Boston-based Barr Foundation’s grant of $230,000 will establish a “performance management tool” to track and measure the success of initiatives undertaken under Massachusetts’ Global Warming Solutions Act (“GWSA”). Supporters expect it to “serve as a national and regional model that other states can adopt to analyze” their own greenhouse gas reduction efforts. The GWSA, enacted in 2008, requires extremely ambitious reductions in greenhouse gas emissions within Massachusetts in the coming decades: an 80% emissions reduction goal by 2050 and 10-25% by 2020 from a 1990 emissions baseline The act directed the Secretary of Energy and Environmental Affairs to set the 2020 reductions and adopt a plan for achieving them.
The planning and regulatory documents issued since enactment recognize that the success of a single state’s effort to address the causes of climate change cannot be measured by the impact of its own reductions in greenhouse gas emissions in effecting changes in the global climate. The effect will simply be too small to measure. Instead, the state’s plan touts the beneficial effects of spurring economic development through the encouragement of green energy and other high tech businesses, the reduction of localized pollution, and the stabilization of energy prices. The success of the program in “bending the curve” of rising greenhouse gas emissions, however, rests entirely on its ability to serve as an example to other political entities – states mainly but, ultimately, geopolitical entities through broader global participation.
In December 2010, the Secretary of Energy and Environmental Affairs released the Massachusetts Clean Energy and Climate Plan for 2020 setting the reduction target at 25% below 1990 baseline. The Executive Summary summarizes reductions anticipated from existing and expected programs (table at page 6). Policies relating to Buildings (9.8% or more than one third of the 25% reduction), Electricity (7.7%) and Transportation (7.6%) account for the vast majority of the reductions. Within each sector, reductions are characterized as either “Existing Policy” (e.g., Federal and California vehicle efficiency and GHC standards – 2.6% reduction), “Expanded Policy” (e.g., advanced building energy codes – 1.6% reduction), or “New Policy” (e.g., Green DOT, the Massachusetts’ transportation agencies fulfillment of their sustainability commitment – 1.2% reduction). The Barr Foundation’s grant will help create the “dashboard” that presumably will take into account the likelihood of adoption of new programs or the expansion of existing ones and the ultimate efficacy of any of the programs, as it tracks the progress of the Massachusetts program.
Efforts to track the success of the Massachusetts program will build on the work done by MassINC, a Boston-based “independent think tank” that earlier this year released a book-length report titled “Rising to the Challenge/Assessing the Massachusetts Response to Climate Change.” This very thoughtful work looks specifically at Massachusetts’ progress to date and likely future success in emission reductions in various sectors; it provides useful capsule descriptions of other state’s programs and of regional and foreign initiatives. And it discusses the crucial issue of the economic costs and benefits of the program, as that will be a prime determinant of the program’s ability to be a role model for other jurisdictions.
The MassINC report recognizes that data on the subject of economic costs and benefits are subject to extremely complex and differing interpretations. The report notes there is general agreement in Massachusetts that “it is desirable to reduce greenhouse gases and develop clean energy [,] it is more difficult to reach consensus when the subject turns to the cost of addressing climate change ….” Id. at 75. Nonetheless, a convincing explanation of the specific costs and benefits of various courses of action is a necessary component of any successful program because the ultimate effectiveness of a state’s program rests on its attractiveness as a model for other jurisdictions – including those with different views of the appropriate tradeoffs between environmental protection and economic development.
Posted on November 16, 2012
Sunday’s New York Times had an op-ed piece by Cass Sunstein, recently departed head of the Office of Information and Regulatory Affairs, advocating for sensible measures to address global climate change. Sunstein’s argument is that
"Economists of diverse viewpoints concur that if the international community entered into a sensible agreement to reduce greenhouse gas emissions, the economic benefits would greatly outweigh the costs."
I don’t disagree with anything he says; I only wonder whether anyone is paying attention. On one hand, while Sunstein notes that President Obama supports cost-benefit analysis, Democrats in Congress – and many environmentalists – have long been skeptical, treating environmental questions as moral issues that should not be subject to something as crass as cost-benefit analysis.
Republicans used to support cost-benefit analysis. Indeed, Sunstein opens the op-ed with a discussion of the Reagan administration’s support of the Montreal Protocol on ozone-depleting chemicals. However, for the past ten years or so, Republicans have abandoned cost-benefit analysis for something much simpler – cost analysis. Today, if regulations cost too much – whatever that means – then they are “job-killers” and thus bad, even if the benefits exceed costs, sometimes by several multiples.
