Litigation Update-May 2014

Donna L. Mastro

Doug Snyder

EPA R3 Office of Regional Counsel

Interstate Pollution Transport Update

On April 29, 2014, the U.S. Supreme Court issued its opinion reversing the D.C. Circuit’s decision in EME Homer City which vacated the Cross State Air Pollution Rule (CSAPR) Decision impacts CSAPR and other actions

We are reviewing the decision and will determine next steps when our review is complete

Court upheld EPA’s FIP authority when States fail to submit (can be immediate but no later than 2 yrs) and EPA’s consideration of cost in contribution analysis for 110(a)(2)(D)(i)(I).

CSAPR focused on attainment and maintenance of the 1997 Ozone NAAQS, 1997 PM2.5 NAAQS and 2006 PM2.5 NAAQS

EPA is moving forward to address transport through rulemaking From an air quality and health perspective, the most pressing

transport challenge appears to be ozone in the eastern half of the U.S.  Specifically, transported emissions may pose challenges for areas with respect to the 2008 ozone standard.

Proposed rule targeted for late summer 2014

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Related EPA Actions

CSAPR Better-than-BART Rule (effective August 7, 2012) Allows CSAPR states to meet the BART requirements for

EGUs with CSAPR programs

Eleven states have partial “friendly” FIPs that substitute CSAPR trading programs for source-specific BART for EGUs, as applicable

Two states have FIP clocks running that are dependent on CSAPR

Implications of the U.S. Supreme Court opinion reversing the D.C. Circuit’s decision in EME Homer City

EPA is reviewing the opinion and will determine next steps for CSAPR Better-than-Bart Rule upon review (as well as approval status of associated regional haze SIPs)

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I-SIPs for NAAQS Implementation

2006 PM2.5 NAAQS

NOI for finding of failure to submit (FFS) 2006 PM2.5 NAAQS iSIPs (9/2013)

13 states out of 19 and the D.C. area have submitted iSIP

NOI for FFS to issue FIP for several states for which EPA previously issued FFS PM2.5 

iSIPs

2010 SO2 NAAQS

NOI for failure to submit SO2 iSIPs (2/2014)

8 states out of 39 that have submitted and Regional offices are taking quick action to review.

2010 NO2 NAAQS

NOI for FFS iSIPs for 2010 NO2 NAAQS

Litigants accepted 7/15/15 deadline; the EPA will issue FFS notice. EPA has approved 110(a)(2)(D)(i)(I) submissions for NO2.

2008 Ozone NAAQS

1/15/2013, EPA published FFS iSIPs for 2008 Ozone (not addressing (D)(i)(I))

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Interstate Transport Portion of iSIPs

For the interstate transport portion of iSIPs (addressing contribution to downwind nonattainment and interference with maintenance), the Supreme Court opinion reversing the D.C. Circuit’s decision in EME Homer City impacts these actions There are deadline suits that relate to this

portion of the infrastructure SIPs. Due date?

We are reviewing the opinion and will determine next steps when our review is complete

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SSM SIP Call

In 2011 EPA entered into a settlement agreement with Sierra Club and Wild Earth Guardians to take final action to grant or deny an administrative petition for rulemaking specific to SSM provisions in SIPs.

EPA proposed a SIP Call to 36 states in February 2013 concerning identified SIP provisions for treatment of excess emissions occurring during startup, shutdown and malfunctions (SSM) The proposal restated and invited public comment on EPA’s SSM

Policy

EPA proposed to allow the affected states 18 months after any SIP calls are final (the max allowed under the CAA) to correct and submit SIPs revisions

Link to EPA’s webpage specific to this rule is at www.epa.gov/airquality/urbanair/sipstatus

Per settlement agreement, final action date is June 12, 2014

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Portland Cement MACT decision

In 2010, EPA promulgated MACT standards for Portland Cement plants setting emissions limits for mercury, hydrogen chloride, total hydrocarbons, and particulate matter with a September 2013 compliance date for existing sources and an affirmative defense to civil penalties when violations stemmed from equipment malfunction. DC Cir. had previously vacated SSM exemptions from a MACT standard b/c emission standards must apply continuously.

In 2011, the D.C. Circuit remanded Cement MACT to EPA. EPA issued its new version in 2013 with a less stringent PM standard and adjusted the compliance deadline back to September 2015 because of the revised PM standard.

2014 Portland Cement MACT Decision

On April 18, in NRDC’s challenge to EPA’s 2013 emission standards, the D.C. Circuit court ruled that EPA does not have statutory authority to provide “affirmative defense provisions,” even in the case of malfunctions. However, Court upheld emission standards. Natural Resources Defense Council v. Environmental Protection Agency, No. 10-1371 (April 18, 2014)

Court upheld emission standards. Compliance in Sept. 2015.

