EPA Removal of Civil Penalty Shield Triggers Utility Lawsuit

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By Patrick Ambrosio

July 8 — The Environmental Protection Agency's decision to remove a provision that shielded utilities from being penalized for excess emissions caused by unavoidable equipment malfunctions drove a power industry trade association to sue the agency ( ARIPPA v. EPA, D.C. Cir., No. 16-1168, statements filed 7/8/16 ).

The EPA removed the civil penalty shield, known as an affirmative defense, from its Mercury and Air Toxics Standards for power plants in an April rule that made “technical corrections” to the standards. The agency is in the midst of removing affirmative defense language from various air pollution rules in response to a 2014 federal appeals court decision that found the inclusion of a similar civil penalty shield in hazardous air pollution standards for cement kilns to be outside the scope of the agency's Clean Air Act authority ( Nat. Res. Def. Council v. EPA , 749 F.3d 1055, 78 ERC 1369, 2014 BL 108218 (D.C. Cir. 2014)).

The Utility Air Regulatory Group, which filed one of the three active lawsuits over the technical corrections rule, said in a July 8 court filing that it intends to ask the U.S. Court of Appeals for the District of Columbia Circuit to review whether the EPA acted illegally in removing the affirmative defense for malfunctions. Specifically, the trade association raised the question of whether the EPA acted in an arbitrary and capricious manner when it removed the civil penalty shield without otherwise taking malfunctions into account in the standards setting process.

The Mercury and Air Toxics Standards, issued in 2012, required the utility industry to spend billions on pollution controls to reduce emissions of mercury and other hazardous air pollutants.

Refuse, Startup Provisions Challenged

The technical corrections rule (RIN:2060-AS41) also is the subject of litigation from ARIPPA, a trade association that represents coal refuse power plants. In a separate July 8 filing , ARIPPA raised a number of legal questions related to the EPA's decision to revise the regulatory definition of the term “coal refuse” under the power plant mercury standards.

ARIPPA said it will ask the court to consider whether the EPA acted illegally when it characterized the revised definition as a clarification, even though the new definition will have “material substantive consequences” on the scope of the power plant standards. The power plant trade association argued in 2015 comments submitted to the agency that the revised definition of coal refuse should be considered a substantive regulatory change that would warrant a reevaluation of emissions limits established under the mercury rule to determine if the limits would apply to additional pollution sources.

Work practice standards that apply during power plant startup are the focus of litigation brought by a coalition of environmental organizations that includes the Sierra Club. The environmental petitioners, in a July 7 filing , questioned whether the agency failed to meet threshold requirements of Section 112(h) of the Clean Air Act for establishing work practice standards for facilities to meet in the place of numerical emissions limits.

The environmental coalition also suggested that the EPA may have violated the Clean Air Act by establishing startup work practices that are not consistent with the provisions of Section 112(d) of the Clean Air Act.

Temporary Halt Requested

The technical corrections rule marked the third time the EPA revised the Mercury and Air Toxics Standards since they were issued. The two prior revisions to the rule also are under review by the D.C. Circuit and are currently being held in abeyance ( Chesapeake Bay Found. v. EPA, D.C. Cir., No. 13-1200, report filed 6/17/16 ; Util. Air Regulatory Grp. v. EPA, No. 15-1013, D.C. Cir., motion filed 6/15/16 ).

The parties involved in litigation over the technical corrections rule, including the EPA, filed a July 8 motion to hold the consolidated cases in abeyance for 60 days.

The parties filed the request in order to obtain additional time to consider how litigation over the technical corrections rule should proceed, whether some of the issues at hand can be consolidated with the other pending cases and whether some issues can be resolved through alternative means.

The Utility Air Regulatory Group is represented by a team of attorneys with Hunton & Williams LLP, led by Lauren Freeman. ARIPPA is represented by Bart Cassidy and Katherine Vaccaro, partners with Manko, Gold, Katcher & Fox LLP. The environmental petitioners are represented by Patton Dycus and Eric Schaeffer with the Environmental Integrity Project, as well as Earthjustice attorneys James Pew and Neil Gormley.

To contact the reporter on this story: Patrick Ambrosio in Washington at pambrosio@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

For More Information

The Utility Air Regulatory Group's statement of issue is available at http://src.bna.com/gDb .

ARIPPA's statement of issues is available at http://src.bna.com/gDd .

The environmental petitioners' statement of issues is available at http://src.bna.com/gDh .

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