While agreeing with the U.S. Environmental Protection Agency in some respects, a three-judge panel at the U.S. Third Circuit Court of Appeals on Sept. 29 struck down EPA’s approval of a regional haze State Implementation Plan (SIP) for the state of Pennsylvania.
Pennsylvania’s conclusions on regional haze were set forth in its 2010 SIP, which was approved by the EPA in 2014. Alleging that the EPA’s approval of Pennsylvania’s SIP was arbitrary and capricious, the National Parks Conservation Association, Sierra Club, and Clean Air Council filed this petition for review. “For the reasons that follow, we will grant the petition in part and deny it in part, and remand the matter to the EPA for further consideration,” said the court in its Sept. 29 decision.
To satisfy the BART requirements, a state’s SIP must first identify all “BART-eligible” sources within its borders. Under the regulations, a stationary source of air pollution is BART-eligible if it: was in existence on Aug. 7, 1977, but not in operation prior to Aug. 7, 1962; fits within one of 26 identified categories; and has the potential to emit annually at least 250 tons of any air pollutant
Pennsylvania submitted its regional haze SIP to the EPA in December 2010, identifying 34 BART-eligible sources of pollution within its borders. These pollution sources — various power plants, mills, refineries, and other facilities around the state — emit visibility-impairing particulate matter (PM), as well as the chemical precursors to PM, which include SO2 and NOx.
Pennsylvania, however, chose to follow the “better-than-BART” approach with respect to eight fossil fuel electric generating stations with a capacity of 750 MW or more. Thus, Pennsylvania conducted a source-specific BART analysis regarding the SO2 and NOx emissions of each source with an electricity generating capacity below 750 MW, but did not do so for generating stations having a capacity of 750 MW or more. Pennsylvania noted that these sources participated in the “cap and trade” program for SO2 and NOx emissions established by EPA’s Clean Air Interstate Rule (CAIR), and concluded that the sources’ participation in the cap and trade program was better than BART at reducing such emissions.
Ultimately, Pennsylvania’s SIP found that requiring additional emission controls at any of the 34 BART-eligible sources would result in only minimal visibility improvement in affected Class I areas. Weighing this minimal improvement against the cost of implementing the controls, Pennsylvania concluded that additional controls were not warranted.
In January 2012, the EPA issued a proposed rule providing for a limited approval of Pennsylvania’s SIP (the “2012 Proposed Rule”). The EPA concluded that Pennsylvania’s BART analysis complied with the statutory requirements of the Clean Air Act and the regional haze regulations. However, the EPA declined to address Pennsylvania’s reliance on the better-than-BART CAIR program regarding SO2 and NOx emissions for certain pollution sources, noting that particular issue was the subject of a separate rulemaking proceeding.
On June 7, 2012, the EPA issued its final rule (the “National Rule”) in the separate proceeding referenced by the 2012 Proposed Rule, disapproving the SIPs submitted by Pennsylvania and 14 other states to the extent they relied on the CAIR program to limit SO2 and NOx emissions. With this disapproval, the EPA also promulgated Federal Implementation Plans (FIPs) for 13 of the states (including Pennsylvania), effectively replacing the states’ reliance on the CAIR program with reliance on the newly promulgated Cross-State Air Pollution Rule, better known as the Transport Rule. By issuing the National Rule, the EPA also finalized its conclusion that the Transport Rule was better-than-BART at reducing SO2 and NOx emissions, and that it addressed the shortcomings of the CAIR program previously identified by the U.S. Court of Appeals for the D.C. Circuit.
The Pennsylvania SIP went through a first round of court review
Shortly thereafter, on July 13, 2012, the EPA finalized its limited approval of Pennsylvania’s SIP. With this “2012 Final Rule,” the EPA responded to comments regarding the 2012 Proposed Rule and reaffirmed its conclusion that Pennsylvania’s BART analysis was proper.
In response to the 2012 Final Rule, the Conservation Groups filed a petition for review with this appeals court, challenging the rule on a number of fronts. The court did not reach the merits of the petition, though, since the EPA filed a motion for voluntary remand without vacatur in order to consider and respond in greater detail to the Conservation Groups’ concerns. The court granted the motion in October 2013, and remanded the matter to the EPA.
Following remand, the EPA entered a final rule on April 30, 2014 (“2014 Final Rule”), reissuing its limited approval of Pennsylvania’s SIP. With this rule, the EPA expanded its responses to certain comments and acknowledged numerous deficiencies in Pennsylvania’s source-specific BART analysis. In the end, however, the EPA approved the SIP, finding that Pennsylvania reasonably concluded that no additional pollution controls were required at the 34 BART-eligible sources given the low visibility impact of the sources in Class I areas and the high cost of implementing the controls.
This petition for review followed, with the Conservation Groups alleging that the EPA arbitrarily and capriciously approved Pennsylvania’s SIP. The appeals court subsequently granted motions to intervene filed by the Pennsylvania Department of Environmental Protection and Homer City Generation LP, the operator of a coal-fired power plant in Indiana County, Pennsylvania.
Among other things, the Conservation Groups challenged the EPA’s decision to allow Pennsylvania to rely on the Transport Rule in lieu of conducting a source-specific BART analysis regarding SO2 and NOx emissions from each source with an electricity generating capacity of at least 750 MW. In particular, they argued that the Transport Rule is not better-than-BART at reducing SO2 and NOx emissions, has not been implemented as the EPA assumed it would be when it permitted Pennsylvania to rely on the rule, and is subject to further delays and legal challenges. The EPA counters that this appeal is not the appropriate vehicle to challenge its finding that the Transport Rule is better-than-BART or its decision to approve states’ reliance on this rule, as both these determinations stem from a final rule and separate rulemaking proceeding not presently before this court. Moreover, the EPA argues that the Conservation Groups must pursue any such challenge in the D.C. Circuit. The appeals court agreed with the EPA on both points.
