D.C. Circuit Largely Vacates EPA State Implementation Plan Call on Startup, Shutdown, and Malfunction Rules

In a 2–1 decision, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) largely vacated an Environmental Protection Agency (EPA) rule requiring 32 states to amend their Clean Air Act implementation plans (called State Implementation Plans, or SIPs) by removing provisions providing either exemptions or affirmative defenses to excess emissions from unit startups, shutdowns, or malfunctions (SSM) — times when pollution controls often cannot fully function as needed.[1] Sources in states that still have or revert to allowing an SSM defense may now have this important operational flexibility. However, stakeholders should track the actions of their individual states and keep close watch on whether EPA or environmental groups seek rehearing or appeal the ruling.

The decision is a significant development in an odyssey that began more than a decade ago. Most state air rules contain either exemptions or other specific rules governing emissions during SSM. In June 2011, the Sierra Club petitioned EPA, asserting that all such exemption and affirmative defense provisions are illegal and requesting a SIP Call requiring states to rescind them. Environmental groups sued EPA to rescind a similar affirmative defense provision in federal Portland Cement Clean Air Act regulations and won.[2] This led EPA to begin a campaign of purging such exemption and affirmative defense provisions from its own regulations and a June 2015 SIP Call requiring states to rescind their own such provisions. The Trump administration stopped the campaign in 2017, but EPA continued it after the change in administrations.[3]

About half of the states subject to the SIP Call, and a number of industry groups regulated under those SIPs, petitioned for review in the D.C. Circuit. After rejecting the Petitioners’ four primary arguments asserting that EPA lacked authority to issue the SIP Call without satisfying various procedural and substantive requirements, the D.C. Circuit turned to EPA’s claim that the various exemptions and affirmative defenses in SIPs (all of which EPA approved before 2011) violated the Clean Air Act. The court found that most of these provisions are compatible with the Clean Air Act.

The court began by breaking the provisions down into five types:

  • Automatic exemptions. A source’s SSM emissions are automatically exempted from the emission standards that apply to the source.
  • Director’s discretion exemption. A state agency official can grant or deny an exemption for SSM emissions based on individual circumstances.
  • Enforcement discretion provisions. Only at issue in Tennessee, this provision recognized that a source’s SSM emissions would violate applicable emission standards, but the state agency would decline to file an enforcement action. EPA asserted that the provision was vague enough to be read as prohibiting EPA from filing its own enforcement action as well as blocking Clean Air Act citizen suits.
  • Affirmative defenses to liability. If a federal or state agency files an enforcement action, or a third party files a citizen suit, the source could invoke an affirmative defense to liability if it proved that certain criteria were met.
  • Affirmative defenses to relief. A source’s SSM emissions would establish liability for violating an emission standard, but it could invoke an affirmative defense to limit or eliminate civil penalties.

EPA argued that none of these types of provisions was consistent with Section 110(a)(2)(A), requiring SIPs to “include enforceable emission limitations and other control measures, means, or techniques … as may be necessary or appropriate to meet” National Ambient Air Quality Standards because the Clean Air Act requires that an “emission limitation” had to apply “on a continuous basis.” (citing 42 U.S.C. § 7602(k)). An exemption or affirmative defense provision meant that the source was not complying with the emission limitation on a continuous basis — namely, during SSM events. The court agreed with petitioners that SIPs contain more than just emission limitations, and, indeed, a SIP may have hundreds of various “control measures, means, or techniques” without any “emission limitations” requiring continuous compliance. Thus, the court held that any emission standard with an integrated exemption or affirmative defense was a permissible “control measure” and rejected EPA’s argument that all SIP provisions must be “emission limitations.” This was particularly true as EPA never found that it was “necessary or appropriate” for any SIP at issue to contain continuously applicable emission limitations instead of “control measures” in order to comply with National Ambient Air Quality Standards. Further, EPA’s interpretation would read everything in Section 110(a)(2)(A) after “include enforceable emission limitations” out of the statute.

The court did find, however, that certain SSM provisions are prohibited under the Clean Air Act. Tennessee’s enforcement discretion provision was ambiguous enough to be read as purporting to prohibit federal and citizen suit enforcement actions and that EPA can prohibit that provision even where it is susceptible to differing interpretations. It further explained that its 2014 NRDC decision held that, once liability is established, courts have the exclusive authority to decide what relief is appropriate. EPA’s former affirmative defense to civil penalties for Portland cement plants encroached on this authority, and the reasoning is just as applicable to state agencies.

For now, regulated industry comes away from the Environmental Committee decision with a win that may allow for reasonable operational flexibility where a state SIP allows an SSM exemption or defense. EPA and the environmental groups meanwhile have difficult choices to make, such as whether to seek rehearing en banc or to appeal the ruling and whether to try again to justify the SIP Call. Similarly, states are in various phases of implementing rule changes based on the SIP Call. Some may elect to allow an SSM exemption or affirmative defense, while others may choose to follow EPA’s determination to remove such provisions, even if allowed under the Clean Air Act.

[1] Envt’l Comm. of the Fla. Elec. Power Coordinating Gp., Inc. v. EPA, Case No. 15-1239 (March 1, 2024).

[2] NRDC v. EPA, 749 F.3d 1055 (D.C. Cir. 2014)

[3] 88 Fed. Reg. 47,029 (July 21, 2023) (final rule stripping affirmative defenses from federal Title V operating permit regulations); 88 Fed. Reg. 83,889 (Dec. 1, 2023) (proposed rule to remove affirmative defense provisions from oil and natural gas production, transmission, and storage facility regulations).

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