Ohio Environmental Law Blog : Ohio Environmental Lawyer & Attorney : Joseph Koncelik : Frantz Ward Law Firm : Environmental Regulation, Land Use, Compliance : Cleveland, Ohio

Today, Ohio EPA released its response to the federal court ruling which struck down the exemption from BAT for sources that emit less than 10 tons per year.  The memo makes clear that it supplants the February 2nd e-mail instructing staff to not issue air permits until the ruling was evaluated. 

There are few surprises in the memo.  It basically states sources will have to go back to case-by-case BAT evaluations.  This was what Senate Bill 265 was designed to eliminate.  Therefore, three years after passage of the bill the status quo remains. 

The memo also says Ohio EPA has supplied some information to U.S. EPA to support the rule exempting sources less than 10 tons per year.  However, U.S. EPA requested additional information which it could not supply due to staffing shortages.  The memo contains no discussion of what has been supplied or what additional information is going to be collected. 

The memo also points out that there may be instances when sources less than 10 tons per year have more stringent regulations than sources greater than 10 tons per year.  I don't anyone anticipated that outcome three years after passage of Senate Bill 265.

Also, notably absent is any discussion of the status of air permits that were issued over the last three years without BAT in accordance with the exemption. The memo only states that Ohio EPA has yet to make a decision as whether to go back and re-issue these permits.  Businesses holding these permits received no word as to whether they are still considered valid or subject to potential federal enforcement. 

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Major uncertainty surrounds Ohio's air permtting program.   I use the term "certainty" because that was the buzz word utilized when business groups fought hard for major reforms that eventually were passed in Senate Bill 265 in 2006. 

Back in 2006, business groups were concerned that  Ohio's system for issuing air permits was far more onerous and unpredictable than other states.  The focus of attention was the requirement to install Best Available Technology (BAT) on smaller sources of air pollution.  

Business groups complained BAT was imposed on an "ad-hoc" case-by-case basis.  Individual permit reviewers could develop inconsistent determinations as what constituted BAT on same or similar sources.  The goal was to get away from this uncertain application of BAT.

The two major reforms secured in Senate Bill 265:

1. All sources less than 10 tons per year (tpy) were no longer required to install BAT
2. For all sources larger than 10 tpy, Ohio EPA could only require BAT through rulemaking that defined BAT consistent with elements set forth in S.B. 265.  It was contemplated the rules would spell out the requirements for various source categories.  Thus, providing certainty by avoiding case-by-case determinations of BAT.

What is the status of air permitting in Ohio three years after passage of these reforms? 

• Business have far less certainty regarding Ohio's permitting process than they did three years ago (prior to S.B. 265)
• Businesses are caught in a stalemate between U.S. EPA and Ohio EPA that could subject them to federal enforcement and make their permits invalid
• Ohio businesses are no closer to avoiding case-by-case BAT decisions as they were three years ago
• In some cases, businesses will take longer to get their permits and still have the same level of required controls
• The two major reforms (the less than 10 tpy exemption and BAT through rulemaking for larger sources) will never be implemented unless hard choices are made.

To preserve the two major reforms, means facing the reality that federal law requires Ohio demonstrate the changes are valid. How does Ohio demonstrate validity?

1. Ohio EPA would have to quantify the lost reductions from "weakening" the BAT requirement (something Ohio EPA hasn't done in three years).
2. The business community will have to help direct the Agency in identifying new air pollution control programs that can be used to offset the lost reductions attributable to BAT.

Less Than 10 TPY Exemption

My last post discussed the recent federal court ruling which determined the exemption from installing BAT for sources smaller than 10 tpy was inconsistent with federal law.  The Court found Ohio EPA failed to properly revise its State Implementation Plan (SIP- the State plan for how it will meet federal air quality standards).

At issue, was a prohibition contained in the Clean Air Act called "anti-backsliding."  In essence, if a state is going to reduce air pollution requirements on one set of sources it must make up for lost reductions by imposing more stringent controls someplace else.

The response to the Court decision by some business groups is to urge Ohio EPA to appeal the Magistrate's decision.  This from the Ohio Manufacturer Association (OMA) Web page regarding the decision:

The OMA is urging the Ohio EPA to mount a vigorous defense of this common sense regulatory reform through all available legal channels.

However, even if the Agency successfully challenged the Magistrate's decision on appeal, I don't see how this fixes things for the business community. At issue in the Magistrate's decision was a Citizen Group's rights to challenge a State's implementation of its SIP- Ohio's air pollution control plan.  

Regardless of the Citizen's suit, U.S. EPA has already put Ohio EPA on notice that it believes the less than 10 tpy BAT exemption is inconsistent with federal law.  U.S. EPA sent a letter back on June 5, 2008 that it could not approve Ohio's attempt to provide the 10 TPY exemption. 

Without U.S. EPA approval, all permits issued without BAT due to the state exemption could be deemed to violate federal law.  All those businesses holding those permits could be subject to federal enforcement action or their permits determined invalid. 

A win on appeal barring the Citizen Group from challenging Ohio EPA isn't truly a fix.  The harsh reality is the only way to fix things for the business community is for Ohio to make an approvable submittal to U.S. EPA.  To be approvable, Ohio will have to demonstrate their reforms don't violate "anti-backsliding."

To make such a demonstration, Ohio EPA must quantify the lost reductions attributable to the 10 TPY exemption- something I don't believe Ohio EPA has done in the three years since passage of S.B. 265.  After Ohio EPA quantifies the difference, it will have to work with the business community to come up with replacement controls to make up for the lost reductions. 

Anything short of developing a "true" fix, leaves the business community with greater uncertainty than it had prior to S.B. 265.

BAT Through Rule Making On Sources Greater Than 10 TPY

Things may even be more complicated for sources that emit more than 10 tpy.  S.B. 265 mandates that Ohio EPA specify BAT on these larger sources through rulemaking.  S.B. 265 provided a three year window to give Ohio EPA time to develop rules specifying BAT for different air pollution source categories. 

In the three years since, Ohio EPA has yet to finalize a single rule defining BAT.  Since the three year deadline has passed, State law now prohibits Ohio EPA from requiring BAT on sources larger than 10 tpy because it has not adopted rules consistent with S.B. 265.  This State law requirement is in conflict with the federal law which requires approval from U.S. EPA before it can be deemed effective. 

On December 10, 2009, Ohio EPA proposed a policy titled "BAT requirement for Permit Applications Filed on or After August 3, 2009."  [August 3rd was the deadline imposed by S.B. 265 after which Ohio EPA could only require BAT through rulemaking].  The Policy was put out for public comment which closed January 31, 2010.  The policy describes the current status as follows:

Ohio is currently working to develop short-term and long-term set of rules that would implement S.B. 265.  A short-term rule would define BAT on a case-by-case basis consistent with the S.B. 265 provisions.  Long-term rules would attempt to define BAT by category when possible.  However, neither short-term nor long-term rules have been developed. 

U.S. EPA has told Ohio EPA that issuing permits on or after August 3, 2009 without BAT would be considered by U.S. EPA as "backsliding" under the statutory provisions of the Clean Air Act and would not be acceptable. 

The policy goes on to say, because Ohio EPA has not adopted any BAT rules it will require BAT on a case-by-case basis to avoid "backsliding" claims. 

First of all...It's been three years since passage of S.B. 265 and the business community is no closer to its goal of avoiding case-by-case BAT decisions.  Even what Ohio EPA describes as its "short-term rule" would require case-by-case BAT. 

Worse yet, the policy makes clear that businesses may even be worse off then prior to S.B. 265.  In the "Common Questions and Answers" Section of the Policy, at least two critical Ohio EPA comments appear:

Question 1:  If a company indicates they do not want Ohio EPA to establish a BAT limit because a BAT rule has not been developed, what should the permit writers do?

The Policy goes on to answer- try and get the company to voluntarily accept a BAT limit or Ohio EPA will have to process the permit without a BAT limit.  However, if there is no BAT limit in the permit, Ohio EPA states:

We will inform them [the business] that U.S. EPA would likely not approve the permit and that U.S. EPA may take some sort of action against either the company or the Ohio EPA because they don't approve the approach.  We will also inform them that we are obligated to provide U.S. EPA with a copy of any issued permit that does not contain BAT.

In essence, unless a business voluntarily accepts a case-by-case BAT limit, they will be subject to enforcement by U.S. EPA. 

The Second major issue appears in Question 5 of the Ohio EPA policy.  It relates to when sources can avoid New Source Review (NSR) which is the complex federal air permitting program.  Due to the complexities of the program there are strong incentives for businesses to avoid NSR.

Prior to August 3, 2009, Ohio EPA used BAT limits to avoid triggering NSR.  However, the policy makes clear they can no longer utilize BAT to avoid NSR because of the stalemate with U.S. EPA. 

The implication is more sources will have to go through a longer permitting process in order to avoid NSR.  Therefore, no only will sources end up with the same controls as prior to S.B. 265, it will take longer to get their permit.

Conclusion

The status quo should be unacceptable to the business community.  It must decide:

1. Whether the reforms in S.B. 265 are worth holding onto. If not, new state legislation is needed to undo the mess.  
2. If the reforms are still critical, then the business community must engage Ohio EPA to fix its issues with U.S. EPA.  It is very important that the business community involve itself in the details of developing a fix.  Otherwise, it risks Ohio EPA spending valuable time developing proposals businesses believe are unworkable.

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On February 3rd Magistrate Judge Mark Able of the U.S. District Court in Columbus ruled that Ohio EPA (and really the Ohio General Assembly) violated that federal Clean Air Act by exempting small air pollution sources from stringent air pollution requirements.  At issue was one major overhaul of Ohio's air regulation included in state legislation (Senate Bill 265)  back in 2006.  The law was designed to reduce the regulatory burden on small businesses. 

The provision exempted small air pollution sources, those that emit less than 10 tons per year, from the requirement to install Best Available Control Technology (BAT).  These sources would still be required to install air pollution control equipment.  However, these small sources could avoid the more time consuming BAT permitting process.

I was Director of Ohio EPA when Senate Bill 265 was passed.  The complaint regarding BAT was that it resulted in uncertain regulatory requirements for business.  Upon receipt of an air permit for a small air pollution source, Ohio EPA would have to decide on a individual case-by-case basis which pollution controls were the most stringent for that particular source. 

Businesses complained that the determinations as to what constituted BAT were inconsistent among Ohio EPA's five district offices.  They also complained that businesses would not be able to plan ahead of time for the types of controls to install.  Rather, business would be forced to wait until Ohio EPA concluded its evaluation.

To reduce the regulatory burden, Ohio businesses sought two major reforms regarding BAT in Senate Bill 265.  The General Assembly passed the bill which included the following.

1. Exempt all sources smaller than 10 tons from having to install BAT.
2. After August 2009, Ohio EPA could only require BAT on larger sources (greater than 10 tons) through specific rulemaking for those types of sources.

The goal of reducing the regulatory burden was understandable.  However, there is a long standing tenant in the federal Clean Air Act that restricts the ability of State's to change pollution control strategies to achieve federal clean air standards.  This is referred to as "anti-backsliding."

• "Anti-Backsliding"- If you drop an air pollution requirement, you must make up for those lost reductions through alternative control strategies. 

The best example of this perhaps is E-check, the automobile tail pipe test that used to be required in Cleveland, Dayton and Cincinnati.  E-check was dropped in Dayton and Cincinnati after the 10 year contract expired.  In order to drop the program, Ohio EPA was forced to make up the lost reductions through new air pollution control requirements.  One new requirement used to replace E-check was the requirement to use less polluting gasoline (RVP gas) in the summer months in Dayton and Cincinnati. 

Ohio EPA failed to adopt replacement strategies after the General Assembly dropped BAT on sources less than 10 tons.  It is my understanding, that Ohio EPA never actually even quantified the lost reductions attributable to dropping the BAT requirement.  U.S. EPA put Ohio EPA on notice this past summer that it failed to address the "anti-backsliding" issue.

Ohio EPA's failure to adopt new controls to replace BAT- a violation of the "anti-backsliding" principal- was one of the reasons Magistrate Abel struck down the provision as a violation of the Federal Clean Air Act.  According to a recent newspaper article, Ohio EPA has decided to stop issuing permits for small sources while it figures out how to address the decision. 

The agency said Wednesday it won't authorize any new or expanded emissions from small sources until the ramifications of the decision are understood. Spokeswoman Heidi Griesmer said the agency has temporarily suspended issuing permits.

"These are small sources of pollution," she said. "We will be complying with the judge's orders but we're right now looking through the decision and figuring out how to do that..."

Griesmer said it was impossible to determine immediately on Wednesday how many exemptions the state has granted to small source polluters. The agency estimates it will take two weeks to mine through its permit database and count them all, she said.

What a mess...

• The Agency will be forced to decide what to do with hundreds of permits it issued in the last three years in which BAT was not required.  Does Ohio EPA go back and revoke those permits requiring businesses to install different air pollution controls? 
• Does the Agency still try and comply with Legislative mandate to eliminate BAT for small sources?  If so, what new air pollution control requirements will it adopt to replace BAT for sources less than 10 tons.  
• What about permits already in the system that were about to be issued?  No doubt the Agency will be forced to go back and determine BAT delaying these permits by many months.  

This is just a sample of the issues facing EPA after S.B. 265.  Next up-  The second major reform in S.B. 265 that prevents Ohio EPA from requiring BAT on sources larger than 10 tons per year unless done through rulemaking.   

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Today, U.S. EPA announced it has officially thrown out the .075 ppm ozone standard proposed in 2008 by the Bush Administration.  The Bush proposal would have reduced the standard from .08 ppm to .075 ppm.  Now the EPA is proposing to set a new revised ozone standard somewhere between .06 ppm to .07 ppm.  This from the Washington Post regarding the proposed new ozone standard:

Ozone standards have been the center of a political and legal battle since the spring of 2008, when the EPA set a looser limit than what its own scientific advisers had suggested and President Bush himself intervened to scale back the agency's proposal at the last minute. The new proposal mirrors what EPA's Clean Air Scientific Advisory Committee unanimously recommended in 2007.

What are the implications for Ohio?  To say they are significant would be a gross understatement.  The following chart from Ohio EPA demonstrates that significant progress has been made in reducing ozone levels in the State.

 However, it becomes more and more difficult to achieve standards as they become more stringent.  Many businesses have already been squeezed hard to reduce their emissions.  The cost to achieve additional reductions will be greater. 

Ohio has been able to redesignate much of the state into attainment with the old .08 ppm standard.  Even Cleveland, the highest ozone levels in the State, was able to achieve the standard barely in time and was redesignated. 

As discussed above, the Bush Administration had previously proposed lowering that standard to .075 ppm. Based upon recent ozone data for major cities, this standard was going to be difficult to achieve.  The chart below show Cleveland monitors just came barely below the .084 ppm standard required to demonstrate compliance.  (EPA allow up to .084 ppm to meet the old standard.  Also note, the chart is in parts per billion).  Cincinnati and Columbus also barely achieved the old standard.

Achieving the .075 ppm standard would be very difficult based upon this data.  However, now comes the news today that EPA has elected to throw out the .075 ppm standard established by the Bush Administration as inconsistent with the scientific recommendations provided to EPA.   This from EPA's press release:

In September 2009 Administrator Jackson announced that EPA would reconsider the existing ozone standards, set at 0.075 ppm in March 2008. As part of its reconsideration, EPA conducted a review of the science that guided the 2008 decision, including more than 1,700 scientific studies and public comments from the 2008 rulemaking process. EPA also reviewed the findings of the independent Clean Air Scientific Advisory Committee, which recommended standards in the ranges proposed today.

Today's announcement indicates the standard will be set some where between .06 to .07 ppm.  What are the implications of the high end of that spectrum, .07 ppm standard, on Ohio? 

• Under the .075 ppm standard 23 out of Ohio EPA's 49 air monitors show non-attainment
• Under the .07 ppm standard 49 out of 49 monitors show non-attainment

Designations could happen this fall, which means virtually every county that touches any major metropolitan area (Toledo, Columbus, Cleveland, Akron, Canton and Youngstown) will be designated non-attainment.  EPA estimates 32 Ohio counties would be out of compliance with the .07 ppm standard.  Non-attainment designations brings with it restrictions on new or expanding businesses.  It also brings with it more stringent air pollution control requirements. 

