On May 1, 2015, the United States Court of Appeals for the District of Columbia issued an opinion remanding to EPA the 2013 federal regulatory provisions allowing emergency engines participating in an emergency demand response (EDR) program to operate for 100 hours without meeting more stringent MACT requirements for non-emergency engines pursuant to 40 CFR 63 Subpart ZZZZ. Delaware Department of Natural Resources and Environmental Control v. EPA, No. 13-1093 (D.C. Cir. May 1, 2015). See 78 Fed. Reg. 6674 January 20, 2013). As with other vacatur actions, the court will issue a mandate after the time has passed for post judgment filings. In its opinion, the court provided EPA, or any party, the ability to file a motion to “delay issuance of the mandate or to request either that the current standards remain in place or that EPA be allowed reasonable time to develop interim standards” if the vacatur causes administrative or other difficulties. EPA has been granted an extension until July 15, 2015 to file a petition for rehearing or a motion to stay the mandate.

The court found that in adopting the 100 hour provision EPA acted in an arbitrary and capricious manner in failing to adequately address comments and justify the exemption.

First, the court found concerns raised during the regulatory comment period regarding the impact of the exemption on grid reliability were not adequately addressed by EPA. Industry and environmental petitioners had raised concerns with EPA that demand response programs based on backup generators had a negative, rather than positive, impact on grid reliability because: (1) backup generators are not subject to the same controls as traditional power plants, cost less and thus underbid conventional power suppliers in capacity markets; (2) increased use of backup generators decreases demand for traditional power in capacity markets, traditional power generators rely on backup generators to recoup costs and under-invest in power plants thus undermining the reliability of the power grid; (3) decreasing power supply from traditional sources creates a less stable grid and power emergencies will increase; and (4) as power emergencies increase, the use of “dirty” backup generators will cause greater pollution. Id. at 20. The court found the comments legitimate and further found that EPA passed off the arguments to other agencies responsible for grid reliability. The court found EPA’s response inadequate when the final rule had based the exemption on grid reliability and EPA’s failure to respond to these serious objections was arbitrary and capricious.

Second, the court found EPA had failed to adequately respond to comments that the 100-hour limit was based on faulty evidence. EPA had relied on comments from a prior rulemaking that the EDR program of regional transmission organization PJM Interconnection, LLC (PJM) required engines to be available for a minimum of 60 hours per year. The court found EPA failed to consider later comments from PJM that the 60-hour rule does not apply to individual engines but engines may be aggregated to meet the 60 hour availability requirement. The court found EPA failed to give an adequate reason for relying on the PJM availability requirement.

Third, the court found EPA did not explain why it did not limit the 100-hour exemption to areas of the country not served by capacity markets as had been proposed in comments to the rule. The court found EPA provided only a “vague desire for uniformity” and EPA should have considered alternatives and provided reasons for not using them. “Because EPA too cavalierly sidestepped its responsibility to address reasonable alternatives, its action was not rational and must, therefore, be set aside.”

Also, the court noted EPA had justified the final rule adopting the 100 hour exemption on the basis of supporting grid reliability but did not involve the federal agencies responsible for grid reliability. “EPA cannot have it both ways it cannot simultaneously rely on reliability concerns and then brush off comments about those concerns as beyond its purview.”

According to the EPA website, the agency is reviewing the decision and will post any updates regarding the regulation.