In a much anticipated move, the Trump Administration has proposed the Affordable Clean Energy (ACE) rule as a replacement for the Obama Administration Clean Power Plan (CPP).  While the CPP was controversial from the start for it broad regulation of the power industry, the ACE rule will be controversial as it signifies a 180 degree turn from aggressive climate change regulation of the energy sector.

Overview of CPP

The CPP was finalized on October 23, 2015.  The fundamental goal was to reduce CO2 emissions from the energy sector (one of the largest contributors to greenhouse gas emissions) by 32% by 2030 compared to 2005 levels.  The reductions were to be achieved through significant emission reductions from coal power plants coupled with incentives to move toward renewable energy and energy efficiency.

The CPP was touted a being flexible by giving states freedom to choose among various “building blocks” to achieve the necessary reductions.  States could either choose to regulate emissions from individual power plants or set a statewide cap of total CO2 emissions from its power sector.

Each state was given its own target for reductions (i.e. hard cap on emissions).  Under the rule, states must submit their plans (referred to as State Implementation Plans or SIPs) by 2018 and start achieving reductions by 2022.  If a state failed to adopt an approvable SIP by the deadline, EPA would impose its own Federal Implementation Plan (or FIP) to achieve the necessary reductions.

The CPP was controversial from the start. Many believed the structure of the plan as an overall regulation of the energy sector went significantly beyond EPA’s legal authority. The entire CPP hinged on the EPA’s authority under Section 111 of the Clean Air Act.  Under Section 111, the CPP set emissions standards across the entire energy sector thereby changing the mix of production to natural gas and renewables. The  crux of the legal challenge to the CPP was that Section 111 only allowed EPA to impose controls at individual power plants (i.e. within the “fence line”), not broadly across the energy sector. In February 2016, in a rare move, the Supreme Court issued a stay of the effectiveness of the CPP while the legal challenges to the CPP were heard in lower courts.

Why Replace the CPP?

The Trump Administration exited the United States from the Paris Agreement, the international accord on climate change.  President Trump and former Administrator Pruitt repeatedly questioned whether climate change was occurring.  Trump called the CPP a “job-killing regulation.”  Then why not simply repeal the CPP  with no replacement?

To repeal the CPP, the Trump Administration must go through the formal rulemaking process.  The Administration would have to justify, legally, why it is getting rid of the plan.  Complicating any effort to simply get rid of climate change regulation of the power sector was the Supreme Court prior ruling in Massachusetts. v. EPA  that the regulation of greenhouse gas emissions was required under the Clean Air Act.  Furthermore, the Obama Administration had already asserted that Section 111 of the Clean Air Act provide EPA the legal authority to regulate CO2 emission from power plants.  Therefore, given the prior Supreme Court ruling and EPA’s prior legal statements, it would be very difficult for the Administration to develop a legal justification for why there should be no regulation of CO2 emissions from the power sector.  The Administration likely decided a more prudent move would be to replace the CPP with a more flexible and less stringent rule.

Affordable Clean Energy Rule

The ACE rule reconsiders EPA’s authority under Section 111 of the Clean Air Act.  While EPA still maintains it has authority to regulate C02 emissions, it believes that authority is limited to requiring specific improvements at individual coal fired power plants  (i.e. within the “fence line).  The standards in ACE are based on a list of candidate heat rate improvement measures (either technologies or operational changes).  ACE removes the push toward natural gas and renewables.  ACE also removes the ability of states to set statewide CO2 caps on emissions as well as the trading program that would have allowed states to trade amongst themselves to more cost effectively achieve necessary emission reductions.

Under the ACE rule, each state must develop custom compliance schedules that include the selected emission standard and compliance deadlines.  States must submit the plans for EPA’s review within three years of the final EPA rule.  This effectively pushes the compliance deadline for states from 2018 under the CPP to likely 2022.  However, units are given up to 24 months to comply, which effectively pushes compliance deadlines further to 2025.

ACE also aims to encourage energy efficiency by redefining the applicability of the New Source Review (NSR) rules for power plants.  Under NSR, a facility must apply for a permit every time there is a “major modification” to an existing plant.  Under the existing NSR rule a change to facility is considered a “major modification” by measuring the change in annual emissions.  Critics of this approach argue this actually discourages energy efficiency upgrades because: 1) utilities may not adopt energy efficient upgrades due to the lengthy permitting process required; and 2) utilities may want to run plants that are more efficient more often and determining whether a upgrade constitutes a “major modification” based on annual emissions discourages increased operation of more efficient plants.  ACE proposes to change the measure for major modifications to an hourly emission test.  This change could greatly reduce the applicability of NSR to existing plants thereby avoiding the lengthy permitting process and encouraging operations of more efficient plants.  Critics argue NSR ensured the plants could not extend there useful life without adopting new emission reduction technologies.