Court chides Pennsylvania for lack of specifics in its analysis
In another area of the appeal, the court wrote: “While we agree with the EPA that Pennsylvania’s SIP states that upgrades and combinations were considered, we cannot discern from the administrative record the specifics of Pennsylvania’s analysis or why it rejected certain upgrades or combinations. As the Conservation Groups noted in their comments to the 2012 Final Rule, Pennsylvania’s SIP states in conclusory fashion that [electrostatic precipitator] upgrades, enhancements, or replacements were considered for certain sources. See, e.g., App. 221 (stating that ‘[t]he retrofit technologies reviewed’ during the course of the BART analysis for the Mitchell Power Station ‘included fuel-related modifications, ESP upgrades, enhancements or replacement, replacement of the ESPs with fabric filters or compact hybrid particulate collectors’). What the SIP fails to do, however, is identify or describe the upgrades considered or explain why these controls were rejected.”
Mitchell is a coal-fired power plant that owner FirstEnergy (NYSE: FE) shut in 2013.
The Conservation Groups also challenged Pennsylvania’s source-specific BART analysis regarding PM emissions from 13 power plants. Specifically, they contended the state improperly concluded that the filterable emission limit of 0.1 pound of particulate matter per million British thermal units (0.1 lb/MMBtu) represents BART for those facilities. The Conservation Groups argue the limit is not sufficiently stringent, and note that lower limits (between 0.07 lb/MMBtu and 0.012 lb/MMBtu) have qualified as BART at other facilities.
In the 2014 Final Rule, the EPA concedes that Pennsylvania failed to determine whether the 0.1 lb/MMBtu emission limit actually represents BART for those facilities. But EPA thinks that Pennsylvania’s failure to do so was not fatal in this instance. The EPA excuses this failure for two reasons. First, it argues that Pennsylvania’s error was essentially harmless, as imposing a stricter PM emission limit on these sources would have minimal visibility impact in Class I areas. Second, the EPA claims that the issue is largely moot since many of these 13 power plants have been retired or put in motion plans to retire or convert to cleaner burning fuels since Pennsylvania conducted its BART determinations. The EPA also notes that the remaining sources will have to comply with a more stringent PM emission limit of 0.03 lb/MMBtu by 2015 due to the implementation of the federal Mercury and Air Toxics Standards (MATS).
“We find the EPA’s arguments unconvincing,” said the Sept. 29 ruling. “[T]he EPA’s claim of harmless error is unpersuasive since the agency has offered scant justification for this position, apart from its own assurances that the multiple flaws in Pennsylvania’s analysis did not impact the reasonableness of its conclusions. Similarly, the EPA has not identified, nor have we located, any legal support for the EPA’s contention that it may excuse errors in a state’s BART analysis as moot based on events that are yet to transpire. To the contrary, the EPA has a statutory obligation to disapprove a SIP that does not comply with the Clean Air Act and to promulgate a FIP if the deficiencies are not timely cured.”
The Conservation Groups also contended that Pennsylvania’s BART analysis regarding PM emissions did not comply with guidelines because the state did not consider more stringent emission limits developed as part of separate air quality permitting processes under the Clean Air Act. In particular, they argue that limits imposed by other programs — known as best available control technology (BACT), lowest achievable emission rate (LAER), and maximum achievable control technology (MACT) — are relevant to the BART analysis because they demonstrate achievable emission reductions.
In response, the EPA noted that the BART Guidelines do not require states to consider the exact emission limits determined to be BACT and LAER. Instead, they must consider the technologies used to achieve BACT and LAER when conducting the first step of the BART analysis: identifying all available control technologies for their pollution sources.
“We agree with the EPA’s reading of the BART Guidelines on these points,” said the court. “As a result, we reject the Conservation Groups’ contention that Pennsylvania improperly failed to consider BACT, LAER, and MACT emission limitations.”
Court rejects ‘cost-effectiveness’ arguments from plaintiffs
The Conservation Groups also argued that Pennsylvania failed to properly evaluate the cost-effectiveness of the pollution controls available for each BART-eligible source. In particular, they noted that Pennsylvania did not set a “threshold” for cost-effectiveness — that is, an amount of money at which it would reject any available control option as too expensive.
The EPA asserted that nothing in the Clean Air Act requires Pennsylvania to set a fixed threshold of cost-effectiveness, and that the applicable guidelines make no mention of such a threshold in their instructions on how to evaluate cost-effectiveness. Instead of drawing a line in the sand on cost-effectiveness, the EPA notes that Pennsylvania’s SIP appropriately determined that pollution “sources with a higher degree of potential visibility improvement from control would justify higher cost controls,” and that “only low cost controls would be justified for sources with a lower degree of potential visibility improvement.”
Said the court ruling on this point: “Because we agree that Pennsylvania was not compelled to set a threshold for cost-effectiveness, we conclude that the EPA did not act arbitrarily by approving Pennsylvania’s SIP absent such a threshold.”
Said the Sept. 29 ruling in conclusion: “In the end, the EPA has identified a host of problems with Pennsylvania’s BART analysis. What it has not done, however, is provide a sufficient explanation as to why it overlooked these problems and approved Pennsylvania’s SIP. Because we, as a reviewing court, need an agency to show its work before we can accept its conclusions, we will remand this case to the EPA for further consideration. For the aforementioned reasons, we will vacate the 2014 Final Rule to the extent it approved Pennsylvania’s source-specific BART analysis and remand to the EPA for further proceedings consistent with this Opinion.”