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A new report regarding fine particulate pollution in the Midwest shows that achieving compliance with federal air quality standards is linked to U.S. EPA's fix for the Clean Air Interstate Rule (CAIR).  The Lake Michigan Air Director's Consortium (LADCO) released its white paper discussing recommendation on addressing fine particulate (p.m. 2.5) pollution in the Midwest.  The white paper includes these major findings:

The air quality studies demonstrated that high daily PM2.5 concentrations occur year-round, but are more likely in the winter and summer months, and are associated with elevated concentrations of particulate sulfate (especially in the summer), particulate nitrate (in the winter), and organic carbon (OC). Effective control programs for these PM species include:

• Regional reductions in sulfur dioxide (SO2) emissions from EGUs and large non-EGUs
• Reductions in ammonia (NH3) emissions from agricultural operations, especially in winter
• Regional reductions in oxides of nitrogen (NOx) emission reductions
• Urban-scale reductions in OC primary emissions from residential wood combustion and mobile sources, and VOC emissions from anthropogenic sources

The report notes that, beside power plant sulfate emissions, PM levels are attributable to agricultural emissions, smoking cars and outdoor wood fireplaces.  However, these types of sources are much more difficult to control. 

• Outdoor wood fireplaces may be responsible for local hot spot type emissions, however regulation of these sources has proved very controversial. 
• Addressing smoking cars and auto emissions in general is always been a difficult task.  Automobile testing, while continuing, is still very controversial. 
• Agricultural operations have fought long and hard to stay out of EPA regulation.  The report acknowledges no federal program for reduction of agricultural ammonia emissions.

In contrast there has been a long track record for regulating power plant emissions.  Starting with the acid rain program, then the NOx SIP call and finally CAIR- there have been three different cap and trade programs set up for reducing emissions.  CAIR is critical because power plants are the largest source of SO2 emissions. (See post, CAIR Impact on Air Quality)  The table below was taken from the report (EGU = Electric Generating Units). 

Table 1. Annual SO2 Emissions in LADCO Region (1000 TPY)

CAIR, under a cap and trade program, would dramatically reduce SO2 power plant emission in two phases- 2010 requires 50% reduction and 2015 requires 65% reduction.  States are counting on the continued existence of CAIR to meet PM air quality standards.  However, the D.C. Circuit Court tossed out CAIR as "fatally flawed."  U.S. EPA is currently working on a "CAIR fix" to address the issues raised in the Court's decision. 

LADCO's white paper makes it clear little thought is being given to what will happen if CAIR cannot be fixed.  A review of the legal issues with CAIR shows the State's better start considering that possibility.

The fact State's have incorporated CAIR into the air quality planning is the main reason the Court allowed CAIR to remain while U.S. EPA worked on its CAIR fix.  But there is no guarantee U.S. EPA is going to find a legally valid way to preserve CAIR.  The Court found many "fatal flaws" but two of those flaws go to the heart of the cap and trade program:

• One of the central problems the Court noted with CAIR was its method for reducing the cap on SO2 emissions.  The Clean Air Act establishes a value for acid rain allowances- one allowance is the right to emit one ton of SO2.  CAIR attempted to reduce the cap by cutting the value of an acid rain allowance in half in 2010. The Court found this to be problematic because the value of acid rain allowances is set forth the Clean Air Act.  The Court said:

Lest EPA forget, it is “a creature of statute,”
and has “only those authorities conferred upon it by Congress”;
“if there is no statute conferring authority, a federal agency has
none.”

CAIR, as program created by rule, cannot trump a statute.  How U.S. EPA can possibly get around the Clean Air Act establishment of acid rain allowance to preserve CAIR reductions is perplexing.

• The Court also questioned the fundamental basis of EPA's cap and trade program that it was not required to eliminate one state's contribution to another state's non-attainment problem.  The Court said:

"Theoretically, sources in Alabama could purchase enough NOx and SO2 allowances to cover all their current emissions, resulting in no change in Alabama's contribution to Davidson County, North Carolina's non-attainment." 

How U.S. EPA can legally show CAIR will address contribution from one state to another while at the same time preserving the cap and trade concept is also perplexing.

While States are counting on preservation of CAIR reductions to meet air quality standards, their faith in U.S. EPA to develop a legally defensible CAIR fix may be misplaced.  Senator Carper has pushed hard to incorporate a new, stronger CAIR-like program in the Senate climate change legislation.  However, this move has not been all that popular as it is seen to slow down progress on climate change.

What will be left if CAIR cannot be repaired is a mess in terms of air quality planning.  It will also make the mountain that much higher to climb for areas recently designated nonattainment by U.S. EPA.

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In March of this year Canada and the United States submitted a bi-national proposal to reduce emissions from ships at ports.  The proposal marked the culmination of years of study of the costs and benefits of requiring emission reductions from ocean going vessels.  However, the proposal never mentions the Great Lakes and includes no analysis of the costs or benefits of extending the requirements to the region.  

Now, in a separate proposed rule making issued on August 28th,  U.S. EPA has proposed to expand the costly shipping regulations to include the Great Lakes region.  The proposed expansion would in essence amend the bi-national proposal even though no formal application has been submitted to the governing international body.  In addition, EPA has not provided a study of the costs/benefits of extending the regulations to the Great Lakes.

Background on North American Emission Control Area

In March 2006, President Bush and Canadian Prime Minister Harper agreed to prepare a bi-national application to the International Maritime Organization (IMO) to designate nearly all of North America's coastlines as an Emission Control Area (ECA).  Ships that enter the ECA are required to reduce emissions through a combination of cleaner burning fuel and air pollution controls. (see, U.S. EPA's frequently asked questions on ECAs)

On March 30, 2009, U.S. EPA submitted the final ECA application to the IMO.  The U.S.-Canadian ECA application included years of work and study of the ship traffic, anticipated air pollution reductions as well as the projected costs of the proposed controls.  A thorough explanation of the studies can be found in the application.  However, the ECA application does not include any studies or evaluation of the shipping traffic or costs in the Great Lakes region.  In fact, no where in the document is the term Great Lakes even found.

[Below are the charts showing the proposed emission reductions as well as the proposed ECA]

 Figure 1- Proposed ECA included in the March 2009 application to the IMO.  Green line denotes area covered by the ECA.

Figure 2- Chart shows the phase in of sulfur limitations on fuel as well as air pollution controls requirements.  Lower sulfur fuel will reduce fine particle pollution in port cities.

The proposal requirement to move from fuel with a 15,000 parts per million (ppm) sulfur content to a clean fuel with only a 1,000 ppm sulfur content amounts to a 98% reduction.  The overall costs of the regulations to the shipping industry is $3.2 billion, with the largest costs being fuel switching at $1.9 billion.

The proposal assumes that ships will reduce the cost of compliance by carrying two fuel tanks.  One tank would contain the much dirtier high-sulfur fuel which would utilized at sea outside the ECA.  Once the ship enters the ECA, it would switch to the low-sulfur fuel.

EPA Proposed Regulation to Extend ECA to Internal Waters Including the Great Lakes

On August 28, 2009 U.S. EPA issued a proposed rule titled "Control of Emissions From New Marine Compression-Ignition Engines at or Above 30 Liters Per Cylinder."   The preamble to the regulations includes the following statement regarding the proposed ECA:

However, our recent proposal for ECA designation that was submitted to IMO, although intended to protect air quality in U.S. ports and internal areas, does not explicitly state that it applies to internal waters. Therefore, we are proposing regulatory text under the authority of APPS, in order to avoid confusion on whether vessels must meet ECA requirements in internal waters. The text clarifies that the ECA requirements generally apply to internal waters, such as the Mississippi River and the Great Lakes, that can be accessed by ocean-going vessels. Vessel emissions in these waters affect U.S. air quality to an equal, if not greater extent that emissions taking place in coastal waters. Specifically, the proposed rule would require compliance with the fuel sulfur requirements and the NOX emission standards of Regulations 13, 14, and 18 in internal waters. (emphasis added)

While there is no doubt cleaner ships in the Great Lakes would improve air quality.  The issue is that U.S. EPA appears to be amending the bi-national application to the IMO without any supporting information.  The IMO ECA application does not include costs for the Great Lakes shipping fleet which is of a different make up than those traveling to ocean ports on the coasts.  

For example, the IMO ECA application estimates compliance costs will be reduced through fuel switching between high sulfur and low sulfur fuel.  However, that will not be an option for ships traveling in the Great Lakes which will always be within the ECA.  Also, the Great Lakes fleet tend to be smaller in size than some of the large vessels that enter the coastal ports.  No analysis has been performed on the costs and benefits given the different make up of the Great Lakes fleet. 

Smaller marine engines are already required to use lower sulfur fuel under the Nonroad Diesel Rule (finalized June 29, 2004).  It is possible that the proposal to extend the ECA to the Great Lakes would have negligible impacts because ships tend to be smaller.  However, without any analysis of the Great Lakes fleet is it impossible to make this determination.

U.S. EPA proposed rule was issued on August 28, 2009 and the Agency has allowed public comments only until September 28, 2009.

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The Obama Administration announced it would review the revised ozone standard of .75 ppb that was previously established by the Bush Administration.   The Obama Administration has said if they decide to revise the ozone standard below .75 ppb they will announce it by December of 2009 and finalize the standard by August 2010. 

As reported in the article, other actions make it appear almost certain that U.S. EPA will revise the standard lower. 

The Justice Department, in a brief filed Wednesday in a federal appeals court, went further, saying that the EPA believes the revision made by the Bush administration does not adhere to federal air pollution law. The brief is part of a lawsuit by environmental groups against the Bush-era rule.

The news of a much tighter ozone standard follows great news for Northeast Ohio that it had achieved the original 8-hour standard of .85 ppb (see, Improving Air Quality Great News for Cleveland Business)  This past week U.S. EPA announced it was granting Ohio's request to redesignate Northeast Ohio Counties (Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage and Summit) attainment . 

An "attainment" status has significant benefits to a community trying to re-build its economy.   It is much easier for businesses looking to relocate or expand to obtain the air permits they will need. Unfortunately, if the standard is reset to something like .70 ppb, Northeast Ohio brief attainment window will close and it will be facing a tremendous obstacle to see an "attainment" status anytime in the near future. 

The above chart is the monitoring data from Ohio EPA's air pollution control plan submitted to U.S. EPA.  It shows the Ashtabula monitor is averaging 84.3 ppb, just slightly below the .85 ppb current standard.  But very, very far away from a possible .70 ppb.  As the Ashtabula monitor goes, so does all the counties in Northeast Ohio.  All eight counties will be in non-attainment if the Ashtabula monitor is not below .70 ppb.

Rather than focus on the economic costs of a revised standard or the difficulty of obtaining that standard, the Cleveland Plain Dealer focused on the future of E-check:

But it doesn't mean that you won't have to E-check your car anymore. Ohio has renewed its contract with Envirotest Systems to conduct the unpopular - though free to drivers - emission tests through June 2011.
 

Such a limited focus fails to recognize the wider implications of the tighter ozone standard.  Businesses that are located outside "non-attainment counties" should pay attention as well. In what has become a re-occurring theme on this blog, tighter ozone standards will have a dramatic impact on the cost of electricity for coal dependent states. 

Roughly 1/3 of all ozone causing pollutants are attributable to coal-fired power plants.  In fact, the progress in achieving the old standard was in large part attributable to federal control programs requiring reductions of these pollutants (NOx SIP Call and CAIR).  To achieve much tighter ozone standards, U.S. EPA will be forced once again to look to tightening emission requirements for coal plants.  Tighter emission requirements translates to higher compliance costs passed on to utility customers.

Ohio really needs to focusing intently on diversifying its energy portfolio to mitigate these increases.  Otherwise, businesses will be looking toward escalating operating costs making Ohio businesses non-competitive.  If you are a business who has opportunities to generate your own power, it would be a strategic advantage to give serious consideration to those plans.

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Back in 2006, while I was still at Ohio EPA, a major piece of state legislation worked its way through the General Assembly.  Senate Bill 265 was developed by business groups in Ohio to address concerns with the structure and implementation of Ohio air pollution permitting programs.  The main target to be fixed was the requirement for all non-federally regulated air sources to install Best Available technology (BAT).

Business groups believed that the BAT requirement put Ohio at a disadvantage to neighboring states by requiring a higher (and more costly) level of controls.  Even more importantly, Ohio businesses felt that implementation of BAT at Ohio EPA lacked the certainty that businesses look for in regulatory programs.

Issues with BAT

The lack of certainty stemmed from the fact that BAT was determined on a case-by-case basis with each individual permit that was submitted to the Agency.  Concerns were expressed that permit reviewers reached different conclusions as to what constituted BAT, sometimes for similar sources. 

During the debate over BAT I was at the center of the storm working as Director of Ohio EPA.  I had to testify numerous times before the Legislature.  While I did not agree with every argument against BAT, I did agree that Ohio EPA was placing too much time and energy into regulating small sources of air pollution.

• FACT:  Ohio has some 70,000 regulated air sources in the State whereas Michigan has less than 10,000

The huge difference in regulated sources is not attributable to there being less industry in Michigan, rather it was because Ohio regulated much smaller sources.  For these reasons, Ohio EPA took a neutral position on the legislation.

Senate Bill 265 passed the Legislature and included two major components as an overhaul of the BAT requirement:

1. It exempted all sources less than 10 tons per year from having to install BAT. 
2. For sources larger than 10 tpy, Ohio EPA could only require BAT by adopting rules specifying what exactly BAT would be for particular sources.  The legislation gave Ohio EPA a three year window to adopt rules.  The window is up this month (August 3, 2009)

Region 5 U.S. EPA Questions Ohio's Ability to Modify BAT

In the ensuing three years since passage of S.B. 265 the course of change has been anything but certain.  U.S. EPA has issued two letters to Ohio EPA.  A June 2008 letter rejected Ohio EPA's rule which would exempt sources smaller than 10 TPY because U.S. EPA said Ohio EPA failed to prove Ohio's air pollution control strategy would not be weakened.  On May 22, 2009, U.S. EPA sent a second letter expressing concern over the impending deadline of August 3, 2009 when Ohio would no longer be able to require BAT without source specific rules.

In discussing the letters with staff, Ohio EPA is confident it can work out with U.S. EPA the exemption of sources smaller than 10 TPY.  However, it is much more difficult to envision a resolution of the issue pertaining to sources larger than 10 TPY. 

As an indication of the messy situation that may emerge, U.S. EPA Region 5 could start issuing notices of violation (NOVs) to all sources that receive an air permit without BAT after August 3, 2009.  In an attempt to avoid such a situation, Ohio EPA has discussed passing a rule that would require BAT on all sources larger than 10 tpy.  The rule would specify BAT are those general characteristics set forth in S.B. 265. 

1. Work practices;
2. Source design characteristics or design efficiency of applicable air contaminant control devices;
3. Raw material specifications or throughput limitations averaged over a twelve-month rolling period;
4. Monthly allowable emissions averaged over a twelve-month rolling period.

Sierra Club Sues Ohio for Failing to Enforce the Clean Air Act

It was not just Region 5 of U.S. EPA that was attacking changes to BAT. The Sierra Club filed suit against Ohio EPA over its rule exempting sources smaller than 10 tpy.  The Sierra Club challenged Ohio EPA under the Clean Air Act''s citizen suit provisions. 

In a very surprising decision, Magistrate Judge Abel found the citizen's suit provisions of the Clean Air Act did not allow suits against a State for failing to to enforce the Clean Air Act.  This decision will be appealed given its broader implications on the scope of the citizen suit provisions.  Given the prior precedents it is unclear whether Judge Abel's decision will be upheld.

Lessons Learned

We will have to wait and see how these major issues unfold over the next few months.  However, there is no doubt that the situation that has emerged after three years is not at all what was envisions during passage of S.B. 265.

The complexities involved in trying to change a State's air pollution control strategy on any significant scale are immense.  Ohio's BAT experience is a prime example.  With 70,000 regulated sources the ability to determine the impact of the BAT changes is almost impossible.  Making such a demonstration is the first step toward gaining U.S. EPA's approval.

Unfortunately, after three years businesses may be left with less certainty than they had before the overhaul was attempted. 

