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April 18 --A federal appeals court April 18 upheld the Environmental Protection Agency's revised air toxics standards for cement kilns but said the agency overstepped its authority when it tried to limit the authority of federal district courts to impose civil penalties for emissions violations during equipment malfunctions.
The decision to vacate the affirmative defense in civil suits will have a far-reaching effect not only on the cement industry but also on other industries that are provided an affirmative defense, including power plants and boiler operators, Jim Pew, an Earthjustice attorney who argued the case for environmental petitioners, including the Natural Resources Defense Council and Sierra Club, told Bloomberg BNA.
An industry source who was involved in the case told Bloomberg BNA that unless the court agrees to rehear the case, which is particularly unlikely because the opinion had no dissent, the decision will affect other industries over the coming years.
“It's highly unlikely there's going to be rehearing, so it's the law of the circuit, and they have exclusive jurisdiction over stuff like this, so my guess is, some way or another over the next year or two, you're going to get [affirmative defenses] stripped out” of existing regulations, the source said. “It's just a question of time.”
The EPA issued a rule in 2010 setting emissions standards for particulate matter, mercury, hydrogen chloride and hydrocarbons, affecting about 100 Portland cement facilities nationwide, but the D.C. Circuit struck down parts of the rule in 2011 (Portland Cement Ass'n v. EPA, 665 F.3d 177, 73 ERC 1801, 2011 BL 314480 (D.C. Cir. 2011)).
In response to the court's decision, the EPA revised the standards in 2013, lowering the particular matter emissions limit and giving industry two extra years to comply (78 Fed. Reg. 10,006).
After the 2013 rule was issued, the environmental groups brought the case back to the D.C. Circuit, arguing the agency is prohibited from weakening existing emissions limits, that it shouldn't have considered the cost-effectiveness of emissions reductions and that it shouldn't have extended the compliance time.
In the April 18 decision, the court rejected all of those arguments, saying the EPA's regulatory decisions were reasonable and will be allowed to stand.
Circuit Judge Brett Kavanaugh wrote the opinion, in which Judges Harry Edwards and Sri Srinivasan joined.
The environmental groups argued the Clean Air Act doesn't allow the EPA to weaken existing emissions standards. The 2010 rule eased the particulate matter standard for existing kilns, to 0.07 pound per ton of clinker from the previous limit of 0.04 pound per ton.
The EPA argued the air act doesn't allow the agency to set a maximum achievable control technology standard that is weaker than a standard that may have been set under a different section of the law.
“In wading through this back-and-forth, we ultimately need not decide whether EPA's reading is the better or only reading of this statutory provision, but simply whether it is a permissible reading,” the court wrote. “EPA administers the Clean Air Act, and we must defer to its reasonable interpretation of any ambiguities in the statute.”
When issuing the revised rule, the EPA conducted new calculations showing plants can meet a standard of 0.07 pound per ton. The agency didn't retain the 0.04 pound per ton standard in the original rule because it did not think that standard was cost-effective.
But the environmental petitioners said the only cost consideration should be whether a standard would bankrupt the industry, not whether it is cost-effective.
“[W]e need not decide whether EPA's reading is the only reading of this provision,” the court said. “Even if the statute does not compel EPA's approach, and even if EPA's reading is not the better reading, we conclude that it is still at least a reasonable reading given the various potential meanings of 'cost' in this context.”
The D.C. Circuit also upheld the EPA's decision to extend the compliance period.
The Clean Air Act gives industry up to three years to comply with emissions standards. Since the rule originally was issued in 2010, the environmental groups argued industry had until 2013 to comply. However, in the final rule, the EPA changed the compliance date to 2015.
The groups said the original compliance date should stand, especially for meeting the standards for mercury, hydrogen chloride and hydrocarbons, which didn't change between the 2010 and 2013 rules. The EPA argued that industry needed additional time to install pollution control equipment to meet the revised particulate matter standard, and because the same controls would be used to reduce emissions of all of the pollutants, the 2015 compliance date should apply for the entire rule.
