D.C. Circuit Dismisses Most Industry Challenges to EPA’s Utility NSPS as Premature, Upholds EPA on Opacity Monitoring and Rejection of State Law Defenses to Civil Penalties

by Dorsey & Whitney LLP

In a unanimous decision issued on March 11, 2014, the United States Court of Appeals for the District of Columbia Circuit rejected, on procedural and substantive grounds, a number of industry challenges to EPA’s new source performance standards for fossil fuel-fired power plants. See Utility Air Regulatory Group v. EPA, No. 12-1166, available here. The NSPS sets emission limits for conventional pollutants, such as sulfur dioxide, nitrogen oxides, and particulates, emitted by power plants built after May 3, 2011. A companion rule governing emissions of hazardous air pollutants from such plants and known as the “Mercury and Air Toxics Standards” or “MATS” remains under review by the same three-judge panel, with a decision expected shortly.

In its ruling, the court first determined that a number of industry’s challenges to the NSPS are barred because they were raised for the first time in petitions for agency reconsideration that remain pending before EPA. While the Clean Air Act specifically provides that the pendency of petition for agency reconsideration does not bar review of the underlying rulemaking on grounds of lack of finality, any judicial review must still be based on comments that were raised before EPA during the public comment period. Because the reconsideration issues had not been raised only during the still-pending reconsideration proceeding rather than during the public comment period, they could not be raised in the petition for judicial review. Once EPA resolves the administrative petitions, however, any challenges on those issues would become timely and could be raised. On this basis, the court dismissed industry challenges to:

  • the 2012 rule’s condensable particulate matter testing requirement for Subpart Da units, which industry contends wasn’t properly included in the final rule;
  • the rule’s establishment of a different frequency for periodic visual opacity inspections under Subparts D, Db, and Dc than under Subpart Da, which industry contends is arbitrary and capricious; and
  • EPA’s suggestion that it would permit the use of state-law affirmative defenses in the context of MATS while not allowing such defenses in the context of new source performance standards, which, again, industry argues cannot be reconciled.

The court did find timely industry’s challenges to the rule’s requirement that power plants employing continuous emissions monitoring systems, or “CEMS,” but not continuous opacity monitoring, or “COMS,” nonetheless also periodically conduct visual opacity inspections, and challenges to certain procedural issues relating to a predecessor 2009 rule; it also found timely an additional Texas challenge to EPA’s decision not to approve state law affirmative defenses in the context of the NSPS. On the opacity monitoring issue, the court found that EPA had rationally explained that the required periodic opacity inspections for plants emitting more than 0.03 lb/MMBtu of particulate matter provided a reasonable check on the proper operation of the CEMS. The court held that any procedural irregularities that occurred in promulgating the 2009 rule were remedied by the procedures EPA employed in issuing the 2012 rule. Finally, the court held that EPA reasonably declined to approve state law-based defenses contained in the EPA-approved Texas SIP to civil penalties (such as a defense based on malfunctions that might have been avoided) for violation of the NSPS, because NSPS are federal standards that are not incorporated into SIPs. Accordingly, EPA was not required to recognize SIP-based defenses to the NSPS.

In sum, absent Supreme Court review, fossil fuel-fired power plants built after May 3, 2011, and employing CEMS but not COMS for particulate matter will be required to conduct periodic visual opacity monitoring, and only unavoidable malfunctions will provide an affirmative defense to alleged violations of the NSPS. The rule’s condensable particulate matter testing requirements and its provisions establishing different frequencies for required visual opacity testing may be reviewed at a later date, depending on how EPA resolves the pending petitions for administrative reconsideration; in the meantime, they remain enforceable parts of the NSPS.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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