Despite the radically different approaches to regulate CO2 from the power sector, EPA projects that the reductions under ACE are very similar to CPP.  This is because market forces will continue to push more closures of coal fired power plants as the country moves more to natural gas.  However, critics argue ACE contains no hard cap on emissions, therefore, the projected reductions are not guaranteed.

What is Next for CPP and ACE?

ACE must undergo a sixty day comment period before the rule can be finalized.  If ACE is made final, numerous legal challenges will certainly ensue.  Once again, the future of climate change regulation in the United States will be decided in the courts.

President Trump’s efforts at regulatory reform continued with the announcement on January 15, 2018 that the U.S. EPA would withdraw its “once in, always in” policy for classification of Major Sources of hazardous air pollutants (HAPs) under section 112 of the Clean Air Act.  Newly sworn in Assistant Administrator of EPA’s Office of Air and Radiation, Bill Wehrum, made the announcement.  Anticipating forthcoming legal challenges Mr. Wehrum stated that the revocation of the policy was “based on a plain language reading of the statute that is in line with EPA’s guidance for other portions of the Clean Air Act.”

What is a Major Source of HAPs?

Under the Clean Air Act a “Major Source” is a air pollution source that has the potential to emit of 10 tons per year of any HAP or 25 tons per year or more of any combination of HAPs. Major sources must obtain a Title V permit which is a highly complex federal permit with stringent reporting and record keeping requirements. Any source of HAPs below these thresholds is classified as an “area source” and is subject to far less regulatory requirements.

What is the “Once in, Always In” Policy?

Historically, U.S. EPA allowed sources to voluntarily limit emissions below the HAP “Major Source” thresholds through a permit (referred to as a “synthetic minor permit” because it caps emission below thresholds).  However, sources were required to cap emission with such a permit before the compliance date established under Clean Air Act regulations, specifically, standards known as Maximum Achievable Control Technology (MACT).  If a source couldn’t obtain a permit or limit its emissions due to production or other business needs, the source was always classified as a “major source.”  The source was not allowed to later find ways to reduce HAP emissions and be declassified as a “Major Source.”

What does U.S. EPA’s Revocation of the Policy Mean?

Under U.S. EPA’s new guidance, facilities maybe able to opt-out of the major source MACT standards and Title V permitting requirements at any time.  Sources that are currently “Major Sources” now have incentive to finds ways to control or reduce emissions to reduce their regulatory burden.

What is Likely to Happen Next?

U.S. EPA says it wants to put its latest interpretation into rules to make it harder for the next Administration to revert back to the “Once in, always in” policy.  It plans on publishing notice in the Federal Register to take comments on adoption of such a rule.

Like many of the Trump Administration’s regulatory reforms of EPA, expect the latest announcement to be challenged in the courts.

The Trump Administration has made rollback of environmental regulations a top priority.  Through the use of Executive Orders and the Congressional Review Act(CRA), the Administration has already undone significant Obama era regulations, including the Waters of the U.S. Rule (WOTUS) and the Clean Power Plan.

The Trump Administration has also proposed significant budget cuts to EPA which could result in the reduction of 31% in federal funds to EPA and result in layoffs of 3,200 EPA workers. Budget cuts to State EPAs through reduction of state categorical grants have also been proposed. These cuts to federal funds could lead to reduced staff at State EPAs across the country.  

While the regulatory rollback and reduction in EPA staffs move forward, donations to major environmental groups around the country have surged since the election.  As reported in the Washington Times, the Sierra Club has reported an increase of 700% in donations since the election.  Across the board, green groups, like the NRDC are reporting a surge in donations.

Putting the New Money to Work

Whether it is the EPA budget reductions or EPA’s exercising enforcement discretion, most anticipate EPA federal environmental enforcement will be on the decline under the Trump Administration. While EPA may not bring suits, many long time environmental legal practitioners anticipate a surge in green groups use of citizen suit provisions to fill the void on enforcement.  

Almost all of the major federal environmental statutes include a "citizen suit" provision that allows individuals and groups harmed by environmental violations to step in the shoes of EPA and sue companies to address violations and pay civil penalties.  Such provisions are included in the Clean Air Act, Resource Conservation and Recovery Act (RCRA) and the Clean Water Act.  Why do many anticipate a surge in such suits?

