Posted on March 22, 2013
On Wednesday, in Decker v. Northwest Environmental Defense Center, the Supreme Court ruled that runoff from logging roads does not constitute a discharge from a point source that requires an NPDES permit. The decision upholds EPA’s interpretation of its own regulations and overturns – what a surprise! – a 9th Circuit decision which had held that permits were necessary for logging runoff.
While EPA got the result that it wanted here, the decision may come back to haunt it in the long run. The decision was largely based on what is commonly known as Auer deference, the rule that courts will defer to an agency’s interpretation of its own regulations unless that interpretation is “plainly erroneous or inconsistent with the regulation.” After a thorough review of the various relevant regulations and a dip or two into the Oxford American Dictionary, and after noting that the agency’s interpretation need not be “the best one”, the Court found EPA’s interpretation “permissible.”
So, why should EPA be concerned? Justice Scalia, at his most curmudgeonly, dissented on the ground that Auer should be overturned because it grants too much authority to agencies. Justice Scalia rejected out of hand what I would have thought would be the simplest and most obvious defense of Auer: that if courts defer to agency interpretation of statutes under Chevron, shouldn’t they, a fortiori, defer to agency interpretation of the agency’s own rules? Apparently not. To Justice Scalia, Chevron deference merely allocates to agencies, rather than courts, the primary duty of interpreting statutes, but allowing agencies to interpret their own regulations has the dangerous result of concentrating both the writing and interpretation function in one branch of government.
I don’t buy it, but it’s important to note that, while Justice Scalia was the sole dissenter, Justice Roberts wrote a concurring opinion, joined by Justice Alito, stating that, while Decker was not the proper case to reassess Auer (a cynic might say that Justice Roberts reached that conclusion because EPA was aligned with industrial interests, rather than the environmental NGOs, in Decker), they were both open to reviewing Auer in the proper case.
Sounds like three votes to me. Somewhat surprisingly, Justice Thomas joined neither the concurrence nor the dissent. Justice Kennedy wrote the majority opinion, so he clearly still believes in Auer. Without Kennedy and with Thomas a cypher at this point, the votes to revisit Auer may not be there. In any case, it is worth noting that Justice Breyer, who is Justice Scalia’s frequent sparring partner on administrative law issues, took no part in the decision. I look forward to his spirited defense of Auer when the time comes.
Posted on March 21, 2013
The EPA issued its long-awaited CISWI Rule in the Federal Register on February 7, 2013. 78 FR 9112. The final rule, entitled “Commercial and Industrial Solid Waste Incineration Units; Reconsideration and Final Amendments; Non-Hazardous Secondary Materials That Are Solid Waste,” contains the provisions in EPA’s 2011 rule, vacated in January 2012, that EPA agreed to reconsider. The 2011 final rule in turn superseded EPA’s 2000 CISWI rule. The new CISWI Rule amends 40 CFR part 60 subparts CCCC and DDDD and part 241. The amendments to 40 CFR part 60 subpart DDDD, along with certain incorporations by reference, were effective on the promulgation date; amendments to part 60 subpart CCCC are effective August 7, 2013, and those to 40 CFR part 241 are effective April 8, 2013.
In response to both the court’s vacatur of a Notice of Delay issued in 2011 and the numerous petitions for reconsideration and comments submitted by the regulated community and the public, the final rule includes three subcategories of ERUs (energy recovery units) and two subcategories for waste-burning kilns based on design-type differences, with separate carbon monoxide (CO) limits for the latter. Certain limits were also revised based on comments regarding the CO span methodology and on incorporation of additional data. The rule establishes stack testing and continuous monitoring requirements and allows for the use of continuous emissions monitoring systems (CEMS), setting levels based on a 3 hour block or 30-day rolling average (depending on the parameter and subcategory of CISWI).
The rule addresses and preserves a source’s choice to cease or start combusting solid waste at any time due to market conditions or other reasons, and to switch from one set of applicable emission standards to another pursuant to CAA section 112, thereby amending the original "once in always in" approach reflected in the earlier versions of this rule. This in turn will provide an incentive to the regulated community to continue operating incinerators.
The deadline for compliance with the CISWI Rule by existing sources depends primarily on when the state implementation plan incorporating the final rule is approved, with such approval required no later than five years after the February 7, 2013 Federal Register publication date. The effective date for new source compliance is August 7, 2013 or the date of startup, whichever date is later. New sources are defined as sources that began construction on or after June 4, 2010, or commenced reconstruction or modification after August 7, 2013.
Posted on March 14, 2013
In December 2012, EPA issued revised enforcement guidance to assist agency personnel in exercising enforcement discretion regarding the treatment of tenants under Superfund’s bona fide prospective purchaser (BFPP) defense. This guidance expands some of the protections provided by the prior, 2009 guidance. Though recognizing that “[l]easehold interests play an important role in facilitating the cleanup and reuse of contaminated properties,” the agency chose a relatively ineffectual tool for addressing prospective tenant liability and encouraging re-use of Brownfield properties. The agency could have better encouraged Brownfield development by providing tenants with guidance on how to avoid Superfund liability in the first place.