These affirmative defense (AD) provisions were created for use only under certain circumstances; ADs can shield sources from monetary penalties in enforcement proceedings. However, DC Cir. found affirmative defense interferes with Citizen Suits under CAA 304 and penalty authority under 113(e). The court limited its holding, however, to civil penalties assessed

in “private civil suits,” suggesting that EPA may be able to issue a rule-based affirmative defense against civil penalties in administrative enforcement actions or enforcement actions by the government.

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Portland Cement MACT cont’d…. EPA is assessing the impact on the proposed SSM SIP Call and the potential

need for any extension of time to allow for any supplemental proposal addressing the impacts of the decision.

EPA’s preliminary view is that a supplemental proposal will be necessary

In Luminant Generation Co. LLC v. EPA in 2013, the Fifth Circuit addressed affirmative defenses in the Texas SIP and upheld EPA’s approval of a 2006 revision of Texas’ SIP which included a rule-based affirmative defense against civil penalties for unplanned maintenance, startup or shutdown activity if the owner or operator could prove several criteria.

The Fifth Circuit noted EPA construes section 113 of the CAA as authorizing affirmative defenses against civil penalties if the defense is ‘narrowly tailored’ and consistent with penalty assessment criteria in section 113(e). Fifth Circuit found this to be a permissible interpretation of CAA, warranting deference to EPA.

Difference: in Luminant, EPA was approving a SIP, whereas in the Portland Cement MACT EPA itself promulgated the affirmative defense provision.

Supreme Court GHG Litigation

On February 24, 2014, the Court heard oral argument in the matter of UARG v. EPA where the Court had granted certiorari on the following question: Whether EPA permissibly determined that its regulation of greenhouse gas

emissions from new motor vehicles triggered permitting requirements

under the Clean Air Act for stationary sources that emit greenhouse gases. Is

NSR limited to criteria pollutants?

The Court’s decision, whether in favor of EPA or not, is likely to result in EPA assessing the implications of the decision on EPA’s permitting related GHG activities

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Treatment of Biogenic CO2 Emissions for PSD and Title V Permitting Purposes

In July 2011, EPA deferred application of Clean Air Act permitting requirements to CO2 emissions from bio-energy and other biogenic sources until July 2014 to learn more about the scientific and technical issues related to accounting for biogenic CO2

In September 2011, EPA issued a draft accounting framework for biogenic CO2 emissions from stationary sources and in September 2012 the Science Advisory Board (SAB) completed its scientific analysis of this framework

In July 2013, the D.C. Circuit Court of Appeals vacated EPA’s deferral of the treatment of biogenic CO2 emissions in Clean Air Act permitting. The Court’s mandate making the vacatur effective will not issue until after the Supreme Court decision D.C. Circuit extended time for submitting petitions for rehearing to 30 days after Supreme

Court decision in UARG v. EPA (expected in early Summer 2014)

Deferral will expire per its own terms in July 2014

EPA is considering recommendations made by SAB in order to determine next steps

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NSR: PM2.5 Significant Monitoring Concentration (SMC) and Significant Impact Levels (SILs)

The January 22, 2013 DC Circuit Court decision in Sierra Club v. EPA vacated the PM2.5 SMC and vacated and remanded to EPA paragraph (k)(2) of two PSD rules (i.e., 40 CFR 51.166 and 52.21) containing the PM2.5 SILs

The two rulemakings below address this Court decision:

1. PM2.5 Vacatur Rule

o Rule removed the PM2.5 SMC and (k)(2) from 40 CFR 51.166 and 52.21

o Direct final rule published at 78 FR 73698, December 9, 2013

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NSR: PM2.5 SMC and SILs (cont.)

2. PM2.5 SILs Reconsideration Rule

Rule will focus on legal and technical basis for the PM2.5 SILs and their use in the PSD air quality analysis

Rule will address significant emissions rates (SER) for SO2, NOx and VOC as PM2.5 precursors and a new SER for ammonia

Rule will also remove mandatory newspaper notice requirement and allow additional methods (media neutral) for public notice of draft permits for major NSR and title V

Proposal anticipated in early 2015

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Mercury and Air Toxics Standards (MATS) : Overview of Action

On December 16, 2011 EPA finalized the Mercury and Air Toxics Standards, the

first national standards to reduce emissions of mercury and other toxic air

pollutants from new and existing coal- and oil-fired power plants.

– Published Thursday, February 16, 2012.

– Revisions regarding limits on new power plants published April 24, 2013.