• Back to case-by-case BAT
• Region 5 scrutiny of Ohio EPA air permits
• Continuing litigation of changes to Ohio's State Implementation Plan (SIP)

This is hardly the specificity that the business community envisioned during passage of S.B. 265.  Business groups envisions rules that would specifically state that type of controls or work practices that must be utilized for different types of sources.  The stop gap rule proposed by Ohio EPA looks more like case specific BAT.

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Yesterday, U.S. EPA announced a proposed rulemaking to formally recognize Cleveland and nearby counties as achieving the 1997 8-hour ozone standard (.085ppb).  As discussed in a previous post, this is very good news for Northeast Ohio businesses in any of the following counties: Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage, and Summit.  U.S. EPA is taking comments on the proposed action until July 13th.

Three years ago the best experts thought it was impossible for Northeast Ohio to achieve the ozone standard by the 2010 deadline.  As a result, draconian measures were suggested by U.S. EPA, including "bumping up" to the next higher non-attainment classification "serious."  Such an action would have made economic growth in the area much more difficult.  It would also have increased environmental compliance costs for area businesses. 

The chart to the left shows the various federal pollution reduction programs that are mandated based upon non-attainment classification.  The chart shows the higher the classification of non-attainment the more federal mandates that will apply.

Northeast Ohio has been at a distinct disadvantage relative to other areas of the state due to its ozone non-attainment status.  It is the only "moderate" non-attainment are in the State.  This results in increased compliance costs for area businesses and also placed restrictions on economic growth not applicable to the rest of the State.  These disadvantages would have been magnified if the Cleveland-Akron-Lorain area was forced to have "bumped up" to serious non-attainment.

Once U.S. EPA finalizes the redesignation to attainment, these disadvantage disappear.  Cleveland-Akron-Lorain will be able to compete equally for new business growth opportunities.  All of this should be really good news for business and the citizens in Northeast Ohio.

The Plain Dealer failed to capture this fact in its coverage of the U.S. EPA ozone announcement.  Instead it focused on the temporary nature of the Cleveland-Akron-Lorain attainment status.  U.S. EPA has adopted a stricter ozone standard (.075ppb) which will likely be applied in 2010.  Current air monitoring shows Northeast Ohio around .084 ppb for ozone which means the same eight counties will once again be deemed "non-attainment" for ozone.   

While it is true the attainment status is temporary, concentrating only on this aspect of the story misses the broader picture.  If the area failed to achieve the 1997 ozone standard it would have faced more regulation and impediments to growth.  Now it appears unlikely that Cleveland-Akron-Lorain will receive a higher non-attainment classification than other major metropolitan areas in the State.  This means it will be able to compete equally with Columbus and Cincinnati for new jobs in the future even if it is once again considered "non-attainment."

The temporary attainment status may present a short window of opportunity for area businesses.  If a business was looking to expand its facility or construct a new facility that would be considered  a "major source" of air pollution, it may be able to obtain requisite permits easier than previously.  But businesses will have to be quick to take advantage if such a window presents itself.  U.S. EPA is set to make formal designation under the new .075 ppb ozone standard in 2010.  At most this means businesses could have a year to act.

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As an indication the New Source Review (NSR) enforcement actions are alive and well, today an Indiana federal court has ordered the shut down of units that triggered NSR and failed to install controls.  In addition, the Court required Cinergy to surrender allowances to compensate for "irreparable harm" caused by the operation of the units in violation of the Clean Air Act

The Federal District Court in Indiana issued its decision in the remedy phase of the New Source Review (NSR) enforcement action against Cinergy Corporation's Beckjord, Ohio plant.  A jury trial was held in May of 2008 to determine whether certain projects triggered NSR.  The jury found that four projects performed at the facility "a reasonable power plant owner or operator would have expected a new increase of 40 tons of SO2 and/or NOx "(NSR major modification trigger levels).  Following the jury's verdict, the Court moved into the remedy stage to determine what relief to grant the plaintiffs for the violations.

The Courts decision is an interesting exercise of looking its crystal ball.  Based on calculations of emissions and modeling, the Court projected environmental harm caused by failure to comply with NSR. 

To determine harm, the Court first determined the type of pollution controls that would have been installed had Cinergy complied with NSR requirements (BACT/LAER).  Those controls established the baseline emissions that should have been emitted since the projects were completed.  All emissions above the baseline were considered  "excess emissions" that resulted in environmental harm and potential health impacts.

It was pretty evident which direction the Court was heading when it included the following statement in its order:

With respect to SO2 emissions, Dr. Fox testified that the annual excess emissions of SO2 is approximately 23,000 tons...Putting this into perspective, this rate is approximately equivalent to the amount of SO2 emitted by 324,000 heavy-duty diesel trucks, which is the total number of trucks registered in Indiana, Ohio and Kentucky.

The analysis of environmental harm and potential health impacts was very similar to the exercise undertaken by the North Carolina Court in the nuisance claims against coal fired power plants (see post, "Nuisance Finding Gives Downwind States New Ammo in Long Cross-Border Pollution War").  Here is what the Court examined to gage harm caused by "excess emissions":

• How did the SO2 and Nox emission impact pm 2.5 and ozone attainment
• What were mercury emission impacts
• Potential health impacts from fine particle pollution
• Damage to the environment from acid rain

After finding irreparable harm from these impacts the Court ordered:

1. Shut down of three units by Sept. 2009
2. Until Sept. 2009, the three units must be run so as not to exceed baseline levels that are based BACT/LAER controls
3. Permanently surrender SO2 allowances in an amount equal to total SO2 emissions from May 22, 2008 until September 30, 2009

For those who though the NSR consent decrees carried with them pretty dramatic remedies, this decision shows you take an equivalent risk by going to trial. 

 (Photo: DanieVDM/everystockphoto.com)

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On May 26th, the Ohio Department of Development announced the recipients of the second round of the Diesel Emission Reduction Grant (DERG) program.  The announcement once again highlights issues with implementation of this grant program. 

After two grant rounds, school buses, transit and rail received the lion share of the total $19.8 million in available funding under this program.  There are issues with this allocation:

• School buses already have available funding through Ohio EPA Clean Diesel School Bus Fund
• Transit has received $203 million in stimulus money
• Rail projects are very costly- the project funded in the two DERG rounds took up nearly 1/2 of the available funding

In concept, the DERG program selects projects based upon cost effectiveness.  This should mean money is directed toward projects that will result in the biggest reductions at the lowest cost. According to U.S. EPA data, the transit sector in Ohio accounts for only 2% of diesel emissions. Other sectors eligible under DERG, such as construction equipment and heavy duty trucks, account for nearly 50% of the diesel emissions.

Yet after two DERG rounds, only 8 pieces of construction equipment and/or heavy duty trucks will be repowered/replaced/retrofitted. 

While I can quibble with how successful DERG has been at targeting sectors for reductions, it is still is a very good program that has resulted in substantial reductions. As detailed in previous posts, DERG is also good for Ohio's economy by promoting voluntary emission reductions that reduces air pollution costs for businesses.   Unfortunately, the Transportation Bill (H.B. 2) cut DERG's funding by 80% (see discussion at the end of this post).

Let's hope the State Legislature doesn't give up on a very worthwhile program.

From' the ODOD DERG press release here is the list of recipients in the second round:

• City of Dublin, in partnership with City of Westerville - Replacing eight model year
1999/2000 short haul diesel trucks.
• Columbus City Schools - Replacing 15 model year 1990 school buses with new school buses.
• CSX Transportation, Inc. - Repowering four Switcher Locomotives with GENSET diesel
engines.
• Great Lakes Construction - Repowering two model year 1987/1988 track type bulldozers.
• Industrial Railway Switching & Services - Retrofitting three switcher locomotives with the
private vendor's "Lean and Green Locomotive Package" technology to reduce overall vehicle
emissions.
• John R. Jurgensen - Replacing two track type bulldozers and four hydraulic excavators with
new vehicles.
• Kenston Local School District - Replacing one model year 1998 school bus with a new plugin
hybrid school bus.
• Manchester Local School District - Replacing one model year 1991 school bus with a new
plug-in hybrid school bus.
• Osnaburg Local Schools, in partnership with Massillon Local Schools and North Canton
Local Schools – Retrofitting six school buses with DPF/CCFS applications and replacing three
school buses with new model year buses.
• Portage County Solid Waste Management District - Replacing one model year 1999 diesel
truck used for the collection of recyclables.
• Ross Local School District - Replacing five model year 1988/1990/1991 school buses with
new buses.
• Southwest Ohio Regional Transit Authority - Repowering 50 model year 2001/2002 public
transit buses.
• Stark County Commissioners, in partnership with Stark County Board of Mental
Retardation and Developmental Disabilities - Replacing seven model year 1993/1995 school
buses with new model year buses.
• Toledo-Lucas County Port Authority - Replacing an existing diesel generator set on port
facility gantry crane.
• Wood County Commissioners, in partnership with Wood County Board of Mental
Retardation and Developmental Disabilities - Replacing five model year 1998/2001/2002
diesel powered school buses with new liquid propane- injected (LPI) engines
• Wood County Engineer’s Office – Replacing two model year 1990/1996 diesel powered dump
trucks with new trucks

Update on DERG Funding

In the last State budget, Ohio set aside $20 million over two years from federal transportation dollars known as Congestion Mitigation and Air Quality (CMAQ) program.  Federal legislation made clear that diesel emission reduction projects were not only acceptable they should be a priority.

After the last budget, Ohio had the largest dedicated diesel fund in the entire Midwest.  Ohio received awards for the DERG program.  The Ohio Diesel Coalition sought to renew the DERG program for another two years at the same level of funding.  Ultimately. H.B. 2 included only $5 million in funding for DERG over the next two fiscal years.  This is a $15 million dollar reduction from the past two years. 

Meanwhile, $15 million has been set aside for public transportation, which has already received, according to the Plain Dealer, nearly $203 million in stimulus funding. 

While DERG has had its issues starting up, most new government programs do.  There certainly is enough demand for the program.  Unfortunately, DERG funding has been reduced by 80%.  This reduction comes at a time when only a few small scale construction equipment projects have received funding.  Ohio has not even scratched the surface of possible reductions from this sector, by far the largest source of diesel emissions.  Now is not the time to be reducing funding for this program.

(Photo: terinea/everystockphoto.com)

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The American Reinvestment and Recovery Act (ARRA) contains the highest federal funding yet for the 5 r's of diesel- retrofits, replacements, repowers, replace and refuel.  The competitive announcements for the ARRA Funding for National Diesel Emissions Reduction Program became available on March 20, 2009. Better get your act together if you still want an application in- the deadline is April 28th to submit a request for funding.  If you can't make the deadline there will be normal funding available ($60 million) in the fall. 

Who can file the application?

1. Regional, state, local, tribal or port agency with jurisdiction over transportation or air quality; and
2. Nonprofit organization or institution which:

a) Represents or provides pollution reduction or educational services to persons or organizations that operate diesel fleets; or

b)Has, as its principle purpose, the promotion of transportation or air quality

What will it pay for?

• 75% for engine repowers
• 25% for all replacements except
• 50% for school buses that meet 2010 standards
• 100% for retrofit technologies
• 100% for idle reduction technologies
• 100% for engine upgrades (kits only)
• 100% for incremental cost of cleaner fuels

Much more information is available on U.S. EPA's Region 5's web page.  Just page down to the section on ARRA. 

Helpful information and tips are available from the Diesel Technology Forum.  For example, here is some very helpful advice on addressing one of the more perplexing components of filing a DERA application- calculating jobs retained or created.

How to Calculate Job Creation - Follow the Flow. Finally, the issue which appears to be causing the most apprehension among applicants is the need to demonstrate how a project will preserve or create new jobs. The sheer range of retrofit options (remember the 5 Rs of retrofit: retrofit, rebuild, repower, replace and refuel?) as well as the varying locations and productivity of individual equipment manufacturing facilities make it very challenging to offer solid figures of new jobs added. But don’t despair. Everyone is in the same situation, so applicants are advised to focus on writing a credible, well-reasoned narrative which highlights the general labor/job impacts along every step of the project flow.

For example: project manager oversees grant award, progress, reporting; device manufacturers produce XXX new devices for the grant (incremental increases in manufacturing, packaging, processing, shipping jobs affected); equipment dealer schedules service to install devices (estimated XXX man-hours for mechanics, helpers and administrative); and so on, specific to your project. If you are not installing equipment yourself, you can ask the equipment manufacturer who has helped assess the fleet to provide an estimate of time necessary to conduct the type of installation you’re seeking. A formula which seeks to quantify jobs through use of a multiplier building on study by Keybridge Research is also available at www.meca.org.
 

UPDATE ON OHIO'S DIESEL EMISSION REDUCTION GRANT PROGRAM (DERG)

At $20 million over two years, Ohio had the largest dedicated diesel fund in the entire Midwest.  Ohio received awards for the DERG program.  Round 2 of funding was just completed and the State will be passing out nearly $11 million in funding.  Seemed like a program well worth continuing...

The Diesel Coalition sought to renew the DERG program for another two years at the same level of funding.  Ultimately. H.B. 2 included only $5 million in funding for DERG over the next two fiscal years.  This is a $15 million dollar reduction from the past two years.  While the Legislature included the full $20 million in funding, the Governor issued a line item veto of the funding (see below).

The Ohio Diesel Coalition still intends to request $20 million in funding for DERG in the regular budget bill.  The Coalition, of which I am a member, will be asking that the $15 million designated for the Public Transportation Green Fleets Program in H.B. 2 to be consolidated with DERG. 

Green Fleets are eligible for funding under DERG.  The Coalition believes it would be better to create a single competitive grant program and allow the best and most effective projects to get funding.  Hopefully we can restore funding for this very successful and worthwhile program.

Governor's Veto message in H.B. 2:

SECTION 512.43.

This provision establishes a diesel emission reduction grant program using federal Congestion Mitigation and Air Quality funds from the Federal Highway Administration.

This provision would have a negative impact on the Department of Transportation’s operations because it diverts a large portion of available flexible funding to specific purposes.

I have directed the Department to dedicate $5 million toward a diesel emissions reduction program for purposes consistent with the intent of the legislation. This funding will provide assistance to small businesses and disadvantaged business enterprises. Therefore, this veto is in the public interest.
 

(Photo: terinea/everystockphoto.com) 

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In a dramatic reversal from the Bush Administration, the Department of Justice and U.S. EPA are renewing their New Source Review enforcement efforts against coal-fired power plants.  The NSR lawsuits originally commenced during the Clinton years have resulted in billions of dollars in new controls and hundreds of millions in civil penalties. 

The industry had breathed a sigh of relief when the Bush EPA announced they were not going to pursue additional cases.  Now the industry faces the prospect of a new round of very costly litigation, controls and penalties.

U.S. EPA issued a press release announcing the first new NSR complaint:

Coal-fired power plants collectively produce more pollution than any other industry in the United States. They account for nearly 70 percent of sulfur dioxide emissions each year and 20 percent of nitrogen oxides emissions. Emissions from coal-fired power plants have detrimental health effects on asthma sufferers, the elderly and children. Additionally, these emissions have been linked to forest degradation, waterway damage, reservoir contamination and deterioration of stone and copper in buildings.

To combat these adverse effects, the EPA and the Justice Department are pursuing a national initiative, targeting electric utilities whose coal-fired power plants violate the law.

The suits reverse the Bush Administration decision to only conclude the Clinton era NSR lawsuits and to not pursue new cases unless the involve violations of the Bush era  NSR regulations. In 2006, former EPA enforcement chief Grant Nakayama told Congress he would pursue investigations of coal-fired power plants only if they appeared to fall out of step with the administration's series of proposed and final changes to the NSR program .  On October 13, 2005 Marcus Peabody, Assistant Administrator, issued a memorandum to U.S. EPA's Office of Enforcement Compliance Assurance directing the office to pursue only cases involving violation of the Bush era NSR rules. 

The NSR directive is just one of many Bush evironmental policy and regulatory decisions that the Obama Administration has reversed.  Utility representatives said the Obama administration's efforts to ramp up NSR enforcement came as no surprise.

On February 25th, the Department of Justice has sued Louisiana Generating, alleging that the NRG Energy subsidiary violated New Source Review requirements by operating the Big Cajun 2 Power Plant without also installing and operating modern pollution control equipment after the generating units had undergone major “modifications.”(DOJ Press Release)

This follows a similar lawsuit filed earlier in February against Westar Energy, Inc for failing to install Best Available Control Technology (BACT) at one or more of its coal-fired power plants.  The complaint alleges that for more than a decade, the Jeffrey Energy Center has operated without the best available emissions-control technology required by the New Source Review provisions of the Clean Air Act to control emissions of sulfur dioxide, nitrogen oxide and particulate matter, contributing to formation of fine particulate matter, smog and acid rain.
 

