Clean Air Act Permits for Farms? Implications of EPA's Disapproval of the California Exemption of Agricultural Operations from Title V Permitting

Richard J. Mannix
rmannix@crowell.com

The U.S. Environmental Protection Agency (EPA) entered a settlement in May 2002 agreeing to override California's exemption of agricultural operations from the state's Clean Air Act Title V program and to implement a federal permitting program for agricultural operations that qualify as Title V "major sources." Implementation of the proposed permitting program in California will be pivotal in the development of the law concerning how or whether agricultural operations are regulated under the Clean Air Act. This article summarizes the relevant Clean Air Act requirements and the basis for California's agricultural source exemption. It then identifies some of the critical legal and technical questions that remain to be answered as EPA implements a federal permitting program in California, the answers to which will influence the future regulation of agricultural air emissions nationwide.

Overview
Early in 2002, petitions by environmental and citizens' groups challenged EPA's approval of Clean Air Act Title V operating permit programs submitted by the California Air Resources Board (CARB) for 34 California air quality management districts. Association of Irritated Residents, et al. v. EPA, No. 02-70160 (9th Cir., filed Jan. 29, 2002); Medical Alliance for Healthy Air, et al. v. Whitman, No. 02-70177 (9th Cir., filed Feb. 4, 2002); Communities for a Better Environment, et al. v. EPA, No. 02-70191 (9th Cir., filed Feb. 5, 2002). The petitioners challenged the legality of provisions that deferred for three years Title V operating permit requirements for agricultural operations due to a California statutory exemption of such sources from permitting requirements. See 66 Fed. Reg. 63,503 (Dec. 7, 2001).

Environmental groups contend that large farms are "major sources" of air pollution that have prevented attainment of national standards for particulate matter (PM) and ozone in areas such as the agriculture-dominated San Joaquin Valley. Referring to these farm sources as "Big Ag" and "factory farms," environmentalists argued it was time for California to stop "shielding" agriculture from Clean Air Act requirements. EPA and the state, however, found too much uncertainty about the nature, source, and effects of farm emissions for the agencies to devise a meaningful strategy for permitting these sources. EPA instead had set out to evaluate the existing science, improve on assessment tools, gather emissions data, and develop policies on how Clean Air Act requirements should apply to this unique category of sources.

EPA's settlement of the litigation now requires that EPA identify and issue Title V operating permits for agricultural "major sources" regardless of the state of the science or of policy judgments regarding rational permit requirements. Pursuant to the settlement, EPA published on July 24 its proposal to partially withdraw its approval of California's Title V programs and to implement a federal program for permitting state-exempt major agricultural sources. See 67 Fed. Reg. 48,426 (July 24, 2002). Meanwhile, the California Farm Bureau had already filed a lawsuit challenging EPA's actions. California Farm Bureau v. EPA, No. 02-72263 (9th Cir., filed July 22, 2002).

EPA's proposed permitting program would require permit applications from certain covered sources as early as May 2003 and from other sources as early as August 2003. 67 Fed. Reg. at 48,428. To implement the program, however, EPA must first address complex threshold questions relating to the status of agricultural operations as "major sources." EPA's action to identify major agricultural sources and to issue permits for any such sources in the coming months will likely affect air emission control strategies in agricultural states nationwide.

The Relevant Clean Air Act Requirements
Under the federal Clean Air Act, 42 U.S.C. §§ 7401-7671q, EPA must publish a list of air pollutants that are emitted by numerous and diverse sources and that may be reasonably anticipated to endanger public health or welfare. Id. § 7408(a). EPA then must promulgate national ambient air quality standards (NAAQS) for each such "criteria" pollutant. Currently, EPA has identified and established NAAQS for six criteria pollutants, including PM and ozone.

States have primary responsibility for the attainment of NAAQS through the adoption of state implementation plans (SIPs) designed to achieve the standards within each air quality control region in the state. 42 U.S.C. § 7407(a). Where areas are in "non-attainment" with the NAAQS for a given pollutant, the state must translate the standard into source-by-source emission limitations for the pollutant. While various SIP requirements may apply depending on the degree of non-attainment, the mix of SIP control measures is essentially determined by the state, subject to EPA approval. Once approved by EPA, however, SIP requirements are enforceable in federal court by EPA, the state, or private citizens.

