Newsletters

Environment June 2008

U.S. EPA’s Final PM2.5 Implementation Rule Brings Changes to New Source Review Permitting

By Andy Bowman, Chair, Environmental Law Department, Bingham McHale LLP

On May 8, 2008, the U.S. EPA issued final rules amending the New Source Review (“NSR”) permitting program for particulate matter less than 2.5 micrometers in diameter (“PM2.5”) known as “fine particulates.” The final rule was published at 73 Federal Register 28321 on May 16, 2008. The new rules will become effective on July 15, 2008.

This rule, along with a rule issued on April 24, 2007 and another rule proposed on September 21, 2007 comprise the framework for the review and issuance of preconstruction permits to meet the National Ambient Air Quality Standard (“NAAQS”) for PM2.5 which was initially established in 1997 and revised in 2006. PM2.5 attainment and nonattainment designations for specific areas became effective April 5, 2005.

When the PM2.5 NAAQS was established in 1997, the U.S. EPA recognized that technology to calculate, model and monitor PM2.5 emissions was lacking. As a result U.S. EPA issued guidance allowing States to use PM10 as a surrogate for PM2.5 until these difficulties were resolved. U.S. EPA issued further guidance in 2005 confirming that PM10 should continue to serve as a surrogate for PM2.5 until PM2.5 NSR regulations were issued. The May 8, 2008 final rule addresses the use of PM10 as a surrogate for PM2.5 and establishes several key elements needed to implement the PM2.5 NSR program:

• Major and minor NSR permits must address direct PM2.5 emissions as well as PM2.5 precursor pollutants.
  
  
• Sulfer dioxide (“SO2”) must be regulated as a PM2.5 precursor.
• Nitrogen oxides (“NOx”) must be regulated as a PM2.5 precursor unless a State demonstrates NOx is not a significant contributor to the formation of PM2.5 for an area.
• Volatile organic compounds (“VOC”) and ammonia are not regulated as PM2.5 precursors unless a State demonstrates VOC or ammonia is a significant contributor to PM2.5 formation in an area.
  
  
• A new source located in an attainment area is considered a major source for Prevention of Significant Deterioration (“PSD”) permit program purposes if it is one of 28 listed source categories with potential emissions of 100 tons or more per year of a regulated NSR pollutant, including a PM2.5 precursor, or 250 tons or more per year of a regulated NSR pollutant, including a PM2.5 precursor, if it is a non-listed source. A new source in a nonattainment area is a major source if its potential emissions of a regulated NSR pollutant, including a PM2.5 precursor, are 100 tons or more per year.
  
  
• An existing source making modifications is subject to NSR if the modification results in a significant emissions rate, defined as:
  • Direct PM2.5 – 10 tpy
  • SO2 precursor – 40 tpy
  • VOC precursor – 40 tpy (if regulated)
  • Ammonia precursor – as set by State
    
    
• U.S. EPA will not require States to include condensable PM when making applicability determinations or establishing permit emission limits for PM, PM10 or PM2.5 in PSD permits or PM10 or PM2.5 in nonattainment NSR (“NA NSR”) permits during a transition period ending on January 1, 2011 (or an early date established in an upcoming rulemaking on PM2.5 test methods).
  
  
• States are not prohibited from setting permit limits that include condensable PM2.5 if the State has developed supporting technical information and test methods to evaluate condensable PM2.5.
  
  
• Compliance with PM10 or PM2.5 limits in permits issued prior to January 1, 2011 shall not be based on quantification of condensable PM unless specifically required by the permit or State Implementation Plan (“SIP”).
  
  
• The final rule allows interpollutant trading under nonattainment NA NSR programs on a regional or state-wide basis, but precludes such trading on a permit-by-permit basis.
  
  
• Offset trading allows direct PM2.5 emissions reductions to offset precursor emissions increases; one precursor to offset emissions increases of another precursor; and precursor emissions to offset direct PM2.5 emissions increases.
  
  
• Indiana will have until May 16, 2011 to adopt amendments to its PSD permit rules and submit a revised SIP to U.S. EPA.
  
