May 01, 2013

D.C. Circuit PM2.5 decision raises challenges for PSD permit applicants

Margaret Peloso

Editor’s note: This is one of two articles in this issue dealing with different national rules and enforcement of standards regulating particulate matter smaller than 2.5 micrometers (PM2.5) in the air. Margret Kim and Robert Jones discuss laws and enforcement related to PM2.5 in China, while Margaret Peloso analyzes a D.C. Circuit decision reviewing EPA’s efforts to regulate PM2.5 pursuant to the Clean Air Act. The editor recommends reading both articles for a better understanding of contrasting national approaches to the same pollutant problem.

On January 22, 2013, the D.C. Circuit issued an opinion in Sierra Club v. EPA, 705 F.3d 458 (D.C. Cir. 2013), invalidating U.S. Environmental Protection Agency (EPA) regulations that established Significant Impact Levels (SILs) and Significant Monitoring Concentrations (Monitoring Concentrations) for fine particulate matter with a size of less than 2.5 micrometers (PM2.5). The D.C. Circuit’s decision raises important questions regarding potential impacts to both pending and future applications for permits under the prevention of significant deterioration (PSD) provisions of the Clean Air Act (CAA). This article explains the D.C. Circuit’s decision and EPA’s subsequent guidance and evaluates implications for the issuance of future PSD permits.

SILs and Monitoring Concentrations

Section 165 of the CAA requires that all new major sources of pollution in attainment areas obtain a preconstruction permit under the PSD program. Each preconstruction permit application must include one year of ambient air quality monitoring data, setting the baseline for air quality in the area where the new facility is to be constructed. The PSD permit application must also include an air quality impacts analysis in which the applicant provides a modeled demonstration that the permitted source will neither cause nor contribute to a violation of the National Ambient Air Quality Standard or consume the PSD increment—the amount by which emissions of a pollutant may increase in an attainment area.

EPA intended SILs and Monitoring Concentrations to be tools to streamline the PSD permitting process by allowing de minimis sources to forgo facility-specific ambient air quality monitoring and more extensive, multi-source air quality impacts analyses. EPA established specific Monitoring Concentrations for PM2.5 and exempted sources with projected impacts below this threshold from the requirement to supply one year of ambient air monitoring data. EPA also established SILs for PM2.5. Under the final rule, sources with projected impacts below the SILs were not required to conduct cumulative air quality modeling as part of the air quality impacts analysis.

The D.C. Circuitinvalidates Monitoring Concentrations and remands SILs

In Sierra Club v. EPA, plaintiffs challenged EPA’s regulations, alleging that EPA lacks the statutory authority under the CAA to issue SILs and Monitoring Concentrations. After the case was filed, EPA conceded that the provisions establishing SILs in the final rule unintentionally stripped permitting authorities of the ability to require an air quality impact analysis for a source with emissions below the pre-established SILs. As a result, EPA asked the D.C. Circuit to remand this portion of the rule for reconsideration.

Although EPA requested remand of the SILs, the Sierra Club urged the D.C. Circuit decide whether EPA has the legal authority to promulgate SILs under the CAA, arguing that EPA does not have the ability to issue de minimis exemptions from the act’s requirements. An industry-based group, the Utility Air Regulatory Group, urged the court to accept the SILs, or alternatively, remand them without vacating that portion of EPA’s final rule.

The court declined the Sierra Club’s request to broadly rule on EPA’s statutory authority, finding that on remand EPA could propose a new rule with or without SILs. While remanding the SILs themselves in the PSD permitting regulations and parallel regulations for SIPs, the court agreed with EPA that the provisions codifying the SILs in 40 C.F.R. § 51.165(b)(2)—deeming a source to cause or contribute to a violation of the ambient standards when it exceeds the SILs in any area not meeting the applicable standards—could stand.

With respect to Monitoring Concentrations, the court rejected that portion of EPA’s rule. The D.C. Circuit concluded that EPA’s decision to exempt some sources from the preconstruction monitoring requirements violated Section 165(e) of the act, which it held is “an ‘extraordinarily rigid’ mandate that a PSD permit applicant undertake preconstruction monitoring.” As a result, the court vacated the portion of the rule establishing Monitoring Concentrations.

EPA’s response to Sierra Club v. EPA

In response to the D.C. Circuit’s ruling, EPA issued guidance on PM2.5 permitting on March 4, 2013. The guidance concludes that it is the responsibility of each permitting authority to align its permitting processes with the D.C. Circuit’s decision. EPA provides guidance in four areas: (1) the status of pending permits, (2) the application of SILs, (3) the submission of monitoring data, and (4) the impact on state implementation plans (SIPs).

With respect to pending permits, EPA advises states to issue permits in a manner that is consistent with the D.C. Circuit’s decision. Presumably, this means that no new PSD permits should be issued relying upon Monitoring Concentrations to forego monitoring or applying to exempt permittees from modeling requirements in a manner that is inconsistent with the D.C. Circuit’s holding. While EPA’s guidance advises states not to take actions that are inconsistent with the holding in Sierra Club v. EPA, it provides no concrete examples of situations in which states may still be able to exempt certain de minimis sources. As a result, pending permit applications may require modifications so that permitting authorities can ensure the PSD permits they issue conform with Sierra Club v. EPA.

