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First Quarter 2014
Inside This Issue
Louisville Metro Air Pollution Control District Reorganizes, p. 1
EPA Proposes and Approves Multiple Indiana SIP Revisions, p. 3
EPA and State Agencies Agree on Commitments and Best Practices for Addressing State Implementation Plan Backlog, p. 4
U.S. Supreme Court Upholds Cross-State Air Pollution Rule, p. 5
Indiana, Kentucky and Other States Respond to Petition Asking for Expansion of the Ozone Transport Region, p. 6
Utility Mercury Air Toxics Rule Upheld by D.C. Circuit Court of Appeals, p. 6
Kentucky Energy and Environment Cabinet Submits Comments on Proposed Standards for Greenhouse Gas Emissions from New Fossil Fuel-Fired Power Plants, p. 8
Kentucky General Assembly Enacts Legislation to Guide State Development of Greenhouse Gas Standards for Existing Fossil Fuel-Fired Power Plants, p. 8
Kentucky Federal Court Rules That Common Law Tort Claims Are Not Preempted by the Clean Air Act, p. 9
Michigan Federal Court Rules that EPA Improperly Second-Guessed Preconstruction Emission Projections in New Source Review Enforcement Action, p. 9
Louisville Metro Air Pollution Control District Reorganizes
By Bradley E. Dillon, Louisville Office
The Louisville Metro Air Pollution Control District (LMAPCD) has announced changes to its structure and personnel to address issues identified in audits of its Air Quality Monitoring Program conducted by the EPA and Kentucky Division for Air Quality (KDAQ) as well as two independent audits of its operations.
As reported in the fourth quarter 2013 Air Quality Letter, Mayor Fischer appointed Keith Talley, Sr. as the Director of the LMAPCD on Jan. 17, 2014. The restructuring has created a new position, Assistant Director, to which Rachel Hamilton has been appointed. Ms. Hamilton, an attorney who was in private practice before joining the LMAPCD about five years ago, will report to Mr. Talley. In addition to Ms. Hamilton’s appointment, other staff moves include: Billy DeWitt has been placed in charge of air monitoring; Michelle King has taken a new position as Executive Administrator of Strategic Planning and Administration; and Matt King, a former permitting supervisor, has been promoted to Engineering Manager in charge of Enforcement and Compliance. Paul Aud continues as the Air Pollution Control Officer.
After the restructuring, Terri Phelps, the head of Enforcement, will now report to Mr. King, who in turn will report to Ms. Hamilton. Mr. Talley stated at the April LMAPCD Board meeting that the new structure will allow enforcement personnel to work with compliance officers in addressing noncompliances and to assure more timely notices of violation. While the reorganization has not been completed, it is anticipated that there will be a reduction in staffing. The former Environmental Programs Division, which made recommendations on such issues as climate change, urban heat, and land use, is now part of the Strategic Planning and Administration Section. The LMAPCD hopes that the restructuring changes will allow it to focus on timely issuance and reissuance of air quality permits, effective and timely enforcement and continuing involvement with sustainability issues through cooperation with other Metro government agencies.
KDAQ Permitting Update
By Kelly D. Bartley, Lexington Office
The Kentucky Division for Air Quality (KDAQ) reports that during the first quarter of calendar year 2014, the agency issued 117 final permitting determinations, including: 10 initial, renewed or significant revisions to conditional major or conditional major/synthetic minor operating permits; four renewed Title V permits; and two Title V permit significant revisions.
IDEM Permitting Update
By Jennifer K. Thompson, Indianapolis Office
The Indiana Department of Environmental Management (IDEM) reports that it issued the following number of permit determinations for the following specified permit categories in the first quarter of 2014: 88 Title V permitting determinations; 54 federally enforceable state operating permitting determinations; 41 minor source operating permitting determinations; 40 source specific operating agreement determinations; and 40 registration determinations.
IDEM also received the following number of permit applications during this same time frame: 73 Title V Permit Applications; 52 Federally Enforceable Operating Permit Applications; 35 Minor Source Operating Permit Applications; 33 Source Specific Operating Permit Applications; 33 Registration Applications; and 33 applications not yet classified.
IDEM’s Permitting Branch is currently operating with 39 permit writers and has four vacant permit writer positions, six section chiefs, 11 administrative personnel, two environmental specialists, and one branch chief.
