Introduction

?On January 25 2018 the Environmental Protection Agency (EPA) issued a guidance memo that reverses the agency's interpretation of the 'once in, always in' policy. The policy locked a source into meeting the maximum achievable control technology (MACT) standards for major sources of hazardous air pollutants under Section 112 of the Clean Air Act.(1) The revised guidance may provide sources that no longer exceed the major source threshold with the opportunity to reduce burdensome monitoring, record-keeping and reporting requirements.

Background

The EPA's 'once in, always in' policy was based on a 1995 guidance memorandum, "Potential to Emit (PTE) for MACT Standards – Guidance on Timing Issues" (J Seitz, May 16 1995). The guidance interpreted that Section 112 required major source MACT to apply to any existing source which remained a major source of hazardous air pollutants on the first compliance date under the applicable standard. After the first compliance date, such sources could not accept PTE limits and become an area source. Thus, sources were permanently locked into MACT based on their emissions history, regardless of whether their emissions subsequently declined below major source thresholds.

New guidance

The new guidance interprets that Section 112 of the Clean Air Act allows sources to take an enforceable emission limit on PTE below major source levels at any time to avoid major source MACT. Once that enforceable emission limit is in place, the facility would become an area source. Area sources typically are subject to less stringent standards or are not regulated under Section 112.

As a matter of law, the EPA argues that its former 'once in, always in' policy contravenes the plain language of the act. In the agency's view, the statutory definition of 'major source' requires actual or potential hazardous air pollutant emissions above the 10/25 tons per year threshold without any temporal limitation. The new guidance also relies on the policy to justify the shift, including concerns that 'once in, always in' discourages voluntary reductions and technological innovation.

The new guidance indicates that the EPA intends to begin rulemaking to codify its new interpretation.

The EPA's abrogation of the 'once in, always in' policy raises several questions.

How long will it take to complete rulemaking on this issue? The timing of the rulemaking depends on several factors, including the agency's competing priorities, resources and staffing. However, it is reasonable to estimate that the process may take 12 to 18 months. Significantly, the EPA was unable to complete a similar rulemaking in 2007, when it had more staff and resources; this raises the question as to whether it is realistic now. This concern may have motivated the EPA to issue the guidance as a way of setting down a policy marker that would make it more difficult for another administration to return to the o'once in, always in' policy.

Will this be litigated? Litigation is likely. The Supreme Court's decision in Perez v Mortgage Bankers generally allows agencies to reverse prior statutory interpretations without going through a rulemaking process, as the new guidance did. However, the EPA may need to revise the text of certain MACT regulations in order to untether applicability from major source status at the time of the first compliance deadline. This would require a rulemaking process in which certain states and nongovernmental organisations may file adverse comments on the abrogation in order to preserve the ability to challenge the decision in the DC Circuit. Challengers may attempt to seek judicial review of the new guidance immediately. The government would likely oppose immediate judicial review based on a lack of finality, ripeness and standing.

When can a source seek a PTE limit to take advantage of this guidance? Companies should at least begin to analyse whether, and to what extent, the new guidance might provide regulatory relief at emissions units subject to major source MACT standards. At complex facilities, there may be multiple MACT standards, and each standard may have differing approaches to major sources, natural area sources and synthetic minor area sources. It is also worth considering whether other applicable requirements might constrain or facilitate a relaxation of a major MACT standard. Ultimately, the state or local permitting agency must process the permit revisions. Therefore, it may be prudent to contact a state or local agency in order to ascertain their position on this issue and the estimated timeline for processing permit revision applications.

What does this mean for New Source Review (NSR) applicability? In NSR enforcement, the EPA has generally mirrored the 'once in, always in' approach for MACT standards, arguing that once an emissions unit triggers major source NSR, it must obtain an NSR permit and install state-of-the-art emissions controls (ie, the best available control technology or lowest achievable emission rate). In contrast, defendants have argued that the remedy for an NSR violation may include an after-the-fact synthetic minor, meaning an enforceable emission limit which caps emissions below major source levels. While not technically applicable to NSR, the logic of the new guidance would support an after-the-fact synthetic minor as a remedy for units which have triggered an NSR.

What role do the states have in implementing this guidance? Sources may have the opportunity to work with states that support the changed policy to revise operating permits to conform to EPA's new approach. At the same time, Section 116 of the act generally allows states to implement more stringent air regulations than the EPA with some important exceptions. Some states might opt to maintain the original 'once in, always in' position as part of their state regulatory schemes.

What effect does this policy change have on Title V permit? If a source is major under Title V for other reasons, it will still require a Title V permit. That permit and any relevant Title I construction permits may need to be revised in order to take advantage of the new guidance. The issue is more complicated if major source MACT is the only reason a source possesses a Title V permit. In that case, it must be determined whether a source is in a category that requires area sources to obtain Title V permits. In any case, permits will likely need to be updated in order to take advantage of the new guidance.

For further information on this topic please contact Samuel B Boxerman or Justin Savage at Sidley Austin LLP's Washington DC office by telephone (+1 202 736 8000) or email (sboxerman@sidley.com or jsavage@sidley.com). Alternatively, please contact Byron Taylor at Sidley Austin LLP's Chicago office by telephone (+1 312 853 7000) or email (bftaylor@sidley.com). The Sidley Austin LLP website can be accessed at www.sidley.com.

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Endnotes

(1) The Clean Air Act defines 'major sources' for the purposes of Section 112 as sources that had actual emissions, or the potential to emit, of 10 tons per year (tpy) of any single hazardous air pollutant or 25 tpy of any combination of hazardous air pollutants.