Standards will reduce emissions of:

– Metals, including mercury (Hg), arsenic, chromium, and nickel

– Acid gases, including hydrogen chloride (HCl) and hydrogen fluoride (HF)

– Particulate matter

Air toxic pollutants are linked to cancer, IQ loss, neurological damage, heart disease,

lung disease, and premature death.

Standards create uniform emissions-control requirements based on proven, currently

in-use technologies and processes.

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MATS - litigationWHITE STALLION ENERGY CENTER, LLC,v. EPA (2014 U.S. App. LEXIS 6944)

April 15, 2014, D.C. Circuit fully upheld MATS. As a result, all existing coal- and oil-fired electric utility units will be required to meet specific numeric emission limits for mercury, particulate matter, and acid gases next year (or 2016 if received 1 year extension).

Key threshold issue for the court was whether EPA properly concluded that the regulation of HAP emissions from electric utilities was “appropriate and necessary.” The majority deferred to EPA.

Specifically, the majority agreed EPA could ignore costs in determining whether to regulate the utility sector. The majority also agreed that EPA could focus solely on the utilities’ contribution to the pollutants of concern, rather than identifying any specific health hazards attributable to utility emissions alone.

Judge Kavanaugh asked what “appropriate” could possibly mean other than to require EPA to conduct a cost-benefit analysis, which he believed to be “just common sense and sound government practice,”

MATS… continued no court has required EPA to consider costs where the word “cost” does not

appear in the relevant statutory provision.

EPA was not required to distinguish between large (“major”) and small (“area”) sources in setting its emission standards.

EPA did not unfairly use a biased dataset to establish the mercury emissions standard.

EPA was not required to set a health based standard for acid gas emissions.

EPA was not required to establish a separate subcategory for circulating fluidized bed combustors, like it had in its boiler rule.

EPA’s “beyond-the-floor” (more stringent) emission standard for lignite-fired units was reasonable.

EPA’s decision to allow similar units at the same facility to average their emissions in determining compliance (without a “discount factor”) was reasonable.

EPA’s monitoring provisions reasonably allowed sources to choose between quarterly stack tests, continuous parameter monitoring, or testing every three years after qualifying as a “low emitting” unit.

environmental petitioners are challenging revised new unit standards (which EPA recently decided to further reconsider).

EPA’s June 2013 proposal to revise the provisions governing startup and shutdown also remains outstanding.

NSR litigation update

US et al v. EME Homer City (August 21, 2013) – Third Circuit upholds dismissal of complaints from US and States against Homer City for alleged NSR violations. Claims for penalties and injunctive relief beyond statute of limitations. Court found NSR violations are not continuing violations. Current Owners did not violate the CAA as didn’t do the modifications. No claims for penalties if > 5 years from modification. Injunctive relief if > 5 yrs ? Not against prior owners. Title V claims dismissed- Court states such claims should be raised in permitting process.

US v. US Steel Corp. (2014) (USDC ND Ind.) (in 7th Circuit)- dismisses penalties and injunctive relief where violations > 5 yrs old even where same owner/operator

States v. Allegheny Energy – WDPa 2014. Dismissed claims for Statute of Limitations, No Equitable Tolling, Other claims were “Routine Maintenance” using “routine to industry” test for all WEPCO factors. Deference to Industry expert. Appeal opportunity to Third Circuit.

US v. Ameren Missouri- ongoing NSR litigation

Discovery ongoing including document production and deposition including productions and depositions from Region III

Issue raised: “Capable of Accomodating”

This is an umbrella term that simply refers to how much of the projected emissions – both in terms of emission factor and activity level - the unit could have also emitted during the baseline period.

“Demand growth” is a subset of “could have accommodated”.

It is important to understand how these terms are different.

“Could Have Accommodated"

This relates primarily to the activity level a unit could have achieved during the baseline period had there been a market for the product.

It is limited by the activity level used for establishing PAE (the demand growth cannot exceed the projected utilization rate).

It is not the faceplate capacity of the unit, or a theoretical utilization rate that could only have been achieved for a very brief time.

20 Demand Growth

BAE = 40,000 gumballs x 5 lbs/gumball = 100 tpy

Em

issi

ons

PAE = 80,000 gumballs /yr x 5 lbs/gumball = 200 tpy

Example 1: Actual Emissions Related to the Change

Emissions that can be excluded

Actual emissions increase related to the change = 92 tpy

43,200 gumballs x 5 lbs/gumball = 108 tpy

Em

issi

ons

PAE = 215 tpy (80,000 total gumballs)

Example 2: Actual Emissions Related to the Change

43,200 red gumballs x 5 lbs/gumball = 108 tpyRed gumballs=125 tpy

Yellow gumballs =90 tpy

Excludable emissions

BAE = 40,000 gumballs x 5 lbs/gumball = 100 tpy