Under Superfund, a tenant's status and activities may give rise to "owner or operator" liability -- for the costs of investigating and remediating a contaminated site and for natural resource damages. The guidance does not flesh out the contours of tenant liability as an owner or operator, but instead assumes that tenant liability exists and explains how the BFPP defense under section 107(r) of Superfund might then be available.
To take advantage of the BFPP defense, an owner or operator of contaminated property must satisfy three statutory prerequisites. It must show: (1) it conducted all appropriate inquiry or AAI, e.g., by having conducted a phase I environmental assessment; (2) it has no affiliation with a potentially responsible party or PRP; and (3) it is satisfying specified continuing obligations, including, among other things, complying with applicable regulatory requirements and not impeding remedial actions.
In brief, the December 2012 guidance confirms that a tenant may receive protection as a BFPP derivatively from its landlord if the landlord conducted AAI, provided that all disposal occurred prior to the landlord’s acquisition of the property and the tenant satisfies the continuing obligations requirement. It also expands EPA's use of enforcement discretion for a tenant who relied upon its landlord for the BFPP defense to include situations in which the landlord loses the BFPP defense, provided the tenant meets the requirements of the BFPP defense other than having performed AAI. In addition, it makes clear that a lease will not disqualify a tenant from the BFPP defense for failure to have satisfied the "no affiliation" prerequisite. Furthermore, it confirms that EPA will use its enforcement discretion for a tenant who independently meets the BFPP prerequisites, including having performed AAI prior to execution of the lease.
The new guidance notes the obvious: all bets are off if the tenant itself engages in an activity that independently creates liability, e.g., by creating or exacerbating contamination. It also notes that, except as otherwise provided, the tenant itself must satisfy the BFPP prerequisites.
The agency explains that it generally will not proactively make determinations as to the availability of the BFPP defense in connection with any particular transaction, e.g., by issuing a comfort letter, though there may be limited circumstances where it might do so. And, of course, the agency’s exercise of prosecutorial discretion provides no comfort where the Superfund claim is brought by a third party, though the agency’s guidance may be persuasive to the court in which the claim is brought.
The problem with the BFPP defense is that it’s a defense, which must be asserted in response to a Superfund claim, and the tenant has burden of proof. Moreover, as far as defenses go, it’s not even the best. The third party defense, which doesn’t require AAI, generally should be available as long as the lease does not relate to the act or omission giving rise to the contamination. See “The Third Party and Transaction-Related Defenses,” J. Civins, M. Mendoza, and C. Fernandez, ABA-SEER Environmental Litigation and Toxic Torts Committee Newsletter, July 2005.
More significantly, as EPA recognizes, “the mere execution of a lease does not necessarily make a tenant liable as an owner or operator,” and the agency and the regulated community would have been better served had the agency issued guidance establishing safe harbors for tenants. A tenant’s first line of defense to Superfund liability should not be a defense, BFPP or other, but rather should be an assertion that it is not a Superfund owner or operator, placing the burden of proof on the plaintiff rather than on the tenant. And case law provides a good basis for EPA issuance of such guidance.
Arguably, a tenant should not be liable and have need of a defense as an owner unless it virtually stands in the shoes of its owner, e.g., by entering into a 99-year lease or by subleasing the property to one who contaminates it. Similarly, a tenant should not be liable as an operator, unless its action caused or exacerbated contamination. Regardless of whether case law adequately fleshes out the contours of a tenant’s owner or operator liability under Superfund, it would have been more useful for the agency to have issued guidance with respect to such liability rather than on the BFPP defense.
Posted on March 11, 2013
Over the past several years, EPA has created or upgraded a number of new informational tools that enable the public to gain access to environmental data. This is part of the agency’s efforts to increase “transparency” regarding private and public sector environmental compliance and enforcement efforts. As expressed in a recent press release, EPA believes that “transparency and access to information at all levels help to drive improvements in environmental performance.”
A couple of very recent examples are worth noting. Earlier this year, EPA announced the creation of new interactive state dashboards and comparative maps. These online tools are components of EPA’s Enforcement and Compliance History Online (ECHO) website, and contain air, water and hazardous waste data for the previous five years. According to EPA, such information includes “the number of completed inspections, types of violations found, enforcement actions taken, and penalties assessed by state.” Users of the site can customize their searches to view just state activity, EPA activity, or both.
