Loopholes, Closed: D.C. Circuit Strikes Down EPA’s Exemption Provisions in its Air Quality Program

In October 2010, the Environmental Protection Agency issued a rule[i] exempting certain polluting facilities from conducting air-quality monitoring as part of the Clean Air Act’s permitting process. [ii] The agency thought it had the authority to exempt the facilities because their emissions were not significant enough to justify the costs of monitoring.  The D.C. Court of Appeals thought otherwise.

The court struck down the rule in late January,[iii] and EPA is now in the process of formulating a new proposed rule that complies with the court’s guidelines.[iv] The rule was an attempt by the agency to forestall the deterioration of air quality resulting from emissions of particulate matter of less than 2.5 micrometers (“PM2.5”).  While it ostensibly represented an effort to strengthen the Act’s regulatory regime, the rule was criticized for the exemption provisions, which effectively gave EPA the power to waive a statutory requirement that polluters must submit air quality studies as a prerequisite for applying for a permit to build or modify a facility.[v] This loophole did not sit well with the court, which held that the agency lacked the statutory authority to promulgate the exemptions.[vi] The decision represents a major setback for EPA’s air-monitoring program for PM2.5, and it creates considerable regulatory uncertainty for entities currently in the process of trying to demonstrate that they qualify for the monitoring exemptions.

EPA established the exemptions through two air-quality screening devices known as Significant Impact Levels (“SILs”) and Significant Monitoring Concentrations (“SMCs”).[vii] SILs are numeric values used to gauge the pollution effects of a new or modified facility, and SMCs are values representing air quality concentration levels for certain pollutants.  Under the rule, if a facility can show that its PM2.5 emissions do not exceed the SILs or SMCs, then it is exempt from conducting the air quality analyses that are a mandatory component of the permitting process for new or modified facilities. [viii] The analyses are intended to provide data indicating whether the facility will end up violating the Clean Air Act’s national ambient air quality standards.[ix]

In justifying the SILs and SMCs, EPA relied primarily on Alabama Power Co. v. Costle.[x] In that case, the D.C. Court of Appeals held that, “[u]nless Congress has been extraordinarily rigid,” an administrative agency likely has an implied “de minimis authority to establish exemptions from statutory commands,” especially in cases where “the burdens of regulation yield a gain of trivial or no value.”[xi] EPA argued that when a facility’s ambient impact is below the SIL or SMC, it is effectively de minimis, and that an exemption is appropriate because the regulation “yield[s] information of trivial or no value.”[xii] The Sierra Club found EPA’s application of its de minimis authority unpersuasive, however, and it filed suit seeking to have the rule vacated.[xiii] The D.C. Court of Appeals largely agreed with the Sierra Club.  It vacated and remanded the SIL provisions that exempted facilities from complying with the monitoring requirements, but it left in place certain provisions that do not implicate the exemption authority.[xiv] The court also vacated the SMC, holding that EPA exceeded its authority in creating this screening device.[xv]

In reaching its conclusion on the SMCs, the court engaged in statutory analysis of § 165(e) of the Clean Air Act, which requires an analysis of the air quality at a given site before a permit application for a new facility can be approved.[xvi] The court interpreted this section as being “extraordinarily rigid” in setting an air-monitoring requirement, holding that Congress’s use of “shall” in this section “evidences a clear legislative mandate that the preconstruction monitoring requirement applies to PSD permit applicants.”[xvii] In its textual analysis, the court juxtaposed the stringent language of subsection (e) with the looser language in other subsections to argue that Congress would not have used such strict language if it intended to allow EPA to waive the requirement.  The court also noted that, because the monitoring data is to be used to determine the air quality at a proposed site before an entity applies for a permit, this data is critical in assessing whether that entity has exceeded the Act’s emission limits; as a result, Congress could not have intended to give EPA discretion to exempt certain facilities from the monitoring.[xviii] Finally, the court pointed out that § 165(e) requires that the air monitoring data be made public to allow “informed participation” in permit application hearings.[xix] Giving EPA the power to waive the monitoring mandate would deprive the public of information necessary for meaningful participation in the hearings.

