D.C. Circuit Vacates Clean Air Act Monitoring Rule

Late last month, the U.S. Court of Appeals for the District of Columbia vacated an EPA rule that prohibited state and local air permitting authorities from imposing additional monitoring requirements in permits issued under Title V of the Clean Air Act. The court’s decision in Sierra Club v. Environmental Protection Agency[1] is the latest installment in a decade-long dispute over Title V’s requirement that all operational permits “set … forth monitoring … requirements to assure compliance with the permit terms and conditions.”[2] In 2006, EPA issued a rule interpreting its regulations as prohibiting state and local authorities from including additional monitoring requirements in Title V permits. In a 2-1 decision, the D.C. Circuit disagreed, vacating EPA’s rule and holding that Title V’s plain language allows state and local permitting authorities to impose supplemental monitoring requirements when necessary to “assure compliance” with emission limitations.

The court’s decision will likely have wide-ranging impacts due to the vast number of outstanding Title V permits. Since Title V was enacted in 1990, permitting authorities have issued over 16,000 operational permits – many of which must be renewed every five years.[3] New and renewed Title V operational permits for power plants, oil refineries, and myriad of other major stationary emission sources may now include supplemental monitoring and reporting requirements imposed by state and local permitting authorities. Failure to comply with supplemental monitoring, or supplemental monitoring that evinces permit exceedances, may potentially result in governmental or citizen enforcement actions. In addition, newly imposed monitoring obligations could mean increased environmental compliance costs for facilities with major emission sources regulated under Title V.

Background

In 1990, Congress added Title V to the Clean Air Act in an effort to guide regulated entities through the statute’s bedeviling maze of federal and state regulations. Prior to the adoption of Title V, emission limits and monitoring requirements for stationary sources were scattered throughout the Clean Air Act’s various programs, resulting in a confusing array of multiple permits covering all the major emission sources at a facility. Title V, however, modeled after the Clean Water Act’s NPDES permitting program, created a national permitting program under which major stationary sources obtained an operational permit that included, in a single document, all applicable emission limits and monitoring requirements, among other permit terms and conditions.

Consistent with other provisions in the Clean Air Act, Title V establishes a framework, often referred to as “cooperative federalism,” under which Congress required EPA to establish the “minimum elements” for permits, which are codified in EPA’s Part 70 regulations.[4] State and local permitting authorities, on the other hand, are charged with issuing permits consistent with state programs approved by EPA.[5]

With respect to monitoring, the Clean Air Act requires that “each permit issued under [Title V] shall set forth … monitoring … requirements to assure compliance with permit terms and conditions.”[6] In other words, the monitoring requirements in a Title V permit must be sufficient to ensure that the permitted facility is complying with the emission requirements set forth in the permit. The requirement that monitoring “assure[s] compliance” becomes complicated when, for example, a Title V permit imposes daily emission limits but require only annual monitoring. Under such circumstances, may a permitting authority establish more frequent or more rigorous monitoring requirements in a Title V permit in order to “assure compliance”? That was precisely the issue before the D.C. Circuit in Sierra Club v. EPA.

EPA’s position on whether permitting authorities could supplement monitoring requirements has shifted over time. In 1998, EPA issued a guidance document that interpreted the Part 70 regulations, specifically 40 C.F.R. § 70.6(a)(3)(i)(B), as allowing state or local permitting authorities to supplement periodic monitoring in order to “assure compliance.”[7] The D.C. Circuit, however, vacated that guidance in 2000 on procedural grounds.[8] In 2002, EPA turned to another provision in the Part 70 regulations, proposing an interpretation of 40 C.F.R. § 70.6(c)(1) that would allow permitting authorities to impose supplemental monitoring requirements.[9] EPA subsequently reversed course, and settled an industry lawsuit challenging its proposed interpretation of 40 C.F.R. § 70.6(c)(1).[10] As part of the settlement, EPA proposed an interpretation of 40 C.F.R. § 70.6(c)(1) that would prohibit monitoring supplementation by state and local permitting authorities.[11]

Analysis

In 2006, EPA issued the rule at dispute in Sierra Club v. EPA, which interpreted the Part 70 regulations as not authorizing monitoring supplementation by state and local permitting authorities.[12] In a 2-1 split opinion, the D.C Circuit disagreed with EPA’s interpretation. Writing for the majority, Circuit Judge Thomas Griffith first noted that Title V provided EPA with two ways to address monitoring requirements that were insufficient to “assure compliance.” First, EPA could initiate a rulemaking to address all inadequate monitoring requirements. While EPA has initiated a programmatic review of monitoring requirements, that review is ongoing. Alternately, EPA could authorize permitting authorities to supplement monitoring requirements in Title V operating permits on a case-by-case basis. EPA’s 2006 rule, however, forbade such supplementation. As a result, the court held that EPA’s 2006 rule was inconsistent with Title V’s plain language, which requires that “[e]ach permit … shall set forth … monitoring … requirements to assure compliance.”[13]

EPA advanced three arguments in support of its interpretation of the Title V monitoring provisions. First, the agency asserted that, taken as a whole, the Clean Air Act only authorizes the EPA to impose new monitoring requirements in Title V permits and not state or local permitting authorities. The court dispensed with this argument by recognizing that when deficiencies exist in monitoring obligations “state and local authorities must be allowed to cure those monitoring requirements before including them in permits.”[14] Next EPA argued that case-by-case supplementation by state and local permitting authorities would be imprudent, as it would potentially result in conflicting requirements, and that EPA’s ongoing programmatic approach will result in greater efficiency, consistency, and public accountability. The court, however, held that such policy arguments could not overcome the statute’s plain language: “when the statute’s language is plain,” the court held, “the sole function of the courts – at least where the disposition by the text is not absurd – is to enforce it according to its terms.”[15] Last, EPA claimed that the D.C. Circuit’s decision in Appalachian Power[16] suggested that state and local permitting authorities were not authorized under the Clean Air Act to impose additional monitoring requirements in Title V permits. In a single paragraph the court swiftly rejected this argument by noting that “[w]e had no occasion in Appalachian Power to determine, as we must here, whether the Act allows supplementation by authorities of inadequate monitoring requirements.”[17]

In the event that the court upheld EPA’s interpretation of the Part 70 regulations as prohibiting supplemental monitoring, the petitioners also raised substantive challenges the specific monitoring requirements in EPA’s Part 70 regulations and requested that the court vacate them. The court, however, upheld the rules on the grounds that “their monitoring provisions are consistent with the Act because they can be easily and reasonably read to allow state and local permitting authorities to supplement inadequate monitoring requirements in each permit issued.”[18]

Circuit Judge Brett Kavanaugh dissented and would have deferred to EPA’s determination that “pre-existing monitoring requirements (for example, in the SIP, NSPS and NESHAP) are to ‘assure compliance’ with emissions limits and that state and local permitting authorities may not add new periodic monitoring requirements when issuing permits.”[19] Accordingly, Judge Kavanaugh would have upheld the EPA’s 2006 rule and rejected the petitioners’ challenge.

For more information on the implications of the D.C. Circuit’s decision on your business, please contact Dustin Till or any other member of Marten Law Group’s air quality practice.