  • Justify Donations– Green groups will show that increased donations are being put to work by taking enforcement to fill the void left by a less active EPA;
  • Easy Access to Monitoring Data Permit compliance and monitoring data is readily accessible online through EPA databases like ECHO or state database counterparts.  This makes it increasingly easier for green groups to identify violations that have gone unaddressed;
  • Civil Penalties-  The citizen suit provisions allow groups to assess civil penalties.  Under law, any civil penalties must go to the U.S. Treasury.  However, groups have used creative approaches like Supplemental Environmental Projects (SEPs) to direct funds to environmental improvement projects or funding local groups;
  • Attorney Fees- Perhaps the biggest incentive to utilize citizen suit provisions is the attorney fee provision.  Courts have established a low threshold for recovery of fees.  This makes it easy for groups to recover their investigatory and legal expenses in pursuing actions; and
  • Lack of Availability of the Diligent Prosecution Defense-  Not only will reductions in EPA staff and resources lead to less enforcement, it also makes it less likely that companies will be able to secure "friendly" administrative or judicial enforcement orders used to block citizen suits during notice periods.  The 60 or 90 day notice periods are meant to give time to allow for state or federal regulators to take appropriate action to resolve violations after receiving notice of a potential citizen suit (i.e. "diligent prosecution" defense).

"New" Citizen Suit Legal Theories

In is not just an anticipated increase in the number of citizen suit actions brought, most see an expansion of the types of harms such suits are used to address.  Across the country, green groups have already utilized long-standing citizen suit provisions to bring creative new causes of action, including:

  • Tennessee Riverkeeper, Inc. v 3M Company- Environmental group have brought a RCRA imminent and substantial endangerment claim against 3M for historical releases of teflon related substances (PFOA/PFOS) which are not currently regulated by EPA.  The Court denied a motion to dismiss the action;
  • Sierra Club v. Chesapeake Operating LLC- Brought RCRA imminent and substantial endangerment claim for earthquakes in Oklahoma allegedly caused by disposal of water from oil and gas extraction;
  • Conservation Law Foundation v. ExxonMobil Corp.-  Alleging imminent and substantial endangerment under RCRA due to climate change; and
  • Upstate Forever and Savannah Riverkeeper v. Kinder Morgan–  Claims brought under the Clean Water Act alleging passive migration of contaminated groundwater to surface water from an oil spill was a violation of the Clean Water Act.  The case was dismissed after the Judge ruled plaintiffs failed to allege facts demonstrating migration of groundwater constituted a "point source" under the Clean Water Act.

Suing EPA to Compel Non-Discretionary Acts

Green groups have always sued EPA to compel the Agency to promulgate regulations or take action that are required under environmental statutes. The Administrative Procedure Act (APA) allows green groups to bring suit to compel an agency action unlawfully withheld or unreasonably delayed. See, 5 U.S.C. Section 706(1).  

Because the Trump Administration will be less inclined to promulgate new environmental regulations, there will almost certainly be a major increase in suits against EPA to compel action. Unlike under the Obama Administration, which resolved many of these suits using consent orders, the Trump Administration will be far less inclined to settle.  This will inevitably lead to long and protracted litigation.  A recent article in the Legal Intelligencer by Kenneth J. Warren discusses the complications for Courts facing these suits to compel EPA to perform non-discretionary duites.

On November 2, 2015, President Obama signed into law the Federal Civil Penalties Inflation Adjustment Improvement Act of 2015.  The law required all federal agencies to increase civil penalties with inflation. While there were previous requirements to increase civil penalties, the new law provides for more dramatic increases attributable to the following changes:

  • Requires adjustments annually instead of every four years as had been previously been required;
  • Institutes a "catch-up" period to increase penalties assuming the more accelerated schedule had previously been in place with a cap on total increases of 150% (which is quite dramatic)
  • Formula for the "catch-up" period is based on how much the October 2015 Consumer Price Index (CPI) exceeds the 1990 CPI (called the "cost-of-living multiplier")

The EPA promulgated the Civil Monetary Penalty Inflation Adjustment Rule to establish a schedule for penalty increases including implementation of the "catch up" provision.  The schedule began implementation on August 1st.  EPA described the purpose of the rule as follows:

The primary purpose of the rule is to reconcile the real value of current statutory civil penalty levels to reflect and keep pace with the levels originally set by Congress when the statutes were enacted.  

