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Late last month, in Wildearth Guardians v. Lamar Utilities Board, Judge David Ebel
ruled that Lamar violated the Clean Air Act by not obtaining a MACT
determination, given that its potential emissions of hydrochloric
acid were 10.3 tons per year, above the 10 tpy limit for any single
hazardous air pollutant. The decision provides an abject
lesson on the costs imposed by regulatory uncertainty.
The facts, in bullet form, are as follows:
In 2000, EPA determined that coal- and oil-fired electric
generating units would be subject to MACT.
In 2004, Lamar decided to upgrade an existing small natural
gas-fired EGU and convert it to coal (and if Lamar hasn't
already been punished enough by the market for that decision, then
you haven't been following the relative prices of coal and
natural gas!).
In 2005, EPA changed course and delisted EGUs from section 112
regulation.
In 2006, Colorado approved the project. Because EGUs
had been delisted, Colorado did not require that Lamar obtain a
MACT determination as part of the permit. Lamar began
construction.
In 2008, the delisting rule was overturned, in New Jersey v. EPA, thus putting EGUs back into the MACT
universe.
In 2009, EPA contacted Lamar and instructed it to obtain a MACT
determination. Lamar, rather than seeking a MACT
determination, concluded that its HCl emissions would be below 10
tpy, and sought a synthetic minor permit from Colorado, limiting
emissions below 10 tpy and thus exempting it from MACT.
In December 2009, Wildearth Guardians sued Lamar for
constructing the upgrade without a MACT
determination.
In 2012, Colorado issued a modified permit, limiting HCl
emissions to 8 tpy and exempting the project from MACT
The court was forced to decide whether, under these
circumstances, Lamar violated the CAA MACT
requirements. The answer was yes. Basically, the
court concluded that, from and after the mandate in New Jersey
v. EPA vacating the delisting rule, and until the synthetic
minor permit was issued in 2012, Lamar violated the Clean Air
Act. While Lamar argued that its original estimate of 10.5
tpy was conservative, and was done at a time when no MACT permit
was required, the court found that this figure still represented
Lamar's formal position regarding its potential to
emit.
Fortunately for Lamar, the court denied Wildearth
Guardian's request that the synthetic minor permit be
invalidated, under EPA's "once in, always in"
policy, which provides that, once an EGU has been found subject to
MACT, the determination cannot be revisited. The court
decided that application of the policy would not make sense on the
particular facts here (which included a statement from EPA
suggesting that it should not
apply). Consider that a small victory for common
sense. The court also both denied an injunction and made
clear that the penalty determination would have to reflect the
unique facts of the case. I don't anticipate any
significant penalty to be imposed against Lamar.
One simple lesson for generators emerges from the case
– and it's one that EPA probably won't
like. Never be overly conservative in one's
emissions estimates. You never know how conservative
numbers might come back to haunt you.
The bigger lesson of course is the cost of this regulatory
ping-pong. I understand that the Bush delisting rule was
extreme and that, whatever its merits as policy, it was always on
very weak legal footing. However, that's little
comfort to the EGUs caught in the ramifications of the multiple
changes in EPA's implementation of the CAA's MACT
requirements. More broadly, even if Lamar's penalty
turns out to be small, the penalty itself doesn't even
scratch the surface of the costs imposed by this type of
uncertainty. How can regulated entities possibly make
rational investment decisions when regulatory requirements can
change at the drop of a hat, or a decision by a judge, or a change
in administration?
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