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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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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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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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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