Maybe four years at MIT brainwashed me into blind acceptance of quantitative analysis, but this stuff doesn’t seem that hard to me. It is profoundly depressing that a significant number of environmentalists look only to the benefits of environmental regulation, while a similar percentage of conservatives now only look at its costs.
Somehow, we’ve got to get the twain to meet.
Posted on November 12, 2012
Those environmental lawyers who had a two- or three-day “vacation” due to Hurricane Sandy now return to the office to face a workload that will in many cases be trebled. First, there’s the work you didn’t get to when your office was closed and now has to be finished post-haste. Second, there’s the work that you would have been doing the next few days had there been no hurricane. And third, there’s the urgent work that you now have to help your clients assess new issues that are present precisely because of the storm.
Wind and water mobilize even structures, equipment and materials that were always meant to be stationary. Storage tanks, waste ponds, drums, hazardous materials and other previously contained environmental hazards have now been released, flooded, or overtopped, often releasing reportable quantities of material. Clients will need to quickly assess the nature and magnitude of releases at and from their facilities to determine their environmental obligations.
The prudent environmental lawyer will immediately begin working with clients to determine whether there are spills and releases that must be reported to federal, state and local environmental agencies. Potential liabilities may depend upon whether under the applicable laws “Act of God” is or is not a defense. Surprisingly, a major hurricane is not, in the eyes (pun intended) of some agencies interpreting some statutes, an Act of God. Clients also need to verify that their pollution control systems – wastewater treatment, air pollution, etc. – are functioning correctly post-storm, even if there were no reportable releases during the storm.
Clients are undoubtedly attuned to the need to submit insurance claims for business interruption and damage to their own property, but now is a good time to begin surveying what kinds of claims might be coming from neighbors and others damaged by releases from the client’s facility. This is particularly so given that we are nearing year-end and many policies no longer have “tails” for notices of claims received after the policy year has run.
Posted on October 17, 2012
By Deborah Jennings and Andrew Schatz
If California regulators approve a proposed AES combined-cycle natural gas-fired peaking power plant, it could blur the standard for Best Available Control Technology (BACT) for greenhouse gas (GHG) emissions from gas-fired electric generating facilities. EPA expressly excluded simple cycle peaking units from its recently proposed New Source Performance Standards (NSPS) for GHGs because combined cycle units, which are GHG lower-emitting, were presumed not to be useable as peakers. By virtue of AES’s proposed combined-cycle peaking plant, EPA may be moved to change its view. Low-emitting combined cycle may set the BACT standard for future, gas-fired peaking units as a result.
AES is proposing to use a combined-cycle system in a peaking capacity at its Huntington Beach Energy Project (HBEP) in Huntington Beach, California. See AES Southland Development, LLC, BACT Determination for the Huntington Beach Energy Project (June 2012). The HBEP will consist of two combined cycle power blocks with a net capacity of 939 MW to be used for peaking and supplying local capacity. AES’s proposal to use combined-cycle for a peaking unit is notable because typically peakers have been simple cycle systems. The combined-cycle system is more efficient than simple cycle systems and has lower GHG emission rates. Whereas simple cycle systems combust natural gas to generate electricity, combined cycle-systems also capture lost heat from the combustion process to generate additional electricity through a steam turbine (i.e. a heat recovery steam generator). Accordingly, BACT for GHG emissions at the HBEP project results in an GHG emissions rate of 1,082 pounds of CO2 per megawatt-hour (lbs CO2/MWh). In contrast, a recent BACT determination for the simple cycle “peaking” power plant at the Pio Pico Energy Center in San Diego was 1,181 lbs CO2/MWh.
Regulatory agencies have struggled to determine what constitutes GHG BACT for natural gas (and other fossil-fuel) fired power plants. Regulatory authorities have declined to require natural gas-fired power plant projects to consider GHG lower emitting combined-cycle technologies in a BACT analysis. For example, in June 2012, Wisconsin authorities declined EPA Region V’s request to consider the use of combined-cycle gas turbines in a GHG permit for a wastewater utility fuelled by landfill gas.
EPA has sent conflicting signals on the issue. In the past, EPA has suggested from time to time that combined cycle be considered in the BACT analysis for natural gas plants. However, in drafting its New Source Performance Standards (NSPS) for GHG Emissions for New Stationary Sources: Electric Utility Generating Units (EGUs), EPA concluded that it cannot require proposed simple cycle facilities to meet the NSPS designed for combined-cycle natural gas facilities based on functional differences in peaking plants. 77 Fed. Reg. 22392 (April 13, 2012).