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In National Farm Bureau Federation v. EPA, the D.C. Circuit Court of Appeals has granted environmental group petition for review of the NAAQS for fine particle pollution known as PM 2.5.  Environmental groups and industry groups both challenged portions of EPA's standard.  The EPA had decided to maintain the annual standard at 15 μg/m3.  The Court concluded the EPA lacked a valid scientific basis to support their decision:

We conclude the EPA failed adequately to explain why, in
view of the risks posed by short-term exposures and the
evidence of morbidity resulting from long-term exposures, its
annual standard is sufficient “to protect the public health [with]
an adequate margin of safety,”

We conclude the EPA has failed reasonably to explain why
it believes its daily standard will “provide an appropriate degree
of protection from health effects associated with short-term
exposures to PM2.5.” Id. at 61,174/3. We therefore remand the
annual standard to the EPA for further consideration of whether
it is set at a level requisite to protect the public health while
providing an adequate margin of safety from the risk of shortterm
exposure to PM2.5

The Court also granted the petition for review of the secondary NAAQS for the fine PM brought by the environmental groups.  The Court said EPA unreasonably concluded that the NAAQS are adequate to protect the public welfare from adverse effects on visibility. 

The Clean Air Scientific Advisory Committee (CASAC),along with medical and public health groups who submitted comments, challenged the EPA’s proposal to retain the existing level of the primary annual fine PM standard at 15 μg/m3 . They urged the EPA to lower the level to somewhere between 12 and 14 μg/m3. The CASAC and several public commenters also objected to setting the secondary standards for fine PM at the same level and averaging time as the primary standards, arguing that they were insufficient to protect against adverse visibility effects.

The Court decided not to vacate the annual standard, but only remand it for Agency review.  The Court left open the possibility EPA could provide a better explanation for maintaining the standard at 15 μg/m3.  However, based on the strong opposition to the standard and CASAC's recommendation to lower the standard, EPA will most certainly oblige.

So what is the potential impact of a lower PM 2.5 standard? The yellow and orange dots are areas that have readings below the 15 μg/m3 but within the CASAC recommendations.  Of course its not just more potential non-attainment areas, it is also the red dots finding it much hard to reach attainment. 

States will need to be aggressively looking at diesel reductions as well as a stronger CAIR program to reach the standards.

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There is good news for area businesses.  Additional compliance costs and restrictions on economic growth will be avoided that were deemed all but certain a few years ago.  The compliance costs were associated with new air pollution controls needed to achieve  U.S. EPA's 1997 8-hour ozone standard (0.85 ppm). The deadline to meet this standard is 2009.

When I was Director of Ohio EPA,  all the modeling and projections showed there was no way Cleveland would meet the standard by the deadline. I remember giving speeches around the State with the basic theme- "we would have to de-populate Cleveland to meet the Ozone deadline."   I remember briefing the Governor that it appeared likely the Cleveland-Akron-Lorain Nonattainment Area would have to "bump up" to the next category of nonattainment-"serious."  By bumping up Cleveland would buy time to reach the standard, but the cost was a list on new federally mandated controls and restrictions.  Bump up would have had devastating impacts on the local economy.

[This is a slide taken from one of the speeches on reaching the ozone standard.  The numbers show various ozone levels at each monitor in the nonattainment area after imposing various control options.  The black number was a series of draconian measures that would have devastated the local economy.  Even after imposing those controls the models predicted continued nonattainment.]

Perhaps this is a lesson about not putting too much faith in modeling, but  based upon recent air quality monitoring Cleveland has indeed attained the 1997 8-hour ozone standard.   Area businesses may never be fully aware of the crisis that was averted.  But this is certainly good news for an area that has struggled to meet federal air quality standards.

Below is additional background on the recent Ohio EPA submittals.

In 2008, Ohio EPA submitted an State Implementation Plan (SIP) for the Cleveland-Akron-Lorain nonattainment area that requested redesignation to attainment status.  This was based on monitoring data from 2005,2006 and 2007 that showed Cleveland close to attainment [0.0853 compared to 0.0853]. 

This month, February 2009 Ohio EPA has prepared an updated attainment demonstration for the Cleveland that incorporates the most recent air monitoring data from the summer of 2008.  Due to ever improving air quality, the updated monitoring data shows Cleveland complies with the Standard [0.084 compared to 0.085 standard]. 

Here is additional detail regarding the two submissions:

2008 Ohio EPA Redesignation Request to U.S. EPA
In the February 2008, Ohio EPA submitted its request to U.S. EPA to have the Cleveland-Akron-Lorain nonattainment area redesignated to attainment. The document included two key conclusions:

1) Monitoring data for 2005-2007 showed the area just above the standard. The data showed 0.853 ppm compared to the 0.85 ppm standard.

2) Ohio EPA was requesting redesignation of the Cleveland-Akron-Lorain area based upon modeling that showed it expected the area to attain the standard by 2009. This was known as the "weight of evidence" approach (WOE). Under the WOE policy, U.S. EPA can redesignate an area attainment even though monitoring data shows it has not met the standard.  However, Ohio EPA must provide the federal EPA convincing evidence the area will reach the standard by the 2009 deadline.

Ohio EPA included the following language in the January 2008 submittal to U.S. EPA:

"The (air) modeling results as well as the previously submitted weight of evidence information supports the conclusion that Cleveland-Akron-Lorain OH area should attain the eight-hour ozone standard on time.

In spite of this evidence, Ohio EPA is developing additional emission reduction options. Ohio EPA recognizes that the ozone standard is currently under review and a final revision to the standard will most likely result in a revised standard that will require additional emission reductions above those necessary to achieve the existing standards. Ohio EPA is currently in discussions with U.S. EPA and local stakeholders assessing the options available to meet the future standard, including the use of lower Reid-Vapor Pressure gasoline. "

Bottom line: Ohio EPA left open the possibility it would impose additional control measures to support its WOE demonstration to U.S. EPA.

2009 Revised Ohio EPA Redesignation Request to U.S. EPA: Ozone levels improved significantly in the summer of 2008. The average of the 2006, 2007 and 2008 ozone seasons shows an overall average of 0.84 ppm which is below the 0.85 ppm standard.

This is very good news for the Cleveland-Akron-Lorain area. This means Ohio EPA no longer has to propose a WOE approach to U.S. EPA. Rather, Ohio EPA can rely on the real monitoring data which already shows attainment with the standard. As a result, all of the language I quoted above regarding evaluating additional control options has been dropped. In the 2009 submittal Ohio EPA states:

"The Cleveland-Akron-Lorain ozone nonattainment area has attained the 1997 NAAQS for ozone and complied with the applicable provisions of the 1990 Amendments to the Clean Air Act regarding redesignations of ozone nonattainment areas...Based on this presentation, the Cleveland-Akron-Lorain ozone nonattainment area meets the requirements for redesignation under the CAA and U.S. EPA guidance....Furthermore, because the area is subject to significant transport of pollutants, significant regional NOx reductions will ensure continued compliance (maintenance) with the standard with an increasing margin of safety."

Bottom line: It appears Ohio EPA is no longer evaluating additional controls to comply with the 1997 ozone standard. In addition, the language referring to "subject to significant transport of pollutants" is a reference to the fact our ozone levels are heavily influenced by emissions from elsewhere in Ohio and the Midwest. This means continued strengthening of programs like CAIR (power plant reductions) will continue to result in improved air quality.

Of course the story does not end here... U.S. EPA is in the process of imposing the new 2008 ozone standard (0.75 ppm). Current monitoring shows Cleveland is a long way from achieving the new standard. Unfortunately, this means Cleveland-Akron-Lorain will not get out from under its nonattainment status anytime in the near future.  But at least we are no longer discussing draconian measures to meet the old ozone standard.

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On January 13, 2009, Judge Lacy Thornburg of the District Court for the Western District of North Carolina issued a major decision in case of North Carolina v. TVA.  When filed, this case was seen as another chapter in the on-going battle between downwind and upwind states over cross-border pollution. 

However, the decision and implications are somewhat surprising.  The Court declared that emissions from four of eleven TVA power plants in upwind states created a public nuisance in the State of North Carolina.  Even though these sources apparently comply with environmental permits and regulations, the Court ordered hundreds of millions of dollars in new pollution control equipment on those plants.

Downwind states suing upwind states over coal power plant pollution is nothing new.  The Northeastern and Mid-Atlantic States have sued Midwestern and Southern States over pollution under a number of theories. 

• They successfully participated in New Source Review enforcement cases with U.S. EPA. 
• They filed Section 126 petitions under the Clean Air Act. Those petitions were later resolved by U.S. EPA by creating the Clean Air Interstate Rule (CAIR)- a cap and trade pollution control program. 
• They have sought new federal legislation tightening emission standards on coal-fired power plants

What makes this suit so different is that the State of North Carolina went outside the typical Clean Air Act tool box in asserting its claims.  Instead the State relied upon common law theories.  The decision will certainly bring a waive of new rounds of litigation.  Especially with the remand of CAIR after the successful challenge by North Carolina. 

Here are some of the significant implications of this decision. 

1. The Court found that significant health effects occur as a result of exposure to pollution at levels even below the National Ambient Air Quality Standards (NAAQS) for PM 2.5 and Ozone. The Courts said:

"After reviewing the totality of evidence, the Court is convinced that exposure to PM 2.5-even at or below the NAAQS of 15 ug/m3- results in adverse cardiopulmonary effects, including increased or exacerbated asthma and chronic bronchitis...these negative but non-fatal health effects result in numerous social and economic harms to North Carolinians, including lost school and work days..."

2. The Court found that sources in upwind states can still have significant impacts on a downwind state’s air quality. However, in this case, the Court drew the line at distance of 100 miles. TVA plants within 100 miles (4 plants) were deemed a nuisance and plants outside 100 miles (7 plants) were not.

3. The Court created a new definition of “significant contribution.” TVA plants that were contributing 3% of the emission responsible for PM 2.5 pollution in North Carolina and roughly 5% of the ozone problem were deemed to significantly contributing. On that basis, these plants (ones roughly within 100 miles) were deemed a nuisance.  Sources that contributed less than 1% were deemed not a nuisance. 

4. The Court required installation of SCRs and scrubbers on a number of units because those units were contributing to the nuisance.

5.  Even though these plants were apparently in compliance with all federal and state environmental permits and regulations, they will be putting on additional controls.

6. The Court included emission rates for each plant in a spreadsheet in the opinion. However, the decision is somewhat vague as to whether these are simply expected emissions post controls or in fact legally enforceable limits.

7. From a legal perspective, I found it interesting that a federal judge in North Carolina found sources in other states to be causing a nuisance by applying the State nuisance law from Alabama, Kentucky and Tennessee where the sources are located.

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On January 12, 2009, U.S. EPA proposed a major revision to its rules implementing the 1997 8-hour ozone standard.

In yesterday's post, I discussed the possibility of E-check expanding in Ohio as a result of U.S. EPA's proposed revisions to implementation of the 1997 8-hour ozone standard (.08 ppm).  Today I want to discuss the larger ramifications of the proposed rule.  The proposal provides a crystal ball type glimpse into how U.S. EPA may implement the 2008 8-hour ozone standard (.075 ppm). 

Depending upon how EPA builds off this proposed rulemaking when developing an implementation rule for the new .075 ppm ozone standard, there could be good news for many areas in the Country, including areas in Ohio.  This is especially true for Cleveland which has been under the most stringent ozone requirements in the State. 

As discussed in yesterday's post, the rigidness of U.S. EPA's requirements is largely dependent upon how areas are classified under the Clean Air Act. The short version- Subpart I good...Subpart II bad.  The chart below captures how EPA requirements ratchet up the more severe your ozone problem.  With each higher classification Subpart II piles on more federal mandates.  Subpart I areas don't carry these same mandates.  In addition, there is no classification system-all areas area considered "basic" non-attainment areas.

In recognition that Subpart II carries with it far more regulatory baggage, in 2004 U.S. EPA tried to expand the scope of Subpart I. In order to expand the scope of Subpart I, U.S. EPA drew a line in the sand at a 1-hour design values of .121 ppm.  Areas below .121 ppm were placed in Subpart I. Using this dividing line, there were 126 areas in country designated "non-attainment" for ozone, 84 were under Subpart I and 42 were under Subpart II.  Cleveland was the only Subpart II area in Ohio.

However, legal challenges resulted in the Court throwing out EPA's dividing line of .121 ppm.  The D.C. Circuit Court said that the Supreme Court required .09 ppm on the 8-hour scale as the level for determining which areas would be subject to Subpart II.  In its latest proposal, EPA acknowledges it has discretion to place areas with an 8-hour design value of less than .09 ppm into Subpart I. EPA is proposing to forgo this option and place all areas under a Subpart II classification because it does not want to delay implementation of the 8-hour ozone standard any further. 

I would predict they will not forgo this option when it comes to implementation of the 2008 8-hour ozone standard of .075 ppm.  I believe they will put all areas with design values less than .09 ppm into Subpart I in order to provide maximum flexibility to the States designing their control plans to meet the standard (referred to as SIPs- State Implementation Plans). 

What is the ozone status in Ohio right now?  Based upon 2005-2008 Air Quality Data here are the current ozone design values for the highest ozone areas in the state.

CINCINNATI- .085 ppm

COLUMBUS- .08 ppm

CLEVELAND- .084 ppm

Based on current air quality Ohio should have no areas close to the .09 ppm cut off for placing areas into Subpart II of the Clean Air Act.  This would include Cleveland which is currently under Subpart II. This is good news for the States.  This approach would give Ohio EPA and other States the maximum flexibility in putting together their SIPs to attain the .075 ppm ozone standard.

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[NOTE: THIS POST WAS REVISED BASED UPON ADDITIONAL REVIEW AND INFORMATION]  The unpopular automobile tail pipe test known as E-check may resurface in Cincinnati under a U.S. EPA proposed rule.  Right now, Cleveland is the only area in Ohio with E-check because the area is under a federal mandate to operate the test.  That federal mandate could expand under a recent U.S. EPA proposal.

E-Check has operated in Ohio since 1995.  It operated for 10 years in Cleveland, Cincinnati and Dayton.  The program was always very unpopular with the general public.  Efforts to discontinue the program were instituted in the Ohio General Assembly on numerous occasions.  Finally, improving air quality and expiration of the 10 year contract allowed both Cincinnati and Dayton to get rid of E-Check back in 2006.  In November 2008 U.S. EPA issued final approval of the removal of E-Check as a control measure for both Cincinnati and Dayton. 

Now E-check may see a resurgence.

U.S. EPA has proposed modifications to the implementation rule for the 1997 8-hour ozone standard.  The implementation rule was issued back in 2004.  The rule was challenged by a group of environmentalists.  In 2006, in response to the challenge, a federal court vacated certain portions of the rule.  U.S. EPA has now issued a revision to the implementation rule in response to the Court decision.

One of the main components of the rule vacated by the Court was the manner in which U.S. EPA classified certain areas under the 1997 8-hour ozone standard.  Some areas with lower ozone levels were classified as Subpart I areas and higher ozone areas were placed under Subpart 2 of the Clean Air Act.  The distinction between Subpart 1 and 2 areas greatly affects the amount of flexibility these areas have in designing the air pollution control plans to comply with the 8 hour ozone standard. 

U.S. EPA attempted to place as many areas under Subpart 1 to provide the greatest degree of flexibility.  Of the 126 areas designated nonattainment, 84 were classified as under Subpart 1, and the remaining 42 as under Subpart 2.  Areas under Supart 2 are further broken down by severity of ozone.  The higher the ozone the higher the classification,  The higher the non-attainment classification the more federally mandated control programs and restrictions will apply to the area. (see next post for a chart on Subpart 2)

Under the old rule, Cleveland fell under Subpart 2 and was classified as a "moderate" non-attainment areas.  "Moderate" non-attainment areas are federally mandated to operate a basic vehicle inspection and maintenance program (I/M program).  Dayton, Cincinnati, Columbus and other areas of the state were classified under Subpart I which carried no federal mandate to run an I/M program like E-check.

