Posted by Eric L. Hiser, November 6th, 2017
In two major decisions, EPA Administrator Scott Pruitt upended modern Title V and NSR practice, ruling that despite past EPA precedent, “the title V permitting process is not the appropriate forum to review … preconstruction permitting decisions” and refusing to issue a Title V objection for allegedly deficient PSD permitting. The decisions were issued in In the Matter of PacifiCorp Energy Hunter Power Plant, Emery County, Utah, Petition No. VIII-2016-4, and In the Matter of Big River Steel, LLC, Osceoloa, Arkansas, Petition No. VI-2013-10. If upheld and followed, these decisions fundamentally change a developing practice of reviewing the PSD permitting process in Title V proceeding and, depending upon one’s point of view, either grant or restore significant authority to the States and local permitting authorities.
PacifiCorp Energy Hunter Power Plant
In PacifiCorp Hunter, the Administrator considered a Title V objection petition filed by Sierra Club challenging the Utah Department of Environmental Quality, Air Quality Division’s (UDAQ’s) decision to issue a title V operating permit to the PacifiCorp’s Hunter Power Plant, a 1,455 MW coal-fired power plant. Sierra Club contended that the Title V permit was deficient because it did not include PSD permitting program requirements, such as best available control technology (BACT) and terms and conditions to protect NAAQS and increments, that Sierra Club asserted are “applicable requirements” due to boiler projects and turbine upgrades in 1997 and 1999. Sierra Club asserted that these were a “major modification” because PacifiCorp used inflated baseline values to prevent the project being classified as a major modification. UDAQ rejected these claims, stating that “any concerns regarding previous permits should have been raised during public comments at the time those permitting actions took place.”
The Administrator began his review by noting that 40 C.F.R. § 70.2’s definition of “applicable requirement” includes two parts: (1) any standard or other requirement provided for in the applicable implementation plan approved or promulgated by EPA …; and (2) any term or condition of any preconstruction permits issued pursuant to regulations approved or promulgated under title I…” Slip op. at 9. As applied to a situation, as in PacifiCorp Hunter, where the facility had obtained a preconstruction permit, Administrator Pruitt found the definition ambiguous:
The EPA has previously interpreted its regulations to apply both sections (1) and section (2) to title I preconstruction permitting requirements after a preconstruction permit has been obtained. But this reading can lead to a requirement that a title V permitting authority or the EPA reconsider, in issuing a title V permit or responding to a petition, whether a validly issued preconstruction permit is the appropriate type of permit. While such an expansive reading of section (1) may have been applied by the EPA in the past in title V petition responses, this leads
to an incongruous result that is inefficient and can upset settled expectations-on the part of a state, an owner/operator, and the public at large- in circumstances where a source has obtained a legally enforceable preconstruction permit in accordance with the requirements of title I.
Slip op. at 10. The Administrator ruled that the minor preconstruction permit defined the applicable requirements and fulfilled the requirements of section (1), so that only the duties in section (2) remain. Accordingly, he ruled that “EPA finds no error in UDAQ’s decision in this case to incorporate the terms and conditions of the previously issued preconstruction permit into the title V operating permit without further review of whether those conditions were properly derived or whether a different type of permit was required for the same construction activity.” Id.
The Administrator stated that this reading “comports with the EPA’s statements regarding the relationship between the CAA’s preconstruction and operating permit requirements at the time that the EPA initially issued the title V regulations in part 70,” citing the preamble to the proposed Part 70 regulations. The Administrator then turned to more recent EPA precedents that would have allowed the review Sierra Club sought. He traced the evolution of the doctrine from a decision in In the Matter of Shintech, Inc., through letters from EPA OAQPS directors stating that EPA could object to a title V permit when EPA believed that the unit had not gone through a proper preconstruction permitting process. He also noted that EPA did not review EPA-delegated PSD permits, because of the review available through the Environmental Appeals Board, citing In the Matter of Kawaihe Cogeneration Project.
In rejecting Shintech and the precedents, Administrator Pruitt relied on the following arguments:
The contemporaneous preamble statements stated that EPA would not use the Title V objection process to “review” state preconstruction permitting decisions and such contemporaneous statements are accorded “great weight”;
The structure and purpose of title V does not support expansive review, as its purpose is to consolidate all applicable requirements, not create new ones;
Congress knew, when it created title V, that preconstruction review was subject to extensive state administrative and judicial review and had given EPA specific oversight authority under title I and there is no indication that Congress sought to “alter the fundamental details” of title I;
Adequate public review and recourse exists for the public to challenge preconstruction review decisions in state court or under Title III authorities;
Re-reviewing prior permitting decisions frustrates the goal of “expeditious review of permit action”;
The 60-day review window shows that Congress did not intend such an in-depth review of prior permitting actions;
EPA’s interpretation restricting review of prior preconstruction permitting decisions in subsequent title V actions “respects the finality of the permitting authority’s preconstruction permitting decision”;
The proper forum for addressing inadequate State SIP proceedings is a SIP call, but no change to permits until the SIP call process is complete.
