Regional Reports: Region 2

Philip E. Karmel
Bryan Cave LLP
New York, NY
Pekarmel@bryancave.com

I.     Federal Court in New York State's Suit Against Niagara Mohawk and NRG Requests Supplemental Briefing on How Possible EPA Changes in the PSD Program May Affect Suit

As previously reported in these pages, on Jan. 10, 2002, New York Attorney General Eliot Spitzer, acting on behalf of the state's Department of Environmental Conservation, filed a lawsuit in federal court in Buffalo alleging that repairs at the Dunkirk and Huntley coal-burning power plants triggered applicability of the Prevention of Significant Deterioration (PSD) regulations and required installation of Best Available Control Technology at these plants, which historically were owned by Niagara Mohawk Power Corporation but were recently sold to NRG Energy. Prior to hearing the defendants' motions to dismiss on statute of limitations and other procedural grounds in July, U.S. District Judge William M. Skretny requested that the parties submit supplemental briefs on how the EPA's announced intention to change the PSD rules may affect the suit. The defendants recommended that the suit be put on hold until EPA takes final action on any changes, asserting that EPA's regulatory changes would involve a "clarification" of existing law that would apply retrospectively to the violations alleged in the state's complaint. The state argued that EPA's proposed changes are still in the preliminary stages and should have no impact on the case. No decision has been reached as the newsletter goes to press.

II.     NYSDEC Issues Draft Environmental Justice Policy

On Aug. 7, 2002, the New York State Department of Environmental Conservation issued a draft environmental justice policy that would, if finalized, further complicate the review process for applications to obtain air and other environmental permits in the state.

The draft policy requires the DEC to provide enhanced accessibility to public permit information, use geographic information screening tools and U.S. Census data to identify minority and low-income communities, provide enhanced public participation and public outreach mechanisms to reach minority and low-income communities, facilitate alternative dispute resolution to resolve conflicts between permit applicants and the public, establish two workgroups to assist the DEC in incorporating environmental justice information in the DEC environmental review process, translate information in the DEC permit process for non-English speakers, develop regulations to enhance and strengthen the elements of the policy, and develop funding and criteria for a technical assistance program to assist in the permit process. Environmental justice issues would be incorporated into the DEC review process through a DEC-specified methodology for conducting a preliminary screen to identify potential minority or low-income communities; enhanced public participation requirements; requiring applicants to show that they have identified stakeholders in the proposed action, distributed information to the community, held public meetings, and established document repositories; and requiring applicants to submit a written report to the DEC summarizing the issues raised during the public participation process. Where the DEC acts as lead agency under the State Environmental Quality Review Act (SEQRA) for a project in a minority or low-income community, DEC will require completion of a Full Environmental Assessment Form, coordinated review of the project with other involved agencies, a public scoping process for any required environmental impact statement (EIS), and the identification in the EIS of the potential significant impacts of the project, whether any minority or low-income community is within its impact area, the existing environmental burden on that area, the project's incremental burden, and propose mitigation measures.

III.     New York Attorney General Reaches Settlements with Truck and Bus Idlers

On June 18, 2002, Attorney General Eliot Spitzer announced settlements with six fleet owners to resolve allegations that they repeatedly violated New York State and City laws that limit the amount of time trucks and buses may idle when not in traffic. The fleet owners (Frito-Lay, Inc., Greyhound Lines, Inc., Community Coach, Inc., Gray Line New York Tours, Inc., Leisure Lines, Inc., and Suburban Trails, Inc.) agreed to implement new idling policies, train their drivers, monitor compliance, pay $103,000 for tree planting projects in New York City, and pay $7,343 to the Attorney General's Office to cover the costs of the investigation. State law provides that trucks and buses with diesel engines may not idle for more than five consecutive minutes, except when powering an auxiliary function (such as loading or unloading cargo or mixing concrete) or when performing emergency services. Under New York City law, buses and trucks (other than authorized emergency vehicles) with any kind of engine may not idle for more than three consecutive minutes, except when powering a loading or processing device.