A second example is EPA’s program to increase the transparency of chemical information under the Toxic Substances Control Act (TSCA). Just last month, EPA released the 2012 Chemical Data Reporting (CDR) information for more than 7,600 chemicals. The data can be used to identify important trends and analyses, such as determining the number of workers exposed to a particular chemical, the top 20 chemicals used in children’s products, the top 20 chemicals used in consumer products and the top industrial sectors that processed and used reportable chemicals. EPA modified the CDR rule (formerly known as the Inventory Update Reporting rule) in 2011 to require that manufacturers and importers submit CDR information electronically. Accordingly, the CDR information is added to the agency database and made publicly available much faster than ever before. Stakeholders such as the American Chemistry Council and the Environmental Defense Fund applauded the recent changes to the CDR rule to increase the amount of information available to the public and thereby improve public understanding and confidence.
With appropriate controls, greater transparency is laudable for a variety of readily apparent reasons, and there is little doubt that federal and state agencies will increase both the number of tools available to the public and the usability of these tools to interpret data in the coming years. Environmental stakeholders should evaluate these new tools and determine the risks and opportunities presented by them.
For example, industry practitioners are quite familiar with the increasing scrutiny that has been placed on corporate decision-making in recent years by major investors and shareholders regarding such matters as the impact of the corporation’s activities on issues like greenhouse gas emissions and sustainability. Some of these entities are using the new information tools and others like them to identify trends and determine how the corporation “measures up” against industry norms and political or governmental expectations. Similarly, corporations are finding that their outside financial auditors are reviewing environmental databases to “check on” the environmental and safety disclosures that the companies are putting forth during the audit period. Indeed, company management and counsel have sometimes been surprised by their auditors’ independently-gathered information that one or more of the company’s plants are listed on EPA or state databases as “non-compliant” with environmental requirements.
In the same way, increased access to environmental and safety information brings with it new opportunities to gather meaningful information that can be extremely useful in preparing business plans for future activities and for claims and litigation related to environmental exposures. Manufacturers and suppliers of environmental products and services, plaintiffs’ counsel, expert witnesses, environmental groups, public and governmental relations firms and insurance companies are just a small subset of the universe of interested parties for whom easier access to environmental and safety information can be helpful. And now such data can be gathered more quickly and at a fraction of the costs that would have been required in the past. Environmental stakeholders would do well to monitor the development of these transparency tools and to assess the risks and opportunities that they present.
Posted on March 1, 2013
The Environmental Protection Agency (EPA) is planning a rulemaking to expand its Toxic Release Inventory (TRI) program in March 2013. Will the oil and gas extraction sector be included in the program’s expansion?
As part of the Emergency Planning and Community Right-to-Know Act (EPCRA), the TRI program gathers and makes public information about chemical and waste management activities at a wide variety of facilities. EPA touts TRI reporting as one mechanism to reduce the release of chemicals into the environment. It claims that the information gathered helps companies keep up with competitors’ efforts to reduce and recycle waste, and that the public dissemination of information can lead to citizen and EPA enforcement.
EPA considered including the oil and gas extraction sector in TRI in 1997, but decided against it due to technical issues in determining whether individual wells spread out over large geographic areas would be considered a “facility” under EPCRA. A petition filed by environmental groups claims these technical issues are resolved and points to the basin-level definition of facility in EPA’s greenhouse gas (GHG) reporting rule as an example of how oil and gas production operations can be aggregated. Meanwhile, the GHG reporting rule is still under administrative reconsideration and the definition of facility under that rule is a key point of contention between EPA and industry.
As recently as last week, EPA’s Inspector General “recommend[ed] that EPA develop and implement a comprehensive strategy for improving air emissions data for the oil and gas production sector.” If oil and gas production is included in TRI, how will it affect the sector? Will it be a way to get at chemical ingredients used in hydraulic fracturing that are otherwise protected from disclosure as trade secrets? Will the aggregation of data for TRI purposes spill over into air and waste permitting decisions? At a minimum, TRI would require industry to gather more information on chemicals, wastes and emissions and make it publicly available. Thus, industry should prepare for the corresponding public attention and regulation that may accompany TRI expansion.
Posted on February 21, 2013
In December 2008, a surface impoundment maintained by the Tennessee Valley Authority in Kingston, Tennessee failed and the coal combustion residuals (CCRs) stored in those impoundment flooded more than 300 acres of land and flowed into Emory and Clinch Rivers. CCRs, often referred to as coal ash, are residues from the combustion of coal in power plants that are captured by scrubbers and other pollution control equipment. CCRs are currently exempt wastes under RCRA but following the TVA spill EPA proposed to regulate coal ash for the first time.
On June 21, 2010, EPA issued its proposed CCR rule. The proposed regulation considers two options for the regulation of CCRs. Under the first option, CCRs would be regulated as special wastes subject to nearly full regulation as hazardous wastes under RCRA Subtitle C. If CCRs are regulated as “hazardous waste,” disposal will likely be required at specially-permitted, off-site hazardous waste disposal facilities. Under the second option, CCRs would be regulated as solid waste under Subtitle D of RCRA. Under this option, EPA is likely to establish national standards for surface impoundments and landfills. If CCRs are regulated under Subtitle D, it is likely a composite liner, a leachate collection and removal system, and a leak detection system will need to be installed at existing ash ponds.
