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

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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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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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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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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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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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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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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As part of the 2008-2009 State budget, Ohio set aside $19.8 million to be used for diesel grants to achieve reductions in air pollution from the transportation sector.  The set aside represents the largest dedicated pool of funds to diesel emission reductions in the Midwest. The grants could be used to pay for pollution control retrofits and anti-idling technology for diesel engines in public and private fleets across the state.

The Ohio Department of Development (ODOD) is charged with implementing the program.  In February 2008 it solicited its first applications.  However, there was a lack of guidance to applicants in the rush to get the program up and running.  As a result, those who still submitted applications did so without knowing whether their application would be deemed sufficient.

Awards were scheduled to be made in early Spring with a second round of applications to follow in late Spring.  Unfortunately, the Federal Highway Administration has raised concerns with the details of the Ohio program that has stopped the program in its tracks.  No announcement has been made regarding the first round of applications and now the second grant round in fiscal year 2008 has been shelved according to ODOD's website. 

Last year I wrote an op-ed piece in Crain's Cleveland Business that made the strong case for reducing emissions from the transportation sector. 

Unfortunately, I couldn't include a graphic with my article because I think this chart prepared by Ohio EPA sums it all up (click on the chart to see a larger version).  The majority of the pollution causing our ozone problems in Northeast Ohio are from the transportation sector, not area businesses.  With Ohio's economy hurting, achieving greater reductions from the transportation community is essential to reducing costs for Ohio businesses and allowing them to compete.  Hopefully, the impediments that have stalled this program can quickly be removed as it has become apparent Ohio will likely have one year to spend the $19.8 million. 

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