EPA Permitting Regulations Vacated—Project Delays Expected

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The recent decision in Sierra Club v. EPA, 705 F.3d 458 (D.C. Cir. 2013) vacated all of EPA’s rules on Significant Monitoring Concentrations (“SMCs”), as well as some (the Prevention of Significant Deterioration (“PSD”) portion) of the Significant Impact Levels (“SILs”) for Particulate Matter in air emissions measuring 2.5 micrometers in diameter or smaller (“PM2.5”).  As a result permit applicants have fewer screening tools available when seeking exemption from analysis and monitoring requirements under the Clean Air Act (“Act”).

A.   Background for the Act, NAAQS, SIPs and PSD

The Act requires EPA to set National Ambient Air Quality Standards (“NAAQS”) for harmful pollutants at levels necessary to protect public health and welfare.  Under the Act, EPA must designate areas as attainment, nonattainment, or unclassifiable for each NAAQS. States have primary responsibility for implementing the NAAQS, and must submit a state implementation plan (“SIP”) specifying how the State will achieve and maintain compliance. See how your state is classified here or view the NAAQS Historical Standards for more information.

In 1977, Congress amended the Act to add Prevention of Significant Deterioration (“PSD”) provisions to protect the air quality in national parks and similar areas of special scenic or recreational value, and in areas where pollution was within the NAAQS, while assuring economic growth consistent with such protection.  When Congress enacted the PSD provisions, it established maximum allowable increases over baseline concentrations—also known as “increments”—for certain pollutants.  For other pollutants, Congress delegated to EPA the task of promulgating PSD regulations. For pollutants that the EPA began regulating after Congress enacted the PSD provisions, which includes PM2.5, the EPA must promulgate PSD regulations within two years of establishing the NAAQS for that pollutant.

The PSD provisions also establish requirements for preconstruction review and permitting of new or modified sources of air pollution. Subsection 165(a) lists the requirements that a permit applicant must meet before starting construction, which include acquiring a PSD permit for the facility. Specifically, the applicant must demonstrate that emissions from construction or operation will not cause or contribute to any violations of the increment more than once per year, or to any violation of the NAAQS ever.

In order to make the demonstration required under Section 165(a), the applicant for a PSD permit must conduct an analysis of the ambient air quality at the proposed site and in areas that may be affected by emissions from the facility for the relevant pollutants.  This analysis must include continuous air quality monitoring data gathered to determine whether the facility will exceed either the increments or the NAAQS.  The Act further mandates that this data be collected for a year before the date the applicant applies for a permit unless a State, in accordance with EPA regulations, determines that a complete and adequate analysis for such purposes may be accomplished in a shorter time period.  The results of the analysis must be made available to the public at the time of the public hearing on the application for a PSD permit.

The Act requires States to address the PSD provisions in their SIPs. EPA has promulgated extensive regulations setting forth requirements and guidelines on how SIPs are to implement the PSD provisions.  For States without an EPA-approved SIP, EPA has promulgated separate regulations implementing the PSD provisions. Visit this link to see your state’s SIP status.

 B. Background for PM2.5, SILs, and SMCs

In 1997, EPA revised its NAAQS to include standards for PM2.5 , and in 2006 it revised the PM2.5 NAAQS,  In 2007, EPA proposed a rule establishing increments for PM2.5.  In the rulemaking at issue in the Sierra case, EPA also proposed two screening tools that would exempt a permit applicant from some of the air quality analysis and monitoring required under the Act and regulations: significant impact levels (“SILs”) and significant monitoring concentrations (“SMCs”).

1.    Significant Impact Levels (“SILs”)

In the SIL rule for PM2.5, EPA defined a numeric value of the impact a proposed major source or modification may have on the NAAQS or PSD increment.  This numerical value, measured in micrograms per meter cubed (μg/m 3), is the level of ambient impact below which EPA considers a source to have an insignificant effect on ambient air quality.  According to the rule, “a source that demonstrates its impact does not exceed a SIL at the relevant location is not required to conduct more extensive air quality analysis or modeling to demonstrate that its emissions, in combination with the emissions of other sources in the vicinity, will not cause or contribute to a violation of the NAAQS at that location,” an analysis EPA terms the cumulative impact analysis or the cumulative air quality analysis.