EPA has not yet taken final action on the proposed CCR rule and has been sued by an environmental group who seeks the issuance of the final rule. In that case, Appalachian Voices v. Jackson, the Agency stated “EPA cannot at this time provide a well-informed judgment as to the specific amount of time that is needed to conclude its review and any necessary revisions of these regulations, and EPA therefore requests an opportunity, following further administrative proceedings, to provide this Court with supplemental briefing at a later date regarding final remedy.” Two actions (I, II) were consolidated in the Appalachian Voices case. EPA has indicated that the final CCR rule is not likely to be issued before the fourth quarter 2013.
Posted on February 6, 2013
Wisconsin has a proud tradition of strong political opinions. Recent Tea-Party backed legislation in Wisconsin limiting the power of government will be interesting to follow as the consequences play out, particularly in the environmental arena.
In March 2011, Wisconsin’s then-new Republican Governor Scott Walker and the Republican legislature passed the Wisconsin Budget Repair Bill, the state law that famously limits the collective-bargaining rights of public employees. Following that, the legislature passed 2011 Wisconsin Act 21, which includes a “limited government” provision that prohibits any “agency [from] implement[ing] or enforc[ing] any standard, requirement, or threshold, including as a term or condition of any license issued by the agency, unless that standard, requirement, or threshold is explicitly required or explicitly permitted by statute or by a rule that has been promulgated in accordance with [state law].”
This will play out in a number of ways. Like other state environmental agencies, the Wisconsin Department of Natural Resources (“WDNR”) relies significantly on guidance documents to implement otherwise complex programs. A number of issues are addressed only in WDNR guidance, not in explicit regulations. These include sediment cleanup standards; references to “sediment” were intentionally removed from the state soil cleanup standards. This not only affects state cleanup programs, but also raises issues as to whether the state sediment cleanup standards can be “applicable or relevant and appropriate requirements” under the Comprehensive Environmental Response, Compensation and Liability Act. Similarly, the WDNR’s vapor intrusion sampling, analysis and remediation protocols are contained only in state and federal guidance documents.
Recently, the U.S. EPA chose language in a proposed SIP denial that adds fuel to some permitting arguments. In 2008, U.S. EPA required revisions to State Implementation Plans (“SIPs”) with respect to PM2.5 permitting; Wisconsin made regulatory changes, and requested SIP approval in 2011. On December 18, 2012, the U.S. EPA proposed disapproval of the SIP revision. 77 Fed. Reg. 74817 (2012). According to U.S. EPA, Wisconsin’s submission is deficient because the Wisconsin regulations do not “explicitly” define the condensable component of PM10 and PM2.5 emissions, and do not “explicitly” identify SO2 and NOx as precursors to PM2.5. The U.S. EPA’s disapproval language gives the Wisconsin Department of Natural Resources the usual additional work to propose and finalize regulatory changes to address the deficiency, but it also gives regulated sources an additional argument that the WDNR lacks the authority to regulate condensable particulate matter and PM2.5 precursors.
Posted on January 18, 2013
Section 316(b) of the Clean Water Act requires that the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact. Although the statutory language is straight-forward, EPA has run into enormous difficulties in promulgating rules to implement Section 316(b).
The latest in a series of rulemaking efforts began on April 20, 2011 when EPA published a proposed rule to protect fish from being killed at water intake structures that withdraw at least 2,000,000 gallons per day from waters of the United States and use at least 25% of the water they withdraw exclusively for cooling purposes. Pursuant to a Settlement Agreement with the environmental group, Riverkeeper, and other organizations, EPA was required to issue the revised rule by July 27, 2012.
When I last wrote about this rulemaking effort by EPA, EPA had received more than 1,100 comment letters and more than 80 documents containing new data for possible use in developing the final impingement mortality limitations. On June 12, 2012, EPA offered a 30-day comment period on the new information with comments due on or before July 11, 2012.
Through the Notice of Data Availability published by EPA on June 12, 2012, EPA also presented data it had received related to the results of EPA’s stated preferences survey. Comments on the data related to EPA’s preference survey were also required to be submitted on or before July 12, 2012.
In my previous blog on this subject, I wrote it was hard for me to understand how EPA would be able to comply with a court-ordered issuance date of new rulemaking by July 27.
Not surprisingly, EPA was unable to issue its new rule by July 27. Instead, EPA entered into a Second Amendment to the Settlement Agreement with Riverkeeper and other organizations. The Settlement Agreement contains the following language: “Not later than June 27, 2013, the EPA Administrator shall sign for publication in the Federal Register a notice of its final action pertaining to issuance of requirements for implementing Section 316(b) of the CWA at existing facilities.” Since entry of the extension, EPA has been remarkably silent about any steps it plans to take prior to the June 27, 2013 deadline for notice of final action.
