On April 18, 2014, the D.C. Circuit issued its decision in Natural Resources Defense Council v. Environmental Protection Agency et al., No. 10-1371 (Apr. 18, 2014), a case challenging new EPA emissions standards that govern the cement industry. In a unanimous decision, the court held that the EPA’s new emission standards are substantively reasonable and should be upheld. However, the court also delivered a potentially significant blow to the agency and companies subject to its myriad regulations by holding that the EPA lacked the power to create affirmative defenses to lawsuits brought under the Clean Air Act’s (CAA) citizen suit provisions. This latter holding represents an important structural limitation on the agency’s power to control the full reach of the emissions standards it promulgates, and could have ramifications in citizen suits brought under a wide range of CAA emissions standards.
The petitioners in the case pursued two main lines of attack against the EPA’s rule: one based on the substance and timing of the new emissions standards and a second aimed at the EPA’s attempt to create an affirmative defense for companies sued under the Clean Air Act’s citizen suit provision for violating those rules. The court issued a split decision, rejecting the petitioners’ first set of arguments but adopting its second one.
As the panel noted, this was not the first time that the court had heard this case. Three years prior, the court had vacated the EPA’s cement emission standards in part, finding that the data set the agency used to calculate permissible emission limits from raw material storage piles included data that should have been excluded from that calculation. See Portland Cement Association v. EPA, 665 F.3d 177 (D.C. Cir. 2011). On remand, the agency excluded that data and issued a more permissive emission standard for certain pollutants, including particulate matter. It also extended the time frame for complying with these new rules from 2013 to 2015. And, importantly, the agency reaffirmed its decision to create an affirmative defense that would insulate defendants against Clean Air Act “citizen suits” based on alleged violations of these emission standards during unavoidable equipment malfunctions.
The court first rejected the substantive and procedural challenges to the EPA emission rules for cement manufacturers. Finding the Clean Air Act ambiguous, it deferred to the agency’s conclusions that (1) the CAA permits the agency to issue new emissions standards that are less restrictive than prior regulations; and (2) the CAA allows the agency to consider the cost-effectiveness of certain proposed alternatives when issuing emissions standards. It also rejected petitioners’ argument that the new standards should be immediately effective, finding that the EPA was within its right to delay implementation of the emissions standards that were revised on remand, and that it would be irrational to have different effective dates for different pollutants regulated by the same EPA rule.
The good news ends there for the agency and regulated industries, however. The court went on to hold that the EPA exceeded its statutory authority when it created an affirmative defense for companies sued in CAA citizen suits for violating these emissions standards. The EPA reasoned that because it was required to enact “continuous” emissions standards—in other words, standards that applied even during a malfunction—it was reasonable to create a defense that would allow a company to escape liability in the event of an unavoidable malfunctions. The court, while not denying the logic of the EPA’s position, nevertheless held it had overstepped its bounds.
The Clean Air Act’s citizen suit provision allows courts to impose “any appropriate civil penalties” against a defendant. 42 U.S.C. § 7604(a). Under this provision, the D.C. Circuit reasoned, only the courts—and not administrative agencies—may determine what penalties are appropriate. To be sure, the court noted, the EPA could intervene in such suits in support of the defendant. Or it could participate as an amicus curiae. But it may not usurp the judicial role by creating an affirmative defense not prescribed by Congress.
This holding could have substantial ramifications in Clean Air Act citizen suit litigation. As the EPA noted in its federal register notices, the agency created similar affirmative defenses to many other emissions standards, including the standards governing emissions from the pulp and paper industry; coal and oil-fired electric utility steam generation units; oil and natural gas production, transmission, and storage facilities; lead smelting activities; shipbuilding and ship repair operations; wood furniture manufacturing operations; nitric acid plants; industrial, commercial, and institutional boilers, commercial and industrial solid waste incineration units; sewage sludge incineration units; and other industries and operations.
To date, these affirmative defenses likely have deterred at least some litigation based on emissions associated with equipment malfunctions. Under the D.C. Circuit’s ruling, however, that barrier to litigation has seemingly been eliminated. Moreover, the burden will now be on the defendants to convince the EPA to intervene or otherwise participate in individual suits on behalf of alleged polluters—something that is far from guaranteed.
This may not be the end of the line for the EPA on this issue, however. As the D.C. Circuit recognized in a footnote at the end of its decision, the Fifth Circuit in Luminant Generation Co. v. EPA, 714 F.3d 841 (5th Cir. 2013), recently upheld the EPA’s approval of a Clean Air Act State Implementation Plan (SIP) that included an affirmative defense like the one struck down in this case. The D.C. Circuit stated that it was taking no position on whether such a provision could be included in a SIP, implying that there was no conflict between its decision and the Fifth Circuit’s opinion. The agency might conceivably ask the Supreme Court to review the matter now in light of this potential circuit conflict. Alternatively, it could continue to litigate the issue in other circuits in the hopes of creating a clear circuit split that would eventually draw the Supreme Court’s attention.
In the short term, however, this decision likely will cause headaches for many companies facing ongoing or threatened CAA litigation related to equipment malfunctions.