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Court Strikes Down EPA’s Clean Air Mercury Rule (2/10/08)

On Friday (02/08/08), the DC Circuit Court stuck down the Clean Air Mercury Rule (CAMR) in its entirety.  The three judge panel vacated the CAMR regulations for both new and existing units.  The decision remands the issue of how to regulate mercury emissions from electric generating units back to EPA for its reconsideration.

How did we get here?  Several states and environmental groups had sued the EPA over the CAMR regulations, which the court elected to consolidate in a single case.  On the other side of the table and adding to the complexity of the case, a number of states and groups, including the Utility Air Regulatory Group (UARG), acted as interveners for the Agency (i.e., supported the defense).  However, while the petitioners posed a number of challenges to CAMR, the court’s action hinged simply on the EPA’s decision to delist the electric generating units (EGUs) from Section 112(c) of the Clean Air Act (CAA).Section 112(n) of the CAA required the EPA to conduct a study of hazardous air pollutants from EGUs to determine whether it was “appropriate and necessary” to regulate the sources under Section 112, which would require prescriptive Maximum Achievable Control Technology (MACT) limitations.  This study was completed in 1998. 

In December of 2000, EPA Administrator Carol Browner announced that it was “appropriate and necessary” to regulate coal- and oil-fired EGUs under Section 112. But, in 2005, EPA reconsidered its decision to list EGUs under Section 112 and determined that its original “finding lacked foundation” and that, for a variety of reasons, it was “not appropriate or necessary” to regulate the units under Section 112.  Instead, the Agency decided it had the discretion to regulate mercury under Section 111 of the CAA and finalized the CAMR regulations based on this new approach.  In Friday’s opinion, the DC Circuit Court stated that the Agency’s 2005 delisting action was without authority because it did not satisfy the requirements of Section 112 (c)(9), which states that the Agency may delist only after determining that the emissions from the sources do not “exceed a level which is adequate to protect public health with an ample margin of safety and no adverse environmental effect will result...” 

In the absence of this evidence, the court was highly critical of EPA’s determination, stating that the Agency “deployed the logic of the Queen of Hearts,” suggesting that EPA’s decision was based on nothing more than the whimsy of its desires.  (While EPA’s actions regarding mercury have been rife with misstep and error, the author finds the court’s critical tone somewhat excessive.)  Since the court found the delisting to be invalid, EGUs should have been regulated under Section 112 not Section 111, so the CAMR regulations “must fall.”   Because the delisting was improper, there is no basis for either the CAMR-related NSPS mercury limits for new sources or CAMR established mercury budget/trading program for existing units.

[Commentary:  The Court’s finding would seem to be predicated on the assumption that the Agency’s December 2000 listing was a final, binding decision.  But, some of the interveners argued that listing was not binding because Section 112(n)(1)(A) states that no listing action of the Administrator “shall be a final agency action” until “the Administrator issues the emission standards for such pollutant or category” (and is, thus, subject to notice and comment).  In other words, the interveners argued that the listing action was not final since the Agency had not finalized the associated MACT standard.  The court (which relegated this issue to a footnote), however, stated that it did not even consider this contention “because EPA has steadfastly refused to join it.”  The Court’s decision to ignore the question of whether the listing actually represented a final decision seems disingenuous not only because the opinion cites the portion of the preamble to CAMR rule where the Agency states that “the December 2000 finding and associated listing are, therefore, not final agency actions” (Federal Register March 29, 2005, p. 16033) but because it was the same court that heard the industry’s initial objection to the listing action.  In that case, the Agency appears to have stated the exactly what it supposedly was refused to join, indicating that “because the decision to add coal and oil fired electric utility steam generating units to the source category list is not yet final agency action, it will be among the matters subject to further comments in subsequent standards rulemakings” (EPA’s Motion to Dismiss UARG v. EPA, 2001).  Is the court itself indulging in the logic of the Queen of Hearts or just in the simplicity of a selective memory?]

Where do we go from here?  It appears that the court’s decision leaves EPA with three options:  1) It can appeal the decision.  2) It can revisit the delisting by developing justification in accordance with Section 112(c)(9).  3) Or, it can develop a MACT standard for EGUs based on Section 112.  While EPA (or the interveners) could appeal, some suggest that this is “a bit of a long shot.”  [Quote by Jeffrey R. Holmstead (the former EPA Assistant Administrator for Office of Air and Radiation who is generally credited as the architect of the Section 111-based CAMR approach) cited in a February 9, 2008 article in the Los Angeles Times.] 

