The DOJ Says EPA's Clean Air Enforcement Actions are "Legally Reasonable"

Jeffrey Marks
Director of Air Quality
National Association of Manufacturers
Jmarks@nam.org

On Jan. 16, 2002, the U.S. Department of Justice (DOJ) released a report entitled, "New Source Review: An Analysis of the Consistency of Enforcement Actions with the Clean Air Act and Implementing Regulations." The DOJ's Office of Legal Policy conducted the review following a directive by the vice president's National Energy Policy Development Group last May. This report is entirely separate from the Environmental Protection Agency's (EPA) study of "the impact of [New Source Review (NSR)] regulations on investment in new utility and refinery generation capacity, energy efficiency and environmental protection."

The Clean Air Act's (CAA) NSR program requires major stationary source emitters to
obtain air pollution permits before undertaking the construction of new plants or making any "non-routine" changes to existing operations that result in a "significant increase" in emissions. In 1999, the EPA filed a wave of enforcement actions against electric utilities for violations of the NSR. The primary issue in these suits was whether certain facility maintenance activities, modifications and changes triggered NSR permitting requirements, or whether these activities fell within the exclusions in the EPA's NSR regulations. The EPA's position is that many of these activities significantly exceeded the scope of the "routine maintenance, repair and replacement" exclusion.

For its report, the DOJ asked two questions:

1. Is the EPA's interpretation of "modification" reasonable in light of the CAA?
2. Should the EPA have observed Administrative Procedures Act (APA) public rulemaking requirements before it brought the enforcement actions?

On the first question, the DOJ concluded that the EPA had a "reasonable basis? for arguing that the EPA's enforcement actions against the utilities are consistent with both the CAA and the APA. Because courts generally defer to EPA interpretations of ambiguous terms such as "modification," the DOJ concluded that the EPA's determination that the defendants "modified" their facilities and thus were subject to NSR is reasonable. According to the DOJ report, "at minimum, the plain language of the regulations affords [the] EPA the discretion to assert in the enforcement actions that a particular plant modification is 'major,' or encompasses more than 'routine maintenance.'" Accordingly, the EPA's discretion, in the view of the DOJ, would only be limited by the APA's "abuse of discretion" thresholds.

Regarding the second question, the DOJ concluded that the EPA's alleged failure to enforce the NSR provisions of the CAA in the past may not reflect a binding interpretation of that statute and, therefore, that the enforcement actions do not violate the APA. Generally, the APA requires administrative agencies to engage in notice-and-comment rulemaking when they wish to impose new substantive regulatory requirements. According to the DOJ report, however, the NSR actions at issue do not proceed from an impermissible reinterpretation of the CAA and its regulations, and as such, no notice-and-comment rulemaking initiative was required. Although the parties to the actions strongly disagree with the EPA's characterization of its history of enforcing the NSR provisions, the DOJ concluded that a reasonable basis exists for the EPA's claim that it has not issued any authoritative interpretation. Thus, the EPA is permitted to distinguish the pending actions from existing case law. That is, the proceedings in question were not indicative of any "subsequent agency action ? such as the issuance of a formal guidance interpreting a regulation ? [that] effected an amendment to a regulation which required notice-and-comment rulemaking."

Although the DOJ's conclusions appear to give the EPA a "green light" to go forward with its NSR enforcement actions, the DOJ stresses that their conclusions are retroactive and express no opinion on how the CAA should be enforced in the future. The report only examines currently pending enforcement actions and conveys the message that any future policy determinations rest with the EPA. This is important given that the EPA is set to release its long-awaited findings on the impact of NSR regulations on utility and refinery investment in generation capacity, energy efficiency and environmental protection.

The EPA's interpretations of the NSR program have fostered considerable uncertainty over whether and how firms should proceed when investing in projects that could improve productivity, energy efficiency and the quality of the environment. All parties, from industry representatives to government officials ? even including the EPA itself, acknowledge that the NSR is problematic. Indeed, the NSR has been the target of federal reform activities for over two decades. Yet, ongoing discussions between affected parties and the EPA have done little to discourage the EPA from pursuing NSR enforcement initiatives that target electric utilities, refineries and other industry sectors. Despite the DOJ's opinion that additional interpretation of a vague statute is legally permissible, some feel that the spirit of the APA rulemaking process is being violated. In light of nearly 20 years of NSR program application and 4,000 pages of guidance and policy interpretations, it is hard not to agree with the contention that the EPA is using the litigation process to force a policy objective on industry without proper notice-and-comment rulemaking. Perhaps the EPA's NSR review will help ameliorate this situation.