In a decision issued June 8, 2007 the DC Circuit Court of Appeals continued its assault on EPA rulemaking by striking down both the Commercial and Industrial Solid Waste Incinerator Rule (CISWI Rule) and the Industrial/Commercial/Institutional Boilers and Process Heaters Rule (Boiler MACT). Since many boilers burn solid waste (wood waste, used oil, scrap tires, process material, etc.) as fuel at least some of the time, the EPA attempted to regulate units designed for energy recovery as boilers and to regulate only units that were primarily "designed to discard materials" as incinerators. While the Court deemed that distinction "reasonable," it held that "it is not the line drawn by the Congress," which it believed "unambiguously" meant to include "any facility which combusts any solid waste material" subject only to specific exemptions.

The Natural Resources Defense Council v. EPA decision promises to have profound business consequences. The Court projected that its ruling would "shift thousands of units that are currently regulated under the...Boilers Rule into the CISWI category." Because of that shift, the Court noted that "the Boilers Rule will need to be revised as well because the universe of boilers subject to its standards will be far smaller and more homogeneous after all CISWI units...are removed from its coverage." Thus, the EPA will be tasked with redeveloping the Boiler MACT's standards considering the new, smaller universe of regulated sources while applying the more stringent methodologies specified in an earlier DC Circuit Court ruling that rejected the EPA's Brick MACT rules. The Court's ruling also brings more units under regulation because the CISWI Rule does not use a major source threshold. As such, CISWI units at nonmajor HAP sources that were exempt under Boiler MACT will now face regulation under the CISWI rule – for a broader spectrum of pollutants. In short, the revised rules will contain different and probably more stringent standards for tens of thousands of incinerators and boilers nationwide.

The Court's decision to vacate the rules also raises two key practical questions: (1) "What standards will apply in the interim?" and (2) "When can we expect new standards?" The Court's decision will not become effective until July 30, 2007 and environmental petitioners are widely expected to ask the Court to extend that deadline so that current standards remain in place until the EPA promulgates replacement rules. EPA and industry objections to this approach are expected to shift the focus to an abbreviated rulemaking schedule under which the EPA will commit to promulgating revised rules in two to three years. The EPA also raised the possibility that the Clean Air Act's "case-by-case" MACT "Hammer" standards under Section 112(j) (which are triggered if the EPA fails to promulgate a particular MACT standard by the statutory deadline) may apply on the theory that the EPA never promulgated a lawful rule. If applicable, those deadlines have long since passed and would thus require a court or agency to establish a new schedule for submission of Section 112(j) permit applications before boiler operators would have a clear obligation to pursue case-by-case MACT standards.

These remaining uncertainties will undoubtedly generate source-specific questions and concerns. Squire Sanders environmental lawyers have been extensively involved in this litigation and the underlying rulemaking efforts and would be pleased to offer their insights and advice. If you have questions or concerns, please contact any of the Squire Sanders environmental lawyers listed in this Alert or the one with whom you are most familiar.