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
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The Fifth Circuit recently handed down an important decision, Louisiana Generating LLC v. Illinois Union Insurance Company, clarifying the scope of coverage under a Premises Pollution Liability Insurance Policy.