LMAPCD Permitting Update
By Bradley E. Dillon, Lexington Office
As discussed elsewhere in this issue of the Air Quality Letter, the LMAPCD restructuring has resulted in some changes to the permitting section of the agency. Matt King, who was previously a supervisor of one section of permitting, is now in a supervisory role over the two permit sections and the compliance section. As before, Eva Addison will head one of the permit sections, while Karen Thorne will now head the other. It is hoped that by combining the permitting and compliance functions, compliance officers will better understand the permitting obligations of the facilities they are inspecting, and better assist facilities to understand and comply with the terms of their permits.
Recent Indiana Rulemaking Actions
By Jennifer K. Thompson, Indianapolis Office
The Indiana Environmental Rules Board met on March 12, 2014, and passed the following air rulemaking actions with general application:
Global Warming Potentials Table Update Emergency Rule, LSA #14-96(E), which updates the CO2e equivalent emissions calculations in 326 IAC 2-2-1(zz)(2)(A) and 326 IAC 2-7-1(40)(B)(i) with the 40 CFR Part 98, Subpart A, Table A-1 published in the Federal Register on Nov. 29, 2013. Effective March 13, 2014.
Sulfur Dioxide Designations Emergency Rule, LSA #14-95(E), (first adopted October 2013 as LSA #14-95(E)), which temporarily amends 326 IAC 1-4-15, 326 IAC 1-4-50, 326 IAC 1-4-56, 326 IAC 1-4-64, and 326 IAC 1-4-85 to add the federal nonattainment designations for the 2010 Sulfur Dioxide (SO2) Primary Standard for Veale Township in Daviess County; Center Township, Perry Township, and Wayne Township in Marion County; Clay Township and Washington Township in Morgan County; Washington Township in Pike County; and Fayette Township and Harrison Township in Vigo County. Effective March 13, 2014.
Expedited SO2 Designation Rule, LSA # 13-502, which adds the federal designations for the 2010 SO2 Primary Standard. To become effective 30 days after filing with the Secretary of State.
The following rulemakings previously adopted by the Indiana Environmental Rules Board also became effective in the first quarter of 2014:
Sewage Sludge Incineration and Carbon Monoxide Monitoring Rule, LSA #13-215, which amends 326 IAC 3-5-1(b)(6) to allow a continuous emissions monitoring system (CEMS) for carbon monoxide (CO) as an alternative to the total hydrocarbon (THC) monitoring. Effective Jan. 15, 2014.
Agency Correction, LSA #14-18(AC), corrects typographical, clerical, or spelling errors in the following rules: 326 IAC 20-13.1-3(c)(3); 326 IAC 20-13.1-6(a); 326 IAC 20-13.1-10(f); and 326 IAC 20-13.1-14(e)(5). Effective Feb. 28, 2014.
EPA Proposes and Approves Multiple Indiana SIP Revisions
By Kate E. Beatty, Indianapolis Office
On Jan. 17, 2014, EPA, by final rule, approved Indiana’s revisions to two provisions applicable to Part 70 sources at 326 IAC 2-7-10.5(b) and 326 IAC 2-7-10.5(k). (79 Federal Register 3120). These provisions authorize the state to incorporate terms from federal consent decrees or federal district court orders into construction permits and to provide a public notice requirement for such actions. EPA initially proposed to approve these revisions on March 15, 2013; however, due to adverse commence received, EPA withdrew the direct final rule to address the comments. The proposed approval remained in effect. The final rule was effective on Feb. 18, 2014.
On Feb. 7, 2014, EPA published a proposed rule seeking to approve Indiana’s State Implementation Plan (SIP) submission addressing the state board requirements under Clean Air Act Section 110(a)(2)(E)(ii) for the 2006 fine particulate matter (PM2.5) National Ambient Air Quality Standard (NAAQS). (79 Federal Register 7410). EPA approved by final rule on Dec. 24, 2013, Indiana’s SIP submission which addressed the state board requirement provisions that were incorporated to comply with Section 128 of the Clean Air Act. (78 Federal Register 77599). The two requirements were: (1) any board or body that approves permits or enforcement actions must have a least a majority of individuals who represent the public interest and do not receive a significant portion of their income from the persons or entities subject to permits or enforcement actions; and (2) any potential conflict of interest by members of the board or body must be adequately disclosed. IDEM requested in a May 22, 2013, SIP submission that EPA’s approval of its state board provisions satisfy any applicable infrastructure SIP requirements for the 2006 PM2.5 NAAQS. In response to IDEM’s request, EPA proposes that Indiana has met the requirements under Section 110(a)(2)(E)(ii) for the 2006 PM2.5 NAAQS. The final rule was effective on Jan. 23, 2014.