EPA’s Adjustment Rule includes the following increases (there are a range of potential penalties in the Adjustment Rule.  The ranges shown below are for some of the more common violations):

  • TSCA toxic substances violations – go from $25,000 per day to $37,000
  • RCRA-  from $25,000 per day to anywhere from $56,467 to $70,117 depending on the nature of the violation
  • Clean Air Act-  from $37,500 (set in 2009) to $44,539 for EPA administrative penalties and a maximum of $93,750 for penalties assessed by a court (the maximum increase of 150% allowed under the rule)
  • Clean Water Act- from $37,500 to anywhere from $44,539 to $51,570
  • ECPRA and CERCLA- from $37,500 to $53,907

To understand the specific penalty increases for particular violations of the statutes set forth above, consult Table 2 of 40 CFR Section19.4 of the EPA Civil Monetary Penalty Inflation Adjustments Rule.

While EPA still has discretion to seek less than the per day maximum civil penalty set forth in the Adjustment Rule, the rule shows an intent that penalties for environmental violations will be significantly larger even when EPA exercises is discretion.

Combating ozone pollution is really about time.  When I was back at Ohio EPA, we had countless meeting discussing how Ohio could (or whether it could) accelerate progress dramatically in reducing ozone pollution.  During that time we would discuss "on-the-books controls" versus new state initiatives.  

"On-the-book controls" referred to a suite of federal air pollution regulations that were put in place to help combat air pollution, including ozone.  The regulations target the two largest contributors to ozone pollution-vehicles and power plants.  The "on-the-books controls" include:

All of these federal air regulations will continue to be phased in over time 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 15 years as the vehicle fleet turns over. In addition, CSAPR has just emerged from litigation and the full reductions have not taken place.

What we learned in our discussions eight years ago was that the state’s had almost no ability to significantly reduce ozone pollution beyond what would be attributable to these federal regulations. At the time, the deadlines for compliance simply didn’t match up with the process for phasing in the federal regulations.  The states needed time.  

Flash forward almost 8 years later and it appears those federal regulations are having a dramatic effect on reducing ozone.  The picture above is taken from a story on Gizmodo regarding improvements to air quality in the last decade.  (Click here to see the very cool video showing reductions).

EPA Denies Request for Redesignation of Attainment Areas for Ozone Standard

On August 14, 2014, EPA Administrator Gina McCarthy denied the 2013 Sierra Club petition that requested U.S. EPA to redesignate as nonattainment 57 areas for violations the 2008 national ambient air quality standards (NAAQS) of ozone.  

Under EPA regulations, ozone levels are based on a three year average of the 8-hour ozone concentration.  The concentrations are averaged because weather plays an important role in the creation of ozone (i.e. hot summers = more ozone).  The averaging is intended to smooth out the variations that may occur due to weather.  

In the Administrator’s McCarthy’s letter denying the petition, she says one of the reason for the denial is to give the states more time.  She specifically cites forthcoming reductions due to federal regulations already in place.  

EPA states that emissions of the ozone precursors are expected to decline significantly:

  • NOx is expected to decline by 29 percent from 2011 through 2018; and
  • VOCs are expected to decline by 10 percent from 2011 through 2018

(Click here for EPA’s extended response setting forth the reasons for denying the petition)

EPA’s decision to deny the petition was sharply criticized by environmental groups.  However, redesignation to nonattainment would force the states to adopt additional reductions beyond these federal "on-the-books" controls.  Those state regulations are no where near as cost effective at reducing ozone pollution and would likely not significantly improve air quality.

EPA decision to give time to the states to allow federal regulations to take hold is based upon practical reality.  The last decade has shown dramatic improvements.  More reductions are locked in and the states would have little ability to accelerate those improvements.

 

When the Title V permitting program was created it was sold as a way to simplify complex air permitting.  U.S. EPA said that it would allow large facilities to aggregate all their air pollution sources under one permit.  EPA indicated this would make it easier for businesses to track their requirements.

What emerged from this "simplified" permitting process was, in fact, permits that were hundreds of pages along.  In addition, new reporting requirements were added onto businesses.  Also, businesses were required to submit an annual certification of compliance which had to be attested to by a responsible official with the company.

