Law360 - June 4, 2015

In response to a petition for final rule-making filed by the Sierra Club, the U.S. Environmental Protection Agency issued on May 22, 2015, its final action requiring 36 states to revise their state implementation plans concerning treatment of emissions during periods of startup, shutdown or malfunction. The EPA is issuing a “SIP call” in those states, finding that the SIPs in those states are “substantially inadequate to meet [Clean Air Act] requirements.” The affected states have 18 months to submit their new SIPs.

Practitioners and plant operators should be tuned into this rule for a number of reasons—technical, legal and financial. First, the rule cuts across all industries in all sectors. Second, many plants and types of equipment are physically unable to meet emissions restrictions during the brief times they are starting up or shutting down operations or during malfunction conditions. For that reason, states, through SIPs, had long provided that brief periods of emissions exceedances during such fleeting occurrences do not put the facility automatically in violation of its air permit or the CAA and state counterparts thereto. Third, the SSM provisions in some instances provided a valid defense from the unfair imposition of fines and penalties for exceedances that cannot physically be prevented. Such proceedings typically involve environmental group citizen suits seeking penalties.

Of note is that the final rule goes even further than the flawed proposed rule, which eliminated the SSM defense for startup and shutdowns events only. The EPA has now required that all states completely eliminate the SSM defense to a citizen suit and/or penalty action, which includes defenses for malfunctions. Previously, the EPA, like the states, had recognized the impossibility of meeting emission limitations when a facility is not operating in a steady-state during startups and shutdowns and particularly in instances of malfunctions, which are beyond the source’s control. Indeed, the emissions limits themselves are based on steady-state operations.

The affirmative defense was not automatic and not easy to maintain. To successfully assert it, the proponent had the burden of proof to show that the excess emissions were caused by an unavoidable failure, that repair was undertaken as quickly as possible, that steps were taken to minimize the duration of any excess emissions, that the facility was operating in a manner consistent with good practices at all times, and more, including that timely notice to environmental regulatory officials was provided.

The EPA attributes this draconian action to an intervening court case, National Resources Defense Council v. EPA, 749 F.3d 1055 (D.C. Cir. 2014), in which the court struck down the EPA’s National Emission Standard for Hazardous Air Pollutants ("NESHAP") rule for Portland cement plants, a rule that permitted an affirmative defense for emissions violations caused by “unavoidable malfunctions.” That case, though, dealt with a NESHAP Maximum Achievable Control Technology Standards, not National Ambient Air Quality Standards (“NAAQS”), and it did not involve state SIPs at all. In fact, the NRDC decision expressly held that it does not apply to SIPs. See NRDC, 749 F.3d at 1064 n. 2. So, the EPA being smitten on that case for this purpose is a romance of convenience.

Many practitioners, plant owners, state environmental officials and state-elected officials should also be concerned about how this final rule came into being from a procedural due process and good government (or lack of both) point of view. The rule came about from the all too overused “sue and settle” dynamic. It traces its genesis to the 2011 petition by the Sierra Club asking the EPA to revoke a state law on the subject and issue a SIP requiring states to change their state laws to suit the Sierra Club. It is no coincidence that the Sierra Club is often a litigant in the citizen suit penalty cases just mentioned. The proposed rule was issued in February 2013 and allowed the states and businesses only 30 days to comment. The EPA extended the comment period for 30 more days, but the time for comment was still inadequate. Thus, the final rule was imposed with little input from the states and business community, who are the parties most affected by the rule.

Also, the rule is disrespectful to the statutory concept of “cooperative federalism” under the CAA. Thirty-six states are told, with little opportunity for their input, that they must change their long-standing state laws. Indeed, any state that does not meet the deadline to change their law would become subject to a federal implementation plan and possibly sanctions, such as loss of federal highway funding.

From a technical, plant and worker safety point of view, the final rule has multiple problems. Contrary to popular belief, startup and shutdown events, and in particular malfunction events, are not “planned,” and emission control technology does not, and cannot, run at full efficiency during SSM events. By way of illustration, the EPA’s final rule is tantamount to mandating automakers to hit their fuel mileage standards during acceleration, deceleration and malfunctions. Of course, such a mandate would be nonsensical. American workers should be wary also because the final rule compromises worker safety. Danger of fire and other mishaps increases during startup and shutdown when emissions control equipment is forced online too early or kept on too late. For example, if flammable gasses are diverted to a thermal destruction pollution control device to early in the startup process, an explosion could result.

The EPA’s attempt to tell the states that they may deal with SSM events with “other approaches” leaves practitioners and their clients with little solace and more questions than answers. For example, SIPs, the EPA says, may include criteria and procedures for the use of enforcement discretion by state air enforcement personnel. Alternatively, SIPs may include alternative numerical limitations or other technological control requirements or work practice requirements during startups and shutdowns. However, the former seems superfluous since states already have enforcement discretion and, more importantly, enforcement discretion would not prevent environmental groups from collecting potentially enormous penalties for nonculpable, beyond-the-control-of-plant operators. As to the latter, the EPA is unable to explain how states are supposed to go about setting up alternative numerical limitations for the thousands of different facilities during startup and shutdown conditions. It also fails to adequately address the fact that there are no currently approved methods to test for compliance with such conditions.

Finally, trying to dress the rule as an “environmental justice” provision is a red herring. As mentioned before, there is no evidence that SSM events cause any NAAQS exceedances or adverse environmental or public health impacts.

The rule will have real-world consequences. Take the case of the Sierra Club’s suit against Georgia Power Company relating to the Wansley Plant. Sierra Club, et al. v. Georgia Power Company, 443 F.3d 1346 (11th Cir. 2006). The suit commenced in 2002 seeking thousands of fines and penalties for exceedances of the plant’s permit limit for opacity. The plant’s continuous opacity monitoring system had registered about 4,000 separate incidences of violation during the period of 1998 to 2002, so the fact the exceedances occurred was not at issue. The district court rejected the SSM defense, finding that it applied only to instances where the state brought an action, and did not apply to a citizen enforcement action.

The Eleventh Circuit reversed, however, and upheld the company’s SSM defense, and the Sierra Club was out of court. The circuit court found that the defense applies to any enforcement action, whether initiated by the state or not. Now that the final rule is in place, which eliminates all defenses for SSM scenarios, decisions like this one from the Eleventh Circuit will go the other way and the Sierra Club will have a lot of large paydays.

At the end of the day, the final rule will do little more than open the door to strict liability private lawsuits for money damages in cases where the operator has no control over the situation. The Eleventh Circuit hit the nail on the head when it recognized in Georgia Power that “[u]ltimately, it appears that Sierra Club’s real complaint is not with Georgia Power’s permit compliance, but rather with the Georgia SSM rule itself.”

The Sierra Club took that as a call to action to implement its “sue and settle” attack to get rid of not only Georgia’s SSM rule, but also 35 other states’ SSM rules. Today’s rule is the upshot of the Sierra Club’s efforts in which the EPA was complicit. In that regard, this final rule is more about the Sierra Club and other nongovernmental organizations' long-term financial planning than it is about environmental protection, environmental justice or public health. Affordable and available electricity and products are fundamental tenants of environmental justice. This final rule will end up creating scarcity, adding unjustified costs, and, in light of its extension to malfunctions, will serve as an even bigger profit center for the Sierra Club and other NGOs than the proposed rule.

"Nothing but Nonsense in New EPA Rule on Emissions," by Michael L. Krancer, Margaret Anne Hill, and Frank L. Tamulonis III was published in the June 4, 2015, edition of Law360. Reprinted with permission. To read the article online, please click here.