Litigation Continues Over EPA CAMR and CAIR Regulations

May 16, 2008
Client Alert Newsletter May 2008

Several years ago, the U.S. Environmental Protection Agency ("EPA") promulgated the Clean Air Mercury Rule ("CAMR"), which established a mercury emission control program, and the Clean Air Interstate Rule ("CAIR"), which established control requirements for sulfur dioxide ("SO2") and nitric oxide emissions. Both CAMR and CAIR apply to sources meeting EPA's regulatory definition of electric generating units ("EGUs"). In addition, both regulatory programs established, at least in part, emission allowance trading options to allow regulated sources to comply with emission standards by purchasing allowances or emission reductions from other sources.

Environmentalists and certain state governments challenged EPA's CAMR requirements, alleging that EPA improperly allowed sources to continue to emit mercury at elevated levels by merely securing mercury emission reductions from other sources. Certain industry sources also challenged the CAMR regulations, contending that EPA did not properly or equitably establish requirements applicable to specific sources. MGKF represented one of these industry sources in the litigation. In February, the D.C. Circuit Court of Appeals vacated EPA's regulations, concluding that CAMR did not satisfy the Clean Air Act provisions applicable to EPA's characterization of mercury as an hazardous air pollutant emission requiring controls. Environmentalist and state sources then successfully requested the court to issue a mandate, compelling EPA to promulgate a new mercury control regulation that satisfies the Clean Air Act standards. EPA has responded by filing a motion requesting the entire court to reconsider the decision of the three-judge panel. Therefore, the litigation is not yet concluded. However, unless the court reverses its decision, EPA must promulgate a new federal mercury standard. In the interim, each state permitting agency must make a case-by-case determination of mercury emission standards for any new or reconstructed EGU, unless the state (like Pennsylvania) has promulgated a generally applicable mercury regulation.

Separately, numerous industry sources have challenged EPA's CAIR regulatory program on various grounds. MGKF represents industrial sources challenging EPA's decision to require sources subject to the SO2 provisions of CAIR to participate in the acid rain requirements of Title IV of the Clean Air Act. During oral argument in this case on March 25, the D.C. Circuit expressed a great deal of skepticism regarding EPA's claims that its regulatory action is consistent with the underlying statutory mandate. The court's decision in this matter may not be issued for several months. If the court overturns EPA's regulation, EPA will likely initiate a new CAIR rulemaking effort, which may take several years to complete.