The cumbersome nature of the Tittle V permitting process coupled with the new regulatory requirements created a significant incentive for businesses to avoid Title V permitting.  Under Title V, every "major source" of air pollution is required to obtain a Title V permit.  EPA defines "major source" as any facility that is a source of air pollutants that "directly emits, or has the potential to emit, one hundred tons per year of any pollutant."  See, 42 U.S.C. Section 7602(j).

The most common way to avoid Title V for facilities that have a potential emit above 100 tons per year (tpy) is by placing enforceable restrictions (through permitting) that cap emissions below the trigger threshold of 100 tpy.  These permits are referred to as "synthetic minor" permits.  Facilities that cannot reduce actual emissions below 100 tpy can’t use this method to avoid Title V.

What happens when two air sources, owned by the same company, exceed 100 tpy? 

EPA will evaluate whether the sources should be treated as a single source for Title V purposes.  EPA’s guidance in this area is not straightforward and has led to creative interpretations aggregating sources together.

What Constitutes a "Single Facility" for Purposes of Title V Permitting

Under EPA rules, multiple pollutant-emitting activities can be aggregated together and considered a single source for purposes of determining whether the 100 tpy threshold for Title V permitting has been exceeded. Under EPA rules, a single stationary source for Title V purposes must satisfy all of the following factors: (1) the sources are under common control; (2) they are located on one or more contiguous or adjacent properties; and (3) belong to the same industrial grouping.  40 C.F.R. Section 71.2.1

In guidance issued by EPA, the Agency stated that single stationary source determinations should be made on a case-by-case basis and that "in some cases, ‘proximity’ may serve as the overwhelming factor."   See, Memorandum from Gina McCarthy, Assistant Adm’r, to Reg’l Admr’s Regions I-X (Sept. 22, 2009). 

EPA Finds Summit’s Production Plant and Wells One Facility for Purposes of Title V

While EPA guidance says proximity should be the key factor, EPA appears to not always follow its own guidance.  Such was the case in its determination with regard to Summit Petroleum Company ("Summit"). 

EPA found that Summit’s natural gas sweetening plant and the associated production wells were one facility for purposes of Title V. Summit’s plant “sweetens” the “sour” gas from approximately one hundred sour gas production wells by removing hydrogen sulfide so that the gas can be used. Summit owns all of the production wells and the subsurface pipelines that connect each of the wells to the sweetening plant. The wells themselves are located over an area of approximately forty-three square miles at varying distances from the plant—from five hundred feet to eight miles away

EPA said that Summit’s plant, wells and flares worked together as a single unit that "together produced a single product."  EPA said Summit could not produce any evidence that the plant and wells were not "truly interdependent."  EPA concluded that given the functional interrelationship, Summit’s plant and wells should not be considered separate emissions sources.

Summit challenged the EPA interpretation arguing that EPA’s interpretation ignored the plain language in the regulations that calls for sources to be "adjacent."  The Sixth Circuit Court, in a 2-1 decision, agreed with Summit after reviewing the regulatory history and EPA guidance. The Court said EPA may not ignore the term "adjacent’ when making determinations as to whether to aggregate related sources.  The Court found that the wells distance from the plant – from five hundred feet to eight miles- meant the source were not "adjacent’ for purposes of treating them as a single source under Title V.  See, Summit v. EPA, Nos. 09-4348; 10-4572 (6th Cir. Aug. 7, 2012).

Conclusion

The Sixth Circuit decision goes a long way in reducing the reach of EPA in trying to aggregate separate emission sources for purposes of Title V.  Based upon the ruling, a company with operations in different locations that are related to one another may be able to still avoid Title V permitting so long as there is some geographic separation between the sources.

The Obama Administration, after stopping the implementation of the Bush-era ozone standard, has delayed choosing a revised standard three times.  These delays had given hope that EPA may wait to choose a revised standard until after the election. 

In conversations with representatives for industry most impacted by the revised ozone standards, they told me they thought the Administration was positioning itself to delay implementation for an extended period of time.  Now, it appears EPA is completing the final steps toward selection of a revised standard.  On July 26th, EPA released the following statement:

Administrator Jackson is fully committed to finalizing EPA’s reconsideration of the Clean Air Act health standard for ground level ozone. That reconsideration is currently going through interagency review led by OMB. Following completion of this final step, EPA will finalize its reconsideration, but will not issue the final rule on July 29th, the date the agency had intended. We look forward to finalizing this standard shortly. A new ozone standard will be based on the best science and meet the obligation established under the Clean Air Act to protect the health of the American people. In implementing this new standard, EPA will use the long-standing flexibility in the Clean Air Act to consider costs, jobs and the economy.

