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“DC Circ. Sends EPA Back To Industrial Boiler Drawing Board”

Law360 Cynthia A. Faur, Peter A. Tomasi

On July 29, 2016, the D.C. Circuit issued a decision in United States Sugar Corporation v. EPA, et al. Among other things, the United States Sugar Corporation panel remanded emission limits for a yet-to-be-determined number of boiler subcategories, a perceived victory for environmental interests that has created substantial uncertainty for owners and operators of industrial boilers.

The 162-page decision covers three consolidated sets of challenges to different U.S. Environmental Protection Agency rulemakings concerning hazardous air-pollutant (HAP) emissions: (1) the major source industrial, commercial and institutional boiler NESHAP (IB MACT) rule, which generally applies to boilers that have the potential to emit more than 10 tons of a single HAP and 25 tons of a combination of HAPs; (2) the area source IB MACT rule, which generally applies to boilers combusting coal, oil biomass or other nonwaste materials that do not meet the major source IB MACT rule emission thresholds; and (3) a related set of HAP standards applicable to commercial industrial solid waste incinerators (CISWIs).

Pollutant-By-Pollutant Approach Upheld

In this decision, the court upheld several key contested elements, including the EPA’s pollutant-by-pollutant approach to setting MACT floors and its use of the upper prediction limit (UPL) to address variability in emissions. Its holding on the appropriateness of the pollutant-by-pollutant approach to establishing MACT floors in particular may have a significant impact on future MACT standards.

The Clean Air Act requires the EPA to set MACT floors for new sources at the level achieved by the best similar unit in a particular subcategory and for existing sources at the level achieved by the best performing 12 percent of similar units in a particular subcategory. In the development of the IB MACT rule, however, there were many instances where the best performing boilers for a particular pollutant did not perform well in controlling emissions of other pollutants. To address this problem, the EPA used a “pollutant-by-pollutant” approach to establish the MACT floors.

Instead of looking at the sources that had the best overall control for the HAPS covered by the IB MACT rule, the EPA reviewed the best performing sources on an individual pollutant basis. For example, in establishing a MACT for particulate matter (PM), the EPA considered the units that had the best control for PM emissions. As a result, for at least two subcategories of boilers, new heavy oil-fired units and existing stoker coal-fired units, there was no single unit that achieved the MACT floor emission levels for all the regulated HAPS.

Industry petitions challenged the EPA’s pollutant-by-pollutant approach, arguing that the plain language of the Clean Air Act required the EPA to identify the best overall units — not the best unit for a control of a particular pollutant. The court, however, found the statute to be ambiguous and that the EPA’s use of the pollutant-by-pollutant approach was reasonable. Accordingly, it deferred to the EPA.

Unspecified Number of MACT Standards Vacated and Remanded to EPA

While the court upheld many elements of the major source and area source IB MACT rules and the CISWI rule, the court remanded several provisions of these rules to the EPA. Of greatest note, the court vacated the currently applicable emission limits in the major source rule for all of the “subcategories” of boilers where the EPA had excluded units that were co-firing less than 90 percent but more than 10 percent of a certain fuel, like coal or biomass. These units were regulated by the EPA under the relevant subcategories, but were not considered when setting the applicable emission limitations because the EPA believed these sources to be dissimilar to boilers that combusted over 90 percent of a particular fuel.

In fact, in the November 2011 revised EPA MACT floor memorandum, the EPA’s consultant, Eastern Research Group Inc., specifically noted that “not all units are designed to fire or are capable of firing different fuels, and the standards were developed in recognition of this fact.”

The court, however, disagreed. It determined that “this disparate treatment makes a difference; several sources excluded from the MACT-floor determination were among the best performing sources (or, in some cases, the single best performing source) in that fuel based subcategory.”

This decision represents the second time the D.C. Circuit has vacated and remanded the EPA’s IB MACT rule. On June 8, 2007, the court vacated and remanded the 2004 version of the IB MACT rule to the EPA because the universe of boilers covered by that rule included units that should have been classified as CISWI units.

In this instance, it at least appears that the remand is more limited. The exact scope of this remand and vacatur, however, is not immediately clear because the specific subcategories remanded were not identified. In fact, a review of the underlying documents in the EPA’s docket for the rulemaking does not clearly disclose which units the agency excluded from the MACT floor determination because of co-firing fuels. The EPA and other interested parties are in the process of reviewing the rulemaking record to determine which subcategories are included in this remand due to exclusion of “higher performing units.”

The court also remanded to the EPA certain other provisions of the rules. These included the exclusion of boilers regulated under the area source IB MACT rule with synthetic HAP limits from the Title V program; the requirement to set emission standards under the CISWI rule for cyclonic burn barrels, the exclusion of burn-off ovens, soil treatment units, and space heaters from treatment as CISWI units; and, finally, the selection of generally available controlled technology standards versus MACT standards for nonmercury metals for area source boilers.

Additionally, the court remanded the EPA’s use of carbon monoxide as a surrogate to achieve reductions in nondioxin and furan organic HAPs. This requirement was remanded without vacatur due to the court’s belief that the EPA would be able to successfully complete this task on a remand.

Looking Forward

While the D.C. Circuit is sending the EPA back to the drawing board once again, the number of categories for with the EPA must redraft its rules will likely be clarified before the agency is required to pick up its pencil. The July 29 decision was stayed by the court until seven days after the disposition of any timely filed rehearing petitions. Reconsideration petitions are due on Sept. 12, 2016.

It remains to be seen whether any of the parties to the challenges (including the EPA) will seek reconsideration of the June 29 decision. However, the court’s decision to vacate a yet unknown number of emission limitations may prompt such a request based on the claim that the court improperly substituted its judgment for the EPA’s technical expertise.