Specifically, EPA declined to include simple cycle facilities as an affected source in the proposed 40 CFR part 60, subpart TTTT for GHG emissions from new facilities governing combined-cycle plants and coal-fired plants. Id. at 22411. In its NSPS proposal, EPA required new fossil fuel-fired EGUs greater than 25 MW to meet an output-based standard of 1,000 lb CO2/MWh, representing the performance of widely used natural gas combined cycle technology. Id. at 22392. (Interestingly, in setting the NSPS at 1,000 lb CO2/MWh, EPA proposes a more stringent threshold for GHG emissions from new facilities than even HBEP). In choosing to exclude simple-cycle facilities from this standard, EPA reasoned that unlike combined-cycle plants (which are typically designed to provide baseload power and are able to emit CO2 at similar levels), simple-cycle plants are typically designed to provide peaking power, operate less, and “it would be much more expensive to lower their emission profile to that of a combined cycle power plant.” Id. at 22411.
In proposing a relatively lower emitting combined-cycle for a peaking unit, the AES project casts doubt on EPA’s conclusion that simple cycle is different. Accordingly, EPA may come to impose combined-cycle BACT limits on future natural gas combustion peaking facilities.
Posted on September 17, 2012
Companies who wrestle with whether their various air pollution-emitting operations must be grouped together for Title V permitting purposes have received some assistance from a recent Sixth Circuit opinion. In Summit Petroleum Corporation v. U.S. EPA, 2012 FED App. 0248P (6th Cir.), the court curtailed EPA’s expansive interpretation of a “single source” under the Clean Air Act.
By rule, operations belong to a single source if they: (1) possess the same SIC codes; (2) are located on contiguous or adjacent land; and (3) are under common control. See 40 C.F.R. § 52.21(b)(5), (6). In addition, by policy, EPA has expanded the definition of “single source” to include not only the facilities that meet these three criteria, but also those facilities that provide support to an adjacent central operation. See Preamble to the August 7, 1980 final Prevention of Significant Deterioration (PSD) regulations, 45 FR 52676; Preamble to Revised Part 51 and Part 70, Draft, February 18, 1998. And, EPA has taken a “functional” approach to the term “adjacent,” such that these support facilities need not even physically adjoin the main facility. For example, EPA considered two aluminum smelter facilities adjacent, despite their 3.4 mile separation, due to the extensive truck traffic between the two properties. See Letter from Steven C. Riva, U.S. EPA, to Robert Lenney, Alcoa Inc., Mar. 9, 2009. See also Letter from Pamela Blakely, U.S. EPA, to Don Sutton, Illinois EPA, re: General Dynamics, Ordinance & Tactical Systems, Inc., Mar. 14, 2006 (several plants considered a single source, despite their 8-mile separation, because they met a “common sense notion of a plant”).
Therefore, when EPA recently considered whether Summit Petroleum Corporation’s gas wells and associated flares should be considered a single source with its gas sweetening plant, EPA did not find it dispositive that several of the wells were located over a mile from the plant and were separated by other intervening properties. Instead, EPA noted that the wells and the plant were highly interdependent and under Summit’s common ownership. As a result, the wells and plant met the “common sense” notion of a single facility. See Letter from Cheryl Newton, U.S. EPA, to Scott Huber, Summit Petroleum Corporation, Oct. 18, 2010.
Summit challenged EPA’s single source determination, and the Sixth Circuit vacated that determination in Summit Petroleum Corporation v. U.S. EPA. The court found it “unreasonable and contrary to the plain meaning of the term ‘adjacent’” that EPA equated “functional relatedness” with “physical adjacency.” Id., at *2. The court ordered EPA to use instead the “ordinary, i.e., physical and geographical” meaning of the word “adjacent.” Id.
This decision will affect long-standing EPA policy and practice in making single source determinations. As the Director of EPA’s Region VIII Air Program noted, there is “no evidence that any EPA office has ever attempted to indicate a specific distance for ‘adjacent’ on anything other than a case-by-case basis.” See Letter from Richard Long, U.S. EPA, to Lynn Menlove, Utah Division of Air Quality, “Response to Request for Guidance in Defining Adjacent with Respect to Source Aggregation,” May 21, 1998, citing 45 Fed. Reg. 52,676, 52,695 (August 7, 1980) (“EPA is unable to say precisely at this point how far apart activities must be in order to be treated separately. The Agency can answer that question only through case-by-case determinations.”). Therefore, companies with “functional” single-source determinations should consider whether the recent Sixth Circuit decision could impact their status under the Title V program.