Concurrent activity at the state level is also of interest. Prior to this latest extension, EPA Region 1 sent about ten extensive Section 308 information requests to facilities in Maine to set the stage for possible issuance of case-by-case, best professional judgment permit requirements pursuant to 316(b) for the selected facilities. It is unclear how the facilities were selected given other Maine facilities also met the proposed thresholds. Those facilities have responded to the information requests but further action even on those facilities is on hold. EPA Region 1 and the Maine DEP have now determined that DEP, which administers a partially delegated NPDES program, now has the statutory capacity to administer the 316(b) program. DEP is in the process of formally seeking explicit delegation for the 316(b) program as anticipated under the original EPA-DEP NPDES Memorandum of Agreement. The DEP has indicated it intends to wait until after EPA issues a final rule implementing Section 316(b) before DEP decides how it proposes to implement 316(b) as a delegated state.
Posted on January 15, 2013
The Attorney Generals of thirteen states (Alabama, Arizona, Georgia, Kansas, Michigan, Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota, Texas, Utah and Wyoming) are investigating EPA's sue-and-settle practice. At issue is the EPA's practice of entering into voluntary settlements of lawsuits brought by environmental groups, through consent decrees, in which the EPA commits itself to promulgate environmental rules and regulations, often under strict time schedules, without input from other stakeholders and impacted parties, including the states. Often-times the EPA also reimburses the environmental group for its attorney fees. Although the stakeholders may have input in the subsequent rulemaking process, the concern is that the effectiveness of such input may be limited because certain results are prescribed by the voluntary settlement or because the agreed schedule effectively limits meaningful input and consideration.
These same concerns were also recently discussed in the June 28, 2012, hearing before the Oversight and Government Reform Committee of the U.S. House of Representatives. Hearing statements and testimony provided good descriptions of (i) how sue-and-settle settlements are a form of "off ramp" rulemaking bypassing the traditional rulemaking concepts of transparency, public participation and judicial review; (ii) how billions of dollars in added costs and millions of lost jobs have resulted from these off ramp settlements and why these added regulatory burdens may not have resulted had the traditional rulemaking process been followed; and (iii) the specific impact of EPA's sue-and-settle settlement upon the Regional Haze rules.
On August 10, 2012, the thirteen Attorney Generals submitted a Freedom of Information Act (FOIA) request to EPA. Among other things, the request seeks communications between EPA and 80 identified "interested organizations", and specifically identifies 33 sue-and-settle settlements entered into by EPA in the last three years. After noting in a press release that EPA entered into one consent decree on the same day the lawsuit was filed, the states seek to determine whether there was collusion to advance a common agenda between the environmental groups and EPA. The FOIA request’s stated purpose is to provide a report to be furnished to the states and Congress outlining EPA's practice. So far, the EPA has done little but object to producing documents, seeking to impose fees upon the states even though the request should be exempt from fees. No meaningful production of documents has occurred.
Certainly there are some good arguments to be made regarding the benefits of allowing citizen groups to file lawsuits to hold EPA accountable. Similarly, there are articles refuting the suggestion of collusion concerning certain prior EPA settlements. Nevertheless, where important environmental policy issues are at stake with far reaching economic consequences, there should never be any question about collusion or secrecy. Transparency should always be the watchword. EPA’s production of the requested documents would do much to advance the goal of transparency. If the settlements were in the best interest of the public, they should be able to withstand the glare of public scrutiny.
Posted on January 7, 2013
Environmental practitioners and their clients have benefitted greatly from the EPA’s historic implementation of the EPA Audit Policy. Thus, the level of concern that has been expressed by environmental practitioners in response to EPA’s statements that the Audit Policy may not live through 2013 is not surprising. For background, see Linda Bochert’s posting, “Dear EPA: please don’t abandon your Audit Policy!”, and FY2013 OECA National Program Manager Guidance.
EPA has discussed the basis for its proposal to abandon the Audit Policy in terms of perceived decreasing utility, which creates difficulty in justifying the expense of implementation. The explanation goes something like this: with the maturity of the environmental programs, regulated industry knows that it needs to comply by now, thus the incentives provided by the Audit Policy are no longer necessary. Also, along with industry outgrowing the original purpose of the Policy, the cost of implementing the policy does not justify its continued implementation in this era of shrinking budgets, particularly given the relatively minor noncompliance events reported pursuant to the Audit Policy.
Has EPA really considered the entire calculus? And, assuming one buys into the external benefits provided by the continued implementation of the Audit Policy, given what’s at stake, isn’t it worth developing options for implementation that don’t impose the same level of staff investment?