Under the proposed rule, all areas designated non-attainment with the 1997 8-hour ozone standard will be classified under and subject to the requirements of Subpart 2 of the Clean Air Act.  If an area has already reached attainment with the 1997 8-hour standard the rule will not apply.  This means Dayton will not be covered under the rule as it has already achieved compliance.  However, areas like Columbus and Cincinnati which have yet to comply with the 1997 8-hour ozone standard risk being reclassified as Subpart 2 non-attainment areas.

Under the proposed rule, EPA would make retroactive classifications based upon 2001-2003 air quality data, not the latest readings which show notable improvement in ozone levels.  If EPA maintains this aspect of this proposal, some areas of the Country will be playing a game of high stakes poker with regard to meeting the 1997 8-hour ozone standard.  EPA states:

Marginal nonattainment areas would have a maximum statutory attainment date of June 15, 2007 and moderate areas a maximum date of June 15, 2010.  Since the marginal area attainment date has passed, EPA proposes that any area that would be classified under the proposal as marginal, and that did not attain by June 15, 2007...would be reclassified immediately as moderate under the rule.

What EPA doesn't specifically address but flows from the statement above is that areas that do not meet the June 15, 2010 deadline as a moderate areas face being bumped up to the "serious" nonattainment classificaiton.  This would not only bring E-check, but a host of stringent federal requirements.

Appendix A to the proposed rule identifies the proposed Subpart 2 Classification for areas likely covered by the rule.  Under the proposal, both Columbus and Cincinnati will be classified as "moderate" non-attainment areas.  The "moderate" designation carries with it the federal mandate to operate an I/M program.

Columbus and Cincinnati could avoid I/M programs if they can fully attain the 1997 8-hour ozone standard before this rule would become effective.  How do things look? 

Columbus:  Ohio EPA has submitted a redesignation request for Columbus which is still under review by U.S. EPA.  Ohio EPA says that the current air quality data from 2005-2008 shows Columbus with a .08 ppm ozone design value.  This is well under the .084 ppm necessary to show compliance.  If recent ozone trends continue Columbus could be redesignated before U.S. EPA finalizes its proposal thereby avoiding any of the complications brought on by the proposed rule.  

Cincinnati:  Ohio EPA submitted a redesignation request for Cincinnati.  However, unlike Columbus, Ohio EPA relies on modeling and not real air quality data in its request for redesignation.  Real air quality data in the SIP submittal shows a design value of .086 ppm.  Even the updated air quality information for 2005-2008 shows Cincinnati with a .085 ppm design value.  While modeling may show  .084 ppm, real air quality data does support the modeling estimates.  The 2009 ozone season could really be make or break for Cincinnati.  If its a bad ozone season, Cincinnati may not only face the return of E-check but a "serious" non-attainment classification which would bring a host of consequences.

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Ohio EPA wants to make it easier for economic development to occur in areas like Cleveland, which are designated "non-attainment" with the federal air quality standards (NAAQS) such as ozone or PM 2.5.   Federal regulations require companies looking to build or expand in these areas to offset their emissions.  Offset is achieved by securing the requisite emission reducition credits from existing companies in the non-attainment area. 

In the past a company had no idea whether sufficient eligible emission reductions had occurred that would allow them to fully offset their emission increases.  Available emission reduction credits was not public information.  This lack of information may have dissuaded companies from considering non-attainment areas for expansion.  This hurts areas like Cleveland which is non-attainment for both ozone and P.M. 2.5.

Ohio EPA will now be establishing a state-wide emission trading bank to help facilitate communication between companies that hold emission trading credits and those that need to purchase the credits to build or expand.  The emission trading bank is in reality a web site that will list the available credits by non-attainment area and pollutant.  It's kind of like a giant advertising billboard for companies holding credits they want to sell.  As further explained below, credits will be listed in the bank as either "verified" or "unverified." 

Ohio EPA has finalized the rules that will govern the emission trading bank, known as the emission reduction credits (ERC) rules.  See,OAC Chapter 3745-111. The rules will become effective on January 8, 2009.  

Basic Overview of Offset Requirement: Under U.S. EPA's New Source Review (NSR) program a company looking to build or expand a facility in a non-attainment area may be required to offset its air emissions before receiving a permit (Permit to Install and Operate- PTIO) to construct the facility from Ohio EPA.  Only new or expanded facilities that are "major" sources need offset their emission.  Generally, a "major" source is a source that will emit over 100 tons of the non-attainment related pollutant or 40 tons if it is an expansion of an existing source.  However, these thresholds vary depending upon the pollutant and how the severity of the non-attainment designation.

Ohio EPA's ERC Program is Voluntary:  There is no requirement to participate in Ohio EPA's emission trading bank.  The ERC rules only apply to those who elect to list their emission credits on Ohio EPA's website.  Private transactions between companies outside of the Ohio EPA's emission trading bank is still permissible.

ERC Program Will List Verified and Unverified Credits:  A company who holds ERC's may elect to have them reviewed and certified by Ohio EPA before listing them.  If Ohio EPA validates the credits they will be considered "verified" and will be listed as such on the web site.  The company will be issued a ERC certificate with a unique number for tracking purposes.

Verified credits have advantages- 1) a buyer should not have to worry as to whether the credits are valid once they turn them in to get their NSR permit; and 2) the permitting process for a new source offsetting its emissions will be faster if it uses verified credits.  For sellers of credits, the disadvantage to verified credits its the administrative costs associated with completing the process. 

Unverified credits can be included in the bank.  However, Ohio EPA's rules will not allow for the transfer of unverified credits.  A company would either have to withdraw the credits and transfer them outside the bank or go through the verification process.

What Types of Activities Generate Credits?  Other states (Pennsylvania, Michigan and New Jersey) have operated banks for a long time with a mixed degree of success.  Studies have shown that 80% of all ERC credits in other states were generated as a result of facility shut downs.  However, ERCs can be generated by installing new pollution control equipment, a change in process or reduced hours if they meet the regulatory requirements (quantifiable, reliable, enforceable and replicable).  Stationary and mobile source reductions can both result in ERCs.

What Should You Consider if You Are a Buyer or Seller of Credits? 

1. Verified credits should be worth more- Verified credits should command a higher price.  They have already been certified by Ohio EPA and therefore carry far less risk than unverified credits.
2. Transfer contracts should allocate risk-  All transfers of credits should be governed by well developed contracts that address the issues associated with the particular transaction.  For instance, are the credits sold "as is" or does the contract contain guarantees as to their validity.  When will payment be made?  What happens if the credits are invalidated?
3. Assess the market-  Whether you are a buyer or seller you should assess the market before making decisions.  What types of credits are available?  How many credits are available?  If you are a buyer, make preliminary inquiries as to price to determine the viability of completing the project.

Are There ERCs in Ohio Right Now?  Ohio EPA has not established the website.  Now that the ERC rules are finalized, Ohio EPA can start to promote the bank.  Hopefully, this will lead to an expansion in the number of credits available.  Based upon limited information from Ohio EPA companies have submitted potential credits for consideration.  Submissions so far include the following types of credits in the locations specified:

Generated in Scioto County
17.75 tons of PM 2.5 ERCs
26.62 tons of SO2 ERCs
14.51 tons of NOx ERCs

Generated in Portage County
57.91 tons of VOC ERCs

Generated in Hamilton County
45.60 tons of VOC ERCs
 

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The Ohio Department of Development launched today the second round of funding under the Diesel Emission Reduction Grant (DERG) program.  There will be at least $9.8 million in funding available in the second round.  You can receive funding of up to 80% of the cost (requires a 20% match) for cost of equipment related to reducing diesel emissions.

 You can access the new application, updated guidance and sample Public Private Partnership (PPP) agreement directly on their web page.  Here is the schedule for the second round:

Release of RFP -December 18, 2008
Bidder Conferences- January 12, 2009, 10:00 a.m.
                                       February 9, 2009, 10:00 a.m.
Deadline to submit applications- March 2, 2009
Announcement of award- May 1, 2009

Changes were made to the program to try and overcome the issues experienced in the first round.  They include:

1. One application for any type of project (Repair, Replacement or Repower)
2. Two bidder conference calls where anyone can call in and ask questions regarding the application or requirements for the program.
3. Application checklist to ensure all the required documents have been submitted.  Failure to file a complete application will result in disqualification.  In the first round 32 applications were deemed incomplete and rejected. 

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The D.C. Circuit Court of Appeals issued its much anticipated decision in response to U.S. EPA's request for reconsideration of the decision vacating the CAIR program.  The decision marks an important victory for U.S. EPA, the State and provides some level of certainty for utilities.

The Court decided to remand the rule to U.S. EPA so it can fix the rules "fatal flaws" identified in its earlier decision.  This decision has the effect of preserving the CAIR rule in the interim while EPA overhauls the rule.  The Court also rejected the request by some to establish a firm deadline by which EPA must re-issue the rule. 

Here is how the Court explained the rationale for its decision:

Here, we are convinced that, notwithstanding the relative
flaws of CAIR, allowing CAIR to remain in effect until it is
replaced by a rule consistent with our opinion would at least
temporarily preserve the environmental values covered by
CAIR. Accordingly, a remand without vacatur is appropriate in
this case...

We explained that vacatur was appropriate
because of the depth of CAIR’s flaws, the integral nature of the
rule, and because other statutory and regulatory measures would
mitigate the disruption caused by vacating the rule. Id.
However, on rehearing, EPA, petitioners, and amici states point
to serious implications that our previous remedy analysis,
including our consideration of mitigation measures, did not
adequately take into account. The parties’ persuasive
demonstration, extending beyond short-term health benefits to
impacts on planning by states and industry with respect to
interference with the states’ ability to meet deadlines for
attaining national ambient air quality standards for PM2.5 and
8-hour ozone, shows that the rule has become so intertwined
with the regulatory scheme that its vacatur would sacrifice clear
benefits to public health and the environment while EPA fixes
the rule.

While not addressing the issue, the Court rejected its request for reconsideration of what EPA identified as key issues.  One such issue was whether EPA has the authority to adjust the value of Acid Rain allowances under CAIR. 

While this decision is very good news for EPA and the States who are trying to plan for meeting air quality standards, it still leave a tremendous amount of uncertainty.  The Court is not reconsidering any of the "fatal flaws" it identified with CAIR, which were numerous.  The rule that will emerge after being fixed by EPA will look vastly different than before.

Now utilities will be left with making key decisions about the use of allowances and construction of new controls without the benefit of knowing what the new CAIR rule will look like.  While the picture got a little clearer today, there is still a whole bunch of uncertainty.

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All the recent climate change related litigation has overshadowed major activity around control of hazardous air pollutants (HAPs) from coal plants.  Mercury is one such HAP.  Back in February 8, 2008  in New Jersey v. EPA, the D.C. Circuit Court of Appeals threw out U.S. EPA's cap and trade program for mercury, known as the Clean Air Mercury Rule (CAMR).  

EPA's decision to create a cap and trade program for mercury was very controversial.  Those opposed said cap and trade was not meant to control toxic pollutants like mercury.  In response, a number of states rejected the CAMR rule and adopted state programs that established control requirements for every coal plant within their borders.

While the federal court declared CAMR illegal, it also made an important determination as it relates to control of HAPs from coal plants.  In order to create the cap and trade program, the Bush Administration had to undue the efforts of the Clinton Administration to establish facility specific control standards for coal plants under Section 112 of the Clean Air Act. 

In December 2000, the Clinton EPA decided to list electric generating units (EGUs) under section 112.  By listing this source category under Section 112, all existing and new plants must meet Maximum Available Control Technology Standards (MACT) for controlling emissions of HAPs.  MACT is emission controls equal to the "average emission limitation achieved by the best performing 12 percent of the existing sources."

In order to create its cap and trade program, the Bush Administration tried to de-list EGUs as a source category regulated under Section 112.  The federal court in New Jersey v. EPA found this action to be illegal.  This means that EPA must move forward with rules establishing a MACT standard for EGUs.  To date, EPA has failed to take such action.  As reported in the Charleston Gazette this week, groups have sued EPA to compel such action. 

A coalition of environmental groups has filed a lawsuit trying to force the federal government to comply with a 6-year-old mandate to reduce toxic chemical emissions from coal-fired power plants.

The suit, filed Thursday in federal court in Washington, asks for a court order requiring the U.S. Environmental Protection Agency to set limits for mercury and dozens of other hazardous air pollutants.

The new lawsuit follows a major decision by a federal court in North Carolina (Southern Alliance for Clean Energy v. Duke) that invalidated a permit for construction of a new coal plant because the permit failed to show compliance with MACT for HAPs.  The main issue in the case was whether the MACT standards apply to the on-going construction of a coal plant following the New Jersey decision.  Notably, the Court ruled that MACT did apply even though the permit was issued and construction had already began on the new source.

While mercury and other HAPs won't be controlled from existing plants until EPA finalizes its MACT standards for EGUs, at least one federal court has said new plants must meet the yet to be established standard.  This presents another avenue for environmentalists to challenge air permits for coal plants, even permits issued prior to the February 8, 2008 decision.

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President Elect Obama has prided himself on appointing a mix of opinions in his cabinet and senior advisors.  For example, his National Security team is made up a former political rival and a Republican from the Bush Administration.  Obama has said he studied history and identified a possible issue in past presidencies is not fostering a diverse mix of opinions to debate policy.  Here is what the President Elect said after making his National Security appointments:

“One of the dangers in a White House, based on my reading of history, is that you get wrapped up in groupthink, and everybody agrees with everything, and there's no discussion and there are not dissenting views,” Obama said, voicing a frequent criticism by some senior Bush-administration alumni.
“So I'm going to be welcoming a vigorous debate inside the White House. But I understand, I will be setting policy as president.

The diversity that was plainly evident in his Naitonal Security team seems to be missing on his Green Team.  Carol Browner as Climate Czar and past senior managers at EPA will fill the other important environmental posts. The announced appointments have met with a mix of reviews.  The USA Today praised the choice in an article title"Obama's Dream Green Team is Warmly Received." 

One is a Nobel Prize winner overseeing research of alternative energy. The three others all have one thing in common: experience working for the Environmental Protection Agency...

"This is clearly a green dream team," said Gene Karpinski, head of the League of Conservation Voters, an environmental group. "These people have shown they can get the job done."

Obama has mustered an "impressive team of experienced and capable leaders," said Tom Kuhn, president of the Edison Electric Institute, a group representing electric companies.

As an opposing view, the Wall Street Journal blasted the environmental appointments in an editorial:

The EPA long ago became the government arm of the environment lobby, but Ms. Browner was especially political. During her EPA salad days, she put out air-pollution standards that even the agency itself said would have no measurable impact on public health, purely as antibusiness punishment. She forced GE to dredge the Hudson River of PCBs that posed no threat to the public. Ms. Browner also rewrote a law called New Source Review so that power plants, refineries and other industries were always breaking the particulate emissions rules....

As for the "team of rivals" hype, the rest of Mr. Obama's energy list is heavy with Ms. Browner's acolytes. Lisa Jackson, for 16 years a top EPA enforcement officer, will now run that agency. At the White House Council on Environmental Quality will be Nancy Sutley, who was Ms. Browner's special assistant at EPA.

The Washington Post noted the commonality in the appointments in their piece covering the appointments titled "Seasoned Regulators to Lead Obama Environment Program." :

Word of their appointment was greeted enthusiastically yesterday by some environmental groups. The League of Conservation Voters called the group a "green dream team."

Industry groups were more cautious. At the U.S. Chamber of Commerce, Vice President William Kovacs said the group worried that the new officials would use their power to limit greenhouse-gas emissions and impose painful new costs on energy use.

"I think that they could be aggressive, and we're hoping that they're really going to look at the circumstances" of the economic downturn, Kovacs said. "That is our biggest single concern, because literally all three of them have a regulatory bent."

Regardless of your opinions of any of appointments as individuals, it is hard to see a wide divergence of opinion emerging.  While there is no doubt seasoned veterans are needed to develop and implement a game changer like climate change legislation, I agree with the President elect...a diversity of opinion is a valuable asset that can improve decision making.

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Is the Court showing signs that it may have gone too far is throwing out CAIR?  After EPA filed a request for rehearing, a hopeful sign emerged last month when the Court asked the parties challenging CAIR to respond to two questions:

1. Does any party really want the entire rule thrown out (vacatur)?
2. Should the Court stay the effectiveness of its decision to throw out the rule until EPA fixes and re-issues a new rule addressing the Court's issues?