Posted on September 13, 2012
One company may own a variety of “functionally related” facilities that are located on various contiguous and non-contiguous parcels of land, spread out over many square miles. May all those “functionally related” facilities be considered “adjacent” and thus deemed to be one single major stationary source for Clean Air Act Title V permitting purposes?
A Court of Appeals recently weighed in on this issue. On August 7, 2012, the Sixth Circuit vacated EPA’s determination that Summit Petroleum Corporation’s natural gas sweetening plant and gas production wells located in a 43-square mile area near the plant were “adjacent” and thus could be aggregated to determine whether they are a single major stationary source for Title V permit purposes. Summit Petroleum Corp. v. EPA, 2012 WL 3181429 (6th Cir., Aug. 7, 2012). The majority held that EPA’s position that “functionally related” facilities can be considered adjacent is contrary to the plain meaning of the term “adjacent,” which implies a physical and geographical relationship rather than a functional relationship. The court also found EPA’s interpretation to be inconsistent with the regulatory history of Title V and prior EPA guidance. The case was remanded to EPA for a reassessment with the instruction that Summit’s activities can be aggregated “only if they are located on physically contiguous or adjacent properties.”
Posted on September 6, 2012
Federal and state regulators have, over the years, frequently received complaints about odor. Because the problem is a common one -- and because the origins of environmental law lie, in part, in the common law of public nuisance -- one might think we would have developed a consistent, practical way of regulating odor. We haven’t. No federal laws address odor, and the various state laws and rules addressing odor are a hodge-podge of not fully-considered ideas.
This is likely due in part to the subjective nature of odor: one person’s stench may be another person’s sweet smell of success. More importantly, though, there is no commonly accepted way of quantifying or measuring odor. If you cannot define something precisely and cannot agree on how to measure it, it necessarily follows that you will have a hard time regulating it. There have been attempts to use odor measurement technologies including the scentometer or field olfactometer, but they ultimately rely on subjective human olfactory assessment. While some states allow them as a guide, it does not appear that any statutory or regulatory scheme has adopted their use, and in fact, some states legislatures have adopted resolutions prohibiting their agencies from using such technologies for enforcement purposes.
So what is a regulator to do? Consider the efforts made by one state, my beloved Commonwealth. Virginia has tried to cram the square peg of odor into the round hole of the Best Available Control Technology (“BACT”) requirement of the Clean Air Act’s prevention of significant deterioration of air quality (“PSD”) preconstruction permitting program. Applying the BACT process to odor may have sounded like a good idea back in the day when the PSD rules were first adopted and BACT was a sexy new acronym, but implementation of the BACT approach for odor has not been easy.
At the outset, there is the difficulty that the BACT process applies only to things that are “pollutants” under the Clean Air Act. Not everything that regulators want to regulate under the Clean Air Act, however, is considered a “pollutant” under the Act. (If you doubt this, recall that it took many years of agency action and litigation and decisions by the United States Courts of Appeals and the Supreme Court before it was generally accepted that carbon dioxide is a pollutant under the Clean Air Act.) And so it is with odor, which is defined by Webster’s Dictionary as “a quality of something that stimulates the olfactory nerves or the stimulation itself. In short, odor is definitely not a “typical” Clean Air Act pollutant. (Interestingly, certain substances that are pollutants, also carry the name “aromatic” if they also happen to be organic compounds with a cyclical structure, but I digress.)
Even if one can accept that “odor” is a “pollutant,” though, can the BACT process be applied to it? Not really. ”Best available control technology” means “an emission limitation based on the maximum degree of reduction of [a pollutant . . .] which the permitting authority . . . , taking into account energy, environmental, and economic impacts and other costs, determines is achievable . . . .” Clean Air Act § 169(3). And typically BACT is determined through a top-down approach, i.e., one starts with the most stringent emission limitation theoretically achievable and then moves down from there only if the various costs of that approach are too high. How can such an approach work for odor, though, when we do not have a unit measure for odor, much less a quantitative scale for objectionable scent. Without such a measure or scale, it is effectively impossible to evaluate whether the environmental, economic or energy costs of reducing odor are reasonable or cost-effective.
