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

Many of the Midwest states, including Ohio, face significant state budget shortfalls- Ohio faces a projected $8 billion dollar hole in its next budget.  With the shortfalls, is very unlikely additional revenue will be available to support existing programs.

The state budget crisis occurs at the same time U.S. EPA has been very active in revising federal air quality standards (National Ambient Air Quality Standards- NAAQS).  As a result of changes to federal standards, states face a massive workload in the next few years on air quality issues. 

Below is a chart showing all of the revised federal air quality standards.  In response to each new standards, the states must develop plans for reducing emissions to show compliance with the revised standards (State Implementation Plans- SIPs).  In the next four years, States will be required to develop at least five new SIPs.

Preparation of SIPs is important work that can have wide ranging impacts on the economy.   If additional regulations to reduce air pollution are necessary, these new regulations increase compliance costs for businesses. 

In determining whether additional regulatory programs are needed, states and U.S. EPA rely upon air quality modeling.  Using air qualify modeling to evaluate alternatives is complex work and sometimes modeling can be inaccurate.

When Ohio EPA evaluated options for Cleveland to attain the 1997 ozone standard (85 ppt), modeling predicted no combination of controls could bring the area into compliance. After an intensive effort by multiple parties (locals, Ohio EPA and U.S. EPA) it was determined Cleveland did not need to adopt aggressive controls to comply because the modeling was either:

1. Underestimating the benefits of some existing pollution reduction programs; or
2. Data regarding emissions from existing sources in the modeling was outdated.

With states facing budget shortfalls and unprecedented amounts of air quality work, one has to question whether a similar effort could be undertaken in the next couple of years.  If that is not the case, decisions on costly new controls could be based on inaccurate or incomplete data. 

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U.S. EPA released is long awaited replacement rule for the Clean Air Interstate Rule (CAIR) which was the controversial cap and trade program for coal-fired utilities.  In December of 2008, the U.S. Court of Appeals for the D.C. Circuit ruled CAIR exceeded EPA's regulatory authority and ordered the Agency to develop an new proposal.

Originally, the Court planned on throwing out the CAIR rule entirely.  However, it was embedded in so many other State air pollution control plans, the Court allowed CAIR to remain in place temporarily while EPA worked to finalize the replacement rule proposed today.

EPA is calling its new proposal the “Transport Rule."   It represents a significant revision from CAIR for a number of reasons including:

• Steeper reductions of NOx and SO2 than proposed under CAIR
• Virtual elimination of the cap and trade mechanism, by assigning each State a firm emission budget which it may not exceed
• Accelerating the time frame for reductions to coincide with the attainment deadlines faced by the States

The Transport Rule proposes a hard 2014 deadline for meeting reduction requirements- it appears the ability to bank allowances ("pollution permits") will no longer be permitted.  Overall, the rule would reduce power plant emissions of sulfur dioxide (SO2) by 71 percent over 2005 levels and nitrogen oxides (NOx) by 52 percent.  SO2 and NOx react in the atmosphere to form fine particle pollution and ground-level ozone (smog).

The agency puts the expected annual cost of compliance to power plant operators at $2.8 billion in 2014.   However, elimination of original cap & trade program set forth in CAIR can only mean significantly increased compliance costs.  The real benefit of cap & trade is to utilized market mechanisms to achieve more cost effective emission reductions.

State Budgets Based On "Contribution" to Downwind Air Quality Problems

The Court's big issue with CAIR, was EPA inability to ensure that the rule would eliminate each State's contribution to downwind air quality issues.  The Court pointed out that all the utilities in any given State, could in theory, meet their compliance obligations by buying allowances and electing not to install pollution controls.

While this is in theory true, that is the point of a cap & trade program designed to utilize cost effective reductions.  The power plants that can reduce pollution in the most cost effective manner will aggressively reduce emissions and sell excess reductions to those plants facing higher compliance costs.

A quick skim of the 1,300 page rule suggests the absence of a real market mechanism to achieve reductions.  Sure EPA says interstate and intrastate trading can remain under its preferred option.  However, States now have imposed hard emission budgets. 

Perhaps this will mean limited intrastate trading, but far less interstate trading.  With a smaller market to trade allowances, EPA makes it more difficult to leverage cost effective reductions. 

Of course, EPA had to address the legal flaws identified by the Court.  The real solution was to get better authority from Congress.  Otherwise, we are left with a shell of a cap & trade program resulting in higher utility compliance costs (aka as higher utility bills).

EPA will take public comment on the proposal for 60 days after the rule is published in the Federal Register. The agency also will hold public hearings. Dates and locations for the hearings will be announced shortly.
 

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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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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 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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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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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 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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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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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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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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 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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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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