  
• During the SIP amendment process, Indiana may continue to use PM10 as a surrogate for PM2.5 in its PSD program.
  
  
• Indiana is not required to regulate SO2 or NOx as PM2.5 precursors in its PSD program until the SIP is revised.
  
  
• As of July 15, 2008, Indiana will no longer be allowed to use PM10 as a surrogate for PM2.5 in its NA NSR program. Permits in nonattainment areas will be issued pursuant to 40 CFR Part 51, Appendix S, until Indiana revises its SIP to incorporate the new NA NSR regulations for PM2.5.
  
  
• As of July 15, 2008 SO2 will be regulated as a PM2.5 precursor in all nonattainment areas for PM2.5 (Indiana has 17 PM2.5 nonattainment areas).
  
  
• NOx will not be regulated as a PM2.5 precursor in nonattainment areas until the SIP is revised.

Additional information is available at www.epa.gov/nsr.

Fourteen States, Two Cities, and Five Environmental Health Groups Challenge U.S. EPA’s Revised Ozone Standards

By Jennifer K. Thompson, Partner, Environmental Law Department, Bingham McHale LLP

On May 27, 2008 two separate groups filed Petitions For Review of the United States Environmental Protection Agency’s (“U.S. EPA”) National Ambient Air Quality Standards (“NAAQS”) for Ozone (73 Fed. Reg. 16436 (March 27, 2008) with the D.C. Circuit Court of Appeals demanding stricter standards. One group consists of the following fourteen states and two cities: New York; California; Connecticut; Delaware; Illinois; Maine; Maryland; Massachusetts; New Hampshire; New Jersey; New Mexico; Oregon; Pennsylvania (through its Department of Environmental Protection); Rhode Island; New York City; and the District of Columbia. The other group, represented by Earthjustice is comprised of: the American Lung Association; Environmental Defense Fund; Natural Resources Defense Council; National Park Conservation Association; and the Appalachian Mountain Club. Additionally, the State of Mississippi and a coalition of industry groups, the Ozone NAAQS Litigation Group, filed separate petitions appealing the standards because they believe the standards are too strict.

At issue are the 2008 revisions to the NAAQS standards for ozone. The NAAQS limits the amount of ozone that can be in the air. The new standards reduce the primary standard, designed to protect public health, from 0.08 parts per million (“ppm”) to 0.075 ppm and also set the secondary standard, aimed at protecting public welfare, at 0.075 ppm. Allegations from the Petitioner’s seeking stricter standards include that U.S. EPA disregarded the advice of the Clean Air Scientific Advisory Committee in setting the standards.

Ozone is not usually emitted directly into the air, but forms when oxides of nitrogen (“NOx”) and volatile organic compounds (“VOC”) react in the presence of sunlight. Major sources of NOx and VOC include: industrial facilities and electric facilities, motor vehicle exhaust, gasoline vapors, and chemical solvents.

Currently, the 1997 standards and the implementation rules for those standards will remain in place until rules addressing the transition from the 1997 standards to the 2008 standards are promulgated. Additionally states are required to continue to develop and implement state implementation plans (“SIPs”) for the 1997 standards. Pursuant to the Clean Air Act, Indiana must submit its attainment/nonattainment recommendations for the 2008 ozone standards to the U.S. EPA no later than one year after the promulgation of the standards (by March 12, 2009). Once the designations are promulgated (EPA has two years to promulgate designations), Indiana will have to submit a new SIP which sets forth Indiana’s plan to meet the 2008 ozone standards. Said SIPs must be submitted within three years of promulgation or such shorter period as the U.S. EPA’s Administrator prescribes. However, this litigation could effect this schedule.

This matter is entitled State of New York, et al v. EPA and has been assigned Cause No. 08-1202 by the D.C. Circuit Court of Appeals.

