• The reliability portions of the new Utility MACT rule, including the Presidential Memorandum and EPA’s Enforcement policy statement on electric reliability;
• What roles FERC, NERC, EPA, Regional Transmission Organizations, State Commissions, and Electric Utilities will have in this new regulatory scheme;
• The challenges in minimizing civil exposure under the Clean Air Act without creating exposure under the Federal Power Act and vice versa; 
• The CSAPR stay and what it means for the future of CSAPR and UMACT; and
• What utilities can do now to manage this new challenge.

Click here to find the slide presentation as well as a recording of the webinar.

Late in the afternoon on December 30, the United States Court of Appeals for the D.C. Circuit issued a stay of the Cross-State Air Pollution Rule (“CSAPR”).  Acting in response to 19 motions filed by various state and utility parties, the court ruled that movants had met the standards for obtaining a stay, which include likelihood of success on the merits and the existence of concrete and imminent irreparable injury.  A stay is an “extraordinary remedy” and is rarely granted.  At the same time, the Court indicated that it intended to proceed to, and resolve, the merits of the case expeditiously.  It asked the parties to submit briefing schedules and formats that would allow the case to be heard by April.  A decision is expected before the end of the year, possibly by mid-year.

The Court further ordered that EPA continue administering the Clean Air Interstate Rule (“CAIR”) pending final disposition of the case.  As a result, EPA will have to reinstate CAIR allowances, at least for 2012.  In anticipation of the transition from CAIR to CSAPR, EPA depopulated all CAIR allowances of vintage 2012 and later this past October.  Because sources have to surrender CAIR allowances for the 2011 compliance periods this coming March (regardless of the outcome of the stay), the 2011 vintage CAIR allowances and earlier (including the banks) were left in place.  In light of the stay, EPA will need to repopulate the facility accounts with 2012 CAIR allowances.  It seems unlikely EPA will deposit 2013 vintage CAIR allowances, expecting the merits to be resolved in 2012.

In its motion for stay, EME Homer City claimed the depopulation of 2012 and later vintage CAIR allowances constituted imminent harm.  In its response, EPA explained that if a stay were granted it would simply repopulate the CAIR accounts.  Specifically, EPA stated: “The fact that CAIR allowances for 2012 and beyond will be terminated on October 14 is a red herring.  CAIR allowances are no longer relevant because they have been replaced by the Transport Rule.  If the Transport Rule were to be stayed or vacated by the Court, EPA would reinstate the CAIR allowances.” 

It is uncertain what EPA will do with the CSAPR allowances. It has populated accounts with 2012 vintage CSAPR allowances for most facilities (86%), and for several states (which have not indicated an interest in adjusting allocations) it has populated accounts with 2013 vintage CSAPR allowances.  What EPA’s next step will be as to CSAPR allowances and CSAPR trading is still to be determined.

Moreover, it should not be assumed that issuance of the stay means the Court will ultimately overturn CSAPR on the merits.  Even though the Court found that movants case has a likelihood of success on the merits, the same Court previously stayed the NOx SIP Call, but then upheld the rule on the merits.

In a related move, EPA on December 30 published in the Federal Register a proposal under which electric generating units located in states that are subject to CSAPR would be deemed to comply with best available retrofit technology (“BART”) requirements for regional haze.  EPA previously determined that EGUs subject to CAIR would be deemed in compliance with BART; however, that determination was going to be obsolete with the sunsetting of CAIR on December 31 and its replacement with CSAPR.  The court’s mandate that EPA reinstate CAIR suggests that EPA’s “CAIR-equals-BART” policy would also remain in effect pending the outcome of the CSAPR litigation.  In the short term, it seems likely that EPA will take comment on its December 30 proposal and then hold off making a final decision until the Court acts on the merits of the CSAPR litigation.

At the webinar, Troutman Sanders partners Peter Glaser and Daniel Larcamp will discuss the following:

• The reliability portions of the new Utility MACT rule, including the Presidential Memorandum and EPA’s Enforcement policy statement on electric reliability;
• What roles FERC, NERC, EPA, Regional Transmission Organizations, State Commissions, and Electric Utilities will have in this new regulatory scheme;
• The challenges in minimizing civil exposure under the Clean Air Act without creating exposure under the Federal Power Act and vice versa;
• The CSAPR stay and what it means for the future of CSAPR and UMACT; and
• What utilities can do now to manage this new challenge.

If you would like to participate in the webinar, please click here for more information.

In responding to comments, EPA rejected claims by the utilities and the state of Oklahoma that the FIP represents an unauthorized federal takeover of Oklahoma’s regional haze program, arguing that such action was necessary in light of Oklahoma’s BART analysis, which EPA characterized as “unreasoned and unjustified.”  At the heart of the dispute between Oklahoma and EPA Region 6 over the implementation of the regional haze program is whether pollution controls known as dry scrubbers are cost-effective at the six plants.  In a regional haze SIP revision submitted to EPA on February 19, 2010, Oklahoma determined that dry scrubbers were unnecessarily expensive, particularly since the scrubbers would only result in a maximum visibility improvement of between 0.30 and 1.19 deciviews per plant at any Class I area, a level of improvement that even EPA admits is at or below the limit of what humans can perceive. 

The preamble to EPA’s final FIP recognizes but mostly rejects a variety of legal and technical arguments raised by commenters.  Although EPA revised its cost estimates upward somewhat in light of comments and also agreed to allow five years for compliance instead of three, the ultimate conclusion of EPA’s BART analysis remains that the six Oklahoma units should be required to achieve 0.06 lb/mmBtu, the level of emissions reduction assumed to be achievable with dry scrubbers.  EPA’s FIP does not actually require the Oklahoma utilities to install dry scrubbers, but instead repeatedly notes that the required emission reductions could also be achieved through the use of wet scrubbers or by switching the units to natural gas. 