On Feb. 25, 2014, EPA, by direct final rule, approved the 1997 8-hour ozone maintenance air quality SIP for Allen, Greene, Vanderburgh, Warrick, and Vigo counties to replace the onroad emissions inventories and motor vehicle emissions budgets (budgets) with inventories and budgets developed by using EPA’s Motor Vehicle Emissions Simulator (MOVES) 2010a. (79 Federal Register 10385). The direct final rule was effective April 28, 2014.
The MOVES 2010a emissions model was announced in March 2010 and is EPA’s tool for estimating highway emissions. Updating these counties’ budgets using the MOVES 2010a emissions model will allow the counties to continue to show conformity to the SIP in plans, transportation improvement programs, and projects.
Additionally, on March 19, 2014, EPA published a direct final rule approving the request to revise the 1997 annual PM2.5 maintenance air quality SIP for the Evansville/Southwestern Indiana Area to replace the budgets with the MOVES emission model. (79 Federal Register 15224). The direct final rule will be effective May 19, 2014.
EPA and State Agencies Agree on Commitments and Best Practices for Addressing State Implementation Plan Backlog
By Jennifer K. Thompson, Indianapolis Office
Over the last year the National Association of Clean Air Agencies, the Environmental Council of the States, and the EPA State Implementation Plan Reform Workgroup (SRWG) have analyzed and discussed how to address EPA’s State Implementation Plan (SIP) backlog and how to keep it from recurring. The SRWG studied the entire process of submitting and reviewing SIPs, as well as the SIP tracking system which provided both EPA and the state air agencies with a better understanding of the issues and challenges each face. As a result, the SRWG has developed commitments and best practices to eliminate the current SIP backlog and to prevent the backlog from recurring.
Pursuant to the Clean Air Act, EPA is required to act on SIP submittals within 12 months of a completeness determination or its equivalent. A backlog is created when SIPs are submitted by states and are found to be complete, or are deemed complete, for more than 12 months, but are not acted on by EPA. To clear the SIP backlog and process new SIP submittals in a timely manner, the SRWG recommends the following commitments and best practices.
Clear the existing SIP backlog (as of Oct. 1, 2013), by the end of 2017, while managing the review of all other SIPs consistent with Clean Air Act deadlines.
EPA Regions to adopt four-year management plans to accomplish the commitments listed in paragraph one above. Each plan shall include processes for:
Collaboratively prioritizing each SIP and/or type of SIP with the state air agency along with a commitment to process the higher-priority SIPs first;
Consistent (scheduled conference calls), collaborative communication between the Region and the states;
Routine reports on the status of the SIP; and
Cooperative, early identification of deficiencies in the state’s SIP submittals.
Identify and address impediments to timely processing of SIPs uniformly across all regions, utilizing EPA’s National SIP Issues Management Dashboard, or other such tools.
Detailed tracking the progress of SIPs.
Ensure SIP consistency and elevation processes are transparent and inclusive with the states.
The SRWG will reconvene annually to review EPA’s progress in clearing the SIP backlog.
Open communication to prioritize EPA actions on SIPs.
Understanding of states’ administrative procedures for adoption of rules and regulations for submission of SIPs to ensure timely comment and input by EPA.
Sharing of early drafts (prior to public comment period) of SIPs with ample time for review to identify approvability, key policy and legal concerns early in the process.
Openly discuss substantive approvability issues and notice of intended action by EPA as early in the SIP review process as possible.
Establish process to elevate issues that cannot be resolved at staff levels.
Early collaboration on multi-state and multi-region areas.
Communicate regularly on status of SIPs.
EPA supports the commitments and best practices developed by the SRWG as a way to keep the SIP backlog low. IDEM staff have advised that EPA Region 5 has already agreed to prioritize National Ambient Air Quality Redesignations, and IDEM even has a commitment from Region V to eliminate the backlog well before the 2017 deadline.
A copy of the SRWG Commitments and Best Practices for Addressing the SIP Backlog as well as other information can be found at: http://4cleanair.org .
Update on Changes to KDAQ Regulations
No new KDAQ regulations or amendments to existing KDAQ regulations have been proposed or approved since the last issue of the Air Quality Letter.
Update on Changes to LMAPCD Regulations
There have been no proposed revisions or amendments to LMAPCD regulations since the last issue of the Air Quality Letter.
