EPA Proposes to Halt Plans to Expand Greenhouse Gas Permitting Requirements to Smaller Sources

The U.S. Environmental Protection Agency (EPA) is proposing not to change the greenhouse gas (GHG) permitting thresholds for the Prevention of Significant Deterioration (PSD) and Title V Operating Permit programs to include smaller sources of GHGs, as it had originally planned.  

EPA's "tailoring rule" administratively altered the GHG applicability thresholds for the PSD and Title V programs of the Clean Air Act.  The rule was designed to initially subject only the largest facilities that emit GHGs to the regulations, then subsequently expand to phase in smaller sources by lowering the applicability levels.  The next phase was to begin in July 2013, with EPA conducting a rulemaking in 2011 to determine the new, lower threshold levels.  But EPA is now proposing to leave the program as is rather than expanding it.   

While EPA claims that the decision not to expand the program is because "the current approach is working well . . . [and] state permitting authorities are currently managing PSD permitting requests," it is unclear why the plans for the program are being altered if it is working so well.  According to EPA, as of December 1, 2011, EPA and state permitting authorities have issued 18 PSD permits addressing GHG emissions.

It is possible that EPA is waiting to see what happens in the legal challenges to the four key pieces of the EPA's suite of GHG regulations--the oral arguments for which are taking place in the Circuit Court for the D.C. Circuit this week--before pushing ahead to expand the program.   

EPA will accept comments on this proposal for 45 days after it is published in the Federal Register. A public hearing will be held on March 20, 2012, in Arlington, Virginia.

Court Vacates EPA’s Self-Imposed Stay on Boiler MACT Rules

The U.S. District Court of D.C. recently vacated EPA’s “Delay Notice” on the Boiler MACT rule it promulgated in February 2011 (and the related solid waste incinerator rule), leaving uncertainty as to the rule’s current effect and whether regulated entities will be required to meet its upcoming compliance date of March 21, 2014.  This is the latest in a long line of legal challenges involving the Boiler MACT rules that has, in the words of Foghorn Leghorn, caused more confusion than a mouse in a burlesque show. 

On February 11, 2011, EPA promulgated standards regulating hazardous air pollutants from Industrial, Commercial, and Institutional Boilers and Process Heaters (referred to as “Boiler MACT”) and Commercial and Industrial Solid Waste Incinerators (“CISWI”).  Numerous environmental and industry groups appealed the rules to the Court of Appeals for the D.C. Circuit.  Due to serious concerns raised about the rules by the public and regulated community after their promulgation, EPA elected to place a stay on their implementation in order to reconsider their content and seek additional comments.

Specifically, EPA found in its Delay Notice: 

justice requires postponing the effectiveness of these rules. . . . EPA has identified several issues in the final rules which it intends to reconsider because we believe the public did not have a sufficient opportunity to comment on certain revisions EPA made to the proposed rules. . . . In addition, EPA received data before finalizing both rules but was unable to incorporate that data into the final rules given the court deadline for issuing the rules, which the Agency was unable to extend. 

Federal Register, Vol. 76, No. 96 (May 18, 2011), pp. 28662–28664, at  http://www.gpo.gov/fdsys/pkg/FR-2011-05-18/pdf/2011-12308.pdf (May 25, 2011).

The Sierra Club immediately challenged the Delay Notice in the U.S District Court of D.C.  Then, in January 2012, the court held that the EPA’s action in issuing the Delay Notice was arbitrary and capricious and vacated the stay.  EPA argued that the stay was allowed because of the pending judicial review in the Court of Appeals, which is a legitimate basis for a stay.  However, the court vacated the Delay Notice because EPA failed to apply the proper four-part test for determining whether a stay was warranted and EPA also explicitly stated that the stay was actually for its own reconsideration of the rules rather than for purposes of judicial review.

EPA has released a proposal for amendments to certain elements of the rules and indicated that it expects to complete its reconsideration of the rules by April 30, 2012, with the final revised rules expected in the fall of 2012. Technically, now that the stay has been vacated, the rules that were published in February 2011 are in effect and require compliance with emissions limits by March 21, 2014 and with certain interim notification deadlines that have already passed.  In order to reduce confusion caused by the vacatur, EPA has now issued a "No Action Assurance" letter to make clear that it will not pursue enforcement of any violations associated with failure to meet initial notification deadlines. This No Action Assurance will be in effect until new compliance deadlines are set by EPA.

The final revised Boiler MACT rule, when published, will extend the compliance date to 3 years from the date of its publication.  Even then, however, the rules are still subject to change as a result of the judicial review by the D.C. Court of Appeals, which is expected to rule on the challenges to the rules in late fall 2012.  In addition, the deadlines may be altered by Congress to allow EPA more time to complete its reconsideration.

EPA Continues Delay on Greenhouse Gas Performance Standards for Power Plants

The Environmental Protection Agency has missed another deadline for proposing the New Source Performance Standard (NSPS) for greenhouse gas (GHG) emissions from electric utility steam generating units subject to 40 C.F.R. part 60, subpart Da ("EGUs").  This is now the third time the EPA has missed a deadline for promulgating the proposed standard.

As described in more detail here, EPA is required to establish the performance standard under a settlement with the Sierra Club, Natural Resources Defense Council, Environmental Defense Fund and several states.  After missing previous court-imposed deadlines, the EPA set a late January 2012 deadline for itself, which has now passed.  While EPA continues to claim that release of the proposed rule is imminent, there is no clear indication when it will actually be released.  The settlement agreement requires the EPA to publish the final rule by May 26, 2012, a deadline which now will almost certainly be missed given the delays in releasing the proposed rule.

