Something In the Air

Our forecast for the top air quality management issues in 2008

Due to a recent U.S. Supreme Court case, global warming will be a major air pollution issue this year. Depending upon how the full spectrum of global warming issues is resolved, the impacts may extend to even the smallest air emissions sources. Implementation of the ozone and fine particulate matter ambient air quality standards continues as a major issue in 2008, and the U.S. Environmental Protection Agency continues its efforts to control hazardous air pollutants.

Global Warming
The U. S. Supreme Court decided the case of Massachusetts v. EPA on April 2, 2007, one of the most significant Clean Air Act cases to date. Massachusetts, other states, and several environmental groups had petitioned EPA to regulate greenhouse gas emissions from new automobiles, requesting the administrator to make a statutory decision under the Clean Air Act's definition of air pollutant that greenhouse gases "cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare." EPA denied the petition. The Supreme Court held that, "Because greenhouse gases fit well within the Clean Air Act's capacious definition of 'air pollutant,' we hold that EPA has the statutory authority to regulate the emission of such gases from new motor vehicles." While the Supreme Court did not specifically direct EPA to regulate greenhouse gases, it seems a foregone conclusion, scientifically and politically, that EPA will have to determine that greenhouse gases are an air pollutant and then regulate them under the Clean Air Act. That decision will have major ramifications.

For the last few years, the political debate on controlling greenhouse gases has focused almost exclusively on large coal-fired electric utilities and new automobile manufacturers. Because of the way the Clean Air Act is written, the court's decision and EPA's subsequent "air pollutant" determination will have a dramatic impact, far beyond coal-fired power plants and automobiles. Once greenhouse gases become a regulated air pollutant, EPA may be required to set a greenhouse gas National Ambient Air Quality Standard (NAAQS), regulate greenhouse gas emissions as part of the New Source Performance Standards (NSPS) and regulate greenhouse gas emissions under the New Source Review (NSR) program -- including both Prevention of Significant Deterioration (PSD) and Non Attainment New Source Review (NA-NSR).

NSR Issues
The impact of the Massachusetts' decision becomes clear when reviewing the Clean Air Act's NSR program. The statutory language defines a major source for PSD as any source with, "the potential to emit [either 100 tons per year or 250 tons per year, depending upon the source category] or more of any air pollutant."

NA-NSR major source thresholds are even lower. Some fairly small air emissions sources would have carbon dioxide emissions above those thresholds, and would thus be major sources once EPA determines that greenhouse gases are an air pollutant. If you are a major source, the Clean Air Act then imposes NSR controls for, "each pollutant subject to regulation" under the statute.

There is significant legal argument about what is necessary for a pollutant to be "subject to regulation" under the Clean Air Act. Environmentalists argue that EPA already regulates carbon dioxide with the monitoring and reporting requirements under the Acid Rain program. Therefore, they want strict technology controls imposed on new power plants under NSR for greenhouse gas emissions. EPA has argued that a pollutant is "subject to regulation" only when EPA sets an emission limit for that pollutant; since no such limit has yet been set, greenhouse gas controls under NSR are not necessary at this time. This conflict will be played out in the federal courts until such time as EPA makes a formal control decision on greenhouse gases or the final appeal is heard. The same outcome is less clear in the individual states that do most of the air permitting.

Many states have adopted NSR programs that have been approved by EPA, and those programs are operated under state statutory and regulatory language that can be quite different from EPA's language. Even when the state language is similar, the permitting agency must determine whether it will interpret the language the same way that EPA has. The Kansas Department of Health and Environment has denied an air quality permit for two proposed coal-fired power-generating units in western Kansas, citing concerns that emissions from the plants would contribute to global warming. Other local jurisdictions may reach similar decisions.