U.S. Supreme Court Upholds Cross-State Air Pollution Rule
By Kate E. Beatty, Indianapolis Office
On April 29, 2014, the U. S. Supreme Court, in a 6-2 ruling, reversed an August 2012 ruling by the U.S. Court of Appeals for the D.C. Circuit, reinstating the Cross-State Air Pollution Rule (CSAPR or the Transport Rule).
The Transport Rule was developed to replace EPA’s 2005 Clean Air Interstate Rule (CAIR) in response to a 2008 court decision that found CAIR to be flawed. The Transport Rule, finalized in July 2011, requires 28 states in the eastern half of the United States, including Indiana and Kentucky, to reduce annual sulfur dioxide (SO2) emissions, annual nitrogen oxide (NOX) emissions and/or seasonal NOX emissions to assist in attaining the 1997 ozone and fine particle and 2006 fine particle National Ambient Air Quality Standards (NAAQS). The Transport Rule also requires a reduction of emissions from power plants, among other sources, that cross state lines and contribute to ground-level ozone and fine particle pollution in other states. EPA promulgated Federal Implementation Plans (FIPs) for each of the states covered by the rule to assure emissions reductions.
In August 2012, the U.S. Court of Appeals for the D.C. Circuit invalidated the Transport Rule for two main reasons: (1) the Transport Rule could require upwind states to reduce emissions by more than their own significant contributions to a downwind state’s nonattainment; and (2) EPA did not provide states with the opportunity to implement the required emission reductions.
The U.S. Supreme Court granted certiorari “to decide whether the D.C. Circuit had accurately construed the limits that the [Clean Air Act] places on EPA’s authority.” The majority opinion in EPA v. EME Homer City Generation, L.P., Case Nos. 12-1182 and 12-1183, was written by Justice Ruth Bader Ginsburg and held that “the [Clean Air Act] does not command that States be given a second opportunity to file a [State Implementation Plan] after EPA has quantified the State’s interstate pollution obligations.” The Court further concluded that the Clean Air Act Good Neighbor Provision “does not require EPA to disregard costs and consider exclusively each upwind State’s physically proportionate responsibility for each downwind air quality problem” and that “EPA’s cost-effective allocation of emissions reductions among upwind States”…“is a permissible, workable, and equitable interpretation of the Good Neighbor Provision.”
Justice Antonin Scalia, writing for the dissent and joined by Justice Clarence Thomas, summarized the majority’s holding as “approv[ing] the undemocratic revision of the Clean Air Act.” Justice Scalia agreed with the D.C. Circuit that EPA violated the law in both the “crafting” and “implementation” of the Transport Rule. Furthermore, he agreed that EPA should have given states a chance to address their contributions to interstate pollution before imposing FIPs.
In light of this decision, CSAPR may now be revived in lieu of CAIR. However, CAIR remains in effect until further review by the Court of Appeals on remand. EPA advises that “no immediate action from States or affected sources is expected.” Additionally, litigation concerning multiple aspects of CSAPR implementation which was put on hold pending a decision, may now resume. It is expected that EPA also will revise the implementation dates of CSAPR which lapsed due to litigation of the rule.
Indiana, Kentucky and Other States Respond to Petition Asking for Expansion of the Ozone Transport Region
By Kelly D. Bartley, Lexington Office
As reported in the last issue of the Air Quality Letter, in December 2013, a group of northeastern states belonging to the Ozone Transport Region (OTR) established under Section 184 of the Clean Air Act petitioned EPA to expand the OTR to include nine additional, upwind states, including Indiana and Kentucky. (The original Petition was signed by eight states: Connecticut, Delaware, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. An Amended Petition was filed one day later adding Pennsylvania as a Petitioner.) The Petition, which was filed pursuant to Section 176A of the Clean Air Act, alleges that EPA-sanctioned air quality modeling shows that interstate transport of ozone and ozone precursor pollutants from the nine upwind states contribute significantly to OTR violations of the 2008 National Ambient Air Quality Standards (NAAQS) for ozone. Petitioners argue that addition of the states to the OTR is necessary to eliminate those contributions. In addition to Indiana and Kentucky, the Petition targets Illinois, Michigan, North Carolina, Ohio, Tennessee, Virginia and West Virginia.
