Regional Reports: Headquarters

Kathryn B. Thomson
Sidley Austin Brown & Wood LLP
Washington, DC
kthomson@sidley.com

I. National Air Quality and Climate Change Issues, Generally

A. Ozone and Particulate Matter Standards

On Dec. 18, 2002, EPA issued its final response to the D.C. Circuit’s remand of the 8-hour ozone standard. The remand directed the agency to consider the potential beneficial impacts of ground-level ozone in protecting the public from potentially harmful solar radiation. In response to the court order, EPA evaluated both the potentially beneficial and the potentially harmful impacts of ground-level ozone on human health. The agency’s review included information that became available subsequent to the initial rulemaking. Based on its most recent review, EPA has again concluded that the information on the potential indirect benefits associated with ground-level ozone pollution is too uncertain and speculative to serve as the basis for establishing a less restrictive standard than that previously proposed by EPA.

Nine environmental groups and public health organizations (including Earthjustice) notified EPA in early January 2003 of their intent to sue the agency for failure to revise air quality standards for ozone and particulate matter (PM). These groups maintain that the agency has failed to comply with its statutory obligation to revise the national ambient air quality standards for ozone and PM every five years. EPA last revised the ozone and PM standards in 1997. At that time, EPA tightened the PM-10 standard, reduced the ozone standard from 0.12 ppm measured over a one-hour period to 0.08 ppm measured over an eight-hour period, and established for the first time a standard for PM of 2.5 microns diameter. According to EPA, the Agency is in the process of reviewing and revising these standards.

B. Clear Skies Initiative

The Bush administration’s Clear Skies Initiative to cut power plant emissions of sulfur dioxides, nitrogen dioxides and mercury emissions was introduced in both the House and Senate on February 27. The bill was introduced in the Senate by Sen. Inhofe (chairman of the Environment and Public Works Committee) and in the House by Reps. Tauzin (chairman of the Energy and Commerce Committee) and Barton (chairman of the Energy and Air Quality Subcommittee). Both bills call for a 73 percent reduction in sulfur dioxide emissions, capping them at 3 million tons per year; and a 67 percent reduction in nitrogen oxide emissions to 1.7 million tons per year. The bills also seek to cap mercury emissions at 15 tons per year, which represents a 69 percent reduction from current levels. All of these emissions reductions would be achieved by 2018 (although the bills call for interim reductions) through a market-based emissions trading program. In return for achieving these reductions, power plants would be exempt from the new source review program, the regional haze program and other programs that are in effect or are scheduled to go into effect concerning the three pollutants. Critics of the initiative maintain that the Bush plan attempts to roll back current requirements and poses a significant risk to human health and the environment by failing to take a more aggressive approach to reducing emissions.

C. Acid Rain Report

EPA recently issued a report documenting the success of the Acid Rain Program. The report, “Response of Surface Water Chemistry to the Clean Air Act Amendments of 1990,” was released by the agency on Jan. 29, 2003 and is available at www.epa.gov/ord. According to EPA, the report shows that the Acid Rain Program has been successful in significantly reducing acid rain in sensitive ecosystems of the United States and has achieved those reductions faster and more cost-effectively than originally thought. The report summarizes data collected by the Agency concerning five geographic areas of the Upper Midwest and the Northeastern states. It concludes that in three geographic areas, one-quarter to one-third of water bodies previously affected by acid rain are no longer acidic, though they remain sensitive to changes in the ecosystem. The report also finds that the percentage of lakes in the Adirondacks that are currently acidic has declined from 13 percent in the early 1990s to 8 percent today; fewer than one percent of lakes in the Upper Midwest are currently acidic, a reduction from 3 percent in the early 1990s; and the percent of acidic stream length in the Northern Appalachian Plateau region has declined from 12 percent to 9 percent over the past decade.

D. Permitting Issues

On Feb. 24, 2002, the Supreme Court granted certiorari to the state of Alaska in a case in which the State is challenging an order by EPA halting the construction of a power plant at the Red Dog zinc mine. Alaska Department of Environmental Conservation v. EPA, No. 02-658 (Feb. 24, 2003). EPA’s order had been upheld by the Ninth Circuit (298 F.3d 814 (9th Cir. 2002)). The state maintains that EPA’s decision, which invalidated a state-issued air quality permit to construct, was an illegal and belated collateral attack on the state’s permitting authority. EPA had invalidated the state’s action on the grounds that the state did not make an appropriate determination regarding “Best Available Control Technology.”