Background on EPA’s Selection of a Revised Ozone Standard

The last time the ozone standard was revised was in 1997.  The 1997 standard was 84 parts per billion (ppb).  The Clean Air Act mandates review of federal air quality standards every five years. 

Back in 2006, the Clean Air Science Advisory Committee (CASAC)- EPA’s science advisory panel- recommended an ozone standard between 60 and 70 ppb after reviewing the latest studies.  In a very controversial move, Bush’s EPA Administrator- Stephen Johnson- chose to set it at 75 ppb instead of a standard in the range recommended by CASAC.

Soon after the election, Obama’s EPA Administrator, Lisa Jackson, announced the Agency was delaying implementation of the 75 ppb standard and revisiting the standard itself.  Since its initial announcement, EPA has delay taking action three separate times.

Costs Cannot Be Considered

The ozone standard is seen by many as the most costly regulatory decision EPA implements.  Total  cost of compliance with the Bush-era standard was estimated at roughly $8 billion.  A revised standard between 60 ppb-70 ppb will be much higher.  Its important to remember the the Supreme Court has already ruled that EPA cannot consider cost in selecting a standard (ATA v. Whitman).

Delays Already Have Avoided Implementation During Economic Downturn

 We probably have already forgotten the schedule for implementation of the proposed 2008 ozone standard (75 ppb).  Final designations were supposed to occur in March 2010.

Final designations would have immediately implemented tough new restrictions for growth in areas that didn’t meet the standard.

Using EPA’s 2008 proposed schedule as a guide, if EPA acts in August 2011 it is likely that final designations won’t be effective until August 2013 or perhaps even longer.  Attainment deadlines pushing out to 2018-2035.

All Signs Point to a 70 ppb Ozone Standard

EPA’s own statements point to a standard lower than 75 ppb.  Let’s look at two of the sentences in EPA’s recent announcement. I have bolded the key language:

  1. A new ozone standard will be based on the best science; and
  2. In implementing this new standard, EPA will use the long-standing flexibility in the Clean Air Act to consider costs, jobs and the economy;

First, EPA states it will select a standard based on the "best science."  As soon as EPA stopped the implementation of the Bush-era 75 ppb standard, it blasted the standard as not based on science.  EPA has boxed itself in a corner and must select a standard in the range recommended by CASAC of between 60 ppb – 70 ppb.

Second, EPA comments show it is already bracing for the backlash that will ensue by selecting a lower standard.  EPA will certainly take heat for imposing a very costly new regulation during a tough economy.  Therefore, it already sending a signal that will will try to ease the pain by "considering costs" when "implementing this new standard."  This could mean a longer implementation or extended compliance deadlines.

On July 13th, Administrator Jackson sent a letter to Senator Carper regarding the 2008 Bush era ozone standard.  This letter is yet another indication EPA will select a standard between 60 ppb to 70 ppb.  In her letter the Administrator basically states the 75 ppb standard was not legally defensible because of CASAC’s recommendation. 

Based on its actions stopping the implementation of the 2008 proposed ozone standard, EPA has no choice but to select a standard within the rage recommended by CASAC.  Given the state of the economy, EPA also has no choice but to select a standard within that range that will have least economic impact- 70 ppb.   

 

Greenhouse Gas Regulation Commences January 2, 2011 without Legislation

On May 13, 2010, EPA finalized its regulatory approach for control greenhouse gases (GHGs) from large stationary sources.  As discussed in prior posts, the statutory thresholds for triggering EPA’s New Source Review program (NSR) are 100/250 tons per year of a regulated Clean Air Act pollutant. 

As its name implies, EPA’s NSR program requires emission reductions from new or modified sources that emit pollutants above the 100/250 TPY threshold in the Clean Air Act.  This trigger level works reasonably well for typical Clean Air Act pollutants, but not for CO2 which is emitted in much larger quantities.  If the 100/250 threshold were applied for GHGs, EPA indicates thousands of sources would be required to obtain federal air permits under NSR. 

To prevent what EPA calls would be an "absurd" result if the statutory thresholds were applied, EPA is proposing to phase the thresholds in over time.  EPA claims they have the authority to temporarily raise the statutory thresholds based on seldom used legal doctrines known as the "absurd results" doctrine and "administrative necessity."  Whether EPA truly has that authority remains to be seen.