By two-page letter dated Feb. 14, 2014, the nine targeted states collectively requested that EPA deny the Petition. The states assert that: (1) implementation of OTR VOC emissions reduction requirements would not lower ozone concentrations in the petitioning states by any substantial amount; (2) air quality analyses relied upon by the petitioning states are outdated and does not reflect current and expected future emissions and air quality; and (3) the Petition inadequately describes the effectiveness of the target states’ air pollution control programs and the emission rates. Pointing to the discretionary nature of EPA’s action on the Petition, the states further argue that a grant of the petition is especially unwarranted since interstate transport issues are being addressed in other ways and requested that “if EPA chooses to move forward with anything other than a denial of the petition” that they be informed “at the earliest date possible.”
EPA has until June 2015 to approve or disapprove the petition. If EPA were to approve the petition as submitted, Indiana, Kentucky and the other targeted states would become subject to more stringent ozone control requirements as well as more stringent new source review permitting requirements for certain sources of VOC emissions. More details on these requirements can be found in the fourth quarter 2013 issue of the Air Quality Letter.
Utility Mercury and Air Toxics Rule Upheld by D.C. Circuit Court of Appeals
By Larry J. Kane, Indianapolis Office
On April 15, 2014, the U.S. Court of Appeals for the D.C. Circuit, in a 2-1 decision, upheld EPA’s Mercury and Air Toxics Rule over the challenges of numerous petitioners. White Stallion Energy Center, LLC v. EPA, Case No. 12-1100. This rule, commonly referred to as the MATS Rule, was established by EPA under Section 112 of the Clean Air Act to control emissions of mercury and other hazardous air pollutants (HAPs) from existing electric utility steam generating units (EGUs).
Development of the highly controversial MATS Rule, which was adopted by EPA in 2012, at 77 Federal Register 9304, had followed a checkered path. The rule was adopted pursuant to Section 112(n)(a)(1)(A) of the Clean Air Act, which required EPA to perform a study of the public health hazards “reasonably anticipated” to result from HAP emissions from EGUs after imposition of other requirements of the Clean Air Act. The statute went on to require EPA to regulate EGUs under “this section” if EPA were to find from the results of this study (the “Utility Study”) that such regulation of EGUs is “appropriate and necessary.”
EPA initially issued a finding in December 2000, based on the Utility Study, that regulation of HAP emissions from EGUs is appropriate and necessary, since EGUs were said to be the largest source of mercury emissions in the United States, which posed significant public health risks, particularly to women of childbearing age who consume fish contaminated from atmospheric deposition of mercury resulting from such emissions. In 2005, however, EPA reversed the 2000 Finding, concluding that regulation of HAP emissions from EGUs under Section 112 was not appropriate, based on a reinterpretation of Section 112(n)(a)(1)(A). Instead, EPA developed and issued a rule controlling mercury emissions from EGUs under Section 111 of the Clean Air Act known as the Clean Air Mercury Reduction rule (CAMR). The CAMR rule was subsequently vacated by the D.C. Circuit, along with the 2005 decision reversing the 2000 Finding, thus setting the stage for EPA’s adoption of the MATS rule.
The primary challenges to the MATS rule, posed by consolidated petitions for review from state, industry and labor union petitioners (the “SIL” petitioners), were that EPA erred in its interpretation of the “appropriate and necessary” threshold finding required for regulation under Section 112(n)(a)(1)(A). In addressing these challenges, the D.C. Circuit followed a traditional Chevron analysis and ultimately concluded that EPA’s interpretations were reasonable and permissible. Perhaps the two most prominent interpretative issues raised by the SIL petitioners involved EPA’s reliance upon the Section 112 delisting criteria in evaluating the public health hazards of EGU HAP emissions and EPA’s exclusion of consideration of costs of regulation from its assessment of whether regulation was “appropriate and necessary.”
Use of Delisting Criteria.
Petitioners contended that EPA “wrongly conflated the delisting criteria with the ‘appropriate and necessary’ determination,” while EPA explained that it employed the delisting criteria to inform its interpretation of “hazards to public health,” a term not defined in the Clean Air Act. The court concurred with EPA, concluding that the agency reasonably relied on the delisting criteria in interpreting the undefined term.
Cost of Regulation.
Based on the relative length of the discussion of this issue in the court’s opinion, it can be inferred that the EPA’s exclusion of consideration of the costs of compliance with regulation of EGU emissions was the most hotly contested issue of the case. Concurring again with EPA, the court observed that a facial review of Section 112(n)(1)(A) “neither requires EPA to consider costs nor prohibits EPA from doing so.” The court further noted that the dictionary meaning of “appropriate” is inherently “open-ended” and “ambiguous” and does not mention costs. Moreover, Section 112 was found to mention costs explicitly where Congress intended that they be considered by EPA, contrasting Section 112(n)(1)(A), which did not mention costs of regulation, with the following subparagraph, Section 112(n)(1)(B), involving the Mercury Study requirement, which did contain an explicit requirement to consider costs. Consequently, the court found that EPA’s position was permissible. A lengthy dissenting opinion on the exclusion of consideration of costs of compliance on the determination of the appropriateness of regulation was filed by one of the judges.
