On January 9, 2012, the United States District Court for the District of Columbia (“D.C. District Court”) issued an opinion and order vacating EPA’s stay of the rules for controlling hazardous air pollutants from boilers (“Boiler MACT”) and commercial and industrial solid waste incineration units (“CISWI Rules”). The Court’s vacatur order creates legal uncertainties for stationary sources which operate these types of emission units; however, the practical impact of the decision remains unclear and may be short lived. The D.C. District Court’s decision leaves open the possibility that EPA could still stay the Boiler MACT and CISWI Rules, but the agency must use different legal and factual criteria. Furthermore, EPA is already on pace to issue a revised version of the Boiler MACT and CISWI Rule in April 2012 which could provide for a delayed compliance extension date as far out as 2015. See, proposed revisions to the CISWI Rule and Boiler MACT at 76 Fed. Reg. 80,532 and 80,598 (Dec. 23, 2011), respectively.

Background

On February 21, 2011, the United States District Court for the District of Columbia ordered EPA to promulgate overdue hazardous air pollutant emission standards for boilers and CISWI units. See, Sierra Club v. Jackson, Civil Action No. 01-1537, 2011 WL 181097 (D.C. Cir. January 20, 2011). In accordance with that order, on March 21, 2011 EPA published the final Boiler MACT and CISWI Rules, to become effective on May 20, 2011. See, 76 Fed. Reg. 15,608. Also on March 21, 2011, EPA announced that it was initiating an administrative reconsideration process to potentially change certain aspects of each rule. 76 Fed. Reg. 15,266. Shortly thereafter, petitions for judicial review were filed in the United States Court of Appeals for the District of Columbia (“Court of Appeals”) challenging each rule. 

On May 18, 2011 (while the petitions for judicial review were pending in the Court of Appeals and two days before the rules were to go into effect), EPA issued a notice staying the effective date of both rules “until the proceedings for judicial review of these rules [in the Court of Appeals] are completed or the EPA completes its reconsideration of the rules, whichever is earlier[.]” (the “Delay Notice” or “stay”). 76 Fed. Reg. 28,664. On July 14, 2011, the Sierra Club filed a petition in the D.C. District Court challenging the validity of EPA’s Delay Notice.

Court’s January 9, 2012 Opinion Vacating EPA’s Delay Notice

In response to the Sierra Club’s lawsuit, the D.C. District Court issued an opinion dated January 9, 2012, holding that EPA had unlawfully issued the Delay Notice. Among other things, the Court held that EPA had used the wrong legal standard when it decided to issue the Delay Notice. The Court determined that EPA was obligated to use a four-part test for determining whether the stay should have been issued, specifically EPA should have considered: (1) whether there was a likelihood of success on the merits in challenging the Boiler MACT and CISWI Rules; (2) whether industry would be irreparably harmed if the stay were not issued; (3) whether a balancing of equities supported granting of the stay; and (4) whether the public’s interest would be served by a stay. In lieu of these four factors, EPA relied on a much simpler criteria finding that “justice so requires” issuing the stay given the pending administrative reconsideration process.

In a move that may benefit industry interests, the D.C. District Court rejected the Sierra Club’s argument that EPA is restricted to staying Clean Air Act rules for no more than three months.  The Court held that EPA has the power to stay rules for much longer periods of time under section 705 of the Administrative Procedure Act. This aspect of the decision suggests that the Court might uphold a future stay if EPA used the four part test and relied upon the pending petitions for judicial review in the Court of Appeals (and not the petition for reconsideration process pending before EPA).

The D.C. District Court concluded that the appropriate remedy for EPA’s unlawful actions was complete vacatur of the Delay Notice. As discussed below, this is significant because a vacatur order treats the underlying Delay Notice as if it had never been issued. The Court rejected EPA’s request that the Delay Notice simply be remanded to the agency for further consideration which would have left the stay in place while EPA conducted further proceedings to support the stay. 

Implications of Decision

When a court vacates an agency action, the legal effect is as if the action never occurred. With the Court’s vacatur of the Delay Notice, the original deadlines and requirements defined in the Boiler MACT and CISWI Rules come back into effect. 

One potential problem is that some of these original deadlines have already passed and sources may have chosen to not take action in reliance on EPA’s Delay Notice. For example, facilities with major source boilers and CISWI units were required to file notifications with the EPA in the fall of 2011. Sources may now need to evaluate whether any of these original deadlines were missed and consider taking corrective action.

Likewise, the original deadlines established for future activities (such as coming into compliance with emission limitations by March 2014) remain in effect. The vacated Delay Notice cannot now serve to extend these deadlines. This may pose problems for sources which assumed that they had a longer planning horizon for installing controls to achieve compliance with the Boiler MACT or CISWI Rules.

Sources which recently constructed or modified boilers should closely review the emission limitations included in the associated construction permit, particularly with respect to hazardous air pollutants. These boilers may have received limits under the MACT Hammer process which may not be sufficiently stringent to comply with Boiler MACT standards which are now in effect for these units.

The Court’s vacatur of the Delay Notice will almost certainly receive additional congressional attention and reinvigorate efforts to provide legislative relief from the adverse consequences associated with the rules. Bills have already been introduced in Congress which would provide EPA 15 months to redevelop the Boiler MACT and provide companies with an additional five years to comply with the final rule. Because boilers are such ubiquitous sources, there is also a possibility that EPA itself may provide more regulatory certainty and flexibility through future rulemaking, including its pending reconsideration process which is slated for completion in April 2012.