July 29 — A federal appeals court sided with environmental organizations in identifying several legal flaws in the Environmental Protection Agency's emissions standards for boilers, while also rejecting several industry challenges to key aspects of the rule ( U.S. Sugar Corp. v. EPA, 2016 BL 245584, D.C. Cir., No. 11-1108, 7/29/16 ; Am. Forest & Paper Ass'n v. EPA, 2016 BL 245584, D.C. Cir., No. 11-1125, 7/29/16 ; Am. Chemistry Council v. EPA, 2016 BL 245584, D.C. Cir., No. 11-1141, 7/29/16 ).
The opinion , issued July 29 by a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit, held that the EPA wrongly excluded high-performing boilers when calculating emissions standards for various subcategories of boilers. The court also found the EPA's justification for several aspects of the rule, including the agency's choice of carbon monoxide as a surrogate for various hazardous air pollutants, to be lacking.
James Pew, an Earthjustice attorney who argued the case on behalf of various environmental organizations, told Bloomberg BNA that he was “pretty pleased” with the ruling, both because the court agreed with the environmental groups on several key arguments and because the court rejected all arguments raised by U.S. Sugar Corp., the American Chemistry Council and other industry petitioners.
“Industry got nothing,” Pew said in a phone interview. “The claims they were raising would have done an enormous amount of damage.”
The maximum achievable control technology standards for major source boilers, commonly referred to as Boiler MACT, apply to more than 14,000 existing boilers at petroleum refineries, chemical manufacturing plants and other industrial facilities. The EPA estimated that it would cost industry $1.6 billion annually to come into compliance with the limits on hazardous air pollutants.
Most owners of coal-fired industrial boilers either shut down or switched fuel sources to natural gas in order to comply with the Boiler MACT standards by a Jan. 31, 2016, deadline, an industry trade group told Bloomberg BNA earlier this year. Still, industry was looking to the D.C. Circuit to provide relief on some aspects of the standards, including the issue of excess emissions that result from malfunctions.
In addition to the major source boiler standards (RIN:2060-AQ25; RIN:2060-AR13), the D.C. Circuit's opinion also addresses legal challenges to EPA's standards for area source boilers (RIN:2060-AM44; RIN:2060-AR14) and commercial and industrial solid waste incinerators (RIN:2060-AO12; RIN:2060-AR15).
D.C. Circuit judges Karen LeCraft Henderson, Janice Rogers Brown and Thomas Griffith rejected a number of industry challenges to key aspects of the standards, including the EPA's handling of malfunctions for boilers and incinerators.
William Wehrum, a partner at Hunton & Williams LLP who argued on behalf of the industry petitioners, told the court in December that the EPA acknowledged that malfunctions will occur, but failed to take that fact into account when calculating emissions standards that apply at all times.
The court rejected the industry argument that the EPA's approach to rely instead on enforcement discretion to address malfunctions violates a Clean Air Act requirement that national hazardous pollution emissions standards issued under Section 112 must be achievable. The court cited statutory language defining achievability to be no less than “the emission control that is achieved in practice” by the best performing sources. The “best controlled similar source” that EPA must base its standards on is unlikely to be a malfunctioning source, the court said.
“If anything, then, the statutory language on its face prevents the EPA from taking into account the effect of potential malfunctions when setting MACT emission standards,” the court said. “At the very least, the language permits the EPA to ignore malfunctions in its standard-setting and account for them instead through its regulatory discretion.”
The EPA has faced legal difficulty over its past efforts to address excess emissions during times of startup, shutdown and malfunction. The agency included affirmative defense language that shielded industry from civil penalties related to unavoidable malfunctions, but the D.C. Circuit ruled in 2014 that doing so is not within the agency's Clean Air Act authority ( NRDC v. EPA , 749 F.3d 1055, 2014 BL 108218, 78 ERC 1369 (D.C. Cir. 2014)).
The court ruled in favor of the Sierra Club, Environmental Integrity Project and other environmental petitioners on several issues. The Sierra Club has received funding from Bloomberg Philanthropies, the charitable organization founded by Michael Bloomberg, the majority owner of Bloomberg L.P., parent of Bloomberg BNA.
One key issue on which the court decided in favor of the environmental organizations was the EPA's method for calculating minimum emissions standards known as MACT floors for different subcategories of boilers. The court concluded that the EPA reasonably created subcategories based primarily on the type of fuel used, but held the EPA erred when it excluded certain high-performing units from its calculation.
