DC Circuit: No PSD "Grandfathering"
On August 23, 2019, the U.S. Court of Appeals for the District of Columbia Circuit (DC Circuit) issued a decision in Murray Energy Corp. v. EPA, in which various states, industry and environmental groups had challenged EPA's 2015 ozone primary and secondary NAAQS and various implementation details. The DC Circuit upheld EPA's primary NAAQS, remanded the secondary NAAQS and vacated EPA's decision to "grandfather" in-process PSD permits from the need to comply with a newly-promulgated NAAQS. From an NSR standpoint, Murray Energy may represent the end of grandfathering.
In the 2015 Ozone rule, EPA had revised the PSD program rules to address a "potential for conflict" between Clean Air Act section 165(a)(3)(B), which requires that the owner or operator of a major stationary source "demonstrate ... that emissions from construction or operation of such facility will not cause, or contribute to, air pollution in excess of any NAAQS," with section 165(c), which requires that the permitting authority must complete processing within one year. See 42 U.S.C. § 7475(a)(3)(B) & (c). To resolve this conflict, EPA "grandfathered" two categories of sources: (1) those with permit applications deemed complete on or before the signature date of the final rule revising the ozone NAAQS; and (2) permit applications for which the permitting authority has "published a public notice of the draft permit or preliminary determination before the effective date of the revised NAAQS." EPA believed that the possible conflict between sections 165(a)(3)(B) and (c) and the resulting ambiguity provided it Chevron authority to resolve the conflict.
The DC Circuit found no ambiguity, quoting Chevron that "if the Act unambiguously authorizes or forecloses EPA's ... rule, step one of the Chevron analysis requires that we follow Congress's express policy choice." Slip op. at 45-46 (citing Sierra Club v. EPA, 536 F.3d 677 (D.C. Cir. 2008) (further citing Chevron, 467 U.S. at 842-43)). The DC Circuit held that EPA's grandfathering rule "is exactly what the plain text of the Act forbids: the 'construction' of a 'major emitting facility' with emissions that will 'cause, or contribute to, air pollution in excess of any ... [NAAQS].'" Slip op. at 46 (quoting 42 U.S.C. § 7475(a)) (emphasis added)). The DC Circuit reasoned that because the "NAAQS are set based on the 'maximum airborne concentration of a pollutant that the public health can tolerate,'" citing the Supreme Court's decision in Whitman v. Am. Trucking Ass’n, 531 U.S. 457, 465 (2001), it would be "strange" to adopt an interpretation that "left the door open for construction projects that will cause or contribute to ozone levels higher than the 'public health can tolerate.'"
The DC Circuit dismissed EPA's contention that the Act requires it to "issue" a permit within one year, noting that the Act requires "only that the permitting authority 'grant or deny' completed permit applications within one year." Slip op. at 47 (citing 42 U.S.C. § 7475(c)). The DC Circuit then proffered its resolution: "If an applicant has not shown that it can meet the new NAAQS, EPA, or a state permitting authority can comply with the timeliness requirement of section 165(c) by denying the application." The DC Circuit dismissed the fact that Congress had previously grandfathered similarly-situated permit applicants, holding that the "inclusion of [the statutory] grandfather clause implies that Congress did not intend EPA to have some inherent grandfathering authority, and that, in the future NAAQS would be enforced as enacted," slip op. 47-48 (citing Andrew v. Glover Constr. Co., 446 U.S. 608, 616-17 (1980). "Nor does it matter that EPA has evidently relied on this grandfathering authority in the past" because "previous statutory violations cannot excuse the one now before the court." Id. (citing New Jersey v. EPA, 517 F.3d 574, 583 (D.C. Cir. 2008).
Finally, the DC Circuit addressed the Ninth Circuit's suggestion, in Sierra Club v. EPA, 762 F.3d 971 (9th Cir. 2014), that EPA could create a grandfathering exception through formal notice and comment rulemaking. The DC Circuit dismissed this bluntly: "Dicta is never binding on any court, nor is it persuasive here, because it is fundamentally incorrect." Slip op. at 49 (citation omitted). In closing, the DC Circuit declared:
The grandfathering provision of the 2015 Rule, as codified at 40 C.F.R. §§ 51.166(i)(11) and 52.21(i)(12), contradicts Congress’s “express policy choice” not to allow construction which will “cause or contribute to” nonattainment of “any” effective NAAQS, regardless of when they are adopted or when a permit was completed. Accordingly, we grant the petition for review with respect to the grandfathering provision, and vacate that portion of the Rule.
It is not surprising that no judge on the Ninth Circuit panel was willing to affix their name to this opinion, for it rides roughshod over history, nuance, and even irony in its rush to reach the court's policy result. This is a shame, because the result may well be correct, but its merits are obscured by the high-handed and self-serving way it was reached.
History. The DC Circuit opinion conveniently forgets that the PSD program was a judicial creation. Congress and the EPA had to sort out the details. Congress did so in the 1977 Amendments, but in a way that tried to balance the equities between various concerns. Hence Congress created a grandfather provision and has not objected when EPA has used them in subsequent, major NAAQS revisions. This context is potentially important, but the DC Circuit opinion sweeps it away.
Nuance. A similar disregard of nuance appears in the opinion's handling of the NAAQS. The opinion's argument that Whitman means any exceedance of the NAAQS will result in widespread adverse health effects ignores both the quoted language from Whitman and the Clean Air Act itself, which provides that the primary NAAQS must be set "allowing an adequate margin of safety" to protect the public health. See Whitman, 531 U.S. at 465; 42 U.S.C. § 7409(b)(1). Should this margin of safety have a bearing on implementation? The opinion has no time for such nuance.
Irony. Any invocation of "natural" reading or "plain language" is deeply ironic in light of the circuit's NESHAP jurisprudence.
High handed. "If a permit applicant has not shown that it can meet the new NAAQS, EPA or a state permitting authority can comply with the timeliness requirement of section 165(c) by denying the application." This statement ignores Congress' intent to require prompt processing, that proposed NAAQS have no legal force, and that requiring sources to model a proposed and often uncertain value exceeds the statute. Worse, its interpretation of section 7475(c) could grant permitting authorities effective carte blanche to block any permit by delaying action for a year and then denying the application for failure to meet the statutory timeline, as if permit applicants solely control the processing timeline.
Self-serving. The opinion dismisses any consideration of history or nuance so that it can invoke Chevron step 1 to impose its policy -- that the NAAQS must be met by any source regardless of where it is in the permitting process -- without having to wrestle with the countervailing equities that Congress and EPA had considered in creating the grandfather provisions.
In this case, the balancing of the considerations suggests that the DC Circuit may well be correct that broad grandfathering may not be appropriate, but wholly lost in its approach is any consideration that limited grandfathering may be appropriate in the interest of administrative finality. A more nuanced and thoughtful opinion might have explored these issues to arrive at a decision that advances all of the congressional goals of the PSD program. That is not this opinion.