In response, twenty-two (22) states, including North Carolina, told the Court they don't want the rule thrown out.  The States requested the Court to stay the effectiveness of its decision to allow EPA to fix the rule.  However, North Carolina was concerned with how much time EPA would have to fix the rule-it opposed an indefinite stay.  Rather, N.C. proposed a deadline of July 2009 after which the stay would end. 

The Utilities were split on the issue.  Some asked for the rule to be thrown out, while others preferred remand.  The argument in support of throwing out CAIR can be summed up by this quote from the brief filed by the Florida Association of Electric Utilities:

Regulatory certainty is critically important, and granting rehearing or staying the mandate would require CAIR states to immediately implement, and affected sources to immediately comply with a rule the Court has declared contains "more than several fatal flaws."

The Utilities opposing remand or a stay ask a valid question- What portion of a "fundamentally flawed" program are going to remain after EPA fixes the rule.  EPA has said it will take 2-3 years to fix CAIR.  The Utilities argue why should they be forced to comply with provisions of the rule that Court has said are fundamentally flawed for the next several years.

U.S. EPA also filed a brief in response to the two questions posed by the Court.  EPA says it prefers a stay of effectiveness of the vacatur decision while it fixes the program.  However, it also says it must have rehearing on certain critical issues or CAIR will be ineffectual at reducing pollution even if the Court grants a stay.

Principally, U.S. EPA wants rehearing on the Court's decision that EPA does not have the authority to adjust Title IV (acid rain) allowance under the CAIR program.  Without the authority, EPA argues it cannot create a program that will impose greater reductions of SO2 emissions. This would mean the less stringent caps under the old Acid Rain Program will remain.

EPA says this will also impact the emission reductions achieved during a potential stay.  Without clear authority to adjust Acid Rain caps and allowances, Utilities will have no incentive to hold banked allowances for future compliance.  This is because Utilities will not anticipate a stronger program will emerge after EPA fixes the rule.  Rather, Utilities will simply use up the allowances during the stay and emission reductions will not occur.

EPA raises an interesting issue-  Even if a stay is granted there will be tremendous uncertainty as to what the Utilities will do with allowances during the stay.  While EPA makes a valid point, they may have ended the possibility of a stay if the Court is unwilling to reconsider its position that the rule is fundamentally flawed. 

Given all the posturing by the Parties, it will be interesting to see what course of action the Court takes in response.

There appears to be growing awareness that the CAIR decision has major implications beyond just the Utilities. For instance, what about upcoming deadlines for attaining federal air quality standards (NAAQS)?  Without the CAIR SO2 reductions States will likely not be able to comply in time.  Should the State's be punished for EPA's failure to develop a legally enforceable program?

In yesterday's U.S. News and World Report  there was an article covering the uncertainty that swirls around the future of clean air post CAIR.  

Five months after a federal court struck down the Bush administration's top program aimed at curbing air pollution, the fate of air quality regulation—and, therefore, air quality—in much of the country is increasingly uncertain, if not imperiled.

I was interviewed for the story and was able to point out that the States can't fix air quality issues on their own.  Federal help through programs like CAIR is needed to address what is a regional issue, not a local issue.

"In the case of fine-particulate pollution, there is a huge regional soup of it," says Joseph Koncelik, an Ohio-based environmental lawyer and the former Ohio EPA director. "So, it's somewhat ineffective if states are working on their own, just trying to control a few factories in their jurisdiction."

If the Court doesn't grant the stay and issues its mandate effectively throwing out CAIR, will EPA  still hold the States accountable for the 2010 deadline to meet the fine particle standard (PM 2.5)?

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DERG Round Two Schedule:  Tentatively, Ohio will begin soliciting grant applications on December 15th for the second round of funding under the Diesel Emission Reduction Grant (DERG) program administered by the Ohio Department of Development (ODOD).  DERG will have approximately $11.2 million in available funding in the second round.  The grants pay for retrofits of emission controls, engine rebuilds, and a portion of the purchase price of new diesel vehicles.  Here are the tentative dates as discussed in a meeting with ODOD last week: 

• Monday, Dec. 15: release of the RFP with a press event, media release and posting of application documents on the website.
• Monday, Jan. 12 at 10 a.m.: first of two bidders conferences
• Monday, Feb. 9 at 10 a.m., second bidders conference
• Monday, March 2, applications due
• The selection team will take up to 60 days to review, score and forward successful applications to the Federal Highway Administration. Projects selected for funding will be notified by May 1, 2009

Grants are available to both public and private entities.  Because the source of funding is the federal Congestion Mitigation Air Quality (CMAQ) program, private companies must enter into a contract (called a Public Private Partnership- PPP) with a public entity.  The money follows from the state to the the public entity who then reimburses the company. 

What Does DERG Pay For? Diesel grants are a great way to pay for fuel saving equipment, like auxiliary power units (APUs), that reduce idling.  Engine or vehicle replacements can be partially funded through the DERG program.  Also, companies who want a greener fleet for contract bidding or as part of the company's sustainability efforts can pay for retrofits that dramatically reduce emissions from their diesel engines.  All applications require a twenty percent (20%) match.

Issues With Round One of DERG:  As discussed in prior posts, the DERG program experienced significant problems and delays in the Round One of funding. Most notable, 42 applications were filed in round one, but only 10 applications were deemed complete- all of which received funding.  As a member of the Ohio Diesel Coalition, we have advocated for a series of improvements to the grant application process to ensure a transparent and competitive grant process.

Improvements to DERG Round Two:  Last week, representatives of the Ohio Diesel Coalition, including myself, met with members of an inter-agency team working on the DERG program to review changes to the program. The State's inter-agency team is composed of officials with the Ohio EPA, Ohio Department of Development and Ohio Department of Transportation.  To help improve the overall application process and to ensure complete applications are submitted, the inter-agency team will put in place the following changes for Round Two:
 

1. A concisely written Request for Proposals (RFP) will be released by ODOD
2. A template of the Public Private Partnership agreement (a major stumbling block for many in round one) has been posted on the DERG website
3. All successful round one applications have been posted on the website
4. Applicants are given more time to prepare applications (up to 2 months)
5. Two separate bidders conferences (in person, by telephone or over the web) will be offered in advance of the application due date to answer questions
6. The State developed a consolidated application form to cover all types of projects (retrofits, repowers and replacements)
7. A checklist will be included in the application packet to ensure applicants include all required information

Other Developments:  ODOD made a policy decision to set aside $5 million of the remaining $11.2 million in funding for public transit projects. However, if total transit requests are below $5 million, all other fleets can compete for these funds. There is no ceiling on project amounts, but the minimum amount that could be requested is $20,000 per project.
 

When To Look For The New Application:  The new RFP has not yet been posted on ODOD's web page.  I imagine all the documents, including the RFP, checklist and other documents will be posted on the release date of the RFP (December 15th).  Keep an eye on ODOD's website for this information.  In the meantime, it may be a good idea to evaluate projects and approach a public entity about a PPP contract

(Photo: Flickr terinea/everystockphoto.com)

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As reported by Platts, on October 21st the D.C. Circuit Court of Appeals asked whether the parties involved in the lawsuits that led to vacatur of the Clean Air Interstate Rule (CAIR) want the entire rule to be thrown out or to be kept in place until U.S. EPA revises the rule. 

The US Court of Appeals for the District of Columbia Circuit on Tuesday
ordered petitioners -- which include utilities Duke Energy and Entergy -- to
respond within 15 days to its inquiry.

It is a move CAIR supporters see as a hopeful sign.

"We see it as a sign that [the court is] working through the reasoning of
our position and, hopefully, will make the right decision" and keep CAIR in
place, said EPA spokesman Jonathan Shradar.

Asking the petitioners whether they want the entire rule thrown out or a
stay of the court mandate indicates the DC Circuit is "taking our petition
seriously," he added.

If the DC Circuit stays its mandate, CAIR could stay in place until EPA
puts in place a revised rule.

This puts the Utilities in an interesting position.  EPA has indicated that CAIR would need a significant rewrite which would include weakening protections that were provided to the Utilities under the original rule.  The weakening would likely include removal of the shield that EPA constructed that protected the Utilities from claims that interstate transport of pollution was not adequately addressed by CAIR.

Given the 15 day deadline, the briefs should have been filed.  It will be very interesting to how the Utilities like to gamble.  Would they prefer the rule to be thrown out and take their chances a new program is developed that is stronger?  Would the prefer maintaining at least the first phase of CAIR to give them some certainty in the allowance markets and be able to plan for new pollution controls?

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I mentioned in my post discussing LADCO air quality meeting that I would put up the most relevant slides or graphics from all the presentation over the two days in Chicago.  I think I can pretty much boil it down to two slides.

This slide was put together by U.S. EPA when meeting to discuss their support of a Legislative fix to reinstate CAIR.  As discussed, no legislative fix appears possible at least in the short run. 

The bar chart shows the reductions of existing SO2 emissions based up various legislative fixes. The bar to the far left is emissions in 2005.  The short series of bars represents full reinstatement of Phase I (2009) and Phase II (2015) of CAIR.  Then we go through no fix, 2 year temporary  fix, 4 year temporary fix, and permanent reinstatement of only Phase I. 

Okay, so this is a great visual for the massive reductions in SO2 expected as a result of CAIR.  With no legislative fix and successful appeal of the Court's decision vacating CAIR unlikely, looks like we are at the "no fix" point on the graph. 

But what does this mean to air quality?  While the presentations from the States all indicate attainment of the 1997 ozone standard (.85 ppm) appears likely, its a much different story for P.M. 2.5 (fine particles).

This is the latest modeling of air quality in the Midwest without CAIR.  The map on the right shows no CAIR. The map on the left with CAIR.  The more color dots the more area not meeting U.S. EPA's PM 2.5 standard.

The chart below provides the overall scorecard.  We go from only 3 areas in the Midwest not meeting the standards, to a total of 20 area. 

Furthermore, all of the presentations discussed that PM 2.5 (fine particle) pollution is regional in nature.  Which means the states will find it probably impossible to attain the standard without regional reductions similar to CAIR's reductions from power plants. 

With more areas not attaining, more states will be forced to consider much costly controls on existing businesses.  In addition, areas that don't meet U.S. EPA's air quality standard find it more difficult to attract new business or plant expansions in their areas.  Not good news for the Midwest during these tough economic times. 

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As reported by the Associated Press last week, U.S. EPA has adopted a new airborne lead standard.  U.S. EPA selected a standard at the lower range of those being considered.  The new standard is ten times more stringent than the old standard.  As was reported:

The new limit - 0.15 micrograms per cubic meter - is the first update to the lead standard since 1978, when it helped phase out leaded gasoline. It is 10 times lower than the old standard, which was 1.5 micrograms per cubic meter.

EPA estimates that 18 counties in a dozen states across the country will violate the new standard, requiring state and local governments to find ways to further reduce lead emissions from smelters, metal mines and other sources.
 

Here are is a good graph and pie chart showing the reductions in lead and sources responsible for remaining airborne lead:

The graph on the right shows airborne lead levels have decreased by 94% since U.S. EPA banned lead from gasoline and took other measures.  The pie chart to the right shows the largest remaining contributor to airborne lead levels is leaded aviation fuel.  However, this would not explain why some counties have such high lead levels.  This can only be explained by factories or sources in those counties.

U.S. EPA's monitoring data that shows only 18 counties in the entire country violate the strengthened lead standard.  Compare that to the ozone and fine particle air quality standards where 30 counties in Ohio alone violated the standard.  This may be due in part to the inadequate monitoring network that exists for measuring airborne lead levels.

Once again Cuyahoga County gets the dubious distinction of being listed as one of the few counties in the country to violate the new lead standard.  However, a closer look at EPA lead monitoring shows Cuyahoga barely over the standard.  EPA data says airborne lead levels are .16 micograms per cubic meter and the standard is .15.  

Ohio's highest lead levels are in Fulton County with reading at .52 micrograms per cubic meter.  The highest in the Country are in Jefferson County, Missouri with a reading of 2.26 micrograms per cubic meter, about 15 times higher than the new standard. 

Placed into context, Cleveland should not face much of a challenge in meeting the new airborne lead standard.  This is good news to an area that has faced the greatest challenge in the state in meeitng ozone and fine particle standards.

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I participated today in a Midwest Air Quality Workshop in Chicago. At the workshop, Bill Harnett from U.S. EPA's Office of Air Quality Planning and Strategy (OAQPS) gave an interesting presentation regarding U.S. EPA's reaction to the vacatur of CAIR by the D.C. Circuit Court of Appeals. Here are a couple of the key issues discussed or observations made:

Chances of Rehearing Appear Slim- U.S. EPA is not very optimistic about their chances to get rehearing from the D.C. Circuit. Apparently only 5 of the 10 justices who sit on the Court do not recuse themselves from U.S. EPA's cases involving the utilities. This means that instead of a full panel of justices, U.S. EPA is requesting reconsideration to only five justices, three of which decided to vacate CAIR already. This means U.S. EPA will have to get one of the Justices to change their previous opinion just to get rehearing...an outcome that does not appear likely.

Even if Rehearing is Granted the Best Hope is Restoring Only a Portion of CAIR- As discussed in my prior post on the brief U.S. EPA filed for rehearing, U.S. EPA seems to have thrown in the towel already on getting all of CAIR restored- meaning the second phase of reductions in 2015 are out of the picture. Even if U.S. EPA gets a rehearing it is already saying the best possible outcome will be to restore the first phase (2009) of CAIR reductions.

No Short Term Legislative Fix- This was apparent with Congress going into recess for the elections. Time simply ran out on a quick fix that could have restored the first phase of the CAIR reductions in 2009. The ramifications are significant because, as discussed below, any path forward will involve at least a two or three year process.

A Fix is at least 2-3 Years Away- While U.S. EPA is already evaluating options for a new federal rule and also hoping for legislation, either approach will be lengthy. U.S. EPA is going to have to wait until a new administration comes into office. Appointments won't happen until at least the Spring. This means a new rule proposal or even rules following legislation won't happen until the summer of 2009 at the earliest. However, even after the rule is proposed this just starts the long rulemaking process. Therefore, U.S. EPA is saying a final rule is 2-3 years away and reductions may be 4-5 years away.

U.S. EPA Wants to Develop a "Safe" or "Bullet Proof" Rule- It is clear U.S. EPA does not want to risk losing the entire CAIR program a second time. To try an ensure that won't happen, U.S. EPA says they will push for a rule that addresses the issues raised by the Court. What this means exactly is unclear, but I doubt the utilities will be happy with the outcome. One option discussed was to craft a federal rule that does not "address" interstate transport, but only "reduces" transport. Under CAIR, U.S. EPA said the states didn't have to do anything more to "address" transport because CAIR solved interstate transport issues. In a new rule, U.S. EPA says they won't go that far leaving additional reductions to solve interstate transport up to the States.

How? U.S. EPA would leave it up to the states to certify in the State Implementation Plans (SIPs) that they have reduced emissions from sources in the State to such a degree they addressed all transport issues. This helps U.S. EPA because if one State's finding that they addressed interstate transport is overturned by the Courts the whole federal rule does not crumble.

For Trading to Survive U.S. EPA Can't Solve Transport, Some Reductions Will Come From the States- This builds upon the notion U.S. EPA will only strive to "reduce" transport and not "address" it . A federal rule that solves interstate transport could not include a cap and trade component. A principle reason the Court vacated CAIR was because with a cap and trade program there were no assurance reductions would occur in any given state. All the sources in a state could satisfy their obligations by purchasing allowances and avoiding controls. As a result, the Court said U.S. EPA illegally concluded in the CAIR rulemaking that it solved interstate transport of emissions from power plants.

Without CAIR State's will attain Ozone but not PM 2.5 - Each of the five LADCO States (Ohio, Indiana, Illinois, Wisconsin and Michigan) gave presentations on their air quality plans. All of the State's a planning to restore the NOx SIP Call in response to the CAIR decision. From the reductions under the NOx SIP Call all the states said they can attain the 1997 ozone standard.