One of the primary mandatory programs for implementing NAAQS is "new source review" - which is the preconstruction review and permitting of any new or modified "major source" to impose emission control requirements on that source. New source review serves to work toward attainment in non-attainment areas and to prevent degradation of air quality in areas that already meet the NAAQS. 42 U.S.C. §§ 7475, 7503. The level of emissions that qualifies a source as "major" varies depending on whether the source is located in an attainment or a non-attainment area and can also vary depending on the degree of non-attainment.

Title V of the Clean Air Act, which was the focus of the California litigation, was enacted as part of sweeping Clean Air Act Amendments in 1990. Title V requires that certain sources obtain an operating permit pursuant to a program developed by the state and approved by EPA. See 40 C.F.R. § 70.3(a). Although primary responsibility for issuing operating permits rests with state and local agencies, Title V requires that EPA fill any gaps in air quality protection by administering a federal operating permits program in areas that lack an EPA-approved or an adequately administered operating permits program. See 40 C.F.R. Part 71.

Sources subject to Title V permitting include "at least" those sources that are defined as "major" for purposes of Title V or that are subject to other specified Clean Air Act programs. EPA can exempt nonmajor source categories, however, and the agency has done so pending future rulemaking that will address whether and how to apply Title V permitting to nonmajor sources. 42 U.S.C. § 7661a(a); 40 C.F.R. § 70.3(b)(1). Thus, for now, states may defer the Title V permitting of nonmajor sources. 57 Fed. Reg. 32,250, 32,251 (July 21, 1992).

The purpose of an operating permit is essentially to consolidate into one document all Clean Air Act requirements applicable to a particular source. Thus, the permit may contain emissions limitations, monitoring requirements, and reporting requirements prescribed in the SIP, as well as any other Clean Air Act requirements applicable to the source. By describing all applicable source-specific requirements in one document, a Title V permit makes it easier (for the operator and for potential enforcers) to identify applicable requirements and determine whether those requirements are being satisfied. See 57 Fed. Reg. at 32,251.

Integrating the Title V program with the pre-1990 Clean Air Act structure has not been easy, however. For example, the definition of a "major" source for purposes of Title V is complicated and can involve sources that are not "major" for purposes of new source review. Moreover, a source is classified as "major" based on its potential to emit a certain quantity of a criteria pollutant, regardless of whether the source is otherwise subject to existing Clean Air Act requirements. Thus, Title V may require an "operating permit" for certain sources where the substantive requirements for that permit have not been established and must be defined on a source-by-source basis.

The California Exemption
Section 42300 of the California Health and Safety Code, which dates from 1976, authorized district boards in the state to adopt rules requiring local pre-construction and operating permits for any source of air contaminants. Thus, the state program required operating permits even prior to enactment of Clean Air Act Title V and applied those requirements to a broader universe of sources. Certain exemptions were provided, however, including an exemption for "[a]ny equipment used in agricultural operations in the growing of crops or the raising of fowl or animals." Cal. Heath & Safety Code § 42310(e). This agricultural exemption is limited to operations "directly involved in the 'growing of crops or the raising of fowl or animals,'" as opposed to post-harvest activities associated with the production of agricultural products. See Letter of Michael P. Kenny, CARB Executive Officer, to Jack Broadbent at 2, EPA Region 9 (Sept. 19, 2001) (Kenny Letter).

Thus, California law prohibits air quality management districts from requiring operating permits for agricultural production sources. EPA initially granted "limited interim approval" of the state's programs, on the condition that the California Health and Safety Code and district rules be revised to eliminate the exemption of agricultural production sources. See, e.g., 61 Fed. Reg. 18,083, 18,087 (Apr. 24, 1996) (final interim approval, San Joaquin Valley). The state statutory exemption still existed, however, when the programs were resubmitted - leaving the districts without authority to meet EPA's condition for full approval.

EPA's Approval of the Temporary Exemption

When the California district programs were resubmitted with the statutory agricultural exemption still in place, EPA considered the arguments made by CARB for again approving the agricultural exemption on a temporary basis. In reevaluating the impact of the state-law exemption, EPA considered several factors. One was the limited nature of the exemption. Many post-harvest activities, including milling, crushing, canning, or cotton-ginning operations, are not exempt. 66 Fed. Reg. 53,151, 53,252 (Oct. 19, 2001); 66 Fed. Reg. 53,354, 53,359 (Oct. 22, 2001). More importantly, since granting interim approval, EPA had become convinced that many agricultural sources were likely not "major sources" under Title V in any case and that technical uncertainty would cloud any efforts to make such determinations. According to EPA:

. . . there is not a reliable or complete inventory of emissions associated with agricultural operations in California that are subject to the exemption. Although further research on this issue is needed, many sources with activities covered by the exemption may not have emissions levels that would subject them to title V, and the State and/or the individual Districts may be able to demonstrate that none of the sources that are exempt under the State law are subject to title V.