E. Greenhouse Gas & Climate Change

Bush Administration Initiatives

In early January 2003 EPA announced a new voluntary effort to reduce greenhouse gas emissions and improve air quality. The effort is called “SmartWay Transport.” Under the program, a number of companies owning or operating ground freight carriers (e.g., trucks and locomotives) have agreed to work with EPA to develop a variety of measures to improve air quality, reduce greenhouse emissions and improve fuel efficiency. The agency estimates that by 2012 the initiative will result in a reduction of approximately 18 million metric tons of carbon equivalent and up to 200,000 tons of nitrogen oxides annually. The chief strategies identified as part of the initiative include: (1) reducing idling times, (2) improving aerodynamics, (3) improving freight logistics, (4) using self-inflating tire systems, and (5) enhancing driver training. Additional information on this program is available at www.epa.gov/otaq/smartway/index.htm.

In mid-February the Department of Energy launched the president’s “Climate VISION” initiative. “VISION” stands for “Voluntary Innovative Sector Initiative: Opportunities Now.” DOE describes the program as a voluntary, public-private partnership to pursue cost-effective initiatives for the reduction of greenhouse gas emissions. To date, the following industry sectors have expressed their interest in and support for the program: the oil and gas industry, the electric utility industry, the chemical industry, the forest products industry and the mining and semiconductor sectors. Information on strategies that each of these sectors are planning to pursue is available at www.energy.gov.

Carbon Dioxide Lawsuits

Seven states served notice on EPA on Feb. 20, 2002 of their intent to sue the Bush Administration for failure to regulate carbon dioxide emissions from power plants. The States claim that such controls are required under Section 111(b)(1)(B) of the Clean Air Act. The notice specifically asserts that EPA is “in violation of its nondiscretionary duty” to assess impacts of air pollutants, including carbon dioxide, from power plants. The states intend to file a formal lawsuit within 60 days if EPA fails to act in response to the notice. The signatories to the notice letter include New York, Connecticut, Maine, Massachusetts, New Jersey, Rhode Island and Washington.

National Academies of Sciences Report

In late February 2003, the National Academies of Sciences issued a report critical of the Bush administration’s draft strategic climate change research plans. The report, “Planning Climate and Global Climate Change Research: A Review of the Draft U.S. Climate Change Science Program Strategic Plan,” asserts that the administration’s plans lack clear vision and will not lead to the kind of reliable research required to make sound, science-based decisions concerning climate change issues. Further, the report concludes that the plans are not adequately funded, and it makes a number of recommendations to clarify the goals of the programs and correct the deficiencies the panel noted. The report was prepared by the National Academies’ National Research Council Committee for Review of the U.S. Climate Change Science Program Strategic Plan and is available at www.nap.edu.

II. New Source Review

A. New Source Review (NSR) Reforms

EPA recently issued two significant new rules – one final rule and one proposed rule – addressing NSR reform. According to EPA, states will be free to adopt more stringent rules as long as they demonstrate that their state programs are at least as effective as EPA’s base NSR programs.

Finalization of Aspects of 1996 Proposed NSR Rule

On Dec. 31, 2002, EPA formally published in the Federal Register a rule finalizing certain aspects of the Agency’s 1996 NSR proposed rule. 67 Fed. Reg. 80186. As discussed in the prior newsletter, the final rule contains five primary changes to the NSR programs concerning (1) the determination of baseline actual emissions, (2) comparison of pre-change actual emissions to projected post-change actual emissions, (3) plantwide applicability limits, (4) a clean unit exemption, and (5) the pollution control exclusion. The final rule took effect on March 3, 2003.

A number of states, principally located in the Northeast, and environmental groups have filed petitions seeking review of the final rule in the D.C. Circuit. Some of the petitioners have filed a motion seeking an immediate stay of the new rules pending a decision by the court. EPA has opposed that motion.