State and Local Government Actions
While the federal government has been slow to act on greenhouse gas controls, state governments have been exceptionally active. Many states have adopted voluntary or "feel good" statutes that encourage caps on greenhouse gas emissions. Enforceable mandatory reductions are somewhat less frequent but increasing rapidly. The Regional Greenhouse Gas Initiative is a group of 10 Northeastern and Mid-Atlantic states working to reduce carbon dioxide emissions. They are promoting a mandatory cap-and-trade system for power plants beginning in January 2009 that would maintain greenhouse gas emissions at current levels from 2009 to 2015 and would require a 10 percent reduction by 2020. The Western Regional Climate Initiative has six states contemplating a mandatory cap-and-trade program that will achieve a 15-percent reduction by 2020. This program would apply to all sectors: energy suppliers, transportation, commercial, residential and industrial.

Local governments also are trying to jump on the bandwagon. The County Board for Cook County, Ill. (the Chicago Metropolitan area) proposed an ordinance that would require air permitting for approximately 1,700 affected sources, imposes an emissions fee of from $5 per ton to $20 per ton for regulated emissions, including carbon dioxide, and would have required a plan to reduce such emissions by 10 percent every three years. The proposed ordinance is temporarily deferred while various interest groups attempt to find a common ground.

NSPS and Other Issues
NSR is not the only program impacted by the Massachusettsdecision. Section 111 of the Clean Air Act requires EPA to set NSPS for new or modified air emission sources that contribute significantly to air pollution. Two NSPS set by EPA, one for power plants and one for industrial boilers, have been challenged by states and environmental groups because they did not include emissions limitations for greenhouse gases. Both cases were filed before the Massachusettsdecision and have been remanded for additional consideration in light of the Supreme Court's recent pronouncement. EPA's recent petroleum refinery proposed NSPS received comments asserting that greenhouse gas controls were necessary. Virtually any additional NSPS from EPA will likely receive public comments about greenhouse gas until the issues are resolved.

Most of the debate regarding the impacts of the Massachusettsdecision has focused on where and how greenhouse gas emissions controls should be implemented, usually against large emissions sources or new cars. But there are two substantial impacts of the decision that have received very little attention. They have nothing to do with controlling greenhouse gases and may affect many smaller sources.

In the first instance, assume there is a small manufacturing facility in an attainment area that wants to build a plant (or modify an existing one) that was not a major source for any existing air pollutant. Assume they would have 50 tons per year of new volatile organic compound (VOC) potential emissions. Because that plant is not a major source for any air pollutant, it would not be subject to NSR. But, if the plant had boilers with potential greenhouse gas emissions over 250 tons per year and EPA determined that greenhouse gases were an air pollutant, then the facility would be a major source (of greenhouse gases) for PSD purposes and a significant increase in any regulated pollutant (here, VOC) would trigger PSD review. With its new status as a major source, the facility would have to undergo PSD review and adopt strict VOC technology controls, since the 50-ton-per-year VOC increase is greater than the 40-tons-per-year VOC significance level set by EPA. In effect, adding greenhouse gases to the list of air pollutants would change many current small emissions sources into PSD major sources and subject them to strict technology controls for other pollutants, even if greenhouse gas controls are not required.

As a second example, consider the Title V permitting program in the Clean Air Act, in which the statute sets a major source threshold value of 100 tons per year "of any air pollutant" (or less in non-attainment areas.) Assume another attainment area small manufacturing facility (or a modest-sized school or shopping center) that has minimal potential emissions for every present air pollutant but has boilers that have 100 tons per year or more of potential greenhouse gas emissions. Because it has only minimal emissions, the facility presently does not require any air permitting. Once EPA determines that greenhouse gases are an air pollutant, that source will become a Title V major source and must undergo full major source permitting.

These issues are particularly troublesome because the major source emissions thresholds and definitions are set in the statutory language of the Clean Air Act. EPA cannot legally determine that the 100-ton Title V emissions threshold (or the other emissions thresholds) set in statutory language applies to every air pollutant except greenhouse gases, and the Supreme Court in Massachusetts effectively determined that greenhouse gases are an air pollutant. If there is going to be a structural reorganization to address greenhouse gases in a different manner, then that solution will have to come from Congress in a revision to the Clean Air Act. The likelihood of getting a rapid solution to this controversial and politically contentious issue from Congress is very small; the likelihood of getting it in a presidential election year is even more remote.

