What’s In The Air This Year? Here Is What You Need To Know About The Clean Air Act In 2014

This year promises many important developments with respect to the U.S. Environmental Protection Agency's implementation and enforcement of the federal Clean Air Act. Here are some major enforcement trends and regulatory issues that regulated parties may want to monitor in 2014.

Air Enforcement: Five Things to Watch as EPA's Old Priorities Confront New Realities

The U.S. Environmental Protection Agency's (EPA) national air enforcement priorities for 2014 are the same as last year's—the focus is on reducing emissions from coal-fired power plants, major industrial operations and oil and gas exploration. But the agency has less money, has suffered some important legal defeats, especially with regard to new source review (NSR) enforcement, and is still grappling with the implications of Sackett v. EPA, a 2012 United States Supreme Court decision that upended the agency's understanding of when its actions are subject to judicial review. As EPA adjusts to its new budgetary and legal circumstances, regulated parties should closely monitor the following five enforcement-related developments:

1. Notices of Violation—Can They Now Be Challenged in Court?

   EPA has long argued that its notices of violation (NOVs) are not "final" actions subject to judicial review. But the Supreme Court's decision in Sackett v. EPA, 132 S. Ct. 1367 (2012), has cast some doubt on the agency's position and the U.S. Court of Appeals for the Fifth Circuit is expected to address the finality of Clean Air Act NOVs later this year in Luminant Generation Company, L.L.C. v. EPA, No. 12-60694. In these circumstances, companies receiving an NOV should carefully consider whether the NOV qualifies as "final" under the test described in Sackett and Bennett v. Spear, 520 U.S. 154 (1997), and should carefully evaluate the pros and cons of filing a judicial challenge to the NOV.

2. "Next Gen" Compliance—What Does it Mean as a Practical Matter?

   EPA's Next Generation Compliance initiative seeks to promote environmental compliance through four principal measures: simpler regulations, featuring built-in compliance incentives and fewer exceptions; advanced monitoring devices; electronic data reporting; and greater disclosure of environmental data to the general public. From an air enforcement perspective, the most important current development is that EPA is increasingly using new monitoring technologies—such as infrared cameras—to identify potential air violations.

   Infrared cameras can detect otherwise invisible emissions from storage vessels and process equipment, as well as insufficient combustion at pollution control flares. But those hidden emissions do not necessarily constitute a violation, even when EPA casts them as evidence of a failure to comply with a "general duty" to follow good engineering practices and to minimize air emissions. Companies accused of regulatory violations based on EPA's use of new monitoring devices should consult counsel about the potential defenses to such allegations—the defenses are often quite strong. But they should also be aware that the new devices often detect leaking product, which means that working with EPA to fix the alleged problems can often be beneficial, whether or not EPA can prove a violation. Companies facing enforcement actions can also sometimes reduce their penalties by agreeing to install advanced monitoring technologies as part of a settlement, although any company that goes that route should be careful to understand exactly how the resulting data will be used to measure compliance going forward.

3. Administrative Settlements—They Become More Attractive in Times of Budget Cuts

   EPA generally has a choice whether to resolve its enforcement actions in a judicial consent decree or in an administrative settlement agreement. Consent...