Landmark U.S. Supreme and D.C. Circuit Court decisions that uphold EPA's revised National Ambient Air Quality Standards (NAAQS) for ozone/particulate matter and the NOx State Implementation Plan Call, have set the agenda for EPA. The two high profile courts in separate, but related cases supported the multitiered ground-level ozone reduction scheme.

Background

Three major ozone reduction initiatives were undertaken by EPA during the late 90s: the NOx SIP Call, the Ozone/Particulate Matter Standard and the New Source Review (NSR) Program.

The NOx SIP Call

In August 1997, eight northeastern states filed petitions with EPA identifying 22 states plus the District of Columbia (D.C.) as containing sources that significantly contribute to regional transport of ozone. On November 7, 1997, the EPA proposed the NOx SIP Call and required the identified states and D.C. to submit plans to address regional transport of ground level ozone. In 1999, several of the 22 states petitioned EPA to be removed from the program. Three won and were removed, reducing the impact to sources in 19 states and D.C.

In March and June of 2000, the NOx SIP Call was challenged in court; but the U.S. D.C. Circuit Court of Appeals issued opinions largely upholding the NOx SIP Call. The latest ruling, issued on May 15, 2001, once again supported the basic provisions of the NOx SIP Call. However, the court disagreed with EPA's reasoning for including cogenerators (industrial facilities that produce electricity using waste heat from industrial processes) and therefore ruled against the EPA in this regard. The ruling reduced the number of facilities directly affected by Section 126, with little impact to the NOx SIP Call. Currently, the affected states and facilities continue to work toward meeting a May 2004 deadline.

Ozone and Particulate Matter Standard

The Clean Air Act (CAA) directs the EPA to establish NAAQS to protect public health and welfare. EPA has established NAAQS for six pollutants: sulfur dioxide, carbon dioxide, nitrogen oxide, lead, ozone and particulate matter (PM). In July 1997, EPA issued revised NAAQS for PM and ozone including a new standard for fine particulate matter (PM2.5) and a more stringent ozone standard of 0.08 ppm, averaged over an eight-hour period.

Numerous industrial groups opposed the new standards and began the long process of appeal through a series of court battles, which eventually lead to a Supreme Court ruling. The February 27, 2001 Supreme Court decision found in favor of EPA's ozone and PM standard on two primary issues:

  • The EPA does have legislative delegated authority under the U.S. Constitution to establish NAAQS that are "requisite to protect the public health" under section 109 of the Clean Air Act.
  • The EPA cannot consider costs when establishing NAAQS, however, costs must be considered when devising implementation plans.

This same ruling found EPA's ozone and PM implementation policy to be "illegal" and partially ruled in favor of the industrial groups. The Supreme Court decision is paradoxical because it reaffirms EPA's authority to set NAAQS while at the same time requires the EPA to redesign their implementation plan. EPA is expected to spend most of 2001 figuring out how to legally implement the new standards.

New Source Review

In 1999, EPA believed that excessive abuse of the NSR program resulted in less than acceptable reductions in NOx and, in response, increased enforcement of the NSR requirements. In an internal EPA document, coal-fired power plants were identified as sources contributing significantly to NOx, SO2, and CO2 emissions. Furthermore, the Agency noted that many outdated utility plants had not been retired and that 30-year old plants were operating longer than planned, yet few had applied for permit modifications that would required stringent New Source Review. This discovery lead to enforcement actions against the utilities.

The U.S. EPA and several large utility companies ended last year in the midst of settlement proceedings. EPA issued a press release in December 2000, announcing a $1.4 billion settlement with Cinergy and claimed to be working on similar agreements with other utilities.

What Does It Mean?

Contrary to many predictions, the current Bush Administration has had less impact on these rulings than expected. The judicially resolved programs will begin to take place over the next 3-5 years and, like many federal rulings, will impact larger companies first with eventual trickledown. The implementation phases of these rulings may be more critical than the rulings themselves. Tense negotiations can be expected and, if we aren't careful, the only winners will be the lawyers.