Boiler MACT: Now What?

January 13, 2012

In the latest chapter of a story that has more twists than a Hitchcock movie, on Monday, Jan. 9, 2012, the U.S. District Court for the District of Columbia vacated EPA’s administrative stay of the industrial boiler MACT and solid waste incinerator NSPS rules, making them effective immediately. (Sierra Club v. Jackson, 2012 U.S. Dist. LEXIS 2457) While the court’s decision is grounded in standard principles of administrative law, the outcome of requiring expensive steps to comply with rules that are both simultaneously under agency reconsideration and judicial review presents complex compliance questions. While the final compliance date is more than two years away, the implications for companies and public entities that need to plan and construct complex control systems are significant.

The two rules create standards for limiting air emissions from commercial and industrial boilers and from commercial and industrial solid waste incinerator units. As a result of a suit by the Sierra Club, the U.S. Court of Appeals for the D.C. Circuit ordered EPA to issue the rules in 2006. EPA obtained a number of extensions but exhausted the court’s patience and was ordered to issue the rules by Feb. 11, 2011. EPA complied, but on March 21, EPA stated that it would reconsider the rules it had just issued. Numerous environmental and industry groups then appealed the rules to the D.C. Circuit. Court of Appeals On May 18, 2011, two days before the rules were to go into effect, EPA issued a Delay Notice under the Administrative Procedure Act (APA), staying the rules until the appellate court completed its review. While the EPA based its stay on the pending judicial review, its main goal was to delay any compliance burdens until it finalized its own reconsidered rules. The Sierra Club immediately challenged the Delay Notice in the D.C. District Court.

The court held that while the APA authorized EPA to stay rules under judicial review, its decision to do so here was arbitrary and capricious. The court noted that EPA failed to apply its usual four part test for determining whether a stay was warranted and that its stated reasons related to its own reconsideration and not to the judicial review. The court considered whether vacating the stay was appropriate given the confusion it would cause but determined that the EPA’s lack of basis for the stay gave it no choice.

The removal of the stay adds yet another element to an already confusing situation. The Clean Air Act specifically mandates that sources must comply with MACT standards within three years of their effective date. In voiding the stay with respect to the boiler MACT, the court restored the original effective date of May 20, 2013. (The compliance date for the incinerator NSPS is several years longer: three years from EPA’s approval of state implementation plans or Feb. 21, 2016, whichever is earlier.) While this may seem like plenty of time, it may not actually be sufficient for companies and public entities such as regional solid waste authorities or municipalities to plan, design, budget, finance, permit and construct controls required by the standard. Public entities in particular face byzantine and time-consuming project feasibility and procurement/financing issues, which will make the truncated schedule a challenge. Companies with strict corporate compliance standards may not be able to delay initiating work beyond a time that allows them to achieve compliance by the deadline and public companies may face tricky SEC reporting issues in the meantime.

Despite the court’s restart of the compliance clock, it is not remotely clear that the current rules will remain in place. They may be modified either as a result of EPA’s reconsideration or as a result of judicial review. For example, through reconsideration EPA may change some of the strict emission limits to work standards that will not require costly controls. EPA intends to announce its reconsidered proposed rules in April 2012 and intends to issue final rules by the fall. The court is expected to rule in late fall 2012 and may make findings regarding the existing rules that both modify those rules and presage modification of the EPA’s reconsidered rules.

All of this activity leaves companies and public entities with hardly any guidance as what the rules are and when these issues will be resolved. Moving forward with plans or projects will require careful assessment of their current obligations and future requirements.

McGuireWoods LLP Clean Air Act Team

McGuireWoods LLP is a full service law firm with a focused practice in climate change and Clean Air Act matters. For more information on the final light duty vehicle rule or EPA’s initiatives to regulate greenhouse gases, please contact the authors, or any member of our Clean Air Act team.