In a final determination published in the June 12, 2015 Federal Register, EPA acted on a Petition for Rulemaking filed by the Sierra Club asserting that the State Implementation Plans (SIP) of 39 states, including Kentucky, were inadequate due to their treatment of excess emissions associated with startup, shutdown and malfunction events. EPA found that the SIP provisions of 36 states were “substantially inadequate” and issued a SIP Call for each of these states, including West Virginia, Kentucky, Illinois, Ohio, and Colorado. Many of the state rules have been in place since the late 1970s. In broad terms, EPA concluded that provisions treating excess emissions during periods of startup, shutdown and malfunction (SSM) as excluded from emission limitations and not in violation of emission standards are at odds with the Clean Air Act.

The revised SIP submittals are due by November 22, 2016. If the state fails to submit a revision to its SIP by the deadline or if EPA finds the submittal inadequate, the finding will trigger an obligation for EPA to impose a Federal Implementation Plan (FIP) within 24 months. Additionally, mandatory sanctions will be triggered, including restrictions on highway funding.

EPA suggested that states could either remove the particular identified offending provision from the SIP, replace the provision with an alternative emission limitation such as work practice standards that would apply during startup or shutdown or rewrite the entire regulatory provision. The final determination provides examples of how states should approach alternative emission limitations and recommends that the states review the statement of EPA’s updated SSM SIP Policy as of 2015.

Seventeen states filed suit in the D.C. Circuit challenging EPA’s final determination, including Kentucky, Ohio and West Virginia. Individual industry petitioners and certain industry groups also filed suit, and environmental groups intervened. The cases were consolidated with the lead case being Walter Coke, Inc. v. U.S. EPA, Case No. 15-1166. The court has set a briefing schedule with final briefs due October 19, 2016. Given this schedule, a decision on the challenge is not expected until after the deadline for the states to respond to the SIP Call.

States are evaluating how best to respond. For Kentucky, EPA found Section 1(1) of 401 KAR 50:055 deficient. Kentucky has identified five options and has sought stakeholder input on those options.

1. Amend 401 KAR 50:055 and remove provisions identified as deficient from the SIP.

2. Remove provisions identified as deficient from the SIP and keep provisions as state only (state origin requirements).

3. Amend 401 KAR 50:055 to provide enforcement discretion.

4. Revise the regulations to establish emission limits/work practice standards.

5. Make no amendments to the regulations or the SIP and require EPA to issue a FIP.

These options are still in the preliminary discussion phase and have not proceeded to proposed rulemaking at this point. A stakeholder meeting to further discuss these options was held on April 19, 2016.

One of the options under consideration by Kentucky is the development of a regulation that would provide for work practice standards to be followed during SSM events since EPA’s determination is clear that work practice standards are emission limitations. North Carolina has issued a proposed regulation following this approach. The North Carolina proposal establishes separate requirements for treatment of malfunction events and treatment of startups and shutdowns. For malfunctions, the approach offers sources an opportunity to seek a source specific malfunction work practice standard permit limit. Alternatively, if the source does not pursue a source specific limit, the Agency director is authorized to exercise enforcement discretion. Additionally, certain types of sources are required to have malfunction abatement plans, which the Agency director must approve. With respect to startup and shutdown, the North Carolina proposal also includes options, such as compliance with the applicable SIP emission limit or permit limit, compliance with one of the general work practice standards identified in the regulation, compliance with a work practice standard in a federal rule or compliance with a source specific work practice standard permit limit. Texas has also issued a proposal to establish alternative work practice standards that would apply in the event of exceeding numerical emission limits during upsets, maintenance or startup and shutdown.

Even as the litigation over the SSM SIP Call proceeds and the affected states are evaluating regulatory changes and their response to the SIP Call, the ramifications of the SIP Call are being felt in other areas. For example, on February 3, 2016, EPA granted in part a Petition from the Environmental Integrity Project regarding the Title V permit issued to Pirkey Power Plant in Texas. The Petition concerned the incorporation by reference of a 2012 NSR permit and how the limits for opacity and particulate matter were addressed during planned maintenance or startup and shutdown activities. EPA concluded that the permit should be revised to make it clear that the SIP opacity and PM limits apply during periods of planned maintenance, startup, and shutdown. This is despite the fact that the 2012 NSR permit established alternative BACT limits for such periods. In making its decision, EPA commented on the fact that it had issued a SIP Call to Texas.

In another example of the scope of EPA’s focus on this issue, EPA announced that it was revising the Arizona BART determination under the regional haze rule with respect to the Coronado Plant. Specifically, EPA determined that the affirmative defense provision should be removed, quoting discussion in the SIP Call. Coronado had argued that the affirmative defense provision was an integral part of the proposed emission limitations. EPA noted that it had issued the SSM SIP Call to Arizona. Echoing comments made in the SSM SIP Call determination, EPA noted that “if Coronado were to violate a BART emission limitation due to a malfunction, [Coronado] retains the ability to defend itself in an enforcement action and to oppose imposition of particular remedies…” 81 Fed. Reg. 21744.