However, without CAIR, attaining the fine particulate (PM 2.5) standard is nearly impossible. CAIR brought huge reductions in SO2 that will be lost without CAIR. LADCO modeling shows we go from 3 to 20 monitors in the Midwest reading nonattainment with the P.M. 2.5 standard without CAIR by 2009. Unless the States get very aggressive and proceed with old command and control enforcement/permitting against these sources it appears unlikely they can get enough reductions to attain the P.M 2.5 standard by their 2010 deadline.

(Note: Once the visuals from the various presentations are available next week I will post the best illustrations of the issues I have discussed above)

 

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On September 24, 2008 U.S EPA filed its petition to the D.C. Circuit Court of Appeals for rehearing En Banc on the vacatur of the Clean Air Interstate Rule (CAIR).  While focus may be on EPA's request for rehearing, a significant concession was made in EPA's brief that has major implications regardless of whether rehearing is granted. 

EPA Concedes CAIR Phase Two Reductions Are Not Aggressive Enough

EPA elected to not seek review of the Court's holding that the 2015 deadline for Phase II reductions is unlawful because it is inconsistent with the shorter compliance deadlines for ozone and p.m. 2.5 contained in the Clean Air Act.  The Court held EPA must require reductions as "expeditiously as practical" but no later than the deadlines established in the Clean Air Act (typically 2010).  In the Court's words:

EPA did not make any effort to harmonize CAIR's Phase Two deadline for upwind contributors to eliminate their significant contribution with the attainment deadlines for downwind areas North Carolina v. EPA slip op. at 25

EPA's concession on the Phase Two deadline runs counter to the Bush Administration's position that a legislative fix of CAIR must preserve the entire program.  To the extent EPA's concedes this point in its rehearing is somewhat puzzling as it was unnecessary at this stage of legal maneuvering.  Perhaps this concession paves the way for a Congressional compromise over a short term legislative fix that preserves Phase I of the program.   Certainly this concession means a rewrite of CAIR that includes more aggressive reductions seems inevitable.

EPA's Arguments in Support of Rehearing

EPA's brief appears to try and lay a guilt trip on the Court as its justification for a rehearing.  EPA rightfully points out the major benefits of CAIR that will be lost if at least Phase I of the program is not preserved:

Most significantly, vacatur will jeopardize massive emission reductions...and accompanying improvements in public health.  EPA estimated that CAIR would prevent 13,000 deaths annually by 2010 and 17,000 premature deaths annually by 2015.

Vacatur will also destroy or reduce the value of banked allowances that companies generated through early emission reductions...6.9 million tons of banked Title IV allowances have lost over three billion dollars in value [since the Court's decision]

There is no doubt the courts decision to throw out the CAIR program has resulted in chaos both in the trading markets and with State's struggling to reach attainment with federal air quality standards.  We will see if the Court agrees that these dire consequences satisfy the standard for review that the matter involve a question of "exceptional importance." 

As a second basis justifying review of the decision, EPA argues that the Court has been inconsistent in its review of the NOx SIP Call and CAIR.  The EPA argues the Court previously upheld the NOx SIP Call in Michigan v. EPA and CAIR uses the "same fundamental approach approved in Michigan."  Both air pollution control programs use economic factors to determine the amount of contribution to downwind state nonattainment upwind states must eliminate.  The economic factor being "highly cost effective controls."

This is the crux of the legal issue and has significant implications for the design of any cap and trade program to control air pollution.  Does the Clean Air Act call for elimination of contribution to downwind air quality issues based upon cost of controls or does it require reductions based upon a State's actual contribution to downwind nonattainment?  If it is ultimately decided that actual contribution must be eliminated, it may prove very difficult to craft a valid cap and trade program without new legislative authority.

EPA's strategy to argue inconsistency appears pretty risky given the fact the Court raises questions regarding legality of the NOx SIP Call.  Specifically, the Court states:  "In Michigan we never passed on the lawfulness of the NOx SIP Call's trading program."  The Court's decision appears to suggest it would have thrown out the NOx SIP Call as well if proper challenges had been made.  

The EPA appears to face a steep climb to ultimately win its appeal.   The Court was unanimous in its finding that basing required reductions on cost effective controls does not comply with the Clean Air Act.

What's Next For CAIR?

Through legal maneuvering, U.S. EPA can effectively delay the effectiveness of the Court's decision to vacate CAIR.  The rehearing petition will likely delay it for a couple months while the Court considers the petition including allowing comment by other parties.  Even if the rehearing is denied, which appears likely given the original decision was unanimous, U.S. EPA can file a motion to stay the effectiveness of the decision while it seeks appeal to the Supreme Court.  By Court rules a stay, if granted or not challenged by the other parties, is good for 90 days.

While EPA delays the effect of the Court's vacatur of the program, efforts will focus on a legislative fix that can preserve at least the immediate future of the program.  However, time is running out on this "quick fix" option as Congress adjourns for the election.

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A lawsuit filed this week  raises an important question about the relationship between the federal government and states pertaining to environmental regulations.  At issue is how much flexibility state's have to modify their air pollution control plans used to comply with federal air quality standards.  As reported in the Columbus Dispatch, the Sierra Club has challenged Ohio's ability to increase the threshold for triggering the requirement to install best available technology (BAT) on smaller sources of air pollution. 

The specific exemption was included in Sentate Bill 265 which increased the BAT exemption from 1.8 tons per year to 10 tons per year.  These sources will still have to include air pollution controls, typically what is called "reasonably available control technology" (RACT).  However, they will no longer have to meet the more stringent BAT standard.

The Sierra Club goal is to prevent small pollution sources from being allowed to increase emissions.  However, they are missing the critical issue.  As long as overall pollution levels remain the same, shouldn't states be allowed to choose what methods they will employ to meet federal air quality standards?  Also, shouldn't states be allowed to change methods if they find one to be ineffective or inefficient?  

The increase in the BAT trigger threshold was adopted because there was a strong belief Ohio was over regulating small sources of air pollution.  As an example, Ohio regulates over 70,000 air sources while its neighbor, Michigan, only regulates 7,000.  Obviously the disparity is not attirubated to Michigan having far less industry or manufacturing, its attiributable to the fact Michigan has a higher threshold for triggering the need for a permit. The Legislation was an attempt to address this disparity.  [A prior post discussed the policy motivations behind the legislation and U.S. EPA's concerns with the changes]

The Sierra Club argues the change violates the Clean Air Act's "anti-backsliding" prohibition.  Under the Clean Air Act, state's are not allowed to undermine the progress made in improving air quality by reducing air pollution control requirements.  However, state's have some discretion to substitute old requirements with equally effective new requirements.

Ohio wants to amend its state air pollution control plan (SIP) to substitute the requirement to install BAT on small sources with other requirements targetting other sources that are currently being implemented.  The new requirements will more than make up for any pollution increase attributable to dropping BAT for small sources.

Shouldn't the State's be allowed to substitute less effective or inefficient pollution control requirements with new requirements that will produce equal or greater reductions?  Hopefully, the Courts and U.S. EPA will say yes.  Otherwise, less effective requirements remain on the books forever. 

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As reported on CNN, the Senate is debating how or whether to legislatively restore the CAIR program that was struck down in Court.  EPA still has a week or so to decide whether to appeal, but all bets are that Congress needs to act in order to save the program.

The game of chicken centers around whether the entire program should be restored, meaning reductions in Phase I set to take effect in 2009/2010 and Phase II which is to take effect 2015.  The White House insists on both Phase I and Phase II.  (proposed CAIR legislation) Senate Democrats, who have long been unhappy with the strength of the CAIR program are talking like they are only willing to put in place Phase I and then work on long term legislation for a stronger program.

President George W. Bush is "pushing for a full codification of CAIR," Carper told reporters. "That just ain't gonna happen. I think they may not be able to get what they want, but they can get what we all need."

But the White House has allies in the U.S. Senate. In a sign of the ongoing standoff, Sen. George Voinovich, R-Ohio, and Sen. James Inhofe, R-Okla., introduced a bill Thursday that would restore the full program instead of just the first phase.

"Options to quickly reinstate Phase I CAIR followed by tighter legislation do not save as many lives as the full CAIR fix until eight to 20 years from now; that means 6,500 to 41,000 more lives will be lost mostly in the next three to six years," according to a statement released by the lawmakers.

With only a few week before Congress is set to adjourn, there does not appear to be much time to resolve the drama.  With so much at stake and the chaos that will ensue if no type of fix is adopted, its hard to believe no action will be taken.  But as long as the White House insists on reinstatement of the whole program it appears likely there will be no resolution.  The Eastern State, Democrats, Environmental Groups and even some of the Utilities believe too strongly CAIR is a weak program.  If this was not the case, Congress would have passed Clear Skies-the legislative precursor to CAIR. 

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As reported in Platts, the Court of Appeals has granted US EPA until September 24th to determine whether to pursue rehearing of the ruling that struck down the Clean Air Interstate Rule (CAIR).

The US Circuit Court of Appeals for the District of Columbia announced
....it was giving EPA more time to file any petition for a rehearing,
which it can seek either before the same three judges or before the full
six-judge court.

Any such petition would originally have been due August 24.

The extra time would likely delay implementation of the court's ruling
for at least another two to three months until the court decides whether it
will approve or deny any EPA petition, according to John Walke, clean air
director for the Natural Resources Defense Council.

The court would seek comments from other parties on any government
petition, giving them up to 30 days, before making a decision, Walke added.

The full effect of the Court's decision takes place on issuance of its "mandate" which effectively throws out the program. The Court of Appeals typically issues its mandate 7 days after the time period for appeal expires. So earliest the full decision would likely take effect is October 1st.

EPA could file a motion to stay the effectiveness of the mandate while it seeks appeal. If no one opposes the motion the stay is effective for 90 days. If the motion to stay is granted, then it will continue while EPA seeks review in front of the Supreme Court.  So, EPA through legal maneuvering can try and delay the inevitable.

Rehearing still appears unlikely as does any Congressional action to provide legal support for CAIR.  Also, the decision to seek more time will keep EPA silent on many aspects how it proposes to deal with CAIR decision.  EPA traditionally provide great deference to the Court while determining whether to seek an appeal.  An information vacuum is not the best thing right now for those struggling to understand how to effectively address the many ramifications of the Court's decision.

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 Yesterday, U.S. EPA announced its proposed non-attainment designations for counties not meeting the new P.M. 2.5 (fine particle) pollution standard.  Ohio was second only to California in total counties designated non-attainment with 28 total counties. 

A county's designation as non-attainment makes economic development efforts more difficult and increases competitive pressure on existing businesses.  The designations mean regulatory restrictions on economic growth and increased pollution control compliance costs for existing businesses. 

How is economic growth impacted?  Before a company can build a new factory or expand, if that factory will result in a moderate pollution increase of fine particles it must offset that emission increase.  An offset is achieved through pollution reductions from existing businesses already located in that county.  The offset requirement, as part of U.S. EPA's New Source Review Program, acts as a strong disincentive to locate in non-attainment counties.  The offset requirement only goes away if the county is redesignated attainment.

How does County get out of its non-attainment designation?  Through reductions in fine particle pollution to levels that comply with the federal standards. Reductions are achieved through a combination of federal and state pollution programs.  The State must develop a pollution control plan (SIP) that shows its strategy for achieving the federal air quality standard by the applicable deadline (2012).

What are the largest sources contributing to fine particle pollution?  Transportation, in particular diesel engines and coal-fired power plants.  While, fine particle pollution is more localized than ozone, it still has a regional component.  Therefore, counties must see state and regional reductions in order to achieve the standard. (Note: the recent letter from State EPA heads to U.S. EPA)

How can Ohio and other states effectively achieve reductions from these sources?  While U.S. EPA has adopted tougher standards for diesel engines, the reductions won't come until there is turnover in the fleet.  Therefore, the full benefits may not be seen for 25 years.  That is why programs like DERG that accelerate diesel reductions are so important. (see yesterday's post on Ohio's diesel grant program). 

Furthermore, Ohio and the other state's efforts to meet the fine particle standard are further complicated by the court decision throwing out U.S. EPA's CAIR program.  CAIR, as described by U.S. EPA, was the "linchpin" program designed to help states achieve attainment with ozone and fine particle standards. (see post "CAIR Decision Will Have Many Aftershocks")

Implementation of the new standard: Below is U.S. EPA's implementation schedule for both the old (65 ug/m3)  and new (35 ug/m3) 24-hour fine particle standards.  While Ohio submitted its SIP in July for the old standard it relied heavily upon CAIR.  So, even for the old program Ohio's SIP will need significant revisions.  It is yet to be seen how states can achieve either standard without regional reductions from coal-fired power plants.  Unfortunately, it doesn't appear Congress is going to act quickly to provide relief to the States.

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You don't often hear Buckeye's saying they need to be more like Longhorns, but Ohio would do well to imitate the Texas approach to reducing diesel emissions in its state.  Back in 2001, Texas established the Texas Emission Reduction Plan (TERP) that has approximately $500 million in funding to help reduce diesel emissions.

Why has Texas made such a heavy investment in its diesel emission reduction program?  Because Texas identified the connection between air quality and business development.  

Here is a quick tutorial on the connection: Counties that do not meet federal ozone or fine particle standards are designated as "non-attainment."  A "non-attainment" classification constrains economic development and puts businesses in those counties at a competitive disadvantage. Reducing diesel emissions through grants and other incentives can be an effective way of reducing emissions to help attain federal air quality standards. 

Ohio's Diesel Emission Grant Program (DERG), with $19.8 million in financing set aside in the last budget, was an initial step toward a Texas like program.  On July 29, 2008 the Ohio Department of Development awarded 10 grants under the Ohio Diesel Emission Reduction Grant (DERG) program.  The grants pay for retrofits of emission controls, engine rebuilds, and a portion of the purchase price of new diesel vehicles.  Total amount requested by the 10 successful grants recipients is $8.5 million. 

Records obtained from ODOD show robust demand for diesel grants across the state.  A total of 42 applications were filed requesting a total of $42 million dollars in funding.  The requests were more then quadruple the total money available. 

There is no doubt there has been frustration with the implementation of the DERG program. Thirty-two (32) of the applications had to be rejected for failing to provide necessary information.  The most common errors that resulted in rejection were: inadequate or missing public-private partnership (PPP) agreements, missing emission calculations or no quote was provided for the diesel equipment to be replaced with grant funds.

On August 14th, I helped facilitate a meeting on behalf of the Ohio Diesel Coalition with the State agencies responsible for implementing the program (Ohio EPA, ODOD and ODOT).  The meeting was productive and many positive suggestions were made for improving the grant application process in the second round of funding.  Stay tuned for an update on the changes adopted by the State for the next grant round likely in September or October.

This will be the last chance to obtain a portion of the $19.8 million set aside in the State budget for the DERG program.  The business community and the Diesel Coalition should have a common goal of seeing applications submitted that far outpace the remaining funding available (between $9 to 13 million).  This will provide a solid platform to ask the Legislature to continue this important program or perhaps even be more like Texas and increase available funding.

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The U.S. Senate Environment and Public Works Committee held a timely hearing on the effect of the Court of Appeals decision vacating CAIR.  There was testimony from US EPA, State, Utilities and one Environmental Group. 

The Senators and all who testified agreed on certain items:

• Substantial health benefits will be lost without action to replace CAIR (17,000 fewer premature deaths avoided each year)
• Tremendous uncertainty exists- the market for trading allowances collapsed following the decision (NOx trading stopped, SO2 allowance prices lost 70% of their value in a day)
• States air quality compliance is in disarray- All who relied on CAIR must redo their clean air plans (SIPs) and will find it extremely difficult to make up the reductions attributable to CAIR
• Utilities risk losing billions in investments in new pollution controls and purchases of allowances (one utility declared a $100 million dollar loss due to collapse of the allowance market)

With so much agreement, one would assume that quick legislative action is likely to address the problem.  Not so fast- Don't forget that the CAIR rule came into existence because Congress could not agree on Clear Skies (a cap and trade legislative proposal).  Those same rifts emerged during the Senate hearing.

• How many P's? (which pollutants should a program cover- NOx, SO2, CO2 or Mercury)
• How many States should be in? (28 versus a national program)
• How steep and fast should reductions be? (there is disagreement even for the two pollutants everyone agrees should be covered- NOx and SO2)

This really is going to boil down to a game of chicken.  On the one side (Democrats, downwind-Eastern states and environmental groups) on the other (Republicans, upwind-Midwest states and the utilities). 