So, if my beloved Commonwealth doesn’t now have the answer, let me cast my net more broadly and ask if anyone knows of a good practical scheme for regulating odor.
Posted on August 30, 2012
On August 13, 2012, the United States Court of Appeals for the Fifth Circuit held that the Environmental Protection Agency’s (EPA) disapproval of the Texas Flexible Permit Program (TFPP) had been arbitrary and capricious, an abuse of discretion, not in accordance with law, and unsubstantiated by substantial evidence on the record taken as a whole. Accordingly, the Fifth Circuit granted the petition for review, vacated EPA’s disapproval of the Texas plan and remanded the matter to EPA.
The TFPP, a Minor new source review (NSR) permit program, had been submitted to EPA in November 1994 as a revision to the Texas State Implementation Plan (SIP). The TFPP authorized modifications to existing facilities without additional regulatory review provided the emissions increase would not exceed an aggregate limit specified in the permit.
Despite the mandate in the Clean Air Act (CAA) that EPA approve or disapprove a SIP revision within eighteen months of its submission, EPA failed to make a determination on the TFPP for more than sixteen years. By the time that EPA announced its disapproval, the State of Texas had issued approximately 140 permits under the TFPP. And despite the excessive delay in announcing its disapproval of the TFPP, EPA found time to promptly notify flexible permit holders in Texas that their facilities were operating without a SIP-approved air permit and that they were risking federal sanctions unless SIP-approved air permits, requiring current Best Available Control Technology, were obtained.
The State of Texas and ten industry and business groups subsequently filed suit challenging EPA’s disapproval, which had been based on three primary arguments: 1) the program might allow major sources to evade major NSR; 2) the provisions for monitoring, recordkeeping and reporting (MRR) are inadequate, and 3) the methodology for calculating permit emissions caps lacks clarity and is not replicable. Two of the justices on the 3-judge panel court rejected each of EPA’s contentions, with the third justice dissenting.
The majority rejected EPA’s contention that the TFPP allowed major sources to evade Major NSR because the TFPP includes three rules that affirmatively require compliance with Major NSR, and EPA could not identify a single provision in the CAA or the CAA implementing regulations that empowered EPA to disapprove a SIP that did not also contain an express negative statement that the Minor NSR permit could not be used to evade Major NSR. Further the court noted that in its briefings, EPA had conceded that language explicitly prohibiting circumvention of the Major NSR requirements is not ordinarily a minimum NSR SIP program element. 75 Fed. Reg. at 41,318-19.
The majority also rejected EPA’s contention that the TFPP allowed the Texas Commission on Environmental Quality executive director too much discretion in determining MRR requirements in a Minor NSR permit and that this amount of discretion is contrary to EPA policy. The court found that EPA could not identify an independent and authoritative standard in the CAA or its implementing regulations that required MRR requirements to be specified in a SIP, rather than based on the size, needs, and type of facility authorized in a Minor NSR permit. In addition, the court found that EPA failed to identify the purported policy of disfavoring “director discretion” in any comments that EPA submitted to the State of Texas on the TFPP regulations or in EPA’s disapproval of the requested Texas SIP revision. Thus, the court held that the purported policy is not in the record on which the court must review EPA’s disapproval under the APA. Although not a factor in its decision, the majority also noted that “other recent EPA action tends to not only undercut the assertion of such a policy but also to give the impression that EPA invented this policy for the sole purpose of disapproving Texas’ proposal.”
Finally, the majority rejected all of the arguments EPA gave for finding the TFPP to be deficient. Among other things, the court concluded that EPA could not identify a single provision in the CAA or EPA’s Minor NSR regulations that requires a state to specify the method of calculating emissions caps or to demonstrate replicability in its SIP or as a condition of approval of a state’s Minor NSR program. Similar to its comments on EPA’s second contention, the majority also noted that EPA appears to have adopted the third test solely for application to the TFPP.
Due to the uncertain status of the TFPP and the risk of federal enforcement, most flexible permit holders requested that the flexible permits be altered to reflect that the authorization meets the air permitting requirements already in the EPA-approved Texas SIP. Thus, EPA succeeded in gutting a Minor NSR permit program that it had wrongly disapproved, but it did not achieve any substantive changes in permit requirements. Although the majority vacated EPA’s disapproval of the TFPP and remanded the matter to the agency, EPA is not likely to act and facilities in Texas are not likely to decide on whether to pursue new flexible permits until after the November election.
