Clear Skies, Cloudy Regulations
Speech given August 21, 2003
Montgomery County
Continuing Legal Education
Kenneth R. Myers, Esq.
High Swartz LLP
Norristown, PA
EPA Developments: Whitman's Final Score
Before departing from her post as Administrator of the U.S. Environmental Protection Agency, Christie Whitman issued the agency's Draft Report on the Environment scoring progress on all fronts, including air pollution, since 1970. The report concludes that emissions of "the six most common air pollutants" (in fact, the criteria pollutants identified by EPA under the Clean Air Act) have declined 25%. In the same period, according to the report, GDP rose 161%, energy consumption rose 42% and vehicle miles traveled rose 149%. The report, clearly pleased with the results of EPA's first thirty-plus years, nonetheless states that "work remains to ensure steady progress in air quality." Areas of the country that remain in violation of primary NAAQS (health-based National Ambient Air Quality Standards) and indoor air toxics are mentioned in this regard.
The report was greeted with disapproval because of its handling (or non-handling) of global warming. Hewing to the White House policy on Kyoto, the report simply refers to other sources to address "the complexities of this issue." The White House position remains unchanged, that global warming needs more study before undertaking any program as costly and constraining as reducing emissions of CO2 and other greenhouse gasses.
Clear Skies Initiative
The Administration's primary policy position on clean air is the Clear Skies Initiative, a combination of regulatory and legislative changes designed to give industry more flexibility while imposing tighter limits on the smog precursor NOX (Oxides of Nitrogen), the toxic contaminant Mercury, and the criteria pollutant SO2. Using emission allowances and trading programs (as typified by the existing SO2 program for powerplant boilers and other major sources), the plan of the proposed legislation is to reduce emissions beginning in 2008, reaching full effectiveness by 2018. The goal of changes in regulations includes clarifying and easing the burden of New Source Review (NSR).
The legislative component, the most significant element of the Clear Skies Initiative, remains pending as H.R.999 and S.485, which the Congress shows no strong desire to muster out. Senator Jeffords (Vermont) refers to it as a "sweetheart deal" for the coal industry.1
As to the regulatory elements, in the past year EPA has taken two steps forward and possibly one step backward in its effort to revamp New Source Review ("NSR").
On December 31, 2002, EPA announced the adoption of changes to the NSR rules.2 Under these rules, the construction of a new "major source" or the modification of a major source which produces a "significant" increase in emissions must be examined and approved by the state agency or EPA under the "PSD" program (Prevention of Significant Deterioration, imposing statutory limits on the "increment" of degradation of air quality that may be produced from any one plant, and a requirement that the "best available control technology" or BACT be utilized) or the "Non-Attainment" program (in areas that do not meet the NAAQS ambient air quality, major new plants or modifications must meet the "Lowest Achievable Emission Rate" or LAER, and provide emission offsets exceeding the projected emissions).
The rule changes in December establish new definitions for the term "major modification." Previously, except for steam electric powerplants subject to the "WEPCO Rule," the math for determining if a modification is "significant" required comparing future "potential to emit" (PTE) with past actual emissions. The rule change in December allows the comparison to consider projected actual emissions that reflect practical and economic limits on the future operation of the source. The period for establishing historic actual emissions is expanded.
Also new in December 2002 is a "Plantwide Applicability Limit" (PAL), allowing a plant operator to avoid NSR by managing all source operations to assure that no major increase in emissions occurs. "Clean units" that have been through NSR may be modified without further NSR review during the next ten years. "Pollution Control Projects" which do not contribute to a NAAQS violation or exceed a PSD increment are exempted from NSR.
On March 10, 2003, EPA adopted a rule applying the December regulations to areas in which the federal government provides the implementation plan ("FIPs"), including Indian reservations and those few areas within states where EPA has taken over writing the rules.3
Several northeastern states and environmental groups filed suit against the December 31 revisions, and some also filed Petitions for Reconsideration with EPA.
On July 30, 2003, EPA announced that it would reconsider five aspects of its December 31 changes: the allowance of "Plantwide Applicability Limits" ("PAL") based on the maximum emissions of any 24 month period during the previous ten years plus the "potential to emit" ("PTE") of any new equipment added after the base period. Also to be reconsidered is the EPA decision that the effect of modifications to existing facilities will be judged on a comparison of past actual to projected actual, not PTE, and a further provision extending the actual-to-projected actual method for replacement units. The EPA will reconsider the "clean unit" exclusion. The fifth area of consideration involved record keeping. Although agreeing to receive comments and reconsider, EPA did not stay the effectiveness of the new rules.