Do those advocating for an aggressive four pollutant bill really want to risk achieving no short term benefits in hopes of more aggressive legislation in the future?   Are they willing to withstand the mess that will ensue in their States without at least a stop gap measure?  Is this really the vehicle to adopt climate change legislation?

On the other side....do Utilities want to face this much uncertainty, especially heading into an election cycle?  Are the Midwest states comfortable that CAIR reductions will be sufficient to meet tougher federal air quality standards?  Are they willing to impose even more costly controls on businesses within their State if cap and trade is taken off the table?

It appears this may be the perfect storm that may actually result in something getting done.  Lets hope so.

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Have you measured your company's carbon footprint yet?  Don't worry if you haven't,  in the wild west that is climate change sometimes it pays to wait and see how things shake out.  For instance, who would have thought just picking an accounting method for measuring greenhouse gas (GHG) emissions would be so complicated. 

There is no doubt that quantifying emissions is gaining in popularity.  A recent survey of North American supply chain executives determined that 60% decided to measure their emissions.  Their motivations may be fear of impending greenhouse regulations, compliance with existing requirements, customer demands or sustainability initiatives within their company.

While many executives have decided to measure emissions, not all executives are going about it in the same way.  A recent study of greenhouse reporting and verification methods found that more than 34 different protocols and guidelines for reporting emissions have been used.  Variation occurs even among companies located in countries or states with mandatory greenhouse gas regulations. 

Such variation leads to a great deal of inconsistency and therefore, a lack in comparability between corporations' reports.  There is ever-growing controversy as to whether within various industrial sectors an apples to apples comparison can be made of company footprints or emission reduction targets.

Perhaps things are beginning to take shape, the States have seemed to coalesce around a greenhouse gas accounting method- The Climate Registry.  (The adjacent map shows those states and Canadian provinces who have endorsed the use of the Climate Registry)  However, until US EPA weighs in, you are still risking having to make adjustments to your calculation of GHG emissions.  Fortunately, the sheriff is about to ride into town.

Recently, Congress directed US EPA to publish a mandatory GHG reporting rule, using the Agency's existing authority under the Clean Air Act. (H.R. 2764, Public Law 110-161).  Congress has required EPA to publish a draft rule by September 2008 and a final rule no later than June 2009.  The long gap between draft and final rule will allow for a rigorous public comment period. 

Congress has directed the Rule must address certain key elements, such as:

• Reporting on emissions from upstream (fossil fuel and chemical producers and importers) and downstream sources (large industrial direct emitters)
• Mandatory reporting thresholds
• Frequency of reporting

The EPA is provided discretion to utilize methods already in use and can build upon existing mandatory and voluntary reporting systems, such as:

• Existing reporting for electric generating units under Section 821 of the Clean Air Act
• Federal reporting program (Title IV, Climate Leaders, 1605(b))
• State programs (California, The Climate Registry, RGGI, other State programs)
• Corporate programs (WRI/WBCSD)
• Industry protocols (API Compedium, CSI Protocol, or International Protocols)

If you're not familiar with all of the references to various protocols that's okay.  It may be prudent to wait until EPA at least releases its draft reporting rule to get an idea of how this shakes out. 

Perhaps EPA will say that use of the Climate Registry method is acceptable for purposes of its rule, in essence endorsing the standard. Due to the number of states and provinces already backing the Registry, that may be very likely.  However, what if EPA decides to build upon or modify requirements?

Keep in mind that even if you wait until September you still risk EPA will make changes during the public comment period.   Companies and organizations that have invested in a certain protocol are going to fight hard to see the EPA rule endorse it.  But in my opinion it would be a grave mistake for EPA to try and avoid controversy by not picking any winners.  Standardization is a must, without it there will always remain issues of inconsistency.

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In my prior posts on CAIR, I analyzed the real world impacts of the Court's decision to vacate the program.  In my final post on CAIR, I highlight some of the legal implications from the Court's decision on business and policy makers.  This is not meant to be a legal brief for lawyers, but rather a quick summary of what matters most from the CAIR decision.

• Congressional Action Needed- Remember "Clear Skies"?  This was the precursor to CAIR.  It was the Bush Administration's attempt to get Congressional action on a power plant cap and trade program.  Congressional failure to pass "Clear Skies" has now led to CAIR getting tossed out. The Court declared EPA's rulemaking approach "fundamentally flawed" (page 59). It appears U.S. EPA cannot legally construct a cap and trade program for power plants directed at ozone and soot through administrative rulemaking.  Therefore, the only way this program gets replaced (and as discussed in my two other posts- it should be) is through Congressional action amending the Clean Air Act.

• Deadlines and Dates-  I had the pleasure of testifying in the U.S. Senate on the issue of ozone/soot deadlines and implementation of federal control programs.  The Court made an astute conclusion in finding that U.S. EPA should have coordinated attainment deadlines for ozone and soot that are applicable to the States with the reductions required under the CAIR program.  The Court held "EPA ignored its statutory mandate to promulgate CAIR consistent with provisions in Title I (of the Clean Air Act) mandating compliance deadlines in downwind state's."  (page 25) 

• Coordination with State Pollution Control Plans- It is illogical to create federal air pollution reduction programs for power plants and vehicles that take 10-25 years to fully implement while requiring States meet federal air quality standards in 3-5 years. Depending on the State, power plants and vehicles make up roughly 30-50% of the ozone problem.  You are handcuffing the State's by designing federal programs that won't assist their efforts to meet federal air quality standards until after applicable deadlines have past.  Especially when much of the ozone and soot problem is regional in nature, not local. (see CAIR II:  Short Term/Long Term Implications)

• Cap and Trade "on the ropes"-  For pollutants with both regional and local consequences it may be enormously challenging to create a valid trading program using the current authority in the Clean Air Act. Both CAIR and CAMR have been vacated by the Courts.  Both represent the newest  cap and trade pollution trading programs developed by U.S. EPA.  Is this the end of cap and trade?    Examine the following quotes from the Court's decision attacking the very foundations of a regional cap and trade program:
  • "Theoretically, sources in Alabama could purchase enough NOx and SO2 allowances to cover all their current emissions, resulting in no change in Alabama's contribution to Davidson County, North Carolina's non-attainment." (page 16)
  • "In Michigan we never passed on the lawfulness of the NOx SIP Call's trading program."  (page 17)  Seems like a less then subtle suggestion the Court may have thrown out the NOx SIP Call if similar challenges were made.
  • "EPA's approach-regionwide caps with no state-specific quantitative contribution determinations or emissions requirements-is fundamentally flawed." (page 59)

• Economics of Compliance, Costs Cannot be the Driver-The Courts have rebuked EPA efforts to increase the relevance of the economic cost of pollution controls.  The CAIR decision once again declares costs secondary to environmental consequence. 
  • "EPA can't just pick a cost for a Region, and deem significant any emissions that sources can eliminate more cheaply." (pg. 37)
  • "EPA's interpretation cannot extend so far as to make one State's significant contribution depend on another state's cost of eliminating emissions." (page 39)
  • The Court strongly criticized EPA's fuel adjustment method of granting more allowances to states with coal burning power plants versus gas or oil.  "The net result will be that states with mainly oil- and gas-fired EGUs (electric generating units) will subsidize reductions in states with mainly coal-fired EGUs...EPA's appraoch contravenes [the Clean Air Act]." (page 41)

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In my previous post on the CAIR decision, I discussed the environmental and practical ramifications of the Court's decision vacating the program.  While speaking at a large permitting seminar for manufacturer's, I had a chance to discuss the conclusions of my prior post with some State officials.  While I was correct that the CAIR decision complicates the State pollution control plans for ozone and soot, the environmental consequences discussed in my prior post need to be adjusted to account for additional factors. 

It is unclear how U.S. EPA will treat State air pollution control plans (SIPs) that rely on CAIR.  However, in the short term, not all the CAIR controls will be scuttled or switched off.  AEP and First Energy have entered into major settlements with U.S. EPA stemming from New Source Review (NSR) violations. 

These settlements require installation and operation of billions of dollars in new air pollution controls on power plants in Ohio.  The consent orders will act as a backstop now that CAIR is gone.  Perhaps some additional state actions will be needed to put additional backstops in place where no federal decree covers the plant.  In summary, it appears the Ohio may have the tools to deal with the short term issues presented by the absence of CAIR for sources within the State. 

The longer term consequences still remain and by 2015 will be felt if Congress does not act by replacing CAIR quickly.  CAIR was designed to drive a second wave of major reductions that will be very difficult to replace without some new federal program.  This second wave of reductions are essential for state's trying to meet the tougher ozone standard (.075 ppm) and soot standard (fine particle- pm 2.5).  If State's fail to meet either the ozone or soot standards, then existing businesses will likely be squeezed for additional air pollution reductions.  Also, economic development is more difficult in areas not attaining federal air quality standards.

Another consequence of the absence of a CAIR like program will be a lot more litigation between the states. It won't just be North Carolina or the East Coast suing upwind sources.  Even Ohio may be suing its neighbors like Indiana to try and force additional reductions.  

Why?  Ozone is truly a regional issue.  Even City's that some may think have no one to blame for their air pollution, such as Cleveland, in fact receive a substantial contribution from upwind sources. Take a look at the figures to the left.  They demonstrate how both ozone and P.M 2.5 are regional issues.  The majority of pollution in these major cities is from regional not local sources.

All this points to the need for Congressional action to replace CAIR to avoid a serious and costly problem for the State's and businesses.  Unfortunately, any action is very unlikely until we have a new President.

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The recent decision issued by the D.C. Circuit Court of Appeal vacating the CAIR rule  has far reaching implications.  It probably justifies at least one more post.  Understandably, reaction has been related to the fact that this major clean air initiative was dismantled with a stroke of a pen.  A fact highlighted by EPA's announcement in 2005 when the CAIR rule was implemented.

“CAIR will result in the largest pollution reductions and health benefits of any air rule in more than a decade. The action we are taking will require all 28 states to be good neighbors, helping states downwind by controlling airborne emissions at their source.”

--Steve Johnson, Acting EPA Adminstrator
3/10/2005

The Court included editorial comments trying to suggest the impact would be minimal.  For instance, the Court points to two power plant pollution control programs (the NOx SIP call and Acid Rain Program) that will still be effective in reducing emissions even after CAIR is gone. The Court also suggests that State's could simply sue one another if more reductions are needed (using its Clean Air Act Section 126 authority).  Litigation is hardly an effective pollution control strategy.

Bottom line, there is simply no way to minimize the impact of its decision or the ramifications for States and US EPA.

The map to the left is a good representation of the breadth of the CAIR program.  Each dot represents advanced pollution controls on a power plant. (Click on the map to enlarge the view)  This map shows US EPA's projections as to controls on power plants by 2010 after CAIR and CAMR (power plant mercury control program), both of which have been vacated by the Court.  While some of the dots may remain due to the NOx SIP Call and Acid Rain Program, many will disappear or be on hold. 

How many dots disappear?  US EPA projected that CAIR would result in 116 more units having advanced air pollution controls in 2010.  By 2020, the number was 287 more units. 

While the decision certainly impacts efforts at cleaner air, it also makes a mess of state air pollution control plans (called State Implementation Plans- SIPs) that have been submitted for approval by US EPA.  Most of the SIPs submitted rely on CAIR as a primary control method to achieve federal air quality standards for ozone and soot.  The ruling brings tremendous uncertainty as to how these state plans will be reviewed.

To support CAIR, US EPA provided modeling to show air quality improvement that would result from reductions brought about by the program.  State's relied upon this modeling as part of their air pollution control plans to achieve federal air quality standards.

What was the magnitude of air quality improvement that US EPA projected? The Agency showed that in 2005, 104 areas didn't meet ozone standards and 43 areas didn't meet pm 2.5 (soot) standards.  By 2010, EPA projected the number of areas not meeting ozone and soot standards would be reduced to 14 and 20 respectively due in part to CAIR.

Now that the State's cannot rely on CAIR as a cornerstone of their air pollution control strategies, those reduction must come from somewhere.  Without these massive reductions State's face missing deadlines to meet federal air quality standards.  Missing the federal deadline can bring sanctions and more rigorous air pollution control requirements on businesses within the state. 

 US EPA has even adopted a tougher ozone standard which is currently being implemented.  The State's face enormous challenges in meeting this new standard if there is no federal air pollution control program applicable to power plants.  From reading the decision, it may be very difficult to craft a legal program using administrative authority.  Congress may have to amend the Clean Air Act to give US EPA the authority, but since 1990 Congress has shown its reluctance to re-open the Clean Air Act.   

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For the first time a court has revoked a permit due to concerns over C02 emissions and climate change.  While there have been previous instances where states have denied permits due to concerns with C02 emissions, this is the first time a court has revoked a previously issued permit.  Notably, the Court did not base its decision on state law, rather it ruled the Clean Air Act (CAA) requires analysis and control of C02 emissions. 

Other courts are currently hearing similar challenges.  If this decision is a trend it will have major implications for any new facilities seeking an air permit.  In a future blog post I will discuss the implications of using the Clean Air Act, specifically the New Source Review provisions, to regulate CO2.  Much speculation has been made as to whether CO2 will be regulated even without action by Congress on comprehensive climate change legislation.

The CO2 decision was issued on June 20, 2008 in Georgia's Fulton County Superior Court.  The Georgia Environmental Protection Division had approved a permit for the construction of a proposed 1200-megawatt coal-fired power plant.   Environmental groups, including the Sierra Club, challenged the permit saying the plant's emission of 8-9 million tons of CO2 had to be considered. Siding with the Sierra Club, the Court overturned the State's issuance and sent the permit back to perform the analysis it said was required under the CAA. 

Note: According to Sourcewatch, between 2007 and 2008, plans for 69 coal plants have been canceled.

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Ohio EPA recently received a letter from U.S. EPA's Region V requesting justification for changes made to the State's air pollution control plan.  The changes to the State plan came about as a result of reform legislation passed by the Ohio Legislature in 2006.  Much has recently been made about the letter sent by U.S. EPA.  There has been two articles (article 1 and article 2) by Spencer Hunt in the Columbus Dispatch discussing the letter.  Also, there was recently an Editorial in the Toledo Blade chastising the Agency for being easy on "polluters" and for failing to timely submit the required information to U.S. EPA. 

Environmental groups have strongly criticized the portion of the legislation that allows smaller facilities (less than 10 tons per year) to avoid installing best available technology (BAT) and install reasonably available control technology (RACT) in its place.  This change has been described as weakening the protection of Ohio's environment.  In reality, it at worst will men minimal increases of pollution from these small sources.  As discussed below, increases that are more than offset by other programs.

I am familiar with these arguments having been at the center of the storm during the legislative debates over S.B. 265.  The editorial and comments strongly criticizing these changes seem to ignore some fundamental facts about Ohio's regulation of air pollution. 

The criticism ignores the fact that federal air quality standards are getting more stringent, not weakening.  Most notably, U.S. EPA recently strengthened the ozone standard.  Ohio still must meet the federal air quality standards.  The state legislation (S.B. 265) provided more flexibility in choosing how to comply.  Bottom line, Ohio's air quality has improved and will continue to improve.

So what was the purpose of the legislation?  Did you know Ohio regulates over 70,000 air sources while its neighbor, Michigan, only regulates 7,000?  This is not because we have so many more sources in Ohio, its because we decided long ago to regulate much smaller sources of air pollution in the state. With Ohio's struggling economy, it makes sense to be more efficient and effective in how Ohio met federal air quality standards.

Maybe this puts the 10 tpy threshold in perspective-the brand new permit for the AMP Ohio Coal fired power plant allows it to emit 3,194 tpy of NOx and 6,820 tons of SO2.  That is one source.  The equivalent of at least 300 or 600 smaller sources taking advantage of the 10 tpy exemption.  (Remember sources less than 10 tpy still must have controls, they just don't have to install more costly controls).

Even when the AMP Ohio facility comes on line, total emissions from Ohio's power plants will be drastically reduced. The total emission budget for Ohio power plants under the federal CAIR program in Ohio is 180,677 tpy of NOx which will be reduced to 95,556 tpy of NOx in 2015.  The reduction of some 85,000 tons of NOx will more than offset any insignificant increase attributable to small sources installing less costly controls.  And that is just one major reduction on-the-books, more reductions will also be forthcoming.

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