Many believe that the Audit Policy has served a purpose far greater than the mere forgiveness of the gravity component of the reported noncompliance events. For many years, the EPA Audit Policy has provided regulated entities with a mechanism to conduct compliance audits with confidence that noncompliance issues can be corrected without fear of punitive enforcement action. The Audit Policy continues to serve this purpose, despite the maturity of the environmental programs, because the nature of regulated entities and industry sectors is so dynamic. Regulated entities are in a constant state of change, as are many EPA programs at any one time. EPA’s assertion that the EPA’s Audit Policy is no longer needed contemplates regulated entities and applicable regulations as static and monolithic bodies and does not recognize the constant state of change across industry sectors and within individual entities, particularly in response to new and modified regulations. Industry sectors also vary in their inherent levels of sophistication and adaptability to changing regulatory requirements, depending in large part upon the degree to which the industry has been pervasively regulated in the past. New regulations across an industry sector upset the equilibrium and demand new management models and compliance approaches, requiring a period of education, acquisition of staff, operational and cultural adaptation to the new requirements. Adaptation within industry sectors can be slowed when immediate demands are placed on sector resources for all entities in that sector simultaneously such as occurs with new industry sector-wide regulation, prioritizing rapid reaction to new regulation over comprehensive proactive compliance. In this regulatory environment, the Audit Policy continues to serve the same purpose as it always has, to encourage a culture of compliance in the dynamic landscape in which regulated entities operate.
To read more and provide your own input on how you believe EPA should approach the future of the EPA Audit Policy, click here.
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 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 December 7, 2012
Since the early days of the Superfund program, EPA has required settling parties to provide financial assurance of the PRPs’ (potentially responsible parties) ability to perform the cleanup work. EPA regulations afford PRPs a choice of financial assurance mechanisms to fulfill this requirement including: a self-funded trust, bonds, letters of credit, insurance or the satisfaction of the “financial test” provided in 40 CFR §264.143(f).
As originally promulgated, the financial test applied to owners and operators of hazardous waste facilities permitted under RCRA. EPA has adopted this test for Superfund financial assurance requirements and state agencies have likewise borrowed it for their own programs. For many years, the “financial test” was the least cumbersome method for PRPs to satisfy their long-term financial assurance obligations. It was also attractive to PRPs because as long as at least one large company met the test, the other PRPs could save the cost of employing alternative financial assurance mechanisms such as prefunding their entire obligation or purchasing letters of credit. Further, while the financial test in 40 CFR §264.143(f) does include very specific and complex financial criteria, in practice EPA often found submission of financial statements or other public financial reports by large companies to be sufficient.
In recent years, perhaps in recognition of the new economic order where major airlines, automobile manufacturers and even manufacturers of famous brands such as Twinkies have filed for bankruptcy, EPA has made strict compliance with the financial means test a settlement priority. All of the forms for financial assurance are now prescribed via EPA’s website. Perhaps the most challenging form for a financial means proponent is the sworn letter from the company’s CFO or accountant certifying that the company satisfies the different elements of the financial test. The letter must be updated and resubmitted every year. The form letter may be found here.
In an era where CFOs and accountants are already burdened with a host of new Sarbanes-Oxley requirements and other regulatory controls, companies are less than enthusiastic about preparing another set of certifications to EPA concerning their company’s financial status. A further challenge presented by the letter is that it must be submitted on behalf of the specific entity participating in the settlement or its parent. Often, a parent corporation cannot or does not want to guaranty a subsidiary’s obligations, and its subsidiary’s financials may not be maintained in a format which makes compliance with the EPA letter practical or feasible.
EPA’s renewed emphasis on financial assurance requirements is understandable in today’s economic climate and even has some benefit for performing parties interested in ensuring that other settling PRPs likewise perform. Indeed, PRP Groups, with the self-interest of protecting themselves from each others’ business failures, often require their group members to provide letters of credit for the benefit of the Group or prefund their Superfund settlement shares into a Group- controlled trust, even if other financial assurance mechanisms have been selected to satisfy EPA.
Whether PRPs like it or not, what is clear is that the era of less than strict compliance with EPA’s financial assurance requirements for Superfund settlements is over.
Posted on December 4, 2012
On March 13, 2012, eleven environmental organizations, led by Gulf Restoration Network ("GRN"), filed
a federal Clean Water Act (CWA) citizen suit which demanded that the U.S. Environmental Protection
Agency (EPA) set federal numeric standards for nitrogen and phosphorus for water bodies within the 31
states comprising the Mississippi River Basin ("Basin States"). Gulf Restoration Network v. Jackson,
E.D. La., No. 2: 12-cv-00677 ("GRN Suit"). The complaint alleges that EPA has failed to develop
numeric water quality criteria for nitrogen and phosphorus in the Basin States. EPA's answer states that it
is appropriately deferring to each state to promulgate numeric nutrient criteria ("NNCs") that satisfy
Clean Water Act water quality standards within the state and that, consequently, federal NNCs are not
appropriate. The trial judge ruled on September 19, 2012 that the case will be decided on "cross-motions
for summary judgment, with no initial disclosures or other discovery." In the same order, the judge set a
briefing schedule for the parties (including numerous entities to which the court granted permission to
intervene) that will extend through the beginning of June of next year.
