Environmental Business Alert
Fifth Circuit Upholds Texas Clean Air Act Flexible Permit Program
On August 13, 2012, the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) issued its opinion upholding the Texas Flexible Permit Program. For now, the decision in Texas v. U.S. Environmental Protection Agency (EPA), settles the issue of whether 140 facility permits for minor emissions sources are legal. EPA had disapproved the program on grounds that the language in the Texas State Implementation Plan (SIP) was ambiguous and potentially provided facilities too much flexibility in meeting the Clean Air Act (CAA or Act) National Ambient Air Quality Standards (NAAQS). The court found that EPA's disapproval, which was sixteen years late, was arbitrary and capricious and in excess of statutory authority. "[T]he EPA based its disapproval on demands for language and program features of the EPA's choosing, without basis in the Clean Air Act or its implementing regulations." The Fifth Circuit noted that Agency interpretations of state law do not require deference, and so rejected EPA's interpretation of the Texas regulatory language. The court also held that Texas has discretion under the CAA to require emissions monitoring and calculation of emissions caps on a case-by-case basis rather than taking a one-size-fits all approach.
Sixth Circuit Limits EPA Aggregation of Major Sources
The U.S. Court of Appeals for the Sixth Circuit held that a natural gas sweetening plant and production wells located up to 8 miles away and connected solely via pipeline do not constitute a single major stationary source under Title V of the CAA. Summit Petroleum Corp. v. EPA addressed an EPA Region 5 effort to utilize the "functional interrelationship" of multiple and distant emissions sources when determining whether these sources constitute a single stationary source. According to 40 C.F.R. § 71.2, EPA will address multiple emissions sources as a single stationary source if they: (1) are under common control; (2) "are located on one or more contiguous or adjacent properties"; and (3) belong to the same major industrial grouping. In its August 7, 2012, opinion, the court found that the term "adjacent" was unambiguous in this context, and therefore rejected EPA's functional interrelationship approach. On remand, the court directed EPA to use the common definition of adjacent in making its major source determination, meaning "physically proximate."
Fifth Circuit Rules on Texas SIP Affirmative Defenses for Start-up, Shutdown and Malfunction Events
On July 30, 2012, the Fifth Circuit in Luminant Generation Co. v. EPA upheld a provision of the Texas SIP that allows a facility to use an affirmative defense for excess emissions during unplanned startup, shutdown or malfunction (SSM) events, provided the emissions do not exceed the overall NAAQS. EPA had approved the provision "because it is narrowly tailored, does not interfere with the Act's requirement that a SIP's emission limitations are continuous or with the state's ability to enforce emission limitations, and does not interfere with any other applicable requirement of the Act, including the attainment of NAAQS." Planned SSM events do not appear to meet these criteria as the court upheld EPA's rejection of an affirmative defense for such events.
EPA Promulgates Final Amendments to Oil and Natural Gas NESHAP and NSPS
EPA has promulgated amendments to the National Emissions Standards for Hazardous Air Pollutants (NESHAPs) for oil and natural gas production facilities (40 C.F.R. part 63, subpart HH) and natural gas transmission and storage facilities (40 C.F.R. part 63, subpart HHH). The August 16, 2012 final rule also adopts New Source Performance Standards (NSPSs) for sources within the crude oil and natural gas production, processing, storage, and distribution sectors (40 C.F.R. part 60, subpart OOOO). The rulemaking limits emissions of volatile organic compounds, sulfur dioxide and hazardous air pollutants from specific operations. It received considerable attention, in part, because it imposes the first Federal emission controls on hydraulic fracturing operations. While some standards retain the proposed retroactive compliance date of August 23, 2011, EPA provided one-year transition time frames for many of the new requirements.
EPA Fuels Program Requires Electronic Reporting
Beginning August 31, 2012, all reports required under the Fuels Regulations at 40 C.F.R. part 80 must be submitted electronically through EPA's Central Data Exchange (CDX). The July 27, 2012, notice indicates that CDX must be used for reports relating to reformulated gasoline, gasoline benzene, sulfur, and toxics content, diesel sulfur limits, additives, and renewable fuel. In addition, facilities producing coal-based liquid fuels and petroleum products also must use CDX to submit greenhouse gas reports required under 40 C.F.R. part 98, subparts LL and MM. Companies should register with CDX immediately if they have not already done so, as the registration process can take up to 5 to 10 days.