The court’s stringent statutory interpretation of § 165(e) leaves EPA with little choice but to promulgate a new rule.  By the court’s reading, the statute is clear:  Congress did not intend to permit agency discretion in enforcing the air monitoring requirements.  When a court strikes down an agency rule, agencies often invoke Chevron v. U.S.A., Inc. v. Natural Resources Defense Council to argue that courts should give agencies deference in interpreting a statute they are charged with administering.[xx] But that strategy will likely not work here.  In its opinion, the court rejected a similar argument that EPA enjoyed a “virtual presumption” of agency authority,[xxi] holding that even if there were a “presumption,” it would be defeated by an “extraordinarily rigid” requirement.[xxii]

The result of the court’s decision will likely be increased regulatory uncertainty surrounding the Act’s permitting process for new or modified facilities.  It is not clear what will happen to pending PM2.5 permits that relied on the SILs and SMCs loopholes, nor is it clear whether the decision will have any bearing on pending permits that used the loopholes for other pollutants.[xxiii] EPA has already stated[xxiv] that it will be reexamining these pending permits in light of the court’s decision—a task it will have to perform while simultaneously drafting the new proposed rule.  In the meantime, facilities engaged in the permitting process will have to abide the delay and uncertainty until EPA figures out a way to reconcile its regulations with the court’s decision.


-Brian Tengel is a General Member of MJEAL

The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.

[i] Prevention of Significant Deterioration (PSD) for Particulate Matter Less Than 2.5 Micrometers (PM2.5)—Increments, Significant Impact Levels (SILs) and Significant Monitoring Concentration (SMC), 75 Fed. Reg. 64,864, 64, 865 (Oct. 20, 2010) (to be codified at 40 C.F.R. pts. 51, 52), http://www.gpo.gov/fdsys/pkg/FR-2010-10-20/pdf/2010-25132.pdf (“Final PSD Rule”).

[ii] Clean Air Act, 42 U.S.C. §§ 7401-7671q (2006).

[iv] Press Release, Envtl. Prot. Agency, D.C. Circuit Decision on the Prevention of Significant Deterioration Rule for Fine Particles – Increments, Significant Impact Levels and Significant Monitoring Concentration (Jan. 29, 2013), http://www.epa.gov/airquality/nsr/documents/summ_court_020613.pdf (“EPA Press Release”).

[v] Sierra Club, supra note 3, at 15, 19.

[vi] Id.

[vii] Final PSD Rule, 75 Fed. Reg. at 64,865-66.

[viii] Sierra Club, supra note 3, at 6-8.

[ix] Sierra Club, supra note 3, at 4, 5.

[x] Sierra Club, supra note 3, at 6.

[xi] Ala. Power Co. v. Costle, 636 F.2d 323, 360-61 (D.C. Cir. 1979).

[xii] Prevention of Significant Deterioration (PSD) for Particulate Matter Less Than 2.5 Micrometers (PM2.5)—Increments, Significant Impact Levels (SILs) and Significant Monitoring Concentration (SMC), 72 Fed. Reg. 54,112, 54,139 (proposed Sept. 21, 2007) (to be codified at 40 C.F.R. pts. 51, 52), http://www.gpo.gov/fdsys/pkg/FR-2007-09-21/pdf/E7-18346.pdf.

[xiii] Sierra Club, supra note 3, at 9, 15.

[xiv] Sierra Club, supra note 3, at 9.

[xv] Sierra Club, supra note 3, at 21-22.

[xvi] 42 U.S.C. § 7475(e)(1).

[xvii] Sierra Club, supra note 3, at 18.

[xviii] Sierra Club, supra note 3, at 18.

[xix] Sierra Club, supra note 3, at 19-20.

[xx] E.g., 467 U.S. 837, 844 (1984) (citation omitted) (“We have long recognized that considerable weight should be accorded to an executive department’s construction of a statutory scheme it is entrusted to administer ….”).

[xxi] Pub. Citizen v. Young, 831 F.2d 1108, 1113 (D.C. Cir. 1987).

[xxii] Sierra Club, supra note 3, at 19.

[xxiii] EPA Press Release.

[xxiv] Id.