“This situation does indeed present a bit of a conundrum,” the court said. “…This conundrum is resolved when one realizes that it would be irrational and even absurd to have different compliance dates for the different pollutants.”
Pew said it is worrisome that, going forward, EPA could restart the compliance clock by revising an emissions standard.
“I hope that wouldn't happen,” Pew said. “I hope the administration would have a more responsible way of looking at the law.”
The D.C. Circuit struck down the provision of the EPA rule that would have limited federal district courts' authority to impose civil penalties on companies that violate emissions standards during times of unavoidable equipment malfunction.
The final rule established an affirmative defense in citizen lawsuits to insulate industry from penalties. The environmental groups argued that penalties are important to deter violations.
The D.C. Circuit said the EPA overstepped its authority because Congress said it's up to the courts, not the administration, to decide when civil penalties are appropriate.
The EPA argued that the affirmative defense is necessary because while sources must control their emissions continuously, the reality is that pollution control equipment can fail.
“That is a good argument for EPA to make to the courts--and for the courts to then consider--in future civil cases when this issue arises,” the D.C. Circuit said. “But it does not suffice to give EPA authority to create an affirmative defense.”
Bruce Pasfield, an attorney with Alston & Bird LLP who has been following the case but wasn't involved in it, told Bloomberg BNA the decision will leave companies with uncertainty over whether an equipment malfunction could open them up to penalties in citizen lawsuits.
“It's problematic for the industry because they are going to have unavoidable malfunctions,” Pasfield said. “At times, that's going to happen. Theoretically, environmental groups could sue any time that happens, so [companies] are fairly wide open in terms of liability for things that might be beyond their control.”
The EPA previously exempted industries from complying with emissions standards during equipment startups, shutdowns and malfunctions. However, the D.C. Circuit in 2008 said the exemption was unlawful, and the EPA has been removing the exemption in various rules and replacing it with the affirmative defense, Pew said (Sierra Club v. EPA, 551 F.3d 1019, 68 ERC 1033, 2008 BL 282130 (D.C. Cir. 2008)).
Pew said the cement case is the first time the court has addressed the legality of the affirmative defense, and the EPA now will have to remove the affirmative defense from other rules, including air toxics standards for power plants and boilers.
“That's huge,” Pew said about the ruling.
Scott Segal, an attorney with Bracewell & Giuliani who was not involved in the case, told Bloomberg BNA that environmental groups are overstating the significance of the win on the affirmative defense issue.
“Cement kilns are already highly regulated at the state and federal levels,” Segal said in an e-mailed statement. “While I am sure cement companies are not pleased to lose the defense, there is little evidence that I am aware of that the affirmative defensive was a particularly critical lynchpin in defending against citizen suits.”
The EPA did not respond to specific questions about the affirmative defense, saying only that it is disappointed in the ruling.
Gregory Scott, president of the Portland Cement Association, said in a statement April 18 that the group also was disappointed.
“How EPA can address the complex issue of [startup, shutdown and malfunction] will have to be re-examined in light of the court's decision,” Scott said.
However, Scott said the decision doesn't affect the ability of states to establish affirmative defenses.
Kavanaugh's opinion specifically mentioned the Fifth Circuit's decision in 2013 to uphold the EPA's decision to approve an affirmative defense in a state implementation plan (Luminant Generation Co. v. EPA, 714 F.3d 841, 76 ERC 1575, 2013 BL 79999 (5th Cir. 2013); ).
“We do not confront the question whether an affirmative defense may be appropriate in a State Implementation Plan,” the D.C. Circuit opinion said.
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The opinion of the D.C. Circuit in NRDC v. EPA is available at http://www.bloomberglaw.com/public/document/Natural_Resources_Defense_Coun_v_EPA_Docket_No_1001371_DC_Cir_Nov/2.
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