Anticipated Developments in Air Quality Regulation

January 8, 2009
by BART CASSIDY and KATE VACCARO
Client Alert Newsletter Forecast 2009

In light of the number of significant court cases during 2008 and the change in administration, we anticipate 2009 to be a significant year for air quality law.

Clean Air Interstate Rule

First, in 2008, the U.S. Court of Appeals for the D.C. Circuit held that the federal Clean Air Interstate Rule ("CAIR") was inconsistent with the Clean Air Act ("CAA"), and remanded the regulation to the U.S. Environmental Protection Agency ("EPA") for rulemaking activity necessary to address the many "flaws" identified by the Court with the regulation. However, the Court subsequently reversed its remedy determination and determined to stay its mandate vacating CAIR, allowing states to begin implementation of either their state-specific CAIR programs or the Federal Implementation Plan ("FIP"), as appropriate, beginning in 2009. EPA must undertake to revise CAIR in a manner consistent with the Court ruling, which appears to require a substantial overhaul of the Rule. Such action may require future significant changes to the state programs that begin in 2009. At the same time, Congress may act to provide statutory authority to EPA to implement CAIR in a manner consistent with the Rule as it was promulgated or a version closely approximating that Rule. Legislative and/or regulatory actions in this context are both possible during 2009.

Mercury Emissions

Next, we anticipate that mercury regulation of electric generating units will also receive attention in 2009, especially in light of the D.C. Circuit's rejection of EPA's federal Clean Air Mercury Rule ("CAMR") in 2008. Unlike CAIR, however, the Court has issued a mandate vacating the Rule, creating legal uncertainty for those states which have promulgated state-specific regulations, such as Pennsylvania, imposing mercury emission standards on electric generating units. Consistent with this vulnerability, the Pennsylvania Commonwealth Court has now determined that Pennsylvania's state-specific mercury emission control program is invalid due to the vacatur of CAMR. The Pennsylvania Department of Environmental Protection ("PADEP") has appealed the Commonwealth Court's decision to the Pennsylvania Supreme Court. Accordingly, EPA and individual states, including Pennsylvania, are evaluating how to pursue mercury emission reduction through other avenues in 2009.

New Source Review

EPA made several determinations at the end of 2008 relevant to the controversial New Source Review ("NSR") program, many of which may be subject to revaluation by the Obama administration. Among other things, EPA decided to revise federal NSR provisions to ensure that fugitive emissions generally are not considered in evaluating emission increases potentially subject to NSR standards. Many states implement state-specific NSR programs, and some, including Pennsylvania, preserve evaluation of fugitive emissions under their own programs. EPA also issued guidance governing the determination of whether multiple activities at the same facility occurring within a relatively short time frame should be considered a "single project" for purposes of NSR analysis, mandating aggregation of emissions from those activities in determining the applicability of NSR. For the most part, the rulemaking establishes a presumption that apparently distinct activities involving separate emissions would not be considered a single project. Unlike the fugitive emissions issue, however, most states have not established separate regulatory provisions for evaluating the aggregation of emissions. Further, EPA has determined for the time being at least, to abandon both its rulemaking effort to establish regulatory provisions analyzing "debottlenecking" under NSR and its attempt to recharacterize the emission test for NSR applicability to consider hourly, rather than annual emission variations, in response to the Supreme Court’s decision in Environmental Defense v. Duke Energy.

In addition to the likely revaluation by the Obama administration of these late term determinations, we anticipate an increased enforcement focus on NSR issues in 2009. Further, states may determine to take state-specific action, either in terms of regulatory change or enforcement initiative, relative to these significant NSR issues.

Emission Standards

EPA is also likely to address the regulation of hazardous air pollutants ("HAPs") under the National Emission Standards for Hazardous Air Pollutants ("NESHAP") in 2009 in the wake of several recent D.C. Circuit rulings. First, EPA may respond to fallout from a December 19, 2008 ruling by the D.C. Circuit vacating EPA's startup, shutdown, and malfunction provisions, which excuse sources from meeting NESHAP limits during such conditions. Second, EPA may be required to establish maximum achievable control technology ("MACT") standards for certain major stationary sources of HAPs following a recent action filed in the D.C. Circuit asking the Court to compel EPA to issue MACT determinations for certain source categories, in accordance with NESHAP regulations. Further, with respect to any new MACT regulatory developments in 2009, it is expected that they will reflect decisions by the D.C. Circuit striking down several MACT regulations promulgated in recent years by EPA. In particular, the Court has determined on several occasions that EPA failed to establish industry-specific MACT standards consistent with the requirements of the CAA. Based on recent rulemaking proposals, it appears that EPA is responding to these Court decisions by using a substantially more conservative, and therefore more stringent, approach toward establishing emission limitations under MACT. We anticipate that this trend will continue in 2009.

State Initiatives

At the state level, we anticipate that states will promulgate revisions to their NSR programs to implement NSR for PM2.5 and its precursors, in satisfaction of the May 2008 EPA rule establishing the NSR requirements for PM2.5. States may also take steps to regulate HAP emission limits for certain major stationary sources, such as industrial boilers, in accordance with Section 112(j) of the CAA, also known as the "MACT Hammer," where EPA has failed to establish MACT standards by the regulatory deadline. In addition to these efforts, Pennsylvania will be implementing a Diesel Vehicle Idling Rule, which restricts idling to 5 minutes in a 60-minute period for most diesel-powered commercial trucks, buses, and school buses; whereas, New Jersey is expected to focus on efforts to meet the reasonably available control technology requirements of the CAA in order to further achieve emission reductions. Finally, Delaware is expected to revise its State Implementation Plan to include provisions for demonstrating compliance with the National Ambient Air Quality Standards for ozone.