Posted on August 29, 2012
The Cross-State Air Pollution Rule (Transport Rule) [76 Fed. Reg. 48208] adopted by EPA in mid-2011 -- requires sources in the eastern U.S. to reduce their emissions substantially. Numerous states and industry groups challenged the rule in the D.C. Circuit, and many of the petitioners asked the court to stay the rule pending litigation. One motions panel of the court stayed the Transport Rule in late 2011, and then a subsequent panel directed that all briefing in the case be completed -- and oral argument be held -- within approximately 100 days after the stay was issued.
That the case was put on such a tight briefing schedule led many litigants to speculate that the court wanted to resolve the case quickly and would issue its decision within 60 days of the April 13, 2012 oral argument. When mid-June came and went with no decision, many of those same litigants then predicted the decision would come by mid-July so as not to interfere with the judges’ summer vacations. In support of their mid-July prediction, they also claimed that the head of EPA’s Air Office, Gina McCarthy, agreed with them. In early July, Ms. McCarthy had indeed told some state regulators that the court would issue its decision on Friday, July 13, but she had quickly added that her prediction should not be taken too seriously because she had been wrongly predicting the imminent issuance of the decision for the past thirty days. Nonetheless, several in the media reported her prediction as gospel, prompting all involved to stay glued to the D.C. Circuit’s website on Friday, July 13.
As one of those waiting for the court to issue its opinion on the Transport Rule, I was reminded of a similar waiting game in which I was involved in 1997. In May of that year, I had argued a case before a three-judge panel in the Fourth Circuit, where I had found one judge to be sympathetic to my argument, one judge to be antagonistic (but nicely so, because this was the Fourth Circuit after all), and the third judge to be a cipher. As soon as oral argument ended, my client started bombarding me daily with the same question: when would the court issue its decision? I couldn’t answer that question (no matter how often I was asked), but I thought retired Fourth Circuit Judge James Marshall Sprouse might have insights into the court’s decision-making process. He had been gracious enough – and patient enough -- to help me prepare for oral argument in my case (and to help me persuade the client to eliminate some of the more bombastic points from the argument).
Gamely consulting his crystal ball and taking into account that the case had been argued so late in the term, Judge Sprouse suggested that (1) if there was no dissent, then the court might issue its decision by the end of July; (2) if one judge dissented, then there might be a delay of another one to two months; and (3) if each of the three judges wrote a separate opinion or if one of the jurists was trying to be Solomon-esque -- finding areas of agreement and areas of disagreement with each of the other two judges on the panel -- then there might not be a decision until well into the fall. Judge Sprouse was spot on in my case: the decision -- which fell into Category 3 -- was issued in late October 1997.
Back to the present now. The D.C. Circuit issued its decision on the Transport Rule on August 21, 2012. In an opinion by Judge Brett Kavanaugh, joined by Judge Thomas Griffith, the court held that the Transport Rule exceeds EPA’s statutory authority in two respects, by (1) requiring upwind states to reduce emissions by more than their own significant contributions to nonattainment in other states, and (2) failing to allow states the initial opportunity to implement the emission reductions required by the Transport Rule. Judge Rogers wrote a stinging dissent.
I leave it to my ACOEL colleague Dave Flannery and his more detailed description of the decision below. I will add only that although Judge Sprouse passed away eight years ago, the timing of the decision was just what he might have predicted.
Posted on August 28, 2012
EPA was handed a setback in its efforts to establish aggressive controls on the energy industry in general, and the electric power industry in particular, when the D.C. Circuit issued its August 21, 2012 decision vacating the Cross-State Air Pollution Rule (CSAPR). EME Homer City Generation LP v. EPA, Case. No. 11-1302.
Significantly, the D.C. Circuit’s order not only vacated and remanded CSAPR, but also directed EPA to continue administering the previously-in-effect Clean Air Interstate Rule (CAIR) pending the promulgation of a valid replacement for CSAPR.
In a 2 to 1 decision, the court ruled that CSAPR exceeded EPA’s authority in two areas:
a. CSAPR impermissibly required upwind states to reduce more than their “significant contribution” to downwind non-attainment; and
b. CSAPR deprived upwind states of the initial opportunity to implement any required emission reductions by immediately imposing a Federal Implementation Plan.