However, the so called "Tailoring Rule" finalized on May 13th is the mechanism that raises the statutory thresholds thereby bringing in only the largest sources of GHGs.  Here is how EPA is phasing in NSR requirements for sources of GHGs:

Phase 1:  January 2, 2011 to June 30, 2011

New Sources (Construction Permits)-  Only sources that trigger NSR due to their non-GHG emissions would be required to address GHG emissions in their permits if GHG emissions exceed 75,000 tons per year.  If GHG’s exceed that threshold they must meet the Best Available Control Technology (BACT) standard to minimize GHG emissions.

Existing Sources-Must incorporate GHG related requirements into their operating permits (Title V).  Right now those requirements are limited to the GHG reporting rules previously established by EPA (40 CFR Part 98- reporting rule fact sheet)

Phase 2:  July 1, 2011 to June 30, 2013

New Sources (Construction Permits)-  Expands beyond just those sources trigger NSR for other pollutants and with 75,000 tons per year of GHG emission.  Any source that emits 100,000 tons per year of GHGs would trigger NSR permitting, even if they don’t require an NSR permit due to other pollutant emissions. 

Existing Sources-  Any modification to a source that would increase GHG emission by more than 75,000 tons per year triggers NSR.  Also, existing sources with emission of 100,000 tons per year, even they have not modified their facility in any way, will be required to obtain an operating permit (Title V) based solely on their GHG emissions.  (EPA estimates the universe of source covered is about 550- mostly landfills and industrial manufacturers.)

Phase 3  Second Rulemaking by July 1, 2012

EPA has stated it will complete a second phase of rulemaking by July 1, 2012 that will further reduce the trigger thresholds below those established in Phase 2.  EPA states it will evaluate a possible threshold of 50,000 tons per year.   Smaller sources would not be covered until April 30, 2016.

Continual Duty to Reduce the Thresholds

Legally, EPA is under a duty to reduce the trigger thresholds as soon as practicable to be in line with the statutory triggers of 100/250 tons per year.  The key question is- How long will the courts allow them to delay implementing what is expressly stated in the Clean Air Act?

(Photo: everystockphoto- cjohnson7

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

What a mess…

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

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

 

I am a bit behind in writing a post about EPA’s release of its endangerment finding.  Earth Day seems like the perfect day to catch up and take advantage of the last few days to look at the reaction and likely consequences of EPA’s significant new action.

 

Background: In Massachusetts v. EPA decided in April of 2007, the Supreme Court held that greenhouse gases (GHGs) are pollutants that may be regulated under the Clean Air Act. But the Court did not go far enough to say EPA must regulate GHGs. At issue was Section 202 of the Clean Air Act which covers regulation of greenhouse gases from motor vehicles.

Under Section 202: The Administrator shall by regulation prescribe standards applicable to the emission of any air pollutant(s) from motor vehicles, “which in his judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.”

The Court said EPA must conclude GHGs from motor vehicles endanger public health (i.e. "endangerment finding") before any regulation of emissions (tail pipe or fuel standards) from motor vehicles can occur. The Court remanded the Section 202 determination to EPA to make a legally defensible finding as to whether motor vehicle GHG emissions endanger public health. 

Key Legal Issues Discussed in EPA’s Proposed Action:  On April 17th, Administrator Jackson issued a proposed finding that vehicle emissions of GHGs do endanger public health.  There is now a 60 day public comment period on the proposed action.

A key legal issue analyzed in the proposed action is whether Section 202 requires "actual harm" from a pollutant before it can be regulated.  EPA’s proposed rule discusses the legislative history behind the language in Section 202 and concludes no finding of actual harm is necessary:

As the Committee further explained, the phrase “may reasonably be anticipated” points the Administrator in the direction of assessing current and future risks rather than waiting for proof of actual harm.

Also, EPA’s proposed action rejects the notion a demonstration is needed that controlling GHG emissions from U.S. autos would actually make a difference in addressing climate change.  The EPA cited to language in the Supreme Court’s Massachusetts v. EPA :

Moreover, as the Supreme Court recognized, “[a]gencies, like legislatures, do not generally resolve massive problems in one fell regulatory swoop.”

Science and Findings in EPA’s Proposed Action:  There is no new science behind the endangerment finding.  Administrator Jackson relies on reports and conclusions from the U.S. Climate Change Science Program, the National Research Council, and the Intergovernmental Panel on Climate Change.  She found these reports to provide more than sufficient support that GHG pose a "risk" to public health that should be addressed. 