Interestingly, the court appears to have reached inconsistent interpretations regarding the import of differences between Sections 112(n)(1)(A) and (B) concerning references to: (1) the costs of regulation of HAPs by EGUs and (2) environmental impacts of HAP emissions from EGUs. As mentioned above, the court viewed the absence of a reference to the costs of regulation in Section 112(n)(1)(A), as compared to the express inclusion of such cost consideration in Section 112(n)(1)(B), to be indicative of Congressional intent for different treatment of costs.
The court similarly dispatched four other, lesser issues raised by the SIL petitioners. Turning to additional issues raised only by industry petitioners, the court methodically rebuffed all challenges. These industry issues included at least two contentions that EPA had selectively used industry data in setting MACT floor limits, a request for a subcategory for circulating fluidized bed EGUs, and a request for a one year extension of compliance deadlines for public utilities.
Environmental petitioners fared no better, as the court rejected two challenges to methods of compliance demonstration, finding again that EPA’s interpretations of statutory requirements were both reasonable and permissible. The final petition addressed by the court was that of an oil and gas energy development company contending that EPA should have imposed stricter emission standards that would have required fuel switching to natural gas. Here, the court did not reach the merits, rejecting the petition for lack of standing. More specifically, the court concluded that the petitioner, whose only interest in the litigation was that of a competitor of the coal-fired utilities subject to the MATS rule, fell outside the zone of interests protected by Section 112.
Whether or not a petition for certiorari to the U.S. Supreme Court is filed, the MATS rule will be likely to continue to be a factor in influencing utilities to shutter older power plants which would not cost effectively shoulder the compliance costs of this and numerous other recent or pending environmental rules.
Standards of Performance
Kentucky Energy and Environment Cabinet Submits Comments on Proposed Standards for Greenhouse Gas Emissions from New Fossil Fuel-Fired Power Plants
By Kelly D. Bartley, Lexington Office
On April 22, 2014, the Kentucky Energy and Environment Cabinet (EEC) submitted written comments regarding EPA’s proposed Standards of Performance for Greenhouse Gas Emissions from New Stationary Sources: Electric Generating Units as published in the Jan. 8, 2014 Federal Register.
The EEC commended EPA for addressing several of the issues raised in its previous comments submitted in June 2012 regarding the previously proposed rule but expressed continued concern that “this iteration of rulemaking continues to jeopardize our state’s economy and future prosperity” by “establishing an unreasonable and unattainable emission limit for coal combustion.” In this regard, the EEC requested that EPA consider a limit of 1,700 lbsCO2 /MWh rather than the proposed range of 1,000 to 1,200 lbsCO2/MWh as the limit for coal-fired boilers. The EEC submitted that a 1,700 lbsCO2/MWh would accomplish nearly 20 percent CO2 emission reductions and is the standard being achieved by only the cleanest and most recently commissioned coal-fired units in the nation.
Consistent with previous comments, the EEC also reiterated its concern with increasing reliance on natural gas for electricity production, arguing that “substitution of natural gas for coal is not a long-term solution for climate change and potentially results in disastrous short-term consequences of decreasing state gross domestic product, rising unemployment, dramatically fluctuating prices that negatively impact consumers, increasing security risks and decreasing the standard of living for many Kentuckians.” The EEC’s complete comments can be found at www.regulations.gov at EPA Docket ID No. EPA-HQ-OAR-2013-0495.
Kentucky General Assembly Enacts Legislation to Guide Development of State Greenhouse Gas Standards for Existing Fossil Fuel-Fired Power Plants
By Jesse M. Parrish, Lexington Office
On April 2, 2014, Governor Steve Beshear signed HB 388 into law after it was passed unanimously by Kentucky General Assembly. HB 388 guides the Kentucky Energy and Environment Cabinet’s (EEC’s) development of a state plan to control carbon emissions from existing power plants. The enactment of HB 388 is in response to President Obama’s Climate Action Plan and the expected promulgation of greenhouse gas emissions standards for existing power plants under Section 111(d) of the Clean Air Act.