The final FIP will become effective 30 days after publication in the Federal Register, expected within a month.  Oklahoma has promised to file suit on the final FIP, claiming that EPA’s actions fail to follow the proper procedures for adopting a FIP and unnecessarily usurp the authority granted to the state of Oklahoma by the Clean Air Act regional haze provisions.

EPA’s first Industrial Boiler MACT, adopted in 2005, was vacated by the U.S. Circuit Court of Appeals for the D.C. Circuit in 2007, which led to the re-proposal of the rule on June 4, 2010.  Amid an outcry from industry claiming the limits set forth in the 2010 proposal were simply unachievable, EPA promised to relax the rule somewhat before releasing it in final form.  Because a court-ordered consent decree established a specific deadline for releasing the final rule, EPA asked the court for more time to make the necessary revisions, but the court denied EPA’s request, forcing the agency to sign the final rule in February.  Although the agency claimed its final rule was sufficient and defensible as officially published in March, the agency immediately began proceedings to reconsider the rule and issued an administrative stay in May to delay its effectiveness.

The proposed “reconsideration rule” released at the end of last week contains a new suite of hazardous air pollutant emission limits that is entirely different from all prior versions of the rule.  Still exempt from those numeric emission limits are natural gas units, units with a heat input capacity of less than 10 mmBtu/hr, and “limited use” units that operate less than 876 hours per year, but all other boilers now face a new set of emissions limitations, some that became more stringent, others that became less stringent. 

Perhaps the most notable change is the elimination of a numeric emission limit for dioxins/furans.  In the preamble to the reconsideration rule proposal, EPA recognized that 55 percent of the dioxin/furan data it has obtained is below detection limits and conceded that almost all of the data is below the limit at which measurements are expected to be reliably accurate.  To avoid requiring source owners to demonstrate compliance with an emission limit at a level that cannot be accurately measured with existing technology, EPA chose instead to impose work practice standards to minimize dioxin/furan emissions, which consist of a periodic tune-up to ensure good combustion is achieved and maintained.

The proposed reconsideration rule continues to impose strict numeric emission limits for the four other pollutants covered by the last MACT rule, namely mercury (Hg), hydrogen chloride (HCl), particulate matter (PM), and carbon monoxide (CO).  PM and CO are not hazardous air pollutants, but function as surrogates for metallic and organic pollutants, respectively.  To establish MACT limits for these four pollutants, EPA divided them into two categories.  Characterizing Hg and HCl as “fuel-based” pollutants, since the emissions of those pollutants are driven primarily by the pollutant content of the fuel, EPA has proposed one Hg limit and one HCl limit each for solid fuels and liquid fuels, without distinguishing between boiler technologies.  In contrast, EPA characterized PM and CO as “combustion-based” pollutants because the emissions of those pollutants are more significantly affected by the design of the unit.  To account for the different emission characteristics of different combustion technologies, EPA has proposed separate emission limits for fourteen different types of boilers likely to be covered by the rule, including three different types of coal units, two different types of liquid fuel units, and seven different types of biomass units, resulting in a greater number of subcategories than any prior industrial boiler MACT rule or proposal.  Since the Clean Air Act requires more stringent emission limits for new units, EPA has also proposed a completely different set of emission limits for new units for all pollutants and subcategories.

The revised emission limits EPA has proposed do not exhibit any clear trend or pattern.  The new limits are based on a different set of data than previous boiler MACT rules – EPA received additional data after the March 2011 final rule and also conducted an additional quality assurance review to eliminate poor quality data.  EPA also revised its calculation methodology somewhat to take into account concerns related to measurement accuracy and detection levels as well.  The result is a completely different set of limits, many of which are as stringent as ever.  For example, most of the Hg and CO emission limits proposed in EPA’s reconsideration rule are actually more stringent than the March 2011 version of the rule.  The PM limits, on the other hand, are less stringent for most categories except some biomass stokers. 

EPA has also included some additional flexibility to the rule by allowing a variety of alternative emissions limits and compliance demonstration methods.  For instance, the reconsideration rule proposes an alternative “total selected metals” limit that can be used in place of the PM limit, a different CO limit for units with a CO continuous monitor, and an “output-based” alternative limits as well.  In addition, a facility with more than one boiler can choose to average the emissions of the boilers together, so long as the source as a whole remains at less than 90 percent of the standard.  EPA also abandoned its plans to require all boilers to employ continuous monitors for PM, but has proposed an option to allow sources to utility continuous monitors for Hg if they prefer.

The reconsideration rule also revises the compliance deadlines – existing units will have three years from the publication of the final reconsideration rule to comply.  EPA explained in its preamble that the deadline extension was justified in part by the fact that utility units will soon become subject to similar MACT requirements, which could compete for limited pollution control vendor resources.  However, EPA has decided not to change the “proposal date” of June 4, 2010, which is the critical date for determining whether an industrial boiler is considered “new” or “existing.”  Because EPA is continuing to promise a final reconsideration rule in April 2012, the compliance deadline for most existing sources will be June 2015, unless they can qualify for a one-year extension.    

Along with its proposed industrial boiler MACT reconsideration rule, EPA has also proposed various revisions and clarifications for the three other related rules, including the “area source” industrial boiler MACT (which applies to boilers at smaller facilities), MACT rules for incinerators that burn solid waste, and a rule to re-define the term “solid waste” to help distinguish between boilers and incinerators that burn secondary industrial materials.  EPA will take comment on all four proposed rules for 60 days from the publication of the rule in the federal register, expected within the month.