66 Fed. Reg. at 53,358. See 66 Fed. Reg. 53,503, 53,505 (Dec. 7, 2001).

EPA concluded that imposing Title V requirements "without a better understanding of the sources and their emissions, would not be an appropriate utilization of limited local, state and federal resources." EPA noted that the National Academy of Sciences would soon complete a study of emissions from animal feeding operations and that EPA and the U.S. Department of Agriculture (USDA) were working jointly to address the air quality impacts of agricultural operations. Accordingly, EPA agreed that permitting these sources should be deferred because currently available techniques for characterizing and monitoring their emissions "are problematic and will be dramatically enhanced by several efforts currently being undertaken with the cooperation and participation of the operators and agricultural organizations, as well as EPA, other federal agencies, and the State and local air pollution agencies." 66 Fed. Reg. at 53,358.

In its December 2001 final approval of the 34 California operating permit programs, EPA "allow[ed] a deferral of title V permitting of agricultural operations involved in the growing of crops or the raising of fowl or animals for a further brief period, not to exceed three years." 66 Fed. Reg. at 53,358. See 66 Fed. Reg. at 53,505. In view of the lack of necessary data and information, EPA considered the three-year timeframe an "ambitious" schedule for the necessary work "to evaluate the existing science, improve on assessment tools, collect additional data, remove any remaining legal obstacles, and issue any necessary guidance." 66 Fed. Reg. at 53,358. There was much to be done. Nevertheless, EPA expected to continue during the deferral period to work with the agricultural industry, the state, and USDA "to pursue, wherever possible, emission reduction strategies." 66 Fed. Reg. at 53,505.

Arguments For and Against EPA's Approval of the Agricultural Exemption
EPA's temporary acceptance of the California agricultural source exemption was arguably the only rational response to the current inability to reliably measure agricultural air emissions. When studies of the same operation by different qualified experts can produce dramatically different emissions "measurements," the scientific foundation for binding regulatory determinations simply does not exist. This was certainly the view of the state agency charged with making such determinations in California. As CARB explained, "[c]learly, more work needs to be done on a national level before concluding that CAFOs [concentrated animal feeding operations] could trigger Title V major source thresholds." Kenny Letter at 4.

Moreover, even assuming the ability to reliably measure emissions, there is considerable doubt as to whether any agricultural operations would be found to emit criteria pollutants at levels above applicable "major source" thresholds. As CARB pointed out, agricultural operations "primarily generate mobile or fugitive emissions which, according to 40 C.F.R. 70.2 (Major Source), are not included in Title V applicability determinations." Kenny Letter at 2. "Fugitive emissions" are those that "could not reasonably pass through a stack, chimney, vent, or other functionally-equivalent opening," 40 C.F.R. § 70.2, such as those originating in wastewater lagoons or open feedlots.

CARB also indicated that "California farms frequently consist of non-contiguous land parcels which do not meet the 'contiguous or adjacent properties' criterion of the [EPA] definition of 'major source'." Kenny Letter at 1. Identifying a "major source" requires aggregation only of stationary sources "located on one or more contiguous or adjacent properties that are under common control of the same person . . . belonging to a single major industrial grouping." 40 C.F.R. § 70.2. CARB thus found it unlikely that any agricultural operation would qualify as a "major source" based on non-fugitive emissions from contiguous or adjacent properties.

Militating against EPA's approval of the temporary exemption, however, was language in Clean Air Act section 502(a) barring the exemption of "any major source" from the Title V permitting requirements. 42 U.S.C. § 7661a(a). The three-year deferral also arguably represented an inappropriate use of EPA's "interim" approval authority under the statute, which allows conditional interim approval for a maximum of two years, without renewal. Id. Even labeling the action as a "deferral" presented a legal problem for EPA. When EPA "deferred" application of the Title V program to nonmajor sources in 1992, the agency stated that "[t]he deferral may not be extended to any major source, as this is explicitly prohibited by Section 502(a) of the Act." 57 Fed. Reg. at 32,261. All told, despite considerable doubt as to which agricultural operations, if any, would ultimately be appropriately characterized as "major sources" under Title V, EPA was likely correct in concluding that its approval of the California exemption was vulnerable to legal challenge.