The GRN Suit, as well as other similar suits that are active in other regions, have prompted many state
environmental agencies to work diligently, pursuant to EPA's deference and also its demand, to develop
NNCs as quickly as possible. If EPA wins the GRN Suit, the Basin States will have to be ready to go
forward with promulgation of their NNCs. If EPA loses, they may be subjected to more stringent federal
NNCs on a "one size fits all" basis. A settlement could mean an even different outcome for all ofthe
In Mississippi, the state's Department of Environmental Quality ("MDEQ") has formed a Nutrient
Technical Advisory Group (TAG) to develop scientifically defensible NNCs that are appropriate for
Mississippi's surface waters. The TAG is composed ofMDEQ staff, MDEQ's external consultants and
in-state university personnel who have water quality expeiiise and is meeting on a regular basis. MDEQ
staff members have stated that the agency's plan is to have draft NNCs developed for all state waters,
excluding the heavily agricultural Delta counties, by June 30, 2013. The draft NNCs for the Delta are to
be developed by November 30, 2014. MDEQ wil then publish these draft NNCs for public comment.
MDEQ has held several stakeholder meetings to discuss the development of Mississippi's NNCs and to
provide an opportunity for questions and comments. The MDEQ staff members have consistently
explained that they are considering "what is protective of the environment" rather than "what is
technically achievable." The new NNCs wil be "worked into permits" as they come up for renewal and
permittees wil be allowed a "reasonable time frame" to come into compliance with the new NNCs.
The key issue for the regulated community in Mississippi, as in other states, will be the cost of
compliance with these new NNCs, which could bear a very expensive price tag. In Florida, for example,
a national environmental engineering consultant prepared an economic analysis of proposed NNCs. The
estimate for direct compliance costs ranged from $ 1.5 bilion annually (best management practices for
impaired water categories) to $4.5 billion annually ("end of pipe" requirements for all water categories).
Regulated communities in Mississippi and in other states across the country are engaging with scientific
and economic data and consultants in order to have an impact concerning this volatile issue. A lot is on
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 October 29, 2012
The aim of this post is to encourage environmental lawyers to pay more attention to issues and developments in human health risk assessment.
Remedial clean ups under Superfund and RCRA are very largely driven by human health risk assessments carried out under EPA’s Integrated Risk Information System (IRIS) as applied to chemicals on the site. The health-protective regulations under the Clean Air Act also are typically the product of statutorily mandated human health risk assessments. Mass tort cases seeking medical monitoring and personal injury are often based on such assessments. Just as the cost of clean up and CAA compliance are driven by these assessments, so too are numerous corporate decisions on what chemicals to use in manufacturing and commercial activity.
Despite its centrality to so many important activities, IRIS is cordoned off from most of the legal system. It is not rooted in or governed by any statute. Its results are not reviewable except in the context of their application to a particular site – and if that site is governed by Superfund, review, as a practical matter, is available only at the end of the remedial process. Perhaps because of this structure and because human health risk assessments are an intensely scientific undertaking, the presence of lawyers is very little felt.
Nonetheless, environmental lawyers should be aware of some on-going efforts aimed at examining and reforming IRIS and similar systems.
First, the Administrative Conference of the United States commissioned Prof. Wendy Wagner of the University of Texas School of Law to undertake a study entitled “Science in the Administrative Process: A Study of Agency Decisionmaking Approaches.” Prof. Wagner details in 80 pages how the processes of EPA (including IRIS), the Fish and Wildlife Service (endangered and threatened species listing) and the Nuclear Regulatory Commission use science in regulatory decision-making. These useful guides are followed by almost 40 pages of recommendations and suggestions of best practices on issues such as the role of OMB in reviewing proposed agency actions with a major scientific component and the right of staff scientists to dissent from agency actions. Not surprisingly, given Prof. Wagner’s professional background, most of the topics on which she focuses are readily accessible to lawyers.
On September 10, 2012, the Administrative Conference held a workshop open to the public on many of Prof. Wagner’s ideas and proposals. It did not appear to me that very many environmental lawyers were on the stage or in the audience, despite the fact that issues and reforms discussed were central to their professional lives.
Second, in 2009, the National Academies published “Science and Decisions: Advancing Risk Assessment.” The volume focuses on EPA and IRIS. It is a thorough review of the issues and challenges of risk assessment from scientists who are, from time to time, called on to review EPA’s handiwork. Although some of the advice is merely editorial – be succinct and to the point, one chart or figure can be worth a thousand words – the authors address many of the major scientific issues in risk assessment, e.g. the selection of default values given the known sensitivity of a lab animal to a chemical, the probable sensitivity of humans has to be “calculated” or how to treat cumulative risks where there is exposure to two or more chemicals.