New Proposed NSR Rule – Routine Maintenance, Repair and Replacement

EPA, on Dec. 31, 2002, also published proposed changes to the NSR exclusion governing “routine maintenance, repair and replacement” (RMRR). Because the existing rules do not explicitly define RMRR, EPA is proposing to provide a more detailed definition of RMRR. The proposed rule suggests some alternatives and seeks comment on those options. There are two primary options: (1) an annual maintenance, repair and replacement allowance; and (2) an equipment replacement approach. (These options were described in more detail in the most recent Air Quality Committee Newsletter). In the proposal, EPA also stated its intent to engage in subsequent rulemaking to address “debottlenecking” issues that frequently arise in applying the NSR rules.

On Friday, Feb. 28, 2003, EPA published a notice extending the deadline for commenting on the proposed rule until May 2, 2003. 68 Fed. Reg. 9614.

B. Developments in NSR Litigation

Tennessee Valley Auth. v. EPA – Eleventh Circuit

On May 21, 2002, the Eleventh Circuit heard oral arguments on the merits of the dispute between Tennessee Valley Authority (TVA) and EPA regarding the agency’s NSR enforcement actions against TVA. The principal issues involve whether the TVA projects before the court were excluded from NSR requirements as “routine maintenance, repair and replacement” activities and, if not, whether such projects resulted in regulatorily significant net increases of criteria pollutants. A decision is still pending.

NSR Trials

Two NSR lawsuits filed against coal-fired electric utilities – one against Ohio Edison Company (in the U.S. District Court for the Southern District of Ohio) and one against Southern Indiana Gas & Electric Company (SIGECO) in the U.S. District Court for the Southern District of Indiana – are scheduled for trial in the first part of 2003. The Ohio Edison trial, which began on February 3, was completed in late February, and post-trial briefing will commence soon. The SIGECO trial is scheduled to commence in late March 2003.

NSR Decisions

In February 2003, the U.S. States District Court for the Southern District of Indiana rendered two decisions concerning motions filed in the SIGECO case. In the first decision the court rejected SIGECO’s motion for summary judgment on the grounds that it lacked fair notice of EPA’s current interpretation of the “routine maintenance, repair and replacement” provision of the NSR rules for the projects at issue in the SIGECO case. United States v. Southern Indiana Gas & Elec. Co., No. IP99-1692 (Feb. 13, 2003). In the second decision the court rejected eight additional defenses raised by SIGECO, finding that each of those defenses was predicated on the fair notice argument previously rejected by the court. (Feb. 18, 2003).

Also in February 2003, the U.S. District Court for the Southern District of Illinois granted in part a motion by Illinois Power Company asserting that the applicable statute of limitations barred certain claims for penalties under the NSR and NSPS provisions of the Clean Air Act. United States v. Illinois Power Co., No. 99-cv-0833-MJR (Feb. 19, 2003). Specifically, the court concluded that claims for penalties under the NSR provisions of the act are barred in their entirety for alleged violations that occurred more than five years ago. The court also found that penalties for certain alleged violations of the NSPS rules (i.e., the notification of construction requirement and the performance test requirement) that were more than five years old were time-barred. However, the court denied Illinois Power’s statute of limitations motion to the extent that it sought relief from penalties for alleged violations of the Illinois State Implementation Plan operating permits program.

III. Title III – NESHAPS

In late 2002 and early 2003 the agency has issued a number of proposed rules establishing HAPs emission limits for a variety of sources. These include:

Reciprocating Internal Combustion Engines

On Dec. 19, 2003, EPA proposed NESHAPs emission limits for pollutants from reciprocating internal combustion engines at stationary sources. These types of engines are used, for example, at power plants, chemical and manufacturing plants, pipeline compressor stations. The proposal includes provisions to exempt low-risk facilities from the requirements. The proposal seeks to reduce emissions of HAPs (e.g., formaldehyde, acrolein, methanol and acetaldehyde) by 40 to 90 percent, depending on the specific type of engine at issue. The agency, as part of its proposal, seeks comments on three options that would focus emission control requirements on the facilities posing the most significant health risks. Under each option, a facility could be exempt from additional control requirements if it can prove that its emissions fall below established health effects thresholds. The comment period on the proposed rule closed on Feb. 18, 2003.