EPA’s guidance emphasizes that the D.C. Circuit did not preclude the use of PM2.5 SILs in their entirety. Rather, EPA encourages permitting authorities that choose to rely upon SILs to take extra care in their application and ensure that the permitting record supports the conclusion that the permitted source will not cause or contribute to a violation of the PM2.5 ambient air standards. EPA suggests one application in which it feels confident that SILs may still be applied. The guidance states that “[i]f preconstruction monitoring data shows that the difference between the PM2.5 NAAQS and the monitored PM2.5 background concentrations in the area is greater than the EPA’s PM2.5 SILs value, then EPA believes it would be sufficient in most cases for permitting authorities to conclude that a proposed source with a PM2.5 impact below the PM2.5 SILs value will not cause or contribute to a violation of the PM2.5 NAAQS and to forego a more comprehensive modeling analysis for PM2.5.”

EPA’s guidance further suggests that SILs may still have a role in cumulative analyses although EPA should be consulted directly before using SILs for this purpose.

Because the D.C. Circuit held that EPA lacks the authority to promulgate Monitoring Concentrations, EPA’s guidance directs all permit applicants, including those who have already applied for but have not yet received their permits, to submit PM2.5 ambient monitoring data “whenever either direct PM2.5 or a PM2.5 precursor is emitted in a significant amount.” While EPA’s guidance requires that all permit applicants submit monitoring data, it also provides that existing data from ambient monitoring stations may be used to fulfill the monitoring requirement if the permitting authority believes that such data is representative. According to EPA’s concurrently issued PSD permit modeling guidance, approximately 1,000 of the 1,500 ambient air quality monitors deployed after the PM2.5 ambient air standards were finalized in 1997 are still in place. As a result, EPA believes that applicants will generally be able to rely upon existing monitoring data to satisfy the requirements of section 165.

EPA’s guidance also clarified that it cannot approve a SIP that contains regulatory language regarding Monitoring Concentrations and SILs that is the same as or similar to the language invalidated by the D.C. Circuit. Neither the Monitoring Concentrations nor the SILs were a required element of an approvable PM2.5 SIP and EPA suggests that, as a result, some states may have approved SIPs that already comply with the D.C. Circuit’s holding. EPA concludes it will likely need to consider future rulemaking to remove the vacated language from the federal PSD regulations and suggests that states with approved SIPs that contain similar language should “begin preparations to remove these provisions.” EPA further advises states whose approved SIPs incorporate the PM2.5 Monitoring Concentrations and SILs to consider these provisions unlawful and not rely upon them in issuing PSD permits.

Concurrently with EPA’s permitting guidance, the agency issued draft PM2.5 modeling guidance for PSD permitting. The modeling guidance states that EPA will no longer rely on the Monitoring Concentrations to exempt sources from preconstruction air quality monitoring requirements and advises states to follow the same course. With respect to SILs, the modeling guidance states that EPA will promulgate new rules and that in the interim it advises against using the SILs in the 2010 final rule. EPA recommends that permitting authorities using SILs ensure that the permitting record and applicable regulations support their use. Further, the draft modeling guidance suggests that SILs may still be used as screening values. The draft modeling guidance states that “[i]f preconstruction monitoring data shows the difference between the PM2.5 NAAQS and the measured PM2.5 background concentrations in the area is greater that the applicable SILs value from the vacated sections…, then the EPA believes it would be sufficient in most cases for permitting authorities to conclude that a source with an impact below that SILs value will not cause or contribute to a violation of the NAAQS and to forego cumulative modeling analysis for PM2.5.”

Finally, the draft modeling guidance notes that other regulations have resulted in substantial reductions in PM2.5 precursors. As a result, EPA believes that an assessment of the impacts of secondary PM2.5 “may be easily addressed through a qualitative assessment, supported by trends in available precursor data and ambient PM2.5 monitored concentrations.”

Implications for PSD permitting

The full impacts of Sierra Club v. EPA are not clear. While all applicants with pending and soon-to-filed applications must now submit monitoring data, it is not yet apparent whether such applicants will be able to rely on existing ambient monitoring data, as EPA suggests. If ambient monitoring data acceptable to a permitting authority are not available, permit applicants will be faced with substantial delays while they gather the year of required monitoring data.

EPA suggested that it will issue new regulations that incorporate some form of PM2.5 SILs, but the guidance provides little certainty in how can be implemented in the interim. As a result, permit applicants and permitting authorities will be faced with substantial uncertainties should they choose to rely upon SILs in determining the scope of the air quality impacts analysis for a source. If SILs are not employed, then modeling of cumulative air quality impacts will be required for all permit applicants.

Finally, it is interesting to note that read in light of other recent D.C. Circuit decisions, this most recent decision is part of a move by EPA away from categorical exemptions under the CAA. For example, in a 2008 opinion, the D.C. Circuit struck down EPA’s practice of exempting emissions of hazardous air pollutants during periods of startup, shutdown, and malfunction from compliance limits. In light of this 2008 decision and a 2011 petition from the Sierra Club, EPA recently issued a SIP call for portions of 36 states to remove categorical exemptions that apply to periods of startup and shutdown. Collectively, these developments suggest a tightening of the CAA enforcement regime and a move away from exemptions for relatively minor sources of emissions.

Margaret Peloso

Margaret Peloso is an associate with the firm of Vinson & Elkins LLP. Her principal areas of practice are environmental law and climate change.