Routine Maintenance
Also on December 31, 21002, EPA proposed to clarify and expand the categories of activities that will be considered RMRR in the future.4 EPA states that uncertainties regarding the activities that fit within RMRR have created problems for industry and resulted in a need for case-by-case analysis of projects. The proposals include various options that would be voluntary (owners or operators could opt to continue using the current procedures for determining what activities constitute RMRR at their facilities, or could invoke the new rules to secure exemption from NSR). EPA seeks public comment but warns that its proposals "should not be used or cited in any litigation as the final position of the Agency."
The Northeast Ozone Problem
EPA continues to litigate the many cases filed during the Clinton Administration against powerplants for alleged NSR violations. The issues surround the exception to NSR requirements that EPA has always recognized, namely, that "routine maintenance, repair and replacement" of equipment does not constitute a modification. The interpretation of those terms has varied substantially from time to time. A number of electric utilities have settled with EPA in the past year, agreeing to implement additional controls and to pay fines that are significant in some cases.
Pending Congressional action on the Clear Skies Initiative, the SIP call remains in effect, requiring eastern and Midwestern states to tighten their NOX controls.
Continuous or Intermittent Compliance
In 1999, the D. C. Circuit Court of Appeals overturned a portion of the Title V Permit regulations of EPA (in the Compliance Assurance Monitoring or "CAM" Rule) in regard to periodic reporting of compliance status by permit holders. Natural Resources Defense Council v. EPA, 194 F.3d 130 (D.C. Cir. 1999). The court ruled that the compliance certification must state whether the facility or source has been in continuous or intermittent compliance. EPA has now revised its regulation to conform to the ruling.5
Classifying "Major" Sources
The Clean Air Act calls on EPA to carry out "prevention of significant deterioration" (PSD) review of any proposed construction or modification of a "major" stationary source. The law specifies that a source is major if it will emit 100 tons per year of a regulated air contaminant and appears on a list of sources contained in the statute, including "chemical process plants." PSD review is also required for a major project that is not listed but will exceed 250 tons per year emission of a regulated contaminant. In Lafleur v. Whitman, 300 F.3rd 256 (2 Cir. 2002), a municipal waste and sewage sludge recycling project was proposed for Middletown, New York, which would have emissions exceeding 100, but less than 250 tons per year. The facility would produce ethanol and carbon dioxide suitable for commercial sale. The New York State Department of Environmental Conservation issued a permit for the plant without requiring PSD review. EPA at first agreed that the plant would carry out "refuse processing," and was not a chemical processing plant within the meaning of the PSD program. But EPA changed its mind and decided that some of the processes within the waste plant were within the definition of a "chemical processing facility". However, the EPA also concluded that those processes (examined separately) did not generate 100 tons per year emission of any contaminant. The court found that Department of Commerce instructions for applying SIC Codes would allow the logic used by EPA in dividing the plant functionally for purposes of classifying it. The appeal petition of neighbors seeking to require PSD review was, therefore, denied.
Overfiling
In the air field, "overfiling"--although uncommon--has garnered additional support in the past year. In U.S. v. Price, 314 F.3rd 417 (9 Cir 2002), a county health department in Nevada filed a Notice of Violation against the defendant as a result of shortcomings in an asbestos removal project. A settlement was reached including a significant penalty payment. Two years later, a federal grand jury returned a criminal indictment against the defendant based on the identical facts and violation of the identical regulations. The Ninth Circuit Court of Appeals held that the state and federal enforcement actions, although based on identical regulations, were separate proceedings and did not constitute double jeopardy.
