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Legal Intelligencer

(by Varun Shekhar)

The U.S. Environmental Protection Agency (EPA) has finalized rulemaking originally proposed in 2016 to remove “emergency” affirmative defense provisions from its Clean Air Act (CAA) permitting regulations for “major sources”.  On July 21, 2023, EPA published a Final Rule amending 40 C.F.R. §§ 70.6 and 71.6 to delete the emergency affirmative defense provisions in light of decisions from the U.S. Court of Appeals for the DC Circuit.

The emergency affirmative defense provision under 40 C.F.R. Parts 70 and 71 originated from rulemaking promulgated by EPA in 1992.  This rulemaking was intended to implement the 1990 amendments to the CAA which established Title V, including requirements for operating permitting programs as applicable to among other things, “major sources”.  The CAA defines a major source as “any stationary facility or source of air pollutants which directly emits, or has the potential to emit, one hundred tons per year or more of any air pollutant…”.  In addition, the CAA also includes as major sources those “that emit[] or ha[ve] the potential to emit considering controls, in the aggregate, 10 tons per year or more of any hazardous air pollutant or 25 tons per year or more of any combination of hazardous air pollutants.”

As part of the 1992 rulemaking, EPA included at 40 C.F.R. §§ 70.6(g) (for state operating permitting programs) and 71.6(g) (for federal operating permitting programs) provisions allowing for an operator to assert an affirmative defense for any unavoidable noncompliance with technology-based emission limits in the event of “any situation arising from sudden and reasonably unforeseeable events beyond the control of the source, including acts of God, which situation requires immediate corrective action to restore normal operation…”.  These provisions also required the operator to keep contemporaneous operating logs or other evidence documenting the occurrence of the emergency event, that the facility was at the time of the event being properly operating, that it took all reasonable steps to minimize emissions, and that notice of the emergency was submitted to the applicable permitting authority within two business days of the exceedance of the emission limit.  The operator bore the burden of proving the occurrence of an emergency event.

The emergency affirmative defense provisions themselves, as well as similar provisions elsewhere that provided liability relief during periods of startup, shutdown, or malfunction (SSM) have been somewhat controversial.  In 2008, the D.C. Circuit in Sierra Club v. EPA, 551 F.3d 1019 (D.C. Cir. 2008) determined that an EPA rule that exempted sources from CAA Section 112 (hazardous air pollutant) emissions standards during SSM periods violated the CAA’s requirement that such standards apply continuously.

However, the key case underpinning EPA’s current rulemaking to delete §§ 70.6 and 71.6 is Natural Resources Defense Council (NRDC) v. EPA, 749 F.3d 1055 (D.C. Cir. 2014).  In that case, a number of groups challenged, among other things, EPA’s rulemaking to create an affirmative defense against citizen suits for violations of CAA Section 112 emissions standards in cases where “unavoidable” malfunctions caused the violation.  EPA explained the basis of this provision was to resolve “tension” between the CAA’s requirement that emission standards apply at all times (as noted in Sierra Club) and the fact that operators may exceed emission limits for reasons beyond their control.  The rule also restricted federal district courts hearing the citizen suit from assessing penalties unless the operator failed to meet their burden of proving all requirements in the affirmative defense.  The court struck down the unavoidable malfunction affirmative defense provision, finding that the rule served to usurp the courts’ role in determining appropriate remedies in a case, and that CAA Sections 113 and 304 did not otherwise support the EPA’s rule.

The D.C. Circuit reaffirmed its decision in NRDC two years later in the case U.S. Sugar Corp. v. EPA, 830 F.3d 579 (D.C. Cir. 2016).  There, industry groups challenged CAA Section 112 emission standards on the basis that the standards were too onerous because they were developed by EPA without taking malfunction events into account.  The court sided with EPA, reiterating its holding in NRDC that had EPA established an affirmative defense provision against citizen suits for violations of the emission standard during malfunctions, it would constitute an “impermissible intrusion on the judiciary’s role.”  Instead, the court found EPA’s approach to developing the standard and reserving the right to exercise enforcement discretion during malfunction events as a reasonable interpretation of the CAA.

The EPA’s current rulemaking to remove the emergency affirmative defense provisions from 40 C.F.R. §§ 70.6 and 71.6 was initially proposed by EPA on the heels of these cases.  During the 2016 proposed rule’s comment period, several commenters argued that EPA was reading the NRDC and other cases too broadly, since none of them involved consideration of the Title V program or its implementing regulations.  Moreover, some expressed the position that there was a distinction between the affirmative defense provision under consideration in NRDC, which affected citizen suits under CAA Section 304, and the emergency affirmative defense provision, which made no reference to Section 304.  Others contended that there was a fundamental difference between emergencies, which often occur through forces outside the boundaries of a facility, and malfunctions which were at issue in NRDC.

The EPA disagreed with these comments, stating that NRDC was fundamentally based on CAA Sections 113 and 304, which pertain to enforcement generally, and are not specific to hazardous air pollutant standards.  In addition, EPA reiterated its position in Sugar Corp. that an affirmative defense provision is unnecessary because it will use its case-by-case enforcement discretion to determine whether to initiate enforcement, as appropriate.  And, according to EPA, removal of the emergency affirmative defense “would harmonize the EPA’s treatment of affirmative defenses across different” regulatory programs under the CAA.

Although this rulemaking does not directly apply to regulated sources, it will have an indirect effect on them.  Specifically, state permitting programs under Title V will have to delete such affirmative defenses from its regulations by August 2024. Moreover, any Title V permits issued by states will eventually need to have removed from them any emergency affirmative defense provisions, although these will most likely occur during subsequent renewals or reissuances of the permit.

Although EPA suggests that the impact of the deletion of the emergency affirmative defense provisions on the regulated community may not be significant, it is important to note that operators will no longer be able to rely upon explicit provisions in their Title V permits to shield them from liability for emissions violations in cases of events like natural disasters or power outages.  Case-by-case enforcement discretion is a matter of agency policy but is not binding upon agencies themselves, which in some cases can lead to disparate penalties or other enforcement results among facilities.  Nonetheless, operators still may find it useful to continue to implement the recordkeeping provisions of the emergency affirmative defense provisions to assist in developing its case for an agency to exercise enforcement discretion in its favor during an emergency event.

Varun Shekhar is a shareholder in Babst, Calland, Clements and Zomnir’s Environmental Group. His environmental practice emphasizes federal, state and local regulatory matters arising under the Clean Air Act (CAA). He counsels facilities across the country regarding permitting, compliance determination and assurance, CAA Section 114 information requests, environmental audits, and emerging air quality issues including climate change and regulation of greenhouse gas emissions. Contact him at vshekhar@babstcalland.com.

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Reprinted with permission from the August 24, 2023 edition of The Legal Intelligencer© 2023 ALM Media Properties, LLC. All rights reserved.