These delays present a double-edged sword for the entities that may be affected by the regulation.  While  businesses are generally not in favor of the imposition of onerous regulations, they also value the ability to plan for the future.  Given the recent barrage of administrative, judicial and legislative actions aimed at developing, changing or halting efforts to regulate air emissions, there is a lot of uncertainty and seeming instability in the regulatory scheme, which presents problems for regulated entities seeking to remain in compliance.

Presumably the EPA is taking so long to propose the EGU NSPS to avoid a train wreck similar to that surrounding the passage of the Boiler MACT rules.  In addition, EPA has indicated that the development of “emissions guidelines” that the states will turn into enforceable standards for existing EGUs pursuant to Section 111(d) of the Clean Air Act (as opposed to federal performance standards that will apply to new and modified units under Section 111(b)) is contributing to the delay because it is a complicated and relatively novel process.  However, there have been some indications from EPA that these emissions guidelines regarding existing EGUs may not even be included in the proposed rule that is expected to come any day now and may be proposed separately at a later date.

 For more information on this or other related environmental law questions, please contact Dan Cory.

Take Warning! Your Spice Cabinet May Contain Pollutants!



Curry powder - delicious spice, or pollutant?

 America beware!  If your spice cabinet is anything like mine, it harbors more than just tasty flavorings to add to your food.  It contains pollutants!  What pollutants, you might ask, does your spice cabinet contain?  Well, according to many insurance policies (possibly even your own homeowners policy), just about any substance under the sun can be classified as a pollutant.

The so-called "absolute pollution exclusion" is one of the most litigated clauses in insurance policies.  In its most common form, it states that the policy excludes coverage for losses caused by "discharge, dispersal, seepage, migration, release or escape of 'pollutants.'"  "Pollutants" are normally defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including vapor, soot, fumes, acids, alkilis, chemicals and waste."  This exclusion first entered policies after congress and the states started passing laws, like the CERCLA or "Superfund" statute, making companies liable for environmental clean up operations.  Insurers claimed they didn't want to have to pay for such expensive operations, but as we'll see, they've recently become quite creative in the application of this exclusion.

The insurance industry generally contends that this scheme is perfectly straightforward.  In, for instance, a first-party property policy, one that claims to cover "all risk of loss," but then excludes certain risks, you look at what caused the loss, and ask "did it result from the discharge, dispersal, seepage, etc. of a pollutant?"  If you're unsure whether a "pollutant" was involved, you just look to the definition.  And here's where things get interesting.  If you read that definition literally, it can encompass anything and everything in the known universe (perhaps excluding dark matter, but I don't know enough about dark matter to analyze whether it's a pollutant, and at any rate, I've never heard of it causing an insured loss.)  For instance, an inkpen is a (1) solid; if someone were to poke me in the eye with it, my eye would be both (2) irritated, and (3) contaminated with a foreign object.  Thus, the injury to my eye would be excluded under a literal reading of the pollution exclusion.  You might say "that's ridiculous!  Even if the definition could be read to include ink pens, no court would ever hold that.  And what the heck does this have to do with spice cabinets?" 

Consider what the Eleventh Circuit Court of Appeals did in Maxine Furs, Inc. v. Auto-Owners Insurance Company, 2011 U.S. App. LEXIS 6706 (11th Cir. Unpublished).  There, a fur shop was located next to an Indian restaurant.  The two businesses shared a ventilation system, and eventually the furs became permeated with the smell of curry powder.  The fur shop had their wares cleaned, and made a claim for the bill to their insurance company, Auto-Owners.  Auto-Owners looked at the pollution exclusion and said, "nope, not covered.  Curry smell is a 'contaminant,' so it's excluded under the pollution exclusion."  My first thought on reading this case was "that's ridiculous!  Even if the definition could be read to include curry powder, no court would ever hold that."  But after the fur shop sued the insurer, both the district court and the court of appeals agreed with the insurer, saying curry smell is a pollutant.  So now we have an exclusion that was originally written to allow insurers to escape paying for the extraction of mercury from the Raritan River being used to exclude coverage for cleaning furs that smell like garam masala. 

Fortunately, most states don't go as far as Alabama in the extent to which they will read the pollution exclusion literally.  Unfortunately, most don't take their own rules of insurance policy construction seriously enough to do with this exclusion what ought to be done: ignore it.  I'll talk about that in another post.  But for now, you may want to consider calling a toxic waste disposal expert the next time you decide to rearrange your spice cabinet.

NRC Downgrades Palisades Nuclear Power Plant

I have been going to my grandma's lake house in Palisades Park in Covert, Michigan my whole life.  Palisades Park is within walking distance of the Palisades nuclear power plant.  Until recently the power plant has operated without major incident.  In each of the last two years, however, the Nuclear Regulatory Commission ("NRC") has downgraded the plant's ranking.

The NRC rates reactors green, white, yellow, and red, in descending order.  Most of the country's reactors are in the highest green category.  At the end of 2011 the plant was downgraded to white and on February 13 the plant was downgraded to yellow because of two violations.  The most serious violation involved an equipment malfunction that a manager said could have killed someone.  The yellow rating requires that the plant undergo increased NRC inspections.  The Palisades plant has 30 days to appeal the decision.  

I'll still go to my grandmother's lake house this summer, but I'll definitely keep an eye on the Palisades plant's status.  For more information, please read the Detroit Free Press' article.  Also, thanks to my aunt Kitzie Connor for forwarding the article.