Here is how EPA has described its action on its web page and in supporting documentation:

The Administrator signed a proposal with two distinct findings regarding greenhouse gases under section 202(a) of the Clean Air Act:

1) The Administrator is proposing to find that the current and projected concentrations of the mix of six key greenhouse gases—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6)—in the atmosphere threaten the public health and welfare of current and future generations. This is referred to as the endangerment finding.

2) The Administrator is further proposing to find that the combined emissions of CO2, CH4, N2O, and HFCs from new motor vehicles and motor vehicle engines contribute to the atmospheric concentrations of these key greenhouse gases and hence to the threat of climate change. This is referred to as the cause or contribute finding.

This proposed action, as well as any final action in the future, would not itself impose any requirements on industry or other entities. An endangerment finding under one provision of the Clean Air Act would not by itself automatically trigger regulation under the entire Act

This last statement is very interesting. 

Does "Endangerment" = "Regulation":  Obviously the positive endangerment finding itself has major consequences.  There is no doubt it sets EPA on a path to regulate GHGs under the Clean Air Act unless Congress passes a cap and trade bill as substitute regulation.  While the path is set, the timing is in question.  Does this proposed action by itself mean all other sources that emit GHGs (beyond just motor vehicles) are subject to regulation under the Clean Air Act?

The status of GHGs under the Clean Air Act is uncertain as it stands.  EPA is currently taking comment on a separate action regarding regulation of GHGs under the Clean Air Act- Reconsideration of Former Administrator Johnson’s memo declaring GHG unregulated without further action.

Deseret Power was an appeal of a coal permit in which Sierra Club argued the permit was invalid because it didn’t include controls for GHGs.  The Environmental Board of Review said it was an open question as to whether GHG are considered "regulated pollutants" under the Clean Air Act. Sierra Club pointed to existing requirements to monitor CO2 emissions as evidence of regulation.  The EAB said EPA had discretion to decide whether monitoring was enough to amount to regulation.

In response to the EAB, Johnson, in one of his last acts before leaving office, tried to fill the void by issuing an interpretive memo determining CO2 was not a regulated pollutant due to the monitoring provisions.  Administrator Jackson is currently reviewing the Johnson memo following the Sierra Club petition.

THIS IS A HUGE ISSUEIf GHGs are regulated pollutants, then no additional legislation, rulemaking or action is necessary.  EPA could not issue permits to sources of GHGs without considering controls for those emissions.

Footnote 29 of the Endangerment Finding:  So does EPA’s proposed endangerment finding amount to "regulation" of GHGs under the Clean Air Act?  Buried in footnote 29 on page 106 of the Proposed Rule is to me one of the most significant consequences flowing from a positive endangerment finding- does the finding amount to regulation.  Here is what footnote 29 says:

At this time, a final positive endangerment finding would not make the air pollutant found to cause or contribute to air pollution that endangers a regulated pollutant under the CAA’s Prevention of Significant Deterioration (PSD) program. See memorandum entitled “EPA’s Interpretation of Regulations that Determine Pollutants Covered By Federal Prevention of Significant Deterioration (PSD) Permit Program” (Dec. 18, 2008). EPA is reconsidering this memorandum and
will be seeking public comment on the issues raised in it. That proceeding, not this rulemaking, would be the appropriate venue for submitting comments on the issue of whether a final, positive endangerment finding under section 202(a) of the Act should trigger the PSD program, and the implications of the definition of air pollutant in that endangerment finding on the PSD program.

EPA’s footnote is confusing.  The issue in the reconsideration on the Johnson memo really should be limited to whether monitoring is sufficient to constitute "regulation" under the Act.  An endangerment finding would be a new action by EPA that will take place after Deseret Power was issued, after the Johnson Memo was written and after EPA granted the reconsideration of the Sierra Club petition. 

Perhaps the final action on the review of the Johnson memo will make this debate moot.  It certainly will if that action is to say GHG’s are a regulated pollutant based upon monitoring requirements alone.  However, anything other than that outcome will allow the endangerment finding to be new grounds to argue GHGs are regulated under the Act.  In a prior post I discussed what a horrible outcome that would be as a regulatory approach. 

Final Comment:  Once again, to those questioning the merits of a Cap and Trade market mechanism for controlling GHGs- consider the alternative.  Like it or not EPA is on a path to regulate GHGs.  Due to the Supreme Court’s holding in Massachusetts v EPA, there is no getting off that path or turning around.

 (see the extended entry for discussion of the reaction to EPA’s action)

Continue Reading Footnote 29 of EPA’s Endangerment Finding