2.    Significant Monitoring Concentration (“SMCs”)

In 1980, EPA adopted regulations that exempt sources from preconstruction monitoring requirements, if the source can demonstrate that its ambient air impact is less than a value known as the SMC.  In the rule establishing a SMC for PM2.5, EPA explained that “[i]f a source can show through modeling of its emissions alone that its impacts are less than the corresponding SMC, there is little to be gained by requiring that source to collect additional monitoring data on PM2.5 emissions to establish background concentrations for further analysis.”  EPA proposed different methodologies for establishing a value for the SMC.

 C.   Basis for Rulemaking

In the final rule issued on October 10, 2010, EPA adopted and set values for both SILs and SMCs for PM2.5.   The legal basis it relied on was Alabama Power Co. v. Costle, 636 F.2d 323 (D.C.Cir.1979), which held that an administrative agency’s de minimis authority to establish categorical exemptions from statutory commands may be permissible as an exercise of agency power, when it is inherent in the statutory scheme, and such authority would permit overlooking circumstances that in context may fairly be considered de minimis. Further, unless Congress has been extraordinarily rigid, there is likely a basis for an implication of de minimis authority to provide exemption when the burdens of regulation yield a gain of trivial or no value.   But that implied authority does not apply to situations where the regulatory function does provide benefits, in the sense of furthering the regulatory objectives, but the agency concludes that the acknowledged benefits are exceeded by the costs.  Applying this de minimis authority, EPA explained that when a source’s ambient impact does not exceed the SIL or SMC— i.e., is de minimis—it considers additional analysis and modeling to yield information of trivial or no value with respect to the impact of the proposed source or modification.

In adopting the SMCs, EPA emphasized that it retained discretion to determine when it may be appropriate to exempt a proposed new major source or modification from the ambient monitoring data requirements under the PSD rules.

Unlike the PSD regulations, the new source review and permitting regulation did not use the SILs to exempt a source from conducting a cumulative air quality analysis. Instead, it states that a proposed source or modification will be considered to cause a violation of a NAAQS when that source or modification would, at a minimum, exceed the SIL in any area that does not or would not meet the applicable NAAQS.

Conclusion

Faced with the Sierra Club’s argument that the agency exceeded its de minimis authority in promulgating the SILs for PSDs, EPA conceded that the regulation was flawed and requested the vacatur and remand.  The discretionary distinction between the rules was critical, with the court ultimately vacating the SILs for PSD regulations because they allowed permitting authorities to automatically exempt sources without showing the facility will not cause or contribute to a violation of NAAQSs.  The SILs for new source review and permitting were allowed to stand because they did not allow the permitting authorities to grant discretionary exemptions.

Likewise, in vacating EPA’s SMCs for PM2.5, the Court found that EPA did not have de minimis authority because Congress was “extraordinarily rigid” in mandating preconstruction air quality monitoring.  The Court read the Act as a mandate that a PSD permit applicant undertake preconstruction monitoring.  Instructive in it’s analysis was Congress’s use of the word “shall” in each sentence and that Congress provided only one exception to the monitoring requirement—a shorter monitoring period, suggesting that no other exceptions were intended.  The court also rejected EPA’s argument that there is a virtual presumption of inherent agency authority to grant de minimis exceptions, noting its circularity.  Even if a virtual presumption existed, that presumption is rebutted by an extraordinarily rigid statutory mandate.  The Court further noted that the exemption would frustrate Congress’s intent that monitoring results be made available to the public at the time of the hearing for the PSD permit.  A permitting authority cannot know if there is a violation of a NAAQS or an increment unless preconstruction monitoring establishes the existing ambient concentrations of PM2.5.  Finally, to allow EPA to retain (and delegate to the State) discretion on when such an exemption would apply allows the authorities to engage in impermissible cost-benefit analysis, which was expressly rejected in Alabama Power, absent a Congressional grant of such authority under a fair reading of the specific statute, considering its aims and legislative history.

This decision will likely slow down the permitting process for new major sources and modifications.  Applicants are advised to begin the process early and engage competent counsel to assist.

For more information on environmental law topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.

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