The Ozone and Fine Particulate SIPs
There are significant issues other than global warming affecting air emissions sources in 2008, including implementation of the ozone and fine particulate (PM2.5) State Implementation Plans (SIPs). The interplay between agency regulatory activity and recent court opinions has created some potential problem areas. Ozone and PM2.5 remain the two NAAQSs that have the most non-attainment nationally.

Ozone SIP
EPA has a somewhat checkered history in attempts to replace the old one-hour ozone standard with a newer eight-hour standard. EPA's April 2004 implementation rule for the eight-hour standard was appealed to the U.S. Court of Appeals, which issued an opinion in late December 2006 in South Coast Air Quality Management District v. EPA. The court affirmed many of the implementation rule provisions but took issue with EPA's decision regarding attainment status for NSR determinations. Many areas of the country had failed to attain the old one-hour ozone standard, and new sources in those areas were governed by the stringent NA-NSR provisions. EPA initially said such areas must continue to use NA-NSR provisions until the area attained the one-hour standard. In the implementation rule, EPA changed position and said new sources could use attainment demonstrations under the new eight-hour ozone standard, and sources in such areas would only have to meet the less stringent PSD requirements. The court found this change to be a violation of the Clean Air Act and remanded the matter back to EPA, while allowing the majority of the eight-hour ozone standard to be implemented.

This raises an interesting question for current NSR implementation in areas that did not achieve the old ozone standard but did attain the new standard. Previously, a new VOC-emitting facility in a one-hour ozone severe nonattainment area would have to undergo stringent NA-NSR if it had potential emissions above 25 tons per year (the major source threshold). If that area attained the new eight-hour ozone standard, a similar VOC source would only have to undergo the less stringent PSD review, and then only if potential emissions were above 100 tons per year. Many permitting agencies are continuing to use the 100-ton threshold and PSD provisions in areas that are now in attainment but never attained the one-hour ozone standard.

Changes in the base year for ozone attainment demonstrations and improved ambient air quality indications are allowing many areas to seek ozone attainment determinations under the existing NAAQS. In addition, recent scientific studies are prompting reevaluation of the role of oxides of nitrogen (NOx) in the ozone-control strategy. While the implementation of the 1997 eight-hour ozone standard is under way, EPA is revising the standard. The new ozone standard should be promulgated by March 12, 2008, and the inevitable process of both implementation and legal challenges for the new rule will start anew.

Fine Particulate SIP
Implementation of the PM2.5 NAAQS is on the traditional merry-go-round where one cycle completes just as another begins. As the SIPs to demonstrate future compliance with the 1997 PM2.5 standard are due to EPA from the states in April 2008, state rules to achieve compliance therefore should be nearly complete. The 2006 PM2.5 standard is now in place with the attainment designations due in October 2008; state SIPs are due in 2012-2013.

One component of the necessary PM2.5 controls is identifying the precursors and the significant emissions increase levels for NSR purposes. EPA's November 2005 proposed PM2.5 implementation rule selected sulfur dioxide (SO2) as a precursor all the time, nitrogen oxides (NOx) as a precursor unless the state demonstrates otherwise, and rejected VOC and ammonia as precursors unless the state demonstrates that they are. The significant emissions increase level was set at 40 tons per year. The 2005 proposed implementation rule should be made final by EPA in early 2008. Any changes from the November 2005 proposal could affect a large number of facilities.

Hazardous Air Pollutants
Hazardous air pollutants (HAPs) have always been an active regulatory area with significant implementation problems. In 2008, EPA regulatory efforts will focus on residual risk and the areas source program. HAP implementation will focus on how to implement controls for several Maximum Achievable Control Technology (MACT) standards invalidated by the courts.

