Appeals Court Revokes Injunction Which Had Blocked Ohio EPA's BAT Exemption for Small Air Pollution Sources
Back in 2006, the Ohio Legislature passed Senate Bill 265 which was hailed as the biggest change to air pollution control regulations in Ohio in several decades. The center piece of the legislation was an exemption for smaller sources of air pollution (10 tons per year or less) from having to comply with Ohio's Best Available Technology (BAT) standard.
The BAT standard was seen as requiring more air pollution controls than other states thereby raising compliance costs for Ohio businesses. Business groups argued that the BAT standard put Ohio at a competitive disadvantage.
When the exemption was passed in 2006, Ohio EPA started to issue permits to companies with less than 10 tons per year (tpy) in emissions without requiring BAT. For around three years, permits were issued to businesses in this manner.
Ohio Seeks Blessing from U.S. EPA to Remove BAT Requirement
While Ohio EPA issued permits to companies without the BAT requirement, the State still was required to obtain approval from U.S. EPA to remove this requirement from its approved plan to comply with federal air pollution standards (referred to as the "State Implementation Plan" or SIP). Each State must submit a SIP to U.S. EPA for approval which demonstrates it will meet federal air quality standards.
The BAT requirement is in Ohio's approved SIP. In June 2008, Ohio EPA sought approval from U.S. EPA to remove the requirement. (See, prior post). U.S. EPA requested information from Ohio EPA to support removal of the BAT requirement. Six years after S.B. 265 was passed, Ohio EPA still has not been able to supply the information to U.S. EPA to secure approval to change its SIP to allow for the 10 tpy BAT exemption.
Failure to secure U.S. EPA's approval created a challenging regulatory environment. S.B. 265 and the BAT exemption was Ohio law. However, U.S. EPA never approved the change to the SIP. Therefore, from U.S. EPA's vantage point Ohio sources still need to comply with the BAT requirement and Ohio is in non-compliance with the Clean Air Act.
Sierra Club Challenges the Ohio BAT Exemption
In September 2008, the Sierra Club sued the Director of Ohio EPA under the Clean Air Act citizen suit provisions. The Sierra Club argued that the Director was in violation of the Clean Air Act because it was issuing permits to companies with less than 10 tpy in emissions without the BAT requirement. Since U.S. EPA didn't approve the 10 tpy BAT exemption, the Sierra Club argued Ohio was in violation of its SIP.
The District Court ultimately agreed with Sierra Club an issued an injunction requiring Ohio EPA to enforce the BAT requirement regardless of the 10 tpy exemption in S.B. 265. On July 2, 2010, Ohio EPA issued memorandum to all air permit staff within the Agency to start enforcing the BAT requirement against sources less than 10 tpy.
Since July 2, 2010, Ohio EPA has been issuing permits to sources less than 10 tpy with the BAT requirement.
Sixth Circuit Overturns District Court
On May 25, 2012, the Sixth Circuit Court of Appeals issued a decision which overturns the District Court ruling and removed the lower Court's injunction against Ohio EPA. The Sixth Circuit Court held that the Sierra Club, as a citizen group, did not have a legal basis to bring the lawsuit.
The Court held that the citizen suit provision of the Clean Air Act only allows lawsuits against sources that violate an emission standard. The Court held the citizen suit provision does not allow suits against regulators (i.e. Ohio EPA) who are not in compliance with their SIP.
The Court noted that the Clean Air Act gives exclusive power to U.S. EPA to take action against a State refusing to comply with its SIP. After waiting for the eighteen months required under the Clean Air Act, U.S. EPA can:
- Can take direct enforcement against businesses who are not complying with the BAT requirement;
- Can take over administration of Ohio's SIP; or
- Can sanction Ohio for failing to comply with its SIP by withdrawing the State's federal highway funds.
In the Six Years since Reforms were passed Ohio Businesses face Greater Regulatory Uncertainty
Some other commentators have suggested that the Sixth Circuit ruling clears the path for Ohio EPA to exempt small Ohio businesses from the 10 tpy BAT exemption. However, until Ohio EPA actually secures U.S. EPA approval for the 10 tpy exemption, nothing is certain.
- Businesses that received permits during the time period from 2006 to 2010 when Ohio EPA was not requiring BAT on 10 tpy sources could face direct enforcement from U.S. EPA;
- Businesses emitting 10 tpy or less that received permits from 2010 to 2012 were required to comply with BAT even though the District Court injunction has since been invalidated;
- After the ruling will Ohio EPA begin issuing permits to sources less than 10 tpy without requiring BAT? If so, the universe of companies facing potential U.S. EPA enforcement will grow
The only good resolution to this uncertainty is for Ohio EPA to immediately gather the information requested by U.S. EPA and secure approval for its SIP modification. However, this is not something Ohio EPA has been able to do in several years due the complexity involved with U.S. EPA's request.
The 2008 letter from U.S. EPA denying Ohio EPA's request to amend the SIP makes clear Ohio EPA needs to do more than just provide information to U.S. EPA. Rather, Ohio EPA would likely need to propose new controls to replace the reductions U.S. EPA believes were obtained through implementation of the BAT requirement (i.e. the Clean Air Act's "anti-backsliding" requirement).
In otherwords, for the reforms to be fully implemented after six years, Ohio EPA will likely have to impose greater regulation on some subset of Ohio businesses.