Clean Air Act New Source Review: Could the D.C. Circuit Deliver a Major Surprise?

By Richard G. Stoll, Esq., and Leah M. Krider, Esq.*

Reprinted with Permission of Andrews Publications, a West business with a copyright symbol 2004.

"New source review" issues under the Clean Air Act have spawned rough-and-tumble regulatory, judicial and legislative battles in recent years. We focus on the judicial front in this article.

Federal courts are playing a significant role in the NSR debate in two ways: federal district courts have issued decisions in recent NSR enforcement cases, and the U.S. Court of Appeals for the D.C. Circuit is now undertaking judicial review of the Environmental Protection Agency's recent "NSR reform" regulations. The D.C. Circuit process is likely to have a more significant and lasting impact, as we explain below.

Background

"New source review" is a misnomer because NSR applies not only to truly new sources, but also to certain types of modifications at existing sources. Attempts to delineate which types of changes at an existing facility would constitute a "modification" triggering NSR have created the most controversy.

We assume the reader understands the basic impacts of a determination that facility changes trigger NSR. Suffice it to say that usually a facility owner wants to avoid NSR because plans for the changes could be substantially delayed or even prohibited, and costs can be greatly increased. Those who are more concerned about possible increases in air emissions in an area and/or who are interested in frustrating a facility's plans want to see NSR triggered.

Major tensions are at play from a legal/policy perspective. An aggressive approach (subjecting more types of changes to NSR) may limit emission increases in an area more effectively, but with great costs and disruptions.

On the other hand, numerous Clean Air Act provisions operate independently of NSR to protect public health and welfare. The current thinking by some at EPA, in fact, is that subjecting fewer types of changes to NSR will provide incentives for modernization and ultimately result in national air quality improvements.

Not surprisingly, environmental groups favor a more aggressive approach and industry groups favor a less aggressive approach. Even less surprisingly, EPA has always been somewhere between environmentalists and industry, although positions taken in the Clinton administration were more aggressive than positions taken in the Bush administration (at least in new rules).

Why Issues Have Heated Up

EPA has issued rules, guidances and case-by-case determinations over the years on the "modification" issue. But until the last few years, the noise level has remained relatively low. The current controversies have been sparked by two developments.

First, EPA in the late 1990s began bringing more enforcement cases and taking more aggressive positions against facilities that had made changes without seeking an NSR permit. In this litigation, sources have argued on various grounds that the change did not trigger NSR. In the federal courts so far, EPA has won on some issues and lost on others. We provide a brief summary below.

Second, EPA is engaging in a "NSR reform" process in attempts to make fundamental changes to long-standing NSR interpretations and guidances through rulemaking. The agency has issued final regulations in two phases (Dec. 31, 2002, and Oct. 27, 2003). EPA's new regulations provide both much greater specificity and a major turn in direction on the most controversial issues. This NSR reform effort could accordingly effectively preempt much of the recent district court case law.

This preemption could occur for two reasons. First, most disputes in the district court litigation have arisen over the meaning of vague regulatory provisions (such as an exclusion from NSR for "routine maintenance"); whenever EPA specifies its interpretations in detail in new regulations, whatever a district judge may have written about the meaning of superseded regulations becomes much less relevant.

Second, once EPA enunciates positions in details through regulations, those regulations become judicially reviewable exclusively in the D.C. Circuit. The regulations' validity cannot be challenged in...