EPA's Agreement to Require Permitting of California Agricultural Operations That Are Major Sources
Information on EPA's settlement and the proposed federal permitting program for California is available on the EPA Region 9 Website at http://www.epa.gov/region9/air. See also 67 Fed. Reg. 35,812 (May 21, 2002) (notice of proposed settlement). As required in the settlement, EPA has proposed that agricultural operations that are "major sources" because of emissions from diesel-power engines submit federal permit applications by May 1, 2003, or six months after the effective date of the federal operating permits program, whichever is later. 67 Fed. Reg. at 48,428. For all other agricultural operations that are major sources, federal operating permit applications would be due by Aug. 1, 2003. Id. The settlement requires that EPA issue operating permits for all of these sources by Dec. 1, 2004.

EPA will accept public comments on its proposed action in California through September 3, 2002. 67 Fed. Reg. at 48,427. The settlement requires that EPA take final action by Oct. 2, 2002.

EPA has retained the right to fully approve California's permit programs in the event that the state removes the agricultural exemption from its Health and Safety Code. In fact, some of the agency's statements suggest rather strongly that EPA would much prefer to cajole the state legislature into eliminating the agricultural exemption, allowing EPA to shift the permitting responsibility back to the state. The EPA regional air division director has offered that "[a]s soon as California removes the agricultural exemption from state law, the EPA will return the permitting authority to the state." EPA Region 9 Press Release, July 23, 2002 (http://www.epa.gov/Region9/air/ca/title5.html). The same EPA press release threatened that "[i]f California does not remove the exemption, the entire state could be subject to stricter emission reduction ratios in high pollution areas and possible highway funding freeze." Id.

Implications of the Settlement in California and Beyond
The question of whether agricultural operations should be regulated under Title V operating permit programs surfaced rapidly and somewhat dramatically in California because of the agricultural exemption that is hard-wired into state law, creating a readily apparent gap in the state's permit program. The agricultural exclusion was all the more controversial because of frustrations experienced over many years in trying to improve air quality in California's "nonattainment" areas and the fact that, in some areas, the state appears to be losing ground.

As the controversy surrounding the exclusion and the settlement subsides, the implications of EPA's action remain uncertain - even aside from the California Farm Bureau lawsuit. EPA claims that "the vast majority of stationary agricultural sources will not require permitting and … the program will not impose any substantive new restrictions on agricultural operations." July 23 Press Release (http://www.epa.gov/Region9/air/ca/title5.html). Yet EPA also predicts that "facilities with large stationary diesel engines and large animal feeding operations" may require permits. Diesel engines with emissions above "major source" thresholds could include, for example, engines used in irrigation pumps.

The bottom line is that EPA's settlement renders agricultural sources in California subject to Title V permitting requirements as a matter of law, but much remains to be done to determine which sources will require permitting and what permit terms will apply. In particular, EPA must complete the work that it identified as necessary when it approved the temporary exemption in December 2001. If the intended deferral of permitting through 2004 set an "ambitious" schedule at that time, the proposed requirement for permit applications by mid-2003, and permits by Dec. 1, 2004, is equally ambitious.

EPA and potentially regulated agricultural operations must address threshold legal and technical questions that will determine whether particular operations are deemed "major" sources. Critical legal issues concern the identification of fugitive versus non-fugitive emissions and the means of designating emissions that should be aggregated as part of a single agricultural "source." The complexity of these questions, however, pales in comparison to the fundamental technical question of whether and how agricultural emissions can be quantified with sufficient reliability to support regulatory determinations. Rational - and therefore lawful - regulation simply cannot stand on a foundation of junk science.

The answers to these questions in California will have consequences for agricultural operations nationwide as states and EPA address the application of Clean Air Act and state air emissions control regulations to agricultural operations. Farming operations in other states are more often in NAAQS attainment areas where federally mandated "major source" thresholds are higher. State SIPs, however, may set lower "major source" emissions thresholds, and some states have "minor source" requirements as well. In any case, the precedents set in California - concerning how agricultural emissions are measured, how fugitive emissions are addressed, and how emissions are aggregated -will likely influence the future regulation of farm emissions nationwide.

Richard Mannix is counsel with Crowell & Moring LLP in Washington, DC.