Residual Risk
Section 112 of the Clean Air Act requires EPA to adopt MACT standards for major sources of HAP. Where those standards do not reduce lifetime cancer risk to the most exposed individual to less than one in a million, Section 112(f)(2)(A) requires EPA to adopt residual risk standards. EPA completed eight residual risk standards by mid-2007 and will complete review of the remaining 88 MACT standards in three groups. Advance Notices of Proposed Rulemakings for Groups 1 and 2 have been published and the Group 3 notice should be published in early 2008.

EPA's residual risk rule for the synthetic organic chemical industry was challenged in the case Natural Resources Defense Council v. EPA because it allowed individual risk greater than one in a million. Final briefs are due in the case in early 2008 and a decision should be out by mid 2008. Since EPA has followed similar risk evaluations in other rules, an adverse decision for EPA could significantly impact the program.

Area Source
Most regulatory attention has focused on major sources of HAP. But Section 112(k) of the Clean Air Act requires EPA to evaluate and regulate significant non-major (area) sources of HAP. Pursuant to a court order, EPA had completed 28 area source categories by June 2007 and was required to complete 10 additional standards every six months until June 2009. EPA can address controls by adopting Generally Available Control Technology. Implementation may be more difficult because the standards affect many entities not traditionally involved in environmental permitting. EPA is considering making some standards apply only in urban environments where population densities are higher.

Vacated MACT Standards
While many of EPA's MACT standards were adopted without significant disruption, several standards were invalidated by the courts, including

  • Clay Ceramic (Subpart KKKKK)
  • Brick and Structural Clay (Subpart JJJJJ)
  • Boilers (Subpart DDDDD), and
  • Plywood MACT (Partial vacature of Subpart DDDD)

EPA has determined that the courts' invalidation of the MACT standards means that permitting agencies must now utilize the case-by-case MACT provisions of Section 112(j) of the Clean Air Act to set standards for the clay ceramic, brick and structural clay and boiler categories. EPA published an amended plywood rule in October 2007.

Many of the state permitting agencies have stated, quite strongly, that they do not have the technical resources to develop case-by-case MACT standards, particularly for the boiler category. Nonetheless, many states have called for Part II MACT permit applications for those facilities subject to Subpart DDDDD, frequently stating that this is simply a protective measure to make sure the facilities have the applications on file and are not in violation of MACT permitting obligations. The National Association of Clean Air Agencies has indicated that it will issue a model rule that state air regulators can use for case-by-case boiler MACT decisions, but the model rule will be more stringent than the EPA rule. EPA is expected to release a guidance memorandum in early 2008 explaining the procedures for implementing Section 112(j) decisions on the vacated MACT categories.

Over the last year, the courts have been more active in redirecting EPA's air pollution control efforts. That trend is likely to continue in the future. EPA's continuing regulatory efforts, and possible court redirection, will make 2008 an interesting year.

About the Author

Bill S. Forcade, who has written regulatory forecast articles for Environmental Protection since 2002, is a partner in Jenner & Block’s Chicago office. He is a member of the firm’s Environmental, Energy and Natural Resources Law, Climate and Clean Technology Law, Trade Secrets and Unfair Competition, Defense & Aerospace, and Association practices. His primary focus is in the area of air pollution and enforcement. In the last five years alone, he has represented clients in more than 20 rulemaking proceedings at both the federal and state level, prepared or reviewed more than 50 Title V operating permit applications, Title IV Acid Rain permit applications, and Title I New Source Review Construction Permit applications, provided ongoing regulatory and permit compliance counseling to both large and small companies and represented clients in more than 30 noncompliance negotiations and formal enforcement proceedings brought pursuant to the Clean Air Act, in both federal and state forums, at administrative and judicial levels. In 2008, Forcade was selected by the Leading Lawyers Network as one of the Top Ten Environmental Lawyers in Illinois and is named in the 2009 edition of Best Lawyers in America for environmental law. He received his law degree from The John Marshall Law School in 1976 and his bachelor's degree in biology and chemistry from the University of Illinois at Chicago in 1971.

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