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December 24, 2008 |
Schiff Hardin Environmental Update On December 23, 2008, the U.S. Court of Appeals for the District of Columbia reversed its July 2008 decision to immediately vacate sweeping federal regulations under the Clean Air Interstate Rule ("CAIR"). CAIR aims to provide cleaner air by tightening the cap on sulfur dioxide ("SO2") and nitrogen oxide ("NOx") emissions. The court granted the U.S. EPA's petition to remand the case without vacatur, concluding vacatur defeats the environmental purpose of the rule. The court denied the U.S. EPA's request for a new hearing en banc. Under the new order, CAIR remains in place and an applicable requirement until the U.S. EPA replaces it with a new rule that addresses the current rule's deficiencies. The court imposed no deadline on the remand but continues to require the U.S. EPA to heed the court's order to remedy the shortcomings of CAIR. In its July 2008 opinion, the court pointed out several flaws in CAIR that any new rule would have to remedy. Some major shortcomings included the U.S. EPA's flawed approach of using region-wide caps with no state-specific quantitative contribution determinations or emissions requirements, the failure of CAIR to connect states' emissions reductions to states' own significant contributions, unlawfully connecting states' emissions reductions with the Title IV trading program, and arbitrarily allocating state budgets from the region-wide NOx cap but adjusting the distribution of allocations to states considering fuel type. Thus, any new rule the U.S. EPA promulgates must differ from the existing CAIR with regard to these substantive areas. Until U.S. EPA promulgates a new rule, states will be required to comply with CAIR as it currently exists. Phase I is scheduled to begin in 2009. Thus, entities will need to comply with existing standards under CAIR, and any failure to do so may trigger an enforcement action. The compliance deadline for implementing Phase I NOx controls is January 1, 2009. The court refused to set a definitive deadline by which the U.S. EPA must promulgate a revised CAIR. However, given the many divergent opinions regarding content of a new rule, the U.S. EPA's need to go back to the drawing board with regard to SO2 caps, serious issues regarding NOx nonattainment areas in upwind locations, the change in administration, and the requirement of a notice and comment period, it is possible that the remand will last through Phase I of CAIR. Also, while there is no timeline for a new rule, the court did remind Petitioners that a mandamus petition may be brought if the U.S. EPA fails to comply with the court's order to correct CAIR's flaws. On the state level this recent decision has two main implications. First, several states, including Illinois, have relied on CAIR for at least some of their attainment demonstrations. Those states can continue such reliance. Second, CAIR requires a Phase I cap for NOx to be in place by 2009. Thus, if states have not yet allocated 2009 NOx allowances, they most likely soon will. In any event, vintage 2009 seasonal NOx allowances must be allocated before the end of the 2009 ozone season to be available for true-up by November 30, 2009, and vintage 2009 annual NOx allowances must be allocated before the end of calendar year 2009 to be available for true-up in early 2010; it is highly likely that both types of NOx allowances will be allocated at the same time. In summary, this decision means that, for now, sources must comply with CAIR in its current form. Failure to hold sufficient vintage 2009 allowances by the true-up date could lead to an enforcement action. While the court has not set any deadline by which the U.S. EPA must correct CAIR's flaws, the remand may last through Phase 1 of CAIR. Also, affected parties should remember that any new rule the U.S. EPA promulgates will be subject to a notice and comment process in which the public will have an opportunity to participate. |