Appeals Court Sides With EPA On New Source Review Revision

A federal appeals court has rejected challenges to substantial portions of a 2002 rule to allow aging industrial plants modernize without buying expensive new pollution controls (State of New York vs. EPA, D.C. Cir., No. 021387A, June 24, 2005).

However, the U.S. Court of Appeals for the D.C. Circuit concluded that two aspects of the 2002 rule rest on impermissible interpretations of the Clean Air Act and a third is arbitrary and capricious. "Specifically, EPA erred in promulgating the Clean Unit applicability test, which measures emissions increases by looking to whether 'emissions limitations' have changed," the court stated. "Congress directed the agency to measure emissions increases in terms of changes in actual emissions. EPA also erred in exempting from New Source Review certain pollution control projects that decrease emissions of some pollutants but cause collateral increases of others. The statute authorizes no such exception."

The court also found that EPA acted arbitrarily and capriciously in determining that sources making changes need not keep records of their emissions if they see no reasonable possibility that these changes constitute modifications for NSR purposes. The agency failed to provide a reasoned explanation for how, absent such records, it can ensure compliance with NSR, the court concluded.

The final New Source Review Reform rule was published Dec. 31, 2002. New York and other states immediately filed a lawsuit challenging the NSR rule, including the actual-to-projected actual emissions test.

According to New York state Attorney General Eliot Spitzer, the D.C. Circuit's decision also acknowledges the right of states to adopt more protective air pollution programs or to keep their existing programs if they better protect the environment and public health than the new federal rules. "EPA's effort to force states to adopt its weaker rules contradicts more than 30 years of states' rights in environmental policy," said Spitzer.

Industry officials also challenged certain aspects of the rule, including the definition of modification. Industry said a modification should be based on the hourly rate of emissions as opposed to annual emissions. NPRA participated with the NSR Manufacturers Roundtable as intervenors in the case.

"Overall, we are pleased with the D.C. Court of Appeals decision," officials with the National Petrochemical & Refiners Association said. "The NSR reform rules allow refineries to proceed with pollution-preventing activities, and installation of new technology that helps reduce emissions. These reforms also consider industry plant operations as a whole, an important step to more efficient environmental regulation."

The court found the following elements permissible interpretations of the CAA and not otherwise arbitrary and capricious: the use of past emissions and projected future actual emissions, rather than potential emissions, in measuring emissions increases; the use of a 10-year lookback period in selecting the two-year baseline period for measuring past actual emissions; the use of a five-year lookback period in certain circumstances; the abandonment of a provision authorizing states to use source-specific allowable emissions in measuring baseline emissions; the exclusion of increases due to unrelated demand growth from the measurement of projected future actual emissions; and the Plantwide Applicability Limitations program. The court also find meritless certain procedural challenges related to lack of notice.

Finally, industry challenges to passages in the preambles of the 2002 and a 1992 rule, as well as government challenges to the implementation of the 2002 rule, are unripe for review.

The court's opinion can be accessed at http://www.cadc.uscourts.gov. Additional information on New Source Review can be found at http://www.epa.gov/nsr.

This article originally appeared in the 06/01/2005 issue of Environmental Protection.

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