EPA is now working on implementing many of the suggestions set out in “Science and Decisions.” In September, 2012, the comment period closed on the draft of EPA’s “Framework for Human Health Risk Assessment to Inform Decision Making.” This document responds in large part to “Science and Decisions,” addressing “the recommendation that EPA formalize and implement planning, scoping, and problem formulation in the risk assessment process and that the agency adopt a framework for risk-based decision making.” EPA is not done absorbing “Science and Decisions” and the National Research Council is not done with EPA. The Council will continue to review how EPA implements IRIS. There will be an emphasis on EPA’s weight-of-evidence analyses and recommended approaches for weighing scientific evidence for chemical hazard and dose-response assessments. See Review of the IRIS Process, National Academies Current Projects.
The ongoing initiatives will provide the structure and the process for human health risk assessments in the future. The work of environmental lawyers will be shaped by what the scientists decide. Environmental lawyers should be engaged in these debates and arguments now.
Posted on September 19, 2012
In his blog post of August 27, Rob Brubaker reported on three cases in which the courts refused to grant deference to EPA decisions under the agency’s Clean Air Act authority. EPA has fared a bit better in two recent Clean Water Act cases.
In Upper Blackstone Water Pollution Abatement District v. EPA case, the issue was whether EPA properly issued a stringent NPDES permit renewal to a sanitary district to control excessive nitrogen and phosphorus loading. The First Circuit Court of Appeals rejected the district’s argument that EPA should have waited until the district could complete its modeling effort, even though the model did not seem close to ready, and that EPA did not apply the best science. The court declined to conduct a de novo review of EPA’s scientific analysis, limiting its inquiry to whether EPA followed the appropriate administrative process, based its decision on record evidence and clearly articulated its reasoning. So long as the criteria imposed are within the “zone of reasonableness”, the court will not strike it down.
Interestingly, the Upper Blackstone court also rejected the district’s argument that the new permit is improper because even with stricter criteria, it would not be sufficient to correct the eutrophication problem in the watershed. The court set that aside, noting that the CWA contemplates multiple sources of contamination and no one party is responsible for cleaning up the river.
The Upper Blackstone case is consistent with the U. S. District Court’s decision in the Northwest Environmental Advocates v. EPA, which I discussed in my March 23 post. In the latter case, the court upheld EPA’s approval of Oregon’s numeric temperature standards, deferring to the EPA’s scientific expertise. It took issue with the narrative Natural Conditions Criteria because it was so broad that the court concluded it supplanted numeric standards. The court left the door open for the Oregon Department of Environmental Quality to rewrite the narrative standard for EPA review, based on the agencies’ own review of the science and a good explanation in support of the standard.
It appears the theme running through three Clean Air Act cases cited in the Brubaker post is that the reviewing court found no authority supporting EPA’s action, or that EPA’s interpretation defied the plain meaning of the statute. In the Clean Water Act cases, EPA overreaching on the Upper Blackstone permit or approval of Oregon water quality standards was not at issue. The focus instead was on whether EPA demonstrated it properly considered the best science available under the authority it had, and then explained how it got to its decision. In that context, EPA and state regulatory agencies will win more than they lose.
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 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 17, 2012
In an effort to inject (no pun intended) regulatory certainty into the permitting of underground injection wells used in oil and gas hydraulic fracturing (HF) operations, on May 10, EPA issued draft guidance for HF operators utilizing diesel fuels in their injection process. EPA did not initially consider HF to be covered by its Safe Drinking Water Act (SDWA) Underground Injection Control (UIC) program. EPA's view changed as the result of a number of court decisions which concluded that HF activities are subject to that program. In 2005, the Energy Policy Act revised the SDWA definition of underground injection was modified to exclude from UIC regulation the underground injection of fluids or propping agents other than diesel fluids used in HF operations related to oil, gas and geothermal production activities. This exclusion has, understandably, proven to be controversial, at least in part because there is no one definition of what constitutes "diesel fuel". The EPA draft guidance attempts to bring clarity to the definition of what constitutes a diesel fuel, by examining whether the injectate is included in one of six identified chemical abstracts and whether the fluid is commonly referred to as "diesel fuel". The draft guidance also touches upon other issues associated with HF operations including which activities are covered by the UIC program and the management of wells over their operational lifetime.
The comment period for the draft guidance closed on July 9, and the guidance, when finalized, will apply only to those jurisdictions in which the EPA directly implements the UIC program (fourteen states and territories and most tribal lands). The guidance, along with proposed requirements for HF on public lands published almost contemporaneously (77 Fed. Reg. 27691; May 11, 2012), signal an intention of the federal government to bring certainty to a very uncertain and controversial issue, and to impact a rapidly expanding industry which has previously been subject primarily to state and local regulation.