First-Ever Jury Verdict Handed Down in Clean Air Act New Source Review Enforcement Case

By E. Ryan Murray, Attorney, Environmental Law Department, Bingham McHale LLP

On May 22, 2008, a jury convened by the U.S. District Court for the Southern District of Indiana handed down what is believed to be the first-ever jury verdict in a Clean Air Act New Source Review (“NSR”) enforcement case. The NSR permitting program is designed to prevent significant degradation of air quality due to the construction of new or significantly modified sources of air pollution. The jury unanimously rejected 10 of 14 NSR violations alleged against Cinergy Corp. (Cinergy and Duke Energy merged in 2005) based on projects conducted at six power plants located in Ohio and Indiana.

The suit, one of many filed against power plants in 1999 and 2000 by the Clinton Justice Department, alleged that Cinergy Corp. made major modifications to six power plants that extended the life of the plants without installing pollution controls required under NSR. The case, United States of America v. Cinergy Corp., focused on whether a “reasonable operator” of the power plants at issue would have believed the projects would result in a net emission increase. Such an increase in plant emissions would subject the projects to NSR requirements including the addition of pollution controls. The jury determined that while the projects did not qualify for an exemption from the NSR requirements because they were not “routine maintenance,” the projects did not increase plant emissions in 10 of the 14 projects. Based on this, the jury determined that 10 projects at five Cinergy Corp. power plants did not violate NSR. Regarding the four projects subject to NSR requirements, the penalty phase of United States of America v. Cinergy Corp. is scheduled to begin on December 8, 2008.

The favorable result achieved by Cinergy Corp. in United States of America v. Cinergy Corp. may influence how parties facing similar NSR enforcement charges choose to resolve EPA allegations. This favorable jury decision may prompt others to consider a jury trial. Until now it has been believed that NSR issues may be too complex to present to a jury.

One U.S. Climate Change Bill Dies in Senate - Another Introduced in the House

By Matt Gernand, Attorney, Environmental Law Department, Bingham McHale LLP

Proposed legislation that would have established a cap-and-trade greenhouse gas emissions program was defeated in the Senate on Friday June 6, 2008. The bill, Senate Bill 3036, would have required the U.S. to reduce its greenhouse gas emissions by 19 percent by 2020 and 66 percent by 2050. The bill would have also established an $802 billion dollar fund to be used for tax relief to protect consumers from increased energy costs. The bill, facing a filibuster by Senate Republicans, needed 51 votes to “invoke cloture,” a process that would have ended the Senate debate thereby precluding an attempted filibuster. The cloture motion only received 48 votes. Indiana Senator Evan Bayh voted for the cloture while Senator Richard Lugar voted against it.

Meanwhile, U.S. Representative Edward Markey (D-MA) introduced a similar bill into the House of Representatives on June 4, 2008. H.R. 6186 would also establish a cap-and-trade emissions program which would require a reduction of greenhouse gases of 85% from 2005 levels by the year 2050. The bill would also require the U.S. EPA to establish revised New Source Performance Standards for coal-fired electric generating units by January 1, 2009. You can obtain the full text version of the bill and track its status at www.govtrack.us.

Compensatory Mitigation Rules Adopted for Corps of Engineers Permits

By Larry Kane, Partner, Environmental Department, Bingham McHale LLP

Comprehensive guidelines for planning and implementation of compensatory mitigation for loss of aquatic resources, when required by permits issued by the Department of the Army’s Corps of Engineers, were adopted in rules jointly adopted by the U.S. EPA and the U.S. Army Corps of Engineers. The rules, published in the Federal Register on April 10, 2008 [73 FR 19594] took effect on June 9, 2008.

A watershed approach is emphasized by the new rule for the selection of compensatory mitigation project locations. Equivalent standards are applied to the maximum extent feasible by the rule to each of three methods of satisfying compensatory mitigation obligations: mitigation performed by the permittee, use of mitigation banks, and in-lieu fee mitigation. A preference is established by the rule for the use of mitigation bank credits since this approach reduces risks and uncertainties of achieving successful mitigation. Enforceable ecological performance standards and regular monitoring will be required for all compensatory mitigation projects.

The rules are codified in 33 CFR Part 332 and 40 CFR Part 230, respectively. Proponents of future projects requiring dredge-and-fill permits from the Corps of Engineers will be well-advised to become familiar with these rules.