As part of his Climate Action Plan announced on June 25, 2013, President Obama directed EPA to develop greenhouse gas emissions standards for both new and existing fossil fuel-fired electric generating units (EGUs). As previously reported in the Air Quality Letter, on Jan. 8, 2014, EPA published proposed standards for new EGUs, and this proposal is undergoing public comment. EPA was also directed to propose standards for existing EGUs by June 1, 2014. EPA is currently developing these standards under Section 111(d) of the Clean Air Act. Section 111(d), historically, has been a seldom used provision of the Clean Air Act, but it affords EPA substantial discretion to establish emission standards in coordination with state regulatory authorities. Under Section 111(d), EPA will promulgate a guideline document that establishes environmental performance, compliance timing and other requirements. The guideline document is then used by state regulatory authorities to develop state plans that are ultimately subject to EPA’s approval. The heart of the aforementioned guideline document is the emission guideline, which is set to reflect “the application of the best system of emission reduction… that has been adequately demonstrated.” In developing the emission guideline, EPA reportedly has spent considerable time evaluating whether the emission guideline is limited to within-the-fence-line measures, such as pollution control equipment or unit-specific emissions standards, or whether EPA may rely on beyond-the-fence-line measures, such as efficiency improvements and emissions trading schemes.
In light of the uncertainty surrounding EPA’s expected proposed rule, the Kentucky General Assembly enacted HB 388 to guide the EEC’s development and implementation of a state plan. Specifically, HB 388 directs the EEC to consider, among other factors, the “consumer impacts including any disproportionate energy price increases in lower income populations,” “the economic impacts of closing the [EGU], including expected job losses,” and the “physical difficulties with or the impossibility of implementing emission reduction measures.” Specific to coal-fired EGUs, HB 388 directs the EEC to set performance standards to include efficiency and other measures that can be undertaken at each coal-fired EGU without “switching from coal to other fuels; co-firing other fuels with coal; or limiting the utilization of the [EGU].” In addition, the EEC must coordinate with the Kentucky Public Service Commission to “ensure that the plan minimizes the impacts on current and future industrial, commercial, and residential consumers; and does not threaten the affordability of Kentucky’s rate or the reliability of electricity service.”
Environmental groups opposed HB 388, arguing that the bill was premature without an EPA rulemaking proposal and would unduly limit the EEC’s flexibility to formulate a state plan. Despite this opposition, the Kentucky General Assembly unanimously passed the measure with votes of 37-0 in the Senate and 99-0 in the House. The Air Quality Letter will continue to monitor EPA’s development of greenhouse gas emission standards for existing EGUs and the EEC’s development of a corresponding state plan.
Kentucky Federal Court Rules that Common Law Tort Claims Are Not Preempted by the Clean Air Act
By Kelly D. Bartley, Lexington Office
On March 19, 2014, the U.S. District Court for the Western District of Kentucky entered a memorandum opinion in a lawsuit asserting negligence, nuisance, and trespass claims against Diageo Americas Supply, Inc. (Diageo) regarding ethanol emissions that allegedly led to “whiskey fungus” impacts on plaintiffs’ property. Merrick v. Diageo Americas Supply, Inc., Case No. 12-334. Plaintiffs argued that whiskey fungus created conditions that required costly cleaning and reduced the value of their property. Diageo moved to dismiss on the ground that the common law damage claims were preempted by the regulation of the emissions under the Clean Air Act.
The court noted the issue of preemption of state common law damage claims for emissions regulated under the Clean Air Act had not been directly addressed by the U.S. Supreme Court or the Sixth Circuit Court of Appeals. However, other courts of appeals have considered the issue, specifically the Third and Fourth Circuits, and reached differing holdings. State courts in Kentucky have also split on the issue with the Franklin Circuit Court finding against preemption of state common law and the Jefferson Circuit Court finding the Clean Air Act preempted common law damage claims for whiskey fungus conditions.
The district court sided with the Third Circuit and determined the Clean Air Act did not preempt the plaintiffs’ Kentucky common law claims under the facts of the case. The court stated that “courts have increasingly interpreted the Clean Air Act’s saving clauses to permit individuals to bring state common law tort claims against polluting entities.” Whether the Sixth Circuit will adopt the court’s reasoning is yet to be determined. The concern with the ruling is that by allowing nuisance and similar common lawsuits to go forward against sources operating under Clean Air Act emission permits, a patchwork of inconsistent compliance standards could be set across the country undermining the comprehensive regulatory structure established by the Clean Air Act.