Significantly, the opinion of the court sets forth a roadmap for the development of a CSAPR replacement rule. This is accomplished by the court’s establishing “several red lines that cabin EPA’s authority.” In many cases the court offers specific examples of the types of calculations that EPA would have to make in order to determine permissible emission reductions. These “red lines” and example calculations are summarized below:
1. EPA cannot force an upwind state to reduce more than its own contribution to a downwind state minus what level EPA determines to be insignificant.
Example: If 3 units were set at the level of insignificance and an upwind state’s contribution to nonattainment in a downwind state is 30 units, then the most reduction that could be required of the upwind state would be 27.
2. EPA’s authority to force reductions on upwind states ends at the point where the downwind state achieves attainment.
3. The extent to which an upwind state’s contribution is significant depends on the relative contribution to nonattainment of other upwind states. The obligation to reduce emissions in the upwind states must be allocated “in proportion to the size of their contributions to downwind non-attainment.”
Example 1: Assume that the relevant national ambient air quality standard (NAAQS) is 100 units, that the ambient level of the at-issue pollutant in downwind state A is 150 units, and that state A is contributing 90 units to that overall concentration. Assume also that three upwind states are each contributing 20 units to the total ambient concentration in downwind state A. Under those circumstances, downwind state A is entitled to at most 50 units of relief -- with the 3 upwind states each contributing 16 2/3 units.
Example 2: If the scenario in Example 1 were changed only to the extent that the upwind states contributed 10, 20 and 30 units respectively, the upwind states would be obligated to reduce their contributions by 8 1/3, 16 2/3 and 25 units, respectively.
Example 3: If the air quality measurement in Example 1 was 180 units and downwind state A contributed 120 of those units, with 3 upwind states contributing 20 units each, then downwind state A is entitled to at most 60 units of relief to be distributed proportionately among the upwind states.
4. EPA may consider costs, but only to further lower an individual state’s emission reduction obligation. EPA may do this in a way that benefits some upwind states more than others. The objective of reducing the control obligation of an upwind state would be to prevent exorbitant costs from being imposed on certain upwind states.
5. EPA must ensure that the combined obligations of the various upwind states do not produce more control than necessary for the downwind state to achieve the NAAQS.
Example: If state A reduces 5,000 tons of NOx to achieve its largest downwind emission reduction obligation while state B reduces 2,000 tons for the same purpose, and if EPA modeling then shows that “all downwind non-attainment” would be resolved if the combined reduction of the two states were 10% lower, then EPA would be obligated to reduce the emissions reduction obligation of the upwind states by 10%.
The court’s ultimate holding on this aspect of the CSAPR decision is:
States are obligated to prohibit only those “amounts” of pollution “which will . . . contribute significantly” to downwind attainment problems – and no more. Because the Transport Rule exceeds those limits, and indeed does not really try to meet those requirements, it cannot stand.
Even as EPA considers its next steps in the wake of the decision, states and regulated sources will begin to focus on how to develop and implement a program to address interstate air quality that satisfies the new ground rules that have been established by the court.
Posted on August 27, 2012
In split decisions over a two-week period on entirely different Clean Air Act issues, three different Circuits refused to give deference to EPA interpretations.
The merits of the three decisions – concerning the latitude States have in designing "minor" new source permitting programs approvable in their State Implementation Plans, the attributes that make a source "major" for Clean Air Act permitting purposes, and the limits on EPA's authority to manage emissions transported from one State to another – are far reaching and significant on many levels. One interesting common thread underlying the merits is how the three different Circuits approached the doctrine of deference.
In Texas v. EPA, No. 10-60614 (5th Cir., Aug. 13, 2012), the Fifth Circuit vacated EPA's disapproval of a State Implementation Plan revision Texas submitted to make its Minor New Source Review rules more flexible (by using a "bubble" concept for reducing the types of minor changes needing separate preconstruction permits). The Court dismissed EPA's position that the Texas rules conflicted with EPA's policy against State Implementation Plan provisions that allow "director discretion." The majority concluded "[t]here is, in fact, no independent and authoritative standard in the CAA or its implementing regulations requiring that a state director's discretion be cabined in the way that the EPA suggests" and "[t]therefore, the EPA's insistence on some undefined limit on a director's discretion is . . . based on a standard that the CAA does not empower EPA to enforce."
