On December 19, 2008, the D.C. Circuit Court of Appeals issued a startling ruling vacating the Startup, Shutdown, Malfunction (“SSM”) rules contained within the NESHAP General Provisions, 40 C.F.R. Part 63, Subpart A. Sierra Club v. Environmental Protection Agency (Docket Nos. 02-1135, 03-1219, 06-1215, 07-1201). The Sierra Club asked the court to strike down the SSM exemption – an exemption that has been in place since the EPA adopted the General Provisions to 40 C.F.R. Part 63 in 1994 pursuant to Section 112 of the federal Clean Air Act (CAA). Until this decision, sources were exempted from MACT technology-based emission limits if all elements of the SSM exemption were satisfied. Sources were nevertheless required by the general duty clause to minimize emissions to the greatest extent possible. In 2002, 2003 and 2006, the EPA promulgated rulemakings to revise these SSM requirements.

The Sierra Club argued that these 2002-2006 changes so effectively modified the original SSM rules that the SSM rules adopted in 1994 should be struck down, although the Sierra Club had not challenged such 1994 rules. Two of the three judges on the panel agreed, relying upon an obscure theory of “constructive reopener” to find that EPA in effect reopened the SSM exemption for comment when it made such substantial changes to the rules. The court’s rationale was based on its conclusion that the original rule had four cornerstone requirements that were undone by the 2002, 2003, and 2006 amendments. These four cornerstones of the original rule were described (perhaps incorrectly) by the majority as follows:

  1. Sources must comply with their SSM plans during periods of SSM;
  2. SSM plans must be reviewed and approved by permitting authorities like any other applicable requirement;
  3. SSM plans must be unconditionally available to the public, which could participate in evaluating their adequacy in the permit approval process; and (4) SSM plan provisions must be directly enforceable requirements.

The dissenting opinion noted that the 1994 SSM rules did not require SSM plans to be submitted as part of a Title V permit application or approved by permitting authorities. Further, although not noted by the dissent, it was never clear that SSM plans were to be “unconditionally” available to the public for review – as in many cases agency confidentiality rules would allow the agency, but not the public, to review such plans. Regardless, the majority found that because the 2002-2006 amendments no longer required that the SSM plan be a part of the permit, no longer required public review, and no longer even required a facility to comply with the plan in order to claim the benefit of the SSM exemption, the EPA had “constructively reopened” the SSM exemption and the Sierra Club could now challenge the underlying 1994 rules.

On the merits, the Sierra Club asserted that both the original and subsequent rulemakings unlawfully and arbitrarily failed to assure compliance with CAA requirements. In vacating the SSM exemption, the D.C. Circuit agreed, stating that “[b]ecause the general duty is the only standard that applies during SSM events – and accordingly no section 112 standard governs these events – the SSM exemption violates the CAA’s requirement that some section 112 standards apply continuously.” The court read CAA Sections 112 and 302(k) together to find that Congress required some “continuous section 112-compliant standards.” (Section 112 provides “emissions standards” must require MACT standards. Section 302(k) defines “emission standard” as “a requirement…which limits the quantity, rate, or concentration of emissions of air pollutants on a continuous basis.”) Emphasis added.

The court noted that EPA had not attempted to justify the SSM rules under Section 112(h) of the CAA. This statutory provision allows EPA to relax a MACT standard “if it is not feasible in the judgment of the Administrator to prescribe or enforce [a numerical] emission standard for control…” Presumably the majority was suggesting that EPA could use Section 112(h) to establish SSM requirements (work practice standards or different numerical emission limits) in lieu of MACT standards during SSM events, but that it had not done so. The dissent argued that the majority should not rest its opinion on this point because the parties had not been given the opportunity to brief this issue. This is a critical point, because the MACT standards are based on actual data demonstrating the capabilities of the best performing facilities (for new sources – the top 5% performers were used for the MACT floor; for existing sources the top 12% of sources); however, for all but a handful of MACT standards, SSM data was excluded from the data base for determining the floor.

The court’s decision to vacate the exemption rather than rescind the 2002-2006 rules was criticized in the dissent as a dangerous precedent. Per 42 U.S.C. § 7607(b)(1), a petition for judicial review must be filed within 60 days from the date notice of an action appears in the Federal Register. Because public notice for the original rulemaking was published on March 16, 1994, any challenge brought after May 16, 1994 is automatically barred. The majority opinion sidestepped the barrier by adopting the Sierra Club’s argument that the subsequent rulemakings significantly changed the context for the SSM exemption and allowed it to be “re-opened” for comment.

But, what is sauce for the goose is sauce for the gander. Because all of the MACT rules were premised upon the existence of the SSM exemption, the revocation of the SSM exemption should now allow constructive reopener by regulated entities to challenge the underlying MACT rules as being too stringent without the consideration of data from SSM periods for development of the MACT floor. This raises the possibility that all MACT standards will require reopener to evaluate SSM data on a source category by source category basis.

The full impact of this decision is yet to be determined. Because the deadlines to request a rehearing and/or appeal have not yet run, the decision is not yet final. The deadline for requesting a rehearing is 45 days after entry of judgment as EPA is a party. The deadline for requesting appeal is 90 days after denial of rehearing or a final decision or rehearing, or if no rehearing is requested, it is 90 days after entry of the judgment. The EPA or American Chemistry Council, intervenor, are likely to request a rehearing on the matter or file an appeal, or both.