Administrator Pruitt then gave the following instructions for future actions:
permitting agencies and the EPA need not reevaluate–in the context of title V permitting, oversight, or petition responses–previously issued final preconstruction permits, especially those that have already been subject to public notice and comment and an opportunity for judicial review. Concerns with these final preconstruction permits should instead be handled under the authorities found in title I of the Act. Where a final preconstruction permit has been issued, whether it is a major or minor NSR permit, the terms and conditions of that permit should be incorporated as “applicable requirements” and the permitting authority and the EPA should limit its review to whether the title V permit has accurately incorporated those terms and conditions and whether the title V permit includes adequate monitoring, recordkeeping, and reporting requirements to assure compliance with the terms and conditions of the preconstruction permit. See 42 U.S.C. § 766lc(a); 40 C.F.R. § 70.6(a)(3), 70.6(c)(l).
Slip op. at 19. Administrator Pruitt stated that this decision did not limit EPA’s authority under Title I and that “where an EPA investigation indicates that a source failed to obtain a required permit (even if a minor source permit was obtained), the EPA may seek to remedy its disagreement with state permitting decisions through enforcement actions,” citing United States v. SIGECO, 2002 WL 1760699 (S.D. Ind, July 26, 2002) and United States v. Ford Motor Co. (736 F. Supp. 1539 (W.D. Mo. 1990).
Based on the foregoing analysis, Administrator Pruitt denied Sierra Club’s PSD claims and, having found no error in the other bases for objection, dismissed the petition.
Big River Steel
In Big River Steel, the Administrator considered a challenge brought against the proposed Big River Steel mill by existing steel mills in the same area, which alleged various deficiencies in the PSD permitting process including the modeling, additional impacts review, and whether certain emission limits were achievable and supportable. Unlike the Utah situation in PacifiCorp Hunter, Arkansas operates a “combined” PSD and Title V permitting process and this was the initial permit for both PSD and Title V purposes.
In Big River Steel, Administrator Pruitt cited and expanded the PacifiCorp Hunter decision, stating:
After a review of the structure and text of the CAA and the EPA’s regulations in part 70, and in light of the circumstances presented by the petition at issue in the PacifiCorp-Hunter Order, the EPA concluded in the PacifiCorp-Hunter Order that the title V permitting process is not the appropriate forum to review preconstruction permitting decisions when a preconstruction permit has been duly issued. After considering the situation presented in the Petition regarding the BRS facility, the EPA has concluded that a title V petition to object is likewise not the appropriate forum for reviewing the merits of the preconstruction permitting requirements derived under title I of the Act in the context of a merged title I and title V program. The EPA is aware that this conclusion differs from the agency’s position in prior title V petition orders involving simil ar circumstances. However, for the legal and policy reasons discussed below and in the PacificCorp-Hunter Order, the EPA believes this position better aligns with the structure of the Act and the EPA ‘s original understanding of the relationship between the operating and construction permitting programs under the CAA after the enactment of title V.
Slip op. at 8-9. The balance of the opinion basically reiterated the PacifiCorp Hunter analysis. Administrator Pruitt added that the “procedural streamlining” of the PSD and Title V permits into a single document did not “establish a public petition opportunity under title V on the preconstruction permitting determinations made in issuing the PSD permit,” reasoning that “the CAA establishes this petition opportunity on the title V permit alone and provides a different mechanism for EPA and citizen oversight of preconstruction permitting decisions under title I.” Slip op. at 11-12. According, Administrator Pruitt denied review and dismissed the appeal.
Together, PacifiCorp Hunter and Big River Steel substantially refashion, if not upend, nearly twenty-years of EPA practice in reviewing PSD permitting decisions in Title V objection orders. Administrator Pruitt’s order does, in fact, put in place a review regime that is closer to what EPA stated it was establishing in 1992. The two orders also go a long way toward redressing a balance of authority that many thought had shifted too far toward EPA from the States and local permitting authorities, when EPA used its essentially unreviewable Title V objection authority to oversee state preconstruction permitting actions. If EPA had used its Title I authorities, those actions would have been judicially reviewable.
While these decisions are bound to be controversial, their emphasis on the finality of the original permitting authority’s decision is a welcome step toward restoring an orderly process in permitting. All challenges to a preconstruction permit should now be heard directly on that permit, rather than indirectly, perhaps years later (nearly 20 years later, in the case of PacifiCorp Hunter). Requiring review of PSD permits during an appeal of the permitting decision, rather than an unrelated permit, should ensure a higher quality, better understood record and over time should develop judicial precedent to guide permitting decisions. Administrator Pruitt’s approach also avoids the practical issue of having to litigate the status of preconstruction permits in every round of a Title V operating permit renewal, which was a position that Sierra Club advocated in PacifiCorp Hunter. There is no evidence that Congress intended such a result.