In Summit Petroleum Corp. v. U.S. EPA, Nos. 09-4348 and 10-4572 (6th Cir., Aug. 7, 2012), the Sixth Circuit vacated EPA's determination that, because they are "functionally related," natural gas production wells are "adjacent" to the gas processing plant to which the output of the wells is pipelined. The practical consequence is that if the wells and the plant are "adjacent," their potential emissions would be aggregated and would exceed the threshold level requiring a Title V permit, whereas if they are not "adjacent," they would be separately subject to less onerous "minor" source permitting requirements. The Court relied upon the dictionary definition, etymology, and case law on the meaning of "adjacent" to conclude that "adjacency is purely physical and geographical." The Court wrote "we apply no deference in our review of EPA's interpretation of ['adjacent']" since the word is "unambiguous," and "we hold that the EPA has interpreted its own regulatory term in a manner unreasonably inconsistent with its plain meaning . . .."
In EME Homer City Generation v. EPA, No. 11-1302 (D.C. Cir., August 21, 2012), the D.C. Circuit vacated EPA's Cross-State Air Pollution Rule (CSAPR), also known as the Transport Rule, requiring 28 States to curtail sulfur dioxide and nitrogen oxide emissions from one State deemed by EPA to "contribute significantly to nonattainment" of National Ambient Air Quality Standards for ozone or fine particulate matter in another State, or to "interfere with maintenance" of such standards in another State. The Court held that the way in which EPA quantified allowable emissions from the various States exceeded the Agency's statutory authority, and that EPA's preemptive implementation of State Implementation Plan requirements was "incompatible with the basic text and structure of the Clean Air Act" and contrary to the "first-implementer role" reserved for the States by the Act. The Court concluded that EPA's interpretation of the "good neighbor" provision – one of more than 20 State Implementation Plan requirements in Section 110(a)(2) of the Act – offended the principle that Congress does not "hide elephants in mouseholes" (citing the Supreme Court's 2001 decision in Whitman v. American Trucking Ass'ns). EPA's interpretation of its authority to promulgate Federal Implementation Plans before giving the States an opportunity to submit State Implementation Plans after EPA determined the level of "good neighbor" emission reductions required was rejected on both step 1 and step 2 Chevron grounds.
Three swallows do not a summer make, but if Courts continue to delve more deeply into the merits of EPA decisionmaking under the Clean Air Act and similar statutes in this era of Congressional gridlock, the consequences could be profound for supporters and opponents of EPA actions.
Posted on August 14, 2012
On Friday, in Texas v. EPA, the 5th Circuit Court of Appeals vacated EPA’s decision rejecting Texas’s SIP revisions that would have implemented (and did implement, for 16 years) a Flexible Permit Program for minor NSR sources. While genuflecting at the altar of deference to agency decisionmaking, the Court concluded that EPA’s rejection was not based on either EPA factual determinations or on its interpretation of federal, as opposed to state, law. The Court also concluded that EPA had not in fact relied on the reasons given in its briefs, and refused to defer to EPA’s “post hoc rationalizations.” The Court thus gave essentially no deference to EPA’s decision.
The interesting part of the decision was the dissent by Judge Patrick Higginbotham, a Reagan appointee. Judge Higginbotham took the majority to task for “not faithfully applying the deferential arbitrary and capricious standard.” He then persuasively demonstrated why the Texas program, as written, did violate the Clean Air Act.
After dismantling the majority’s logic, he then addressed the practical heart of the case – EPA’s 16-year delay in rejecting the SIP revisions. While criticizing EPA for the delay, Judge Higginbotham pointed out that there is a statutory remedy for EPA’s failure to rule on the revisions – a suit under section 7604(a)(2) of the CAA – a remedy never pursued by Texas.
What’s important about this case is that is an excellent example of why judicial restraint is so often “more honor’d in the breach than the observance.” (It’s been a while since I’ve quoted Shakespeare.) When a federal agency unwinds state policy after a sixteen-year delay, it’s very tempting for courts to engage in judicial activism, if that’s what it takes to go upside the agency’s head. The harder course, requiring more discipline, is to remain true the ideal of judicial restraint – that a court is not to substitute its judgment for an agency acting pursuant to an act of Congress. Therefore, Judge Higginbotham’s conclusion seemed worth note:
"As so often with political debate in search of a legal forum, its utility lies largely in pleasure of expression. Angst over perceived federal intrusion into state affairs ought be eased by the reality that laws enacted by Congress are laws of the States. Congress passed the Clean Air Act and made it enforceable by the EPA. The State was represented in that decision by two senators and its thirty-two other elected members of Congress. It also bears mentioning that its former governor was resident in the White House for eight of the years in passage here. The Clean Air Act is not foreign law. I dissent."