United States: 5th Circuit Rules CAMR Permitted Power Plant Still Covered by MACT

In Sierra Club v. Sandy Creek Energy Associates, Inc., ___ F.3d ___, 2010 U.S. App. 24144 (5th Cir. 2010), issued just before Thanksgiving, that the 5th Circuit Court of Appeals held that an owner of a coal fired power plant being constructed pursuant to a PSD permit was required to obtain a Maximum Available Control Technology (MACT) mercury determination during construction, even if that determination was not necessary at the time the PSD permit was issued. Based on that holding, the court reversed a lower court denial of an injunction seeking to halt the project's construction. The ruling endangers any coal fired project permitted during the time the EPA's Clean Air Mercury Rule (CAMR) was in effect.

The case involved a coal fired power plant being constructed by Sandy Creek in Reisel, Texas. The plant received its PSD permit in 2006, more than one year after EPA determined that coal fired power plants were no longer covered by Section 112 of the Clean Air Act (CAA), pursuant to a statutory exception for electric generating units. EPA made this determination to "delist" coal fired power plants from MACT requirements in adopting CAMR, a comprehensive rule addressing mercury emissions from such facilities. As a result, CAMR replaced the need for PSD permits for coal fired power plants to include MACT determinations for mercury control technology. Based on these regulations, Texas issued its PSD permit allowing the construction of the Sandy Creek power plant without a MACT determination regarding mercury controls.

In 2008, one month after construction began on the project, the D.C. Circuit Court of Appeals vacated CAMR in New Jersey v. EPA, finding that the EPA had not followed CAA requirements for delisting coal fired power plants from Section 112 MACT requirements. Six months later, the Sierra Club sued to enjoin the ongoing construction of the Sandy Creek project, based on its failure to perform a MACT determination. The District Court granted summary judgment for Sandy Creek, holding that the MACT requirement was not in place at the time of the PSD permit issuance and did not apply now that construction was ongoing.

The 5th Circuit reversed, finding that the language of Section 112 forbade construction without a MACT determination, and could not be limited solely to the time when (or prior to) construction commenced. The court held that Texas' issuance of the PSD permit allowing the construction was irrelevant, ruling that no agency regulation or procedure could preclude the application of the MACT requirement contrary to the language of the CAA. The court also ruled that Texas' permit finding in 2006 that a MACT determination was not required, could not constitute a MACT determination for the purposes of Section 112. It then remanded the case back to the District Court for further consideration.

The court's decision is chilling on a number of fronts. First, it allows courts to enjoin the continued construction or modification of any coal fired power plants permitted while CAMR was in effect where the construction permit did not include any MACT determination, which probably includes all of them. Second, it potentially paves the way for the retroactive application of any MACT standard adopted while construction of a MACT applicable source is in progress.

While the CAMR situation is unique in that the MACT requirement existed before CAMR and the D.C. court subsequently vacated CAMR, the court's decision undercuts the finality of federal construction permits which are generally deemed to include all requirements necessary to build and begin operation of an air source. If, as the 5th Circuit holds, MACT compliance assessments are required at any point during construction, this may include compliance with MACT standards adopted after the PSD permit is issued. The court's language provides no basis for distinguishing between new MACTs and preexisting MACTs held in abeyance at the time of permit issuance. As a result, the court introduces another major point of uncertainty in permitting and constructing major sources.

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