Iron and Steel Foundries

In late December 2002, EPA proposed a rule designed to reduce emissions of HAPS from iron and steel foundries by 40 percent and reduce particulate matter and volatile organic emissions as well. EPA estimates that the proposed rule would result in a reduction of pollutants from this industry by 900 tons per year. The HAPs covered by the proposal are lead, manganese, naphthalene, methanol, formaldehyde, and triethylamine. The rule would apply to approximately 100 iron and steel foundries across the United States.

Lime Manufacturers

A proposed rule seeking the reduction of HAPs from the lime manufacturing was also published in late December 2002. The rule, if finalized, would apply to an estimated 56 facilities and would require substantial reductions in emissions of a variety of HAPs, including hydrogen chloride and certain metals through the use of state-of-the-art pollution controls. EPA estimates that the rule would result in a two-thirds reduction in the emission of HAPs and a 50 percent reduction in particulate matter emissions. The comment period for the proposed rule closed on Feb. 18, 2003.

Automobile Surface Coating

The agency has proposed a new rule that would establish emission controls for the automobile surface coating industry. The rule seeks the reduction of HAPs, such as xylene, toluene and ethyl benzene, by approximately 60 percent from 1997 levels. Under the proposed rule, manufacturers would be able to select from among several compliance options. EPA estimates that the proposed rule will cost the auto industry approximately $154 million annually to comply.

Plywood Industry

EPA has recently proposed a HAPs rule for plywood and composite wood manufacturers. The proposed rule also includes an exemption for low-risk facilities. EPA estimates that the rule, which will seek a 42 percent reduction in HAPs (from 1997 levels), will effect 223 facilities and will cost industry approximately $479 million to comply initially, with annual operation and maintenance costs of up to $142 million. EPA is accepting comments on the proposed rule through March 10, 2003.

Industrial Boilers

On Jan. 13, 2003, EPA proposed air toxic standards for industrial boilers. The proposed rule would apply to industrial, commercial and institutional boilers, as well as process heaters. The proposal seeks the reduction of HAPs (e.g., lead and hydrochloric acid) by 60,000 tons per year at an estimated cost to industry of approximately $800 million annually. This proposal, like several others, would exempt low-risk facilities from the control requirements of the rule. The comment period closed on March 14, 2003.

Combustion Turbines

In addition, EPA has proposed emission limits for stationary combustion turbines that would reduction HAPs emissions (e.g., formaldehyde, toluene) by 95 percent. According to the agency, the rule would impact 160 existing sources and 155 new sources and would cost industry approximately $68 million in initial costs and an additional $21.5 million annually to comply with the requirements of the proposal. This proposal, too, would exempt low-risk facilities and emissions from control requirements. The comment period closed on Feb. 13, 2003.

Waste Landfills

On Jan. 16, 2003, EPA published a final rule in the Federal Register that establishes bioreactor standards and reporting requirements for waste landfills. Specifically, the rule sets new pollution standards for solid waste landfills that use water to accelerate the decomposition of waste (so-called “bioreactors”). In addition, the rule creates new reporting and planning requirements for conventional solid waste landfills. Although the rule does not change emission limits established under a prior NESHAPs rulemaking, it does require “bioreactor” landfills to install controls sooner than conventional landfills. The controls must achieve a 98 percent reduction in organic compound emissions. The rule will apply to bioreactor landfills with a design capacity greater than 2.5 million megagrams or 2.5 million cubic meters. The final rule will also require conventional landfills to prepare and submit startup, shutdown and malfunction plans to EPA and prepare deviation reports semi-annually. The Agency estimates that the rule will cost industry approximately $2.1 million annually.

IV. Enforcement and Compliance Results – 2002

On Jan. 30, 2003, EPA released data on its compliance assurance and enforcement results for fiscal year 2002. According to EPA, the agency achieved significant reductions in the amount of pollution introduced into the environment (including the removal of more than 37 million pounds of sulfur dioxide from the air), received more than $140 million in administrative, civil and criminal penalties, and obtained commitments from companies to pay an estimated $4 billion dollars relating to injunctive relief and supplemental environmental projects.

The agency also reported that the number of companies self-disclosing violations in FY 2002 increased by 26 percent and that EPA was engaging in more compliance inspections than in recent years.