While the EPA allowed sources that combust at least 10 percent of a fuel to be considered part of a subcategory, the agency declined to consider emissions from any source that burned less than 90 percent of the fuel when determining the best-performing sources for the purposes of setting the MACT floor. That methodology excluded several of the best-performing sources within some subcategories, the court said.
“The [Clean Air Act], however, demands that source subcategories take the bitter with the sweet,” the court said. “If the EPA includes a source in a subcategory, it must take into account that source's emissions levels in setting the MACT floor.”
The court vacated the emissions standards for all major boiler subcategories that would have been affected had EPA considered all sources. Pew told Bloomberg BNA that he was still reviewing the ruling and could not quantify how many emissions standards are affected by that portion of the ruling, though he said he was glad that the court agreed that the EPA's approach to screen out some of the best-performing sources was “pretty ridiculous.”
The court ruled against the EPA on several other aspects of the boiler and incinerator standards, though the court remanded those issues back to the EPA without vacating the relevant portions of the rule.
The remanded issues include EPA's selection of carbon monoxide as a surrogate for non-dioxin/furan organic air toxics. The court found that the EPA's contention that good combustion would minimize emissions of both carbon monoxide and those hazardous air pollutants is “not alone sufficient” to support its selection of carbon monoxide as a surrogate.
“The EPA could not conclude that [carbon monoxide] acts as a reasonable surrogate...without at least considering a key factor: whether the best performing boilers might be using alternative control technologies and methods that reduce organic [hazardous air pollutant] emissions beyond what they achieve by regulating [carbon monoxide] alone,” the court said.
The legal issue reviewed by the court is not as broad as the practical consequences if it's determined that the EPA can't justify carbon monoxide as a surrogate, Pew said. The only way the agency is regulating benzene, polycyclic organic matter and other harmful pollutants is through standards on carbon monoxide emissions, he said. If carbon monoxide isn't a valid surrogate, then the EPA would be in violation of the Clean Air Act requirement that all of those pollutants be regulated, according to Pew.
The court declined to vacate the carbon monoxide standards because it would cause “substantial disruptive effects” through the removal of emissions limits for regulated hazardous pollutants. The court also said it expects that EPA will be able to offer an adequate explanation for its choice of carbon monoxide as a surrogate.
The court also remanded parts of the boiler and incinerator standards back to the EPA with instructions to:
The American Wood Council, which represents wood product manufacturers, issued a July 29 statement describing the D.C. Circuit's decision as a “step back” for industry.
“It is unfortunate that the rule was partially vacated and remanded in several key areas by the D.C. Circuit,” Robert Glowinski, president and chief executive officer of the council, said. “AWC worked long and hard with EPA to develop a rule that was protective of health and the environment, yet pragmatic and well tailored for safely burning carbon neutral biomass residuals in our boilers...we remain committed to these objectives going forward.”
The association's statement also highlighted the court's decision to reject key industry challenges to the Boiler MACT rule, including the malfunction issue and a requirement that boiler operators conduct an energy assessment. The court rejected an industry argument that the energy audit provision was beyond the scope of EPA's Clean Air Act authority because the study requires an analysis beyond the boiler that is the source of pollution.
The court also ruled in the EPA's favor on a number of other challenges, including an industry challenge to the EPA's “pollutant-by-pollutant approach” to setting MACT standards, which the court ruled to be a reasonable interpretation of Clean Air Act language.
The EPA's use of the Upper Prediction Limit, a statistical tool used to predict the level of emissions that the “best-performing” facilities in a source category are expected to meet, also was upheld by the court. The D.C. Circuit in 2013 remanded part of EPA's sewage sludge incinerator standards back to the EPA due to uncertainty with the Upper Prediction Limit ( Nat'l Ass'n of Clean Water Agencies v. EPA , 734 F.3d 1115, 2013 BL 220506, 77 ERC 1473 (D.C. Cir. 2013)).
The environmental petitioners argued that use of the Upper Prediction Limit resulted in MACT floors that were less stringent than they should be. However, the court found that the EPA “has carried its burden” of showing that the statistical tool does reflect a reasonable estimate of the emissions achieved by the best-performing sources.
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The D.C. Circuit's opinion is available at http://src.bna.com/hf6 .
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