TVA Case on ACO
The Clean Air Act empowers EPA to issue an Administrative Compliance Order ("ACO") without a hearing. EPA issued an ACO against the Tennessee Valley Authority, asserting that a number of rehabilitation projects at TVA electric power plants required NSR permits that TVA did not obtain. When negotiations failed, EPA did not proceed to federal district court to prove the violations and secure a remedy. Rather, it decided to assign the task of taking evidence on the ACO to the Environmental Appeals Board (EAB), which assigned it to an administrative law judge. The EAB was instructed not to make findings of fact and was given a limited time in which to act. The ACO was, for the most part, affirmed by the EAB, and TVA appealed. Tennessee Valley Authority v. Whitman, -- F.3rd -- (11 Cir. 2003). The court ruled that the hearing by the EAB did not constitute due process of law. The court also refused to review the ACO on the merits, finding that it did not constitute "final agency action" under the Clean Air Act and hence was not appealable. The ACO process utilized by EPA in an effort to secure an enforceable agency order, although struck down in this instance, may remain viable where an emergency or imminent and substantial endangerment is threatened.
Pa. Environmental Quality Board
New regulations have been issued in the past year in efforts to reduce Volatile Organic Compound (VOC) emissions. Portable fuel containers of capacity up to 10 gallons, used in this state, are now required to have automatic closure devices and overflow protection.6 A more sweeping rule adopted at the same time will require 80 types of consumer product to satisfy VOC content limitations, expanding and tightening the effects of a rule adopted by EPA in 1998 for a smaller number of products.7 Items addressed include air freshener, antiperspirants, cooking spray aerosols, floor polish and paste wax, glass cleaner, nail polish remover, shaving cream, and tile and wall cleaners, inter alia. The rule implements a Northeast Ozone Transport Commission initiative. It takes effect for the manufacture and sale of covered products on and after January 1, 2005.
Pa. Environmental Hearing Board Held Not a Policy Body
In Pa.DEP v. North American Refractories, 791 A.2d 461 (Commonwealth Ct. 2002), a kiln operator shut down a unit in 1997. In 1998 it decided that the shutdown would be permanent, and within a year it applied for an ERC (Emission Reduction Credit). DEP denied the credit because the application had not been filed within one year of the "initiation of [the] emissions reduction" as called for under the regulations. Refractories appealed and the Environmental Hearing Board, after hearings and consideration of the DEP's interpretation of the regulation, concluded that Refractories was entitled to the ERC. The DEP appealed that ruling to the Commonwealth Court, which reversed. The court ruled that the DEP's interpretation of its regulations is entitled to "great deference," whereas the Board is not a policy making body and does not have the expertise of the Department. Therefore, the Board cannot reject an interpretation of a regulation by DEP if that interpretation is "reasonable."
A further holding in the same vein arose in Browning-Ferris Industries, Inc. v,. Pa. DEP, 819 A.2d 2148 (Commonwealth Ct. 2003). Browning-Ferris proposed to accelerate the rate of disposal at an approved landfill, but needed a permit modification. DEP granted the modification over neighbor complaints, making the necessary finding that the "benefits clearly outweigh the harms." The only identifiable benefit, however, was the acceleration of "host fees" to the municipality (the payments per ton of waste buried); the total sum paid would not change because the total landfill capacity was not increased. The Environmental Hearing Board decided that the acceleration of benefits would be matched by an acceleration of detriments (litter, noise, vectors), and that there was no basis for the Department's conclusion that the benefits clearly outweigh the harms. It reversed the DEP action. Again, the Commonwealth Court held that the Board is bound by a Department interpretation of the regulations (in this case, the weighing of benefits and detriments), and reinstated the permit modification.
The potential implications of American Refractories and Browning-Ferris are significant. The Board hears cases de novo under law; but if it is bound to accept any judgment or interpretation by the Department that is "reasonable," this is likely to decide the result of most if not all cases. Refractories involved a relatively pure question of the meaning of a regulation. Browning-Ferris, however, involves a number of judgments of fact - benefits and harms -- rather than expertise in a reading of a regulation.
1) Both Bills are in subcommittee. The Senate subcommittee has held hearings on S. 485 this Spring.
2) 68 Federal Register 80186 et seq (December 31, 2003).
3) 68 Federal Register pp. 11316 et seq (March 10, 2003).
4) 68 Federal Register pp. 80290 et seq (December 31, 2002).
5) 68 Federal Register pp. 38517-38523 (June 27, 2003).
6) 25 Pa. Code § 130.101 et seq., added at 32 Pa. 4819 (October 4, 2002).
7) 25 Pa. Code § 130.201 et seq., added at 32 Pa. B. 4824 (October 4, 2002).
