Tenth Circuit vacates Hunter Energy

On July 2, 2020, the Tenth Circuit Court of Appeals rendered its decision in Sierra Club v. U.S. EPA, in which Sierra Club sought direct review of the Administrator’s decision in PacifiCorp Hunter Energy, previously discussed in NSR Law Blog. In the Hunter Energy decision, EPA Administrator Pruitt had held that title V objections are not the proper forum for reviewing PSD permitting decisions. Sierra Club appealed, arguing that Title V encompasses “all applicable requirements.” In a decision focusing solely on the regulatory definition, the Tenth Circuit agreed, vacating and remanding the Sierra Club’s petition for objection back to EPA. A circuit split now exists between the Tenth Circuit, which holds that EPA’s regulatory definition and the Utah SIP compel the broadest range of review, and the Fifth Circuit, which holds that the text and structure of the Act make the narrower reading more persuasive. The Fifth Circuit’s decision was previously discussed in NSR Blog.

ANALYSIS

After a brief foray into whether the Sierra Club has constitutional standing to challenge the Hunter permit (it does), the Tenth Circuit turned to the merits of whether EPA must review Sierra Club’s Title I claims in a petition for objection. First, the Tenth Circuit said that it would apply Auer deference, but only if the regulation is ambiguous. Slip op. at 16. Turning to the regulatory definition, the court noted 40 C.F.R. § 70.2 states that “Applicable requirement means all of the following… (1) any standard or other requirement provided for in the applicable implementation plan. Slip op. at 16. It then held that Utah Administrative Code r307-405-2 requires major NSR. Therefore, the Tenth Circuit reasoned, major NSR applicability is an applicable requirement.

Second, the Tenth Circuit rejected EPA’s arguments that the terminology was ambiguous: the first item in the regulatory definition is narrowed by the second; the definition contains a qualifier, and that EPA intended Title V permits only as a place “to consolidate the requirements already imposed in other administrative proceedings.” The court rejected the first argument, holding that “Part (2) clarifies that terms in the preