Power Plant Reductions- EPA Gets it Wrong....Again

On August 21st, the D.C. Circuit Court vacated U.S. EPA's Cross-State Air Pollution Rule (CSAPR) also known at the "Transport Rule."  This is not the first time EPA has had its power plant pollution reduction rule vacated.  The Transport Rule was the replacement to the Clean Air Interstate Rule (CAIR) which was also struck down by the Court in December 2008.

Here was a paragraph from a blog post I wrote when EPA released the Transport Rule

After two years of development, EPA has released its proposed Transport Rule and is very confident it can withstand legal challenge. They stated in the presentation that their lawyers are confident the structure of the Transport Rule will meet the Courts mandate by ensuring elimination of "significant contribution."

I remember attending this presentation which was made by senior officials with EPA.  EPA said their lawyers had combed through the CAIR decision to make sure the had a lock solid replacement rule.  After the D.C. Circuit Court ruling, the EPA lawyers better go back to the drawing board. 

 Why the Court Struck Down the Transport Rule

The Court found two fundamental flaws with EPA's Transport Rule:

  1. Greater Reductions Required than a State's Contribution to Downwind Non-Attainment-  Under the Clean Air Act, State's are required to eliminate their contribution to non-attainment of federal air quality standards in downwind States.  Under the Transport Rule, EPA quantified State's downwind contribution, but then imposed controls on power plants that were based on cost.  In some cases EPA admitted the reductions were more than the State's contribution to downwind non-attainment.  The Court said EPA had no right to force reductions beyond a State's downwind contribution even if EPA found the reductions to be cost effective.
  2. EPA Ignored the Federalist Structure of the Clean Air Act-  Under the Transport Rule, EPA determined the contribution to downwind non-attainment and then immediately imposed specific reductions on sources in those states.  The Court said that EPA should have stopped after it quantified each State's contribution to downwind non-attainment and allowed each State to determine on its own how to eliminate that contribution. Each State should have been given an opportunity to chose its own mix of new air pollution reductions through the State Implementation Plan (SIP) process.

The Court decided to keep CAIR in place while EPA tries to figure out a legally defensible rule requiring reductions from power plants.  CAIR now remains in place after it was supposedly vacated by the Courts four years ago.

Implications from EPA's Ruling

It will be very difficult to craft a legally defensible rule that reduces power plant emissions on a regional basis in order to address the "significant contribution" provisions of the Clean Air Act.  To be fair to EPA, the Agency appears to get conflicting guidance from the Courts.

The Court in the CAIR ruling was sharply critical of EPA because it allowed power plants to avoid necessary reductions through its emission trading provisions.  The provisions of the Transport Rule were designed to specifically address the flaws identified by the Court.  EPA felt the Transport Rule addressed the fundamental flaw of CAIR by ensuring each State eliminated its contribution to downwind non-attainment.  But after two years of evaluation, EPA still issued an invalid rule.

In reaction to the ruling, EPA may give up on designing a regional reduction program for power plants.  It may simply define each State's significant contribution and leave it up to the State to find the necessary reductions.  If it goes this route it will shift the burden onto the State's in having to make the really hard choices in terms of emission reductions.  It is much easier for the State's to simply implement rules mandated by the federal EPA.  Otherwise, the States are left to pick the winners and losers in terms of costly new controls on companies within its borders.   

It also looks like it will be very difficult to develop any sort of power plant rule that has emission trading. EPA would likely have to go back to Congress to obtain clear authority under the Clean Air Act.  Any change to the Clean Air Act seems highly unlikely in today's political environment.  This is a shame because emission trading has been consistently found to be far more cost effective than traditional command and control regulation.

U.S. EPA Proposes New P.M. 2.5 Federal Air Quality Standard

Under increasing pressure from the Courts, EPA announced on June 14th its proposed revision to the federal air quality standard for fine particles (microns less than 2.5).  The last standard was 15 ug/m3 which was established in 1997.  EPA is now proposing to lower the standard somewhere between 12 and 13 ug/m3. 

Back in 2009, the Court overturned EPA's proposal to keep the standard at 15 ug/m3.  Since that time various groups have been trying to force EPA to promulgate a new standard.

In May, the District Court of Columbia had granted a motion for preliminary injunction sought by the American Lung Association, other environmental groups and the States.  The case is American Lung Association et al. v. EPA, No. 1:12-cv-00243-RLW (D.D.C.).  The order resulted in EPA accelerating release of its proposed standard.

Background on Federal Air Quality Standards (National Ambient Air Qulity Standards- NAAQS)

Counties that fail to meet the federal air quality standard are designated "non-attainment."  Under the Clean Air Act, non-attainment areas face more difficult air permitting requirements for larger air sources which can deter economic development. 

In addition, each state must develop a plan (called a "State Implementation Plan" - SIP) to meet the federal standards.  The SIP must demonstrate that a mix of federal and state air pollution regulations will allow each of the counties in the state to meet the standard.  The SIP process often results in state's implementing new pollution control requirements which increase compliance costs.

States that fail to meet the deadline for attaining the standards face sanctions from EPA. 

Ohio's Progress in Meeting the PM 2.5 Standard

Due to its relatively high population and manufacturing base, Ohio has always faced challenges in meeting air quality standards.  Ohio still has areas that have failed to properly demonstrate compliance with the 1997 fine partcle standard. 

Below a is chart from a presenation by Ohio EPA from March which shows current monitoring of air quality in the major cities in Ohio:

It is worth noting that an improvement of 1 ug/m3 is quite significant. 

The Chart shows Ohio's air quality is improving.  However, even if EPA picks the high end of the range and sets the new standard at 13 ug/m3, the State will  have a number of counties designated as non-attainment areas. 

U.S. EPA says they will make designations of counties in December 2014 with non-attainment designations will become legally effective in early 2015.  States will be given until 2020 to comply with the standard.

National Progress in Meeting the Standard Hinges on Proposed EPA Rules

U.S. EPA projects that only a couple of counties will be out of attainment by 2020. 

However, this projection is based upon a major assumption- all currently proposed federal air pollution rules remain effective.  Many of these rules are highly controversial and face legal as well as political challenges. The federal rules EPA considered in place for purpose of the modeling  include: the Cross State Air Pollution Rule (power plans), the Mercury and AIr Toxics Standard (power plants) and various emissions standards for vehicles, aircraft, locomotives and ships.

 

Appeals Court Revokes Injunction Which Had Blocked Ohio EPA's BAT Exemption for Small Air Pollution Sources

Back in 2006, the Ohio Legislature passed Senate Bill 265 which was hailed as the biggest change to air pollution control regulations in Ohio in several decades.  The center piece of the legislation was an exemption for smaller sources of air pollution (10 tons per year or less) from having to comply with Ohio's Best Available Technology (BAT) standard. 

The BAT standard was seen as requiring more air pollution controls than other states thereby raising compliance costs for Ohio businesses.  Business groups argued that the BAT standard put Ohio at a competitive disadvantage.

When the exemption was passed in 2006, Ohio EPA started to issue permits to companies with less than 10 tons per year (tpy) in emissions without requiring BAT.  For around three years, permits were issued to businesses in this manner.

Ohio Seeks Blessing from U.S. EPA to Remove BAT Requirement

While Ohio EPA issued permits to companies without the BAT requirement, the State still was required to obtain approval from U.S. EPA to remove this requirement from its approved plan to comply with federal air pollution standards (referred to as the "State Implementation Plan" or SIP).  Each State must submit a SIP to U.S. EPA for approval which demonstrates it will meet federal air quality standards.

The BAT requirement is in Ohio's approved SIP.  In June 2008, Ohio EPA sought approval from U.S. EPA to remove the requirement.  (See, prior post).   U.S. EPA requested information from Ohio EPA to support removal of the BAT requirement.  Six years after S.B. 265 was passed, Ohio EPA still has not been able to supply the information to U.S. EPA to secure approval to change its SIP to allow for the 10 tpy BAT exemption. 

Failure to secure U.S. EPA's approval created a challenging regulatory environment.  S.B. 265 and the BAT exemption was Ohio law.  However, U.S. EPA never approved the change to the SIP.  Therefore, from U.S. EPA's vantage point Ohio sources still need to comply with the BAT requirement and Ohio is in non-compliance with the Clean Air Act.

Sierra Club Challenges the Ohio BAT Exemption

In September 2008, the Sierra Club sued the Director of Ohio EPA under the Clean Air Act citizen suit provisions.  The Sierra Club argued that the Director was in violation of the Clean Air Act because it was issuing permits to companies with less than 10 tpy in emissions without the BAT requirement.  Since U.S. EPA didn't approve the 10 tpy BAT exemption, the Sierra Club argued Ohio was in violation of its SIP.

The District Court ultimately agreed with Sierra Club an issued an injunction requiring Ohio EPA to enforce the BAT requirement regardless of the 10 tpy exemption in S.B. 265.  On July 2, 2010, Ohio EPA issued  memorandum to all air permit staff within the Agency to start enforcing the BAT requirement against sources less than 10 tpy.

Since July 2, 2010, Ohio EPA has been issuing permits to sources less than 10 tpy with the BAT requirement. 

Sixth Circuit Overturns District Court

On May 25, 2012, the Sixth Circuit Court of Appeals issued a decision which overturns the District Court ruling and removed the lower Court's injunction against Ohio EPA.  The Sixth Circuit Court held that the Sierra Club, as a citizen group, did not have a legal basis to bring the lawsuit. 

The Court held that the citizen suit provision of the Clean Air Act only allows lawsuits against sources that violate an emission standard.  The Court held the citizen suit provision does not allow suits against regulators (i.e. Ohio EPA) who are not in compliance with their SIP. 

The Court noted that the Clean Air Act gives exclusive power to U.S. EPA to take action against a State refusing to comply with its SIP.  After waiting for the eighteen months required under the Clean Air Act, U.S. EPA can:

  1. Can take direct enforcement against businesses who are not complying with the BAT requirement;
  2. Can take over administration of Ohio's SIP; or
  3. Can sanction Ohio for failing to comply with its SIP by withdrawing the State's federal highway funds.

In the Six Years since Reforms were passed Ohio Businesses face Greater Regulatory Uncertainty

Some other commentators have suggested that the Sixth Circuit ruling clears the path for Ohio EPA to exempt small Ohio businesses from the 10 tpy BAT exemption.  However, until Ohio EPA actually secures U.S. EPA approval for the 10 tpy exemption, nothing is certain.

  • Businesses that received permits during the time period from 2006 to 2010 when Ohio EPA was not requiring BAT on 10 tpy sources could face direct enforcement from U.S. EPA;
  • Businesses emitting 10 tpy or less that received permits from 2010 to 2012 were required to comply with BAT even though the District Court injunction has since been invalidated;
  • After the ruling will Ohio EPA begin issuing permits to sources less than 10 tpy without requiring BAT?  If so, the universe of companies facing potential U.S. EPA enforcement will grow

The only good resolution to this uncertainty is for Ohio EPA to immediately gather the information requested by U.S. EPA and secure approval for its SIP modification.   However, this is not something Ohio EPA has been able to do in several years due the complexity involved with U.S. EPA's request. 

The 2008 letter from U.S. EPA denying Ohio EPA's request to amend the SIP makes clear Ohio EPA needs to do more than just provide information to U.S. EPA.  Rather, Ohio EPA would likely need to propose new controls to replace the reductions U.S. EPA believes were obtained through implementation of the BAT requirement (i.e. the Clean Air Act's "anti-backsliding" requirement).

In otherwords, for the reforms to be fully implemented after six years, Ohio EPA will likely have to impose greater regulation on some subset of Ohio businesses.

As Dust Settles After Ozone Announcement the States Emerge as the Big Winners

The Obama Administration had already delayed issuance of a revised ozone standard three times.  EPA had said repeatedly that it would it would finally promulgate the new standard by this  August.  Then last week, President Obama shocked many by announcing that EPA would not issue a new ozone standard until 2013.

A Little History on Ozone

Under the Clean Air Act, EPA is required to review the ozone standard every five years.   In 2008, the Bush Administration set the new ozone limit at 75 parts per billion (ppb). That was tighter than the existing regulations, but considerably weaker than the 60 to 70 ppb recommended  by the Clean Air Science Advisory Committee (CASAC- a science advisory panel which advises EPA in settings National Ambient Air Quality Standards).

Litigation ensued over the Bush standard.  However, a cease fire was called when the Obama Administration took office and called the 75 ppb indefensible.  The EPA promised to revisit the standard and set it somewhere between the 60 to 70 ppb recommended by CASAC.

Since EPA made its early pronouncements, the economy has not improved causing the EPA to delay issuance of a new standard on three different occasions.  The final arbitrary deadline was set for this August to finally announce the new standard.  But on the eve of the announcement, the Obama Administration issued a statement that it would wait until 2013 to review the standard.

Internet Blisters with Commentary

The media and internet has been awash in debate regarding the delay in the ozone standard.   Time wrote a piece titled "Is President Obama Bad for the Environment."  The backlash from environmental groups and clean air advocates has been dramatic. Industry has heralded the decision.  Here is a sampling from the various perspectives:

  • MoveOn.org said they don't know how they can support the President's re-election after such an announcement. 
  • Sierra Club- "Had the EPA smog pollution regulations come into effect as anticipated, it would have prevented 12,000 deaths, 5,300 heart attacks, and tens of thousands of asthma attacks.  Its time we stop pitting the false promise of jobs from a desperate-albeit wealthy and powerful-industry against the best interests of the American People."
  • National Petrochemical & Refiners Association- "President Obama acted in the best interests of the American people last Friday when he blocked the Environmental Protection Agency from imposing unrealistic, unjustified and unneeded new ozone standards on our nation. The president should now follow up by stopping EPA from imposing other extreme regulations that will cost our economy billions of dollars and wipe out millions of American jobs, without providing any significant environmental benefits."
  • Business Roundtable-  Calls the ozone standard the single most expensive environmental regulation in U.S. History.  In an op-ed piece, Governor Engler says that 85% of U.S. counties would be in "nonattainment" with the new standard triggering a cascade of federal and state controls.  EPA estimates the new standards could cost between $20 to $90 billion annually.

For some additional perspectives on both sides of the debate I would recommend reviewing the National Law Journal's Energy & Environment Blog- "Sizing Up Obama's Ozone Standard Delay"

Implications for Ohio

In my former role as Director of Ohio EPA, I got to see first hand how the state's dealt with meeting new federal air quality standards, including the ozone standard.  From that experience I concur with the business groups who were concerned with the new standard's impacts on a struggling economy.  This is particularly true for states like Ohio with high population, heavy reliance on manufacturing and where coal is the main source of power generation.

A "nonattainment" designation for a metropolitan area is a massive impediment to economic development.  Particularly metropolitan areas that rely on a growing manufacturing base to attract new jobs.   Air permitting requirements under nonattainment New Source Review places these areas at a competitive disadvantage to areas that meet the standard. 

Even more importantly, I learned that the states, in reality, have far less ability to institute regulations that reduce smog then the federal EPA.  This is because much of the nonattainment problem is attributable to interstate pollution.  Also, much of it comes from vehicles for which there is very little ability to reduce emissions through state regulation. The last decade has demonstrated that federal regulations directed at vehicles and interstate pollution are much more effective in reducing ozone levels than negligible benefits achieved through state regulation.

Existing Federal Regulations Will Continue to Reap Clean Air Benefits

While new state air pollution regulations have little impact in improving air quality, federal regulations have resulted in dramatic improvements.  Areas that five years ago were thought never to reach attainment with the old 1997 ozone standard (like Cleveland) have been able to reach attainment.

Here is a chart of exceedences of the ozone standard in Ohio going back to 2000.  Recently, there are no exceedences of the old 1-hr standard (.0125 ppm) and very few of the 1997 8-hr standard. Over the last five years the major benefits of the federal air regulations discussed above have been realized.

However, what is not shown is the number of exceedences that would occur under a 8-hr standard within the CASAC range of .070 to .060 ppm.  It would be pretty dramatic.

These existing federal regulations will continue to improve air quality because they are phased in over time.  These regulations include:

All of these federal air regulations will continue to be phased in greatly reducing the precursors that lead to the creation of ozone (smog). The full benefit of some of these major regulations won't be seen for another 20 years as the vehicle fleet turns over.  In addition,  CSAPR is just on the books and will dramatically reduce power plant pollution.

Bottomline- Air Quality Improves While States Get Some Breathing Room

Even though the ozone standard will not be revised until 2013, air quality will continue to  improve as a result of these major federal air quality regulations.  Meanwhile, the states will not be saddled with non-attainment designations under a new standard during a tough economic period. 

When the ozone standard is revised, the States will have benefited from the greater reductions achieved from these federal regulations. These air quality benefits will make it much more realistic that the states can achieve the new standard. 

 

Ozone Standard Inconsistent with President's Executive Order on Cost of Regulation

Back in 2007, U.S. EPA was sued by some States and environmental groups who challenged the legitimacy of the ozone standard -75 parts per billion (ppb)- selected by the Bush Administration.  In 2009, the Obama Administration announced that it was reconsidering the 75 ppb standard.

U.S. EPA is likely to revise the standard to somewhere between 60 ppb to 70 ppb. (See the map for the implications of a revised standard on the Midwest)

Back in September 16, 2009, U.S. EPA filed a pleading informing the Court that it would finalize the new standard by August 31, 2010. 

 

In curious timing, the U.S. EPA announced it needed two more months and could not finalize the ozone standard until late October. 

Some questioned, including me, whether the delay was a calculated move to make the controversial announcement after the election. (See, prior post)  Now U.S. EPA has announced, once again, it would delay the finalization of the standard.  Only this time the delay would be nearly six months.

On December 8, 2010, U.S. EPA filed a Motion declaring it would need until the July 29, 2011 to complete its review of the ozone standard.  The U.S. EPA said it needed to consult its science advisory board (Clean Air Scientific Advisory Committee- CASAC) due to the significant number of comments and new information it received. 

In the motion, U.S. EPA sets forth its process for finalizing the ozone standard.

  1. U.S. EPA will develop a set of questions for CASAC for its review asking the Committee to review scientific evidence and other information before U.S. EPA
  2. CASAC will hold public meetings to discuss its response to the questions;
  3. CASAC will provide additional written advice to U.S. EPA regarding the new ozone standard; and
  4. New public comment period to provide comments on CASAC review and to U.S. EPA

President's Executive Order

On January 18th, President Obama's issued an executive order requiring all federal agencies to evaluate the economic impacts on business of its rulemakings. The executive order directs federal agencies developing regulations to “use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.”  At its core, the order is intended to force federal agencies to provide greater attention to the potential costs and burden of new regulations on businesses.  

While the motion delaying finalization of the ozone standard was filed prior to the executive order, U.S. EPA's actions are consistent with the Obama Administration's overall goal of giving greater scrutiny to the impact on economic growth from regulation.  Only problem is that the U.S. Supreme Court has already ruled that the Clean Air Act prohibits U.S. EPA from considering costs and economic impact when setting the ozone standard. 

U.S. Supreme Court determined in Whitman v American Trucking that U.S. EPA could not consider costs in setting the standard. The Court held EPA can only consider costs if its expressly granted that authority by Congress:

Section 109(b) [of the Clean Air Act] does not permit the Administrator to consider implementation costs in setting NAAQS. Because the CAA often expressly grants the EPA the authority to consider implementation costs, a provision for costs will not be inferred from its ambiguous provisions.

Rather than continuing to manipulate the process by constantly delaying the final ozone standard, perhaps the Administration needs to realize that ozone standards and the National Ambient Air Quality Standards (NAAQS) have huge impacts on the economy. 

Some sort of cost-benefit analysis that allows considerations of costs in setting standards just makes sense. We can't continue to ignore the impacts of new controls and the Clean Air Act's restrictions on economic growth imposed on areas that do no meet the standard. 

State's Face Huge Air Quality Workload During Budget Crisis

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. 

EPA Plays Politics By Delaying Ozone Rule

Back in 2007, U.S. EPA was sued by some States and environmental groups who challenged the legitimacy of the ozone standard -75 parts per billion (ppb)- selected by the Bush Administration.  In 2009, the Obama Administration announced that it was reconsidering the 75 ppb standard.

Ostensibly 75 ppb remains on the table. However, U.S. EPA is likely to revise the standard to somewhere between 60 ppb to 70 ppb.  Back in September 16, 2009, U.S. EPA filed a pleading informing the Court that it would finalize the new standard by August 31, 2010.

As the election looms and the economy's lack of a strong recovery is playing a bigger role, U.S. EPA's revised ozone standard has been sharply criticized as raising costs on industry.  U.S. EPA estimated the cost of compliance at between $19 billion to $90 billion a year by 2020, which will be largely imposed on manufacturers, oil refiners and utilities. 

The U.S. Supreme Court determined in Whitman v American Trucking that U.S. EPA could not consider costs in setting the standard.  The Court held EPA can only consider costs if its expressly granted that authority by Congress:

Section 109(b) [of the Clean Air Act] does not permit the Administrator to consider implementation costs in setting NAAQS. Because the CAA often expressly grants the EPA the authority to consider implementation costs, a provision for costs will not be inferred from its ambiguous provisions. 

The Bush Administration standard of 75 ppb was criticized as not meeting the standard established by the Court because it was inconsistent with recommendations by the EPA's science advisory panel.

While EPA may not be able to consider costs, it apparently can consider politics.  On August 20th, EPA filed a brief with the U.S. Court of Appeals District of Columbia informing the Court that it will take longer to finalize the new standard.

"EPA expects that this process will take approximately two months longer than initially estimate. Thus, EPA's current schedule is to sign a final rule on the reconsideration of the 2008 Ozone standard on or about the end of October 2010."

End of October...or may sometime after November 2, 2010? 

Three Years After Major Reforms- Ohio's Air Permitting Process is Anything But Certain

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

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

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

The two major reforms secured in Senate Bill 265:

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

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

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

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

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

Less Than 10 TPY Exemption

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

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

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

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

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

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

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

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

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

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

BAT Through Rule Making On Sources Greater Than 10 TPY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Conclusion

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

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

EPA Announces Tighter Ozone Standard; Big Implications for 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. 

 

Cleaning Up Midwest Fine Particulate Pollution- Reliance on CAIR Misplaced

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. 

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)

   

2005

2012

2018

Point-EGU

 

2,826 (83%)

1,665 (77%)

1,468 (76%)

Point-NonEGU

470 (14%)

423 (20%)

393 (20%)

Area

 

47 (1%)

44 (2%)

42 (2%)

Nonroad

 

61 (2%)

16 (1%)

11 (1%)

On-road

 

20 (1%)

5 (--)

4 (--)

   

3,425

2,155

1,919

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.

 

Ohio BAT- Changes to State Air Pollution Control Strategy Prove Daunting

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

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

Issues with BAT

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

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

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

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

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

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

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

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

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

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

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

 

 

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

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

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

Lessons Learned

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

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

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

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

 

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

Court Rejects EPA's Fine Particle Standard

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.

 

 

 

 

 

Improving Air Quality Good News to Cleveland Area Businesses

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.

U.S. EPA Ozone Rule Shows Potential For More Flexibility in the Future

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.

E-Check May Come Back to Cincinnati Under EPA Proposed Rule

[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.

 

Court Saves CAIR, Remands to EPA

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.

 

Impact on Air Quality Without CAIR

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. 

CAIR: EPA's Path Forward Slow and Unclear

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)

 

Lawsuit Challenges State's Right to Modify its Air Pollution Control Plan

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

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

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

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

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

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

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

U.S. EPA's Fine Particle Designations Impact County Economic Development Efforts

 Yesterday, U.S. EPA announced its proposed non-attainment designations for counties not meeting the new P.M. 2.5 (fine particle) pollution standardOhio 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.

Milestone

1997 PM2.5 Primary NAAQS

2006 PM2.5 Primary NAAQS

Promulgation of Standard

July 1997

Sep. 2006

Effective Date of Standard

Sep. 1997

Dec. 18, 2006

State Recommendations to EPA

Feb. 2004
(based on 2001-2003 monitoring data)

Dec. 18, 2007
(based on 2004-2006 monitoring data)

Final Designations Signature

Dec. 2004

No later than Dec. 18, 2008*

Effective Date of Designations

April 2005

Typically no later than 90 days after publication in the Federal Register

SIPs Due

April 2008

3 years after effective date of designations

Attainment Date

April 2010
(based on 2007-2009 monitoring data)

No later than 5 years after effective date of designations

Attainment Date with Extension

Up to April 2015

No later than 10 years from effective date of designations

 

 


 

$8 Million in Ohio Diesel Emission Reduction Grants Awarded

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

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

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

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

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

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

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

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

 

 

 

CAIR: Summary of Senate Committee Hearing

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

The Senators and all who testified agreed on certain items:

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

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

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

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

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

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

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

CAIR III: Creating Key Legal Precedent on Cap and Trade

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.

 

 

 

  • 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)

 

CAIR Part II: Update on Short Term/Long Term Impacts

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.

CAIR Decision Will Have Many Aftershocks

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.