The next step in the judicial process would be a hearing by the full DC Circuit Court, which, given the unanimous nature of the decision by the three judge panel, might be difficult to obtain.  This would leave only an appeal to the US Supreme Court, which may also be less disposed to hear the case for the same reason.Beyond an appeal, EPA could choose to salvage CAMR by developing Section 112(C)(9) justification for the delisting.  However, baring the aforementioned argument that a listing action is not final until the standard is developed (and subject to notice and comment) that the court elected to ignore, Section 112(C)(9) creates a hole that is much easier to fall into than it is to climb out of.  Under the court’s decision, the pages of discussion that EPA included in the preamble to the “Delisting Rule” describing the reasons its initial finding was a mistake count for nothing.  The Agency must show that the emissions do not “exceed a level which is adequate to protect public health with an ample margin of safety and no adverse environmental effect will result...”  

If EPA must fall back to developing a MACT standard, will the Agency simply be able to dust off the MACT standard that it initially proposed in parallel with the cap-and-trade-based CAMR proposal back in 2004, or will it need to go completely through the MACT standard development process based upon new utility control and performance data?  In accordance with the CAA, the MACT limit for new sources shall be no less than the “best controlled similar source, as determined by the Administrator.”  For existing sources, MACT standards must be no less stringent than the average of the best performing 12% of existing sources. Either way the impact of a MACT standard on industry would be great.  All units would need to comply with the mercury limits.  There would be no trading and, thus, no chance to balance out one unit by “over-controlling” another.  Based on the court’s decision for National Lime Association v. EPA (December 2000), some would also argue that listing EGUs under Section 112 subjects the units not only to mercury limits but potential monitoring and limitation requirements with each of the 189 hazardous air pollutants listed under Section 112.

What does this mean for mercury monitoring?  While the ruling did not explicitly touch on the subject, it is logical to infer that if CAMR is dead then any monitoring required in conjunction with the program is likewise dead.  40 CFR 75.80(a) states that sources must comply with the mercury monitoring requirements only “to the extent that compliance is required by an applicable State or Federal Hg mass emission reduction program that incorporates by reference, or otherwise adopts the provisions of, this subpart.”  Vacating the CAMR program would seem to remove the applicability of the Part 75 mercury requirements for the states that adopted EPA’s model CAMR trading rule although some states may need to revisit their specific regulations.  For states that chose to implement mercury regulations that were more stringent than CAMR, those requirements (and any associated monitoring) would still stand.

At present, EGUs are in limbo.  The court has not issued the mandate for the decision so the monitoring provisions are technically still in effect.  Obviously, however, there remains considerable uncertainty around what EPA’s response to this decision will be and whether CAMR is actually down for the count.  If an appeal is successful, the court’s action will, presumably, have no impact on the impending Part 75 monitoring deadline.  Even if CAMR is out for good, the monitoring hiatus will likely be (excluding some political force majeure) only a temporary one since any mercury MACT standard will presumably include continuous monitoring requirements.  While no trading would be involved, the importance such data, in terms of the total cost and scope of the associated emission reduction, would only increase.  [Some had suggested that even if the court vacated the CAMR, that the monitoring provisions could still stand.  It had been suggested that the Agency would petition (and perhaps it still will) that the CEMS data would be necessary to establish the MACT standard and that the court might specifically stay the mandate on certain CAMR monitoring related provisions.  This author, however, finds such a position difficult to justify.]

How similar any MACT monitoring requirements would be to the current Part 75 requirements is a serious question since the MACT standard and any associated monitoring requirements would fall under the jurisdiction of EPA’s Office of Air Quality and Planning Standard (OAQPS) rather than the Clean Air Markets Division (CAMD).  For example, would OAQPS entertain a periodic testing approach for a mercury MACT standard similar to the Part 75 provision for low mass emission units and how might the QA requirements differ?  In general, the OAQPS regulations tend to be more straightforward than Part 75 with fewer monitoring options.  Under a MACT standard, the reporting provisions would likely be more similar to Part 60 excess emissions rather than the highly prescriptive, data intensive requirements of Part 75. Enjoy your CAMR “vacation” – things may get interesting. [This article was written by Steve Norfleet who acknowledges that he is not a lawyer and that the opinions expressed in this article are solely his own.]

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