D.C. Circuit to Hear Consolidated Challenges to EPA's New Startup-Shutdown-Malfunction Rule

On May 22, 2015, the U.S. Environmental Protection Agency ("EPA") issued a final rule requiring 36 states to revise their State Implementation Plans ("SIPs") under the Clean Air Act ("CAA"). See 80 Fed. Reg. 33839 (June 12, 2015).

The rule requires states to revise their plans to disallow "affirmative defense" provisions, which protect industrial facilities from civil penalties for violations of the National Ambient Air Quality Standards ("NAAQS") that occur during periods of equipment startup, shutdown, or malfunction ("SSM").

The rule was issued in response to a 2011 Sierra Club petition. EPA promulgated the rule under § 110(k)(5) of the CAA, which provides a mechanism, commonly referred to as a "SIP call," allowing EPA to require states to revise SIPs that the Administrator of the EPA finds to be "substantially inadequate to meet CAA requirements." The new rule gives states until November 22, 2016 to revise their SIPs.

The rule is a change of course in the long-standing EPA practice of allowing SIPs to include affirmative defenses, or provide automatic exemptions from emissions limits, during SSM periods. EPA stated that the decision to eliminate SSM affirmative defenses from SIPs arose out of the April 2014 case NRDC v. EPA, 749 F.3d 1055 (D.C. Cir. 2014). There, the U.S. Court of Appeals for the District of Columbia ruled that EPA lacked authority under the CAA to grant affirmative defenses to manufacturers of Portland cement that exceeded emissions limits during SSM periods. The court held that such affirmative defenses must be heard at the judicial level, and thus EPA exceeded its statutory authority by including affirmative defense provisions in the regulations. Following the decision in NRDC, EPA adopted the position that the CAA does not permit the agency to include affirmative defense provisions in its regulations. In this most recent rule, the EPA extended its position to SIPs.

Not surprisingly, the rule was met with legal challenges by both states and industry. On August 11, 2015, 17 states filed a petition for review of EPA's SSM rule in the D.C. Circuit Court of Appeals, arguing that the rule impermissibly usurps the authority that the CAA gives states to develop SIPs. Thus, the D.C. Circuit must decide whether to agree with EPA that the reasoning in NRDC extends to affirmative defenses in SIPs, or to limitNRDC's reach to EPA regulations because states have broader authority in enacting SIPs than EPA does in promulgating regulations.

Separately, on June 16, 2015, Texas and several industrial companies and organizations located in Texas challenged the SSM rule in the U.S. Court of Appeals for the Fifth Circuit. On July 17, 2015, EPA objected to the jurisdiction of the Fifth Circuit to hear the case and requested that the court dismiss the case or, in the alternative, transfer it to the D.C. Circuit. In support of its argument, EPA pointed to a provision of the CAA requiring that petitions for review of "nationally applicable" agency action be filed in the D.C. Circuit.See 42 U.S.C. § 7607(b).

In response, petitioners argued that the Fifth Circuit was the appropriate forum because petitioners presented a "narrow challenge" to only those portions of the rule that applied to Texas and regulated entities in Texas. EPA countered that petitioners mischaracterized the issue: "The fact that EPA's national action may apply to individual states, or individual petitioners within those states, differently based on state-specific circumstances is not determinative."

The Fifth Circuit agreed with EPA and, on August 28, 2015, transferred the Texas case to the D.C. Circuit. Petitioners then requested that the D.C. Circuit send their claims back to the Fifth Circuit, because, according to petitioners, the claims they present are unique to Texas. On October 27, 2015, the D.C. Circuit denied petitioners' motion, ruling that "Texas petitioners have demonstrated no need to depart from the court's usual practice of consolidating 'all petitions for review of agency orders entered in the same administrative proceeding.'"

D.C. Circuit Denies Petitions for Emergency Stay of Clean Power Plan  

In yet another challenge to the Clean Power Plan, the United States Court of Appeals for the District of Columbia again ruled in favor of EPA by denying petitions for an emergency stay of the Plan's deadlines. In re: State of West Virginia, et al., No. 15-1277 consolidated with No. 15-1284. This decision comes on the heels of the D.C. Circuit's recent dismissals of Murray Energy and a group of states' challenges to EPA's legal authority to promulgate the Clean Power Plan, as discussed in the Summer 2015 issue of The Climate Report.

A large coal company and 15 states ("petitioners") brought emergency petitions on August 13, 2015, 10 days after EPA finalized the Clean Power Plan and several weeks before the Plan's publication in the Federal Register on October 23, 2015.

