Evaluating Legal Challenges to EPA’s PSD Regulations

Gregory E. Wannier
Deputy Director

As discussed previously, implementation of EPA’s greenhouse gas regulations necessitates a large program of regulation under the Clean Air Act’s Prevention of Significant Deterioration (PSD) program.  EPA has attempted to give states authority to implement these changes, but not all parties have been compliant.  A series of EPA rules passed in December 2010 found that certain State Implementation Plans (SIPs) were inadequate for addressing greenhouse gas permitting requirements and established temporary federal permitting programs to cover those regions.  Unsurprisingly, these determinations have been challenged in the DC Circuit.  According to the most complete statement of issues in the case, filed March 17, 2011, the challenges focus on four major questions:

  1. Whether EPA violated the CAA by not allowing three years for states to pass appropriate SIPs in accordance with EPA’s past regulations;
  2. Whether EPA used the wrong provision in the CAA to issue its SIP call;
  3. Whether EPA incorrectly assumed that PSD was self-executing such that outdated SIPs could not legally issue permits for GHG emissions starting on January 2, 2011; and
  4. Whether, even if EPA acted lawfully above, it invalidly declined to give a reasonable period of time to revise SIPs using notice and comment procedures.

The first two contentions implicate CAA’s structure for dealing with SIP revisions.  The first contention, that EPA was required to give three years for states to amend their SIPs, focuses on a prior EPA regulation, 40 CFR 51.166(a)(6):

“Any state required to revise its implementation plan by reason of an amendment to this section, including any amendment adopted simultaneously with this paragraph(a)(6)(i), shall adopt and submit such plan revision to the Administrator for approval no later than three years after such amendment is published in the Federal Register.”

However, this regulation is based on CAA §110(a)(1), which requires that states submit SIPs “within 3 years (or such shorter period as the Administrator may prescribe).”  As such, it only applies if the second contention, that EPA should have asked for SIP revisions under CAA §110(a) rather than correcting SIP inadequacies under CAA §110(k)(5), is true.  Subsection (a) regulates the promulgation and revision of existing SIPs, whereas Subsection (k) allows the EPA to ask states to remedy SIP plans that are “substantially inadequate.”  Thus, the central question here is whether EPA actively changed the required coverage of states’ SIPs (which would necessitate “revisions”), specifically through its Tailoring Rule, or whether states’ SIPs were already required to automatically cover new regulated sources, (making their old SIP provisions “substantially inadequate”).

EPA argues that the failure it took issue with on December 13 was not the failure specifically to regulate GHG emissions, but rather the failure to include provisions that automatically update SIPs to include newly regulated pollutants (such as GHGs).   This latter failure dates back to December 31, 2002, when EPA most recently reiterated its requirement that states automatically include new pollutants in their SIPs.  States would then have had eight years to revise their SIPs, and their failure to do so (thereby failing to cover GHG permitting requirements) would be a long-term inadequacy that could be remedied under Subsection (k).

EPA also points out that even if revisions should have been requested under Subsection (a), the 3-year statutory guideline is not mandatory upon EPA (it may set a shorter time period).  This means that EPA is entitled to set whatever limits it chooses; and in this case other regulations, which “automatically apply PSD to newly regulated pollutants” (see 75 Fed. Reg. 77,708), suggest that EPA never intended its own 3-year protection to apply to mere updates to PSD pollutant lists.

The third claim, that EPA incorrectly interpreted PSD as applying automatically (as opposed to being a voluntary EPA decree), seeks to establish that EPA actively added new SIP requirements via its GHG regulations, which would necessitate that states revise their SIPs before GHG permitting requirements could be put in place.  EPA instead characterizes the process as automatically resulting from EPA’s proper performance of mandatory statutory duties.

EPA’s argument here points to mandates established by the Clean Air Act, as explained in the landmark Supreme Court case Massachusetts v. EPA.  That case made clear that EPA could not decline to issue an endangerment finding for policy reasons, and thereby forced EPA to determine whether or not GHGs endangered public health and welfare.  It further held that “If EPA makes a finding of endangerment, the Clean Air Act requires the agency to regulate emissions of the deleterious pollutant from new motor vehicles” – a conclusion that is confirmed in CAA §209(a).  According to the Johnson interpretive Memo, or Timing Rule, this led automatically to PSD requirements, which state SIPs were inadequately prepared to implement.  Thus, assuming EPA’s Timing Rule holds up in the DC Circuit, EPA has a sound chain of mandatory activities leading directly to the imposition of PSD requirements.

Petitioners have responded in comments that they view the Tailoring Rule as being the source of the binding requirements for GHG-based permitting under PSD.  However, this misstates the purpose of the Tailoring Rule, which reduced, rather than introduced, the applicability of GHG permitting activities.

The petitioners’ final claim, that even if EPA was legally within its rights to impose its Federal Implementation Plan it did not grant sufficient time for states to revise their SIPs, may be the strongest claim of the group.  The statutory structure appears to technically warrant every EPA action taken so far; but the short turnaround between the May 2010 Tailpipe Rule and the January 2011 implementation date could conceivably be seen as providing an unreasonably short amount of time for states to respond.

EPA argues that most states (other than Texas) volunteered to correct their SIPs before EPA had required; but as EPA would have still implemented federal licensing procedures, this looks like a Hobson’s choice for states: accept EPA permitting until they issue an acceptable state plan.  The stronger EPA argument is that the large majority of states were able to establish satisfactory SIPs by January 2 (EPA’s actions have only focused on 13 jurisdictions).

Resolution of these issues may well be put on hold pending resolution of challenges to EPA’s underlying GHG regulations.  However, if those regulations are upheld, then the nature of EPA’s implementation process may well face further scrutiny here.

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