Michigan Federal Court Rules that EPA Improperly Second-Guessed Preconstruction Emission Projections in New Source Review Enforcement Action
By Robin B. Thomerson, Lexington Office
In a case remanded from the U.S. Court of Appeals for the Sixth Circuit, the U.S. District Court for the Eastern District of Michigan has limited EPA preconstruction enforcement actions to a cursory review “of a source operator’s preconstruction projections to determine whether they comport with the letter of the law.” As reported in previous issues of the Air Quality Letter, U.S. v. DTE Energy Co., Case No. 10-13101, involves an EPA enforcement action against DTE Energy (DTE) and Detroit Edison relating to DTE’s preconstruction emission estimates that indicated a proposed facility modification would not be subject to Prevention of Significant Deterioration (PSD) review under the Clean Air Act. (See enforcement decisions summarized in the third quarter 2011 and first quarter 2013 Air Quality Letter.)
In the initial enforcement action, the district court agreed with DTE’s position that as long as pre-project requirements were met (i.e., an emissions analysis was performed in accordance with regulatory requirements), a violation could be found only if the project actually caused an emissions increase as determined by the first year of post-construction monitoring. The district court further rejected EPA’s claim that DTE’s analysis regarding preconstruction emissions was deficient. On appeal, the Sixth Circuit reversed the district court ruling precluding an EPA enforcement action until after the first year of post-construction monitoring finding that “a preconstruction projection is subject to an enforcement action by EPA to ensure that the projection is made pursuant to the requirements of the regulations.” However, the Sixth Circuit stated that the regulations do not require approval of emissions projections prior to construction and that if EPA “can second guess the making of the projections, then a project-and-report scheme would be transformed into a prior approval scheme. The Sixth Circuit remanded the case to the district court to determine whether DTE had complied with the regulations regarding emission projection.
In its March 3, 2014, decision, the district court found that DTE met the regulatory requirements for preconstruction emissions projections. DTE’s project involved replacement and refurbishing of a coal-fired electric utility generating unit. Although DTE projected that emissions of NOX and SO2 would increase by thousands of tons per year after the project, DTE determined that the “demand growth” exclusion applied to the entire increase as unrelated to the project since before the project DTE could accommodate the increase based on additional customer demand. EPA argued that DTE had improperly applied the demand growth exclusion. The district court stated that EPA was limited to “a surface review” of preconstruction projections to determine if the “letter of the law” had been met. “Anything beyond this cursory examination would allow EPA to ‘second-guess’ a source operator’s calculations; an avenue which the Sixth Circuit explicitly foreclosed to regulators.” The court found that EPA was not alleging a violation of its regulations but rather took “defendants to task over the extent to which they relied up the demand growth exclusion.” The district court found EPA’s allegations to be “exactly what the Sixth Circuit envisioned when it precluded EPA from second-guessing ‘the making of [preconstruction emission] projections.’” Further the court found EPA had not identified a regulation requiring DTE to “demonstrate the propriety of their demand growth exclusion calculations” and that EPA’s allegation was belied by the fact that DTE demonstrated, and EPA conceded, that actual post-project emissions never increased.
Finally, the district court noted, as had the Sixth Circuit, that EPA has the authority to obtain emissions information from DTE and initiate an enforcement action should emissions traceable to the project increase.
Other Significant EPA
Notices & Rulemakings
79 FR 13393
Proposed Rule. EPA proposed revisions to Subpart W of the Greenhouse Gas Reporting Rule, applicable to the petroleum and natural gas systems source category. The revisions are intended to clarify or simplify calculation methods for certain sources at facilities in order to reduce the burden associated with data collection and reporting. The revisions include: changes to units of measure, terms, and definitions in certain equations; revisions to reporting requirements; and minor technical revisions and corrections to the text of the rule.
79 FR 17339
Final Rule. EPA amended the national emission standards for hazardous air pollutants (NESHAPs) for three source categories: Group IV Polymers and Resins, Pesticide Active Ingredient Production, and Polyether Polyols Production. EPA did not make changes to the emission standards for these three NESHAP source categories, concluding that its residual risk and technology review of the standards did not indicate the need for amendment. However, the NESHAPs were revised in other respects. EPA eliminated the exemption for periods of startup, shutdown and malfunction, so the emission standards in the rule apply at all times. EPA also amended the standards to require electronic reporting of performance test results and to require monitoring of pressure relief devices in organic HAP service that release to the atmosphere. The amendments took effect on March 27, 2014.
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