In support of their petitions, petitioners asserted that because the Clean Power Plan was final, the matter was ripe for review, notwithstanding the fact that it had not yet been published in the Federal Register. Petitioners argued that the final rule exceeded EPA's legal authority, in part because coal-fueled power plants were sources already regulated under Section 112 of the Clean Air Act, but EPA impermissibly was attempting to regulate them simultaneously under Section 111(d) of the Clean Air Act.

Petitioners further argued that, absent a stay, they faced irreparable harm. They contended that it could have been months before the final rule was published in theFederal Register, while the deadlines for submission of State Plans under the Clean Power Plan—September 6, 2016 and September 6, 2018—remained firm. Petitioners explained that their primary concern was the significant time and resources they would have to expend, beginning immediately, in order to comply with the Plan's strict deadlines, without first being able to challenge the final rule.

In response, EPA countered that the All Writs Act, 28 U.S.C. § 1651(a), remained unavailable to petitioners and that the court lacked jurisdiction because the Clean Air Act prescribes a particular time period (60 days following publication in the Federal Register) and a particular procedural mechanism (a petition for review) for challenging final rules. Additionally, EPA argued that petitioners failed to demonstrate irreparable harm because the compliance deadlines were still far off and petitioners would not be injured by waiting until publication of the final rule to challenge it.

On September 9, 2015, the D.C. Circuit issued a per curiam decision denying petitioners' applications for an emergency stay of the Plan's deadlines:  

[I]t is ORDERED that the petitions be denied because petitioners have not satisfied the stringent standards that apply to petitions for extraordinary writs that seek to stay agency action. See Reynolds Metals Co. v. FERC, 777 F.2d 760, 762-63 (D.C. Cir. 1985); Washington Metro. Area Transit Comm'n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977).

The cases cited by the court, Reynolds and Washington Metro, set forth the factors the D.C. Circuit considers when ruling on an emergency stay. Both cases emphasize the requirement that irreparable injury must be likely to occur for the stay to be granted. Although not expressly stated in the decision, the references to Reynolds and Washington Metro suggest that the D.C. Circuit agreed with EPA that petitioners did not demonstrate irreparable harm sufficient for an emergency stay of the final rule's deadlines.

Upon publication of the Clean Power Plan in the Federal Register on October 23, dozens of states and industry groups, including each of the states that sought an emergency stay before the Plan was published, launched petitions challenging the final rule. On October 26, the D.C. Circuit consolidated those challenges. On November 2, the coal company, which also previously sought an emergency stay, moved to intervene in support of the petitions in the consolidated suit.

Kansas and Nebraska Challenge EPA's Vehicular Emissions Model  

In October 2014, U.S. EPA released and published the MOVES2014 Motor Vehicle Emissions Model, an emissions model that states must use to craft future State Implementation Plans ("SIPs") and, starting in October 2016, to demonstrate that their transportation projects conform to their SIPs. See 79 Fed. Reg. 60343 (Oct. 7, 2014). In December 2014, the states of Kansas and Nebraska, and two environmental organizations, petitioned the United States Court of Appeals for the District of Columbia to strike down the model on procedural and substantive grounds. State of Kansas et al. v. Environmental Protection Agency et al., No. 14-1268.

Petitioners argued that EPA's promulgation of the model was procedurally flawed and violated the Administrative Procedures Act ("APA") because EPA implemented the model without providing the public notice or an opportunity for interested parties to comment. On the merits, petitioners alleged that the model was unsound because it was based, in part, on a significantly flawed fuel effects study. According to petitioners, the study's conclusions regarding increased emissions generated by ethanol use were spurious because, among other things, the study's test fuels contained more toxic components than actual market fuels.

EPA's response focused on the deficiencies in the states' and organizations' efforts to establish standing. EPA argued that the neither the organizations nor the states had demonstrated standing because none of their standing theories established that the model will cause them a concrete and imminent injury. According to EPA, the two states had no current or imminent legally binding obligation to use the model, and that any future obligation, air-quality harm, or negative economic impact was speculative. EPA also argued that the D.C. Circuit lacked jurisdiction to review the model because release of the model did not constitute final agency action and that, in any event, the notice-and-comment requirements did not apply to the model because it was a "nonbinding technical tool."

On October 14, 2015, petitioners filed their reply brief. Petitioners addressed EPA's arguments regarding standing, arguing that, on October 1, 2015, EPA finalized new ozone National Ambient Air Quality Standards that would require the states to use the model in their SIPs. Petitioners also took issue with EPA's characterization of the model as "non-binding policy," noting that the official release for the model contained language indicating that states' use of the model was mandatory.

Oral argument has not yet been scheduled in the matter.