From Michael Cooke of GT Tampa:

EPA and the federal courts have been busy with air issues in December and January, and the results have created substantial uncertainty for sources planning compliance efforts. These actions include two new air toxics rules for electric utilities (the “Mercury and Air Toxics Standard,” or “MATS”), issued by EPA in mid-December; a federal district court order issued in early January 2012 that vacated and remanded the “Delay Notice” EPA had issued to postpone the effectiveness of the Major Source Boiler MACT and Commercial and Industrial Solid Waste Incineration (“CISWI”) unit standards ; and an order of the U.S. Court of Appeals for the D.C. Circuit staying the effectiveness of the final Cross-State Air Pollution Rule that was issued by EPA on August 8, 2011. These actions affect a wide range of stationary air sources, including cement kilns, electric generating units, solid waste incinerators, and numerous industrial, commercial and institutional boilers. Regulated entities, understandably, are struggling to assess the impacts of them and make appropriate compliance plans. 

Electric Utility Air Toxics and NSPS Rules

The MATS, issued by EPA on December 16, 2011, includes a maximum achievable control technology standard (“MACT) and a new source performance standard (“NSPS”). The MACT applies, in general, to coal- and oil-fired electric generating units (“EGU”), requiring them to monitor and reduce the level of mercury (“Hg”) and other heavy metals, acid gases, SO2, NOx, and particulate matter in their emissions.   It also incorporates work practice standards to address organic air toxics such as dioxin/furan.   It will become effective 60 days after publication of the new rule in the Federal Register, which should occur by next March or April. Waste-to-energy EGUs (i.e., solid waste incinerators that are used to produce energy) generally are not subject to the MATS rule but are covered by the CISWI standards (see discussion below).   Under MATS, existing sources will be required to comply with the new standards within three years, with the potential for two 1-year extensions. The EPA also issued a New Source Performance Standard that applies to new units built, modified or reconstructed after May 3, 2011. EPA estimates that 40 per cent of the coal-fired units covered by the rule do not have the advanced compliance controls contemplated for compliance. Grid reliability is a serious issue and challenges to the new rule are expected. 

Order Vacating Delay Notice For Major Source Boiler MACT and CISWI

Just as the major source boiler MACT and CISWI were scheduled to become effective in May of last year, EPA issued a “Delay Notice” that postponed the effectiveness of the rules until the earlier of judicial review or EPA’s reconsideration of the rules could be completed. Although judicial review of the substantive challenges to the rules has been pending in the U.S. Court of Appeals since shortly after the rules were published, environmental petitioners subsequently filed challenges to the Delay Notice in federal district court. On January 9, 2012, after determining it had subject matter jurisdiction to hear the challenge, the U.S. District Court issued an order that vacated the Delay Notice and remanded it to EPA. The court held that EPA had acted arbitrarily in issuing what was, in effect, an administrative stay of the rule by not adequately addressing the traditional requirements for a stay. The effect of the vacatur order appears to activate the deadlines and requirements in the original rules. Adding to the uncertainty about applicable deadlines and standards, however, on December 23, 2011, the EPA had proposed revisions to the original standards. According to EPA, the reconsideration process is not expected to be completed until Spring 2012. This leaves regulated entities, which include more than 14,000 industrial boilers, as well as certain waste to energy and cement incinerators,    guessing which standards ultimately will apply to their facilities and what immediate steps they need to take to ensure compliance with the existing rules. Although, from a purely legal perspective, the original standards (including notice requirements where deadlines already have passed) seem to apply now, from a practical perspective, some form of reconsidered standard is likely to prevail.

Stay of CSAPR

On December 30, 2011, the U.S. Court of Appeals issued a stay of the Cross State Air Pollution Rule that became final on October 7, 2011. The rule, which was designed to replace the Clean Air Interstate Rule promulgated in 2005 and which also applies to coal-fired EGUs, includes a January 1, 2012, compliance deadline for those states subject to SO2 and annual NOx reductions and an additional compliance date of May 1, 2012, for those states subject only to the ozone season NOx reductions. These were the same compliance dates that had been included in the proposed rule, but completion of the proposed rule had been delayed for a year, causing some affected entities to expect the dates to change. Do to the uncertainty created by the delay, some sources which had not already started to construct control projects they had planned for compliance purposes found it difficult to meet compliance requirements by the final deadlines. Moreover, both CAIR and CSAPR incorporate emissions trading programs to facilitate compliance with air emissions budgets, but the programs differ in certain respects in terms of the compliance caps and interstate trading that is permitted. Not surprisingly, the value of CSAPR credits dropped substantially once the stay was announced and some exchanges have delisted future sales of them for the time being .

Cement MACT Issues

Cement manufacturing facilities with incinerators that burn solid waste potentially are subject to CISWI rather than the Cement MACT that was issued in 2010. Although the Cement MACT is being litigated, and EPA is reconsidering certain aspects of it, the status of the CISWI rule and changes ultimately made to it could have a significant effect on the regulation of cement kilns. In the CISWI reconsideration proceeding, EPA is proposing to adjust emissions limits for waste-burning cement kilns (and for energy recovery units). EPA also is proposing revisions of the final rule that dealt with the types of non-hazardous secondary materials that can be burned in boilers or solid waste incinerators, classifying a number of secondary materials as non-waste when used as a fuel and allowing operators to request EPA to identify certain materials as non-waste fuels. Cement kilns need to track these issues carefully and consider commenting on the reconsidered rules. Comments must be received by February 21, 2012.  

Next Steps

The final form of these various rules won’t be known for some time. Affected facilities–e.g., cement kilns, electric generating units, waste-to-energy units, commercial, industrial, and institutional facilities with boilers–need to track these developments carefully to analyze potential impacts on their compliance programs and make appropriate adjustments.