IV.     High Ozone Days Mean Low Mass Transit Prices in New Jersey

New Jersey Transit, which operates 238 bus routes, 12 commuter rail lines, and two light-rail services in the state for the benefit of some 380,000 daily commuters, continued its OzonePass program this summer. The agency offers participating employers $2 round-trip tickets that can be passed on to employees to be used on days when ozone levels are high enough to be unhealthful, as measured by EPA's Air Quality Index. Participating companies buy the passes in May at the beginning of the smog season and get a fax or email alert the day before a red or orange ozone rating is predicted to alert their employees that the passes may be used the next day.

V.     New Jersey Proposes New Ozone-Precursor Regulations

On Aug. 5, 2002, the New Jersey Department of Environmental Protection proposed new regulations to regulate ozone precursors. The proposed regulations would establish more stringent equipment and operating specifications for vapor cleaning machines used to clean metal parts, require the use of higher efficiency spray guns in body shops and other mobile equipment repair and refinishing facilities, and increase the stringency of the state's gasoline vapor recovery regulations.

Jonathan S. Martel
Arnold & Porter
Washington, DC
Jonathan_Martel@aporter.com

Case Summary: LaFleur v. Whitman, --- F.3d ----, 2002 WL 1759809 2nd Cir. (N.Y.)

(Jonathan S. Martel, Arnold & Porter, represented Intervenor Masada in this case)

On July 31, 2002, the U.S. Court of Appeals for the Second Circuit rejected a petition challenging EPA's decision not to object to a Title V permit issued to Pencor-Masada Oxynol, L.L.C. (Masada) for construction of a first-of-its-kind plant in Middletown, New York to convert municipal waste and sewage sludge into fuel grade ethanol. The waste first is processed at a materials separation facility. Thereafter, the organic materials are fed to an acid hydrolysis process. Hydrolyzed material is then fermented to make ethanol. Cellulose material that cannot be hydrolyzed is fed to a gasifier, which supplies steam to the plant. Air emissions include NOx below the 100 tpy PSD threshold as well as sulfur dioxide below the 250 tpy PSD threshold for non-listed source categories.

The key substantive issue was whether the plant either is a "chemical process plant" (a listed category subject to the 100 tpy threshold), or a chemical process plant "embedded" within the plant has emissions above 100 tpy. The New York State Department of Environmental Conservation (NYSDEC), after consultation with EPA, granted Masada's Title V permit application, determining that the facility was not subject to PSD, because it qualifies as a refuse processing plant (rather than a chemical process plant), and any embedded chemical process plant would exceed the 100 tpy threshold. Petitioners not only challenged EPA's refusal to veto the Title V permit, but also instituted an Article 78 proceeding in New York state court challenging NYDEC's issuance of the permit on the same grounds. The New York court rejected petitioners arguments before their petition for review to the Second Circuit.

The Second Circuit then rejected the petition for review on two independent grounds. First, the court of appeals held that the petitioners' were collaterally estopped from challenging EPA's decision, because the New York state court had already resolved the same substantive issues in the petitioners' state court challenge to the NYSDEC permit. The court applied New York estoppel rules and held that the state court already decided identical issues that were necessary to its judgment. The Court of Appeals rejected as irrelevant that EPA was not a party to the state court proceeding.

The Court of Appeals also addressed the merits, holding that EPA (and NYSDEC) had properly relied on Masada's projection that its revenues would be dominated by tipping fees (rather than ethanol sales) in applying the SIC code to conclude that the facility is a refuse processing plant rather than a chemical process plant. The court also found that EPA had properly determined that the emissions source at the plant - the gasifier that burned the material left over after hydrolysis - was not part of an "embedded chemical process plant." The court upheld EPA's reasoning that the gasifier functioned to eliminate the leftover material and was thus part of the refuse elimination function, rather than part of the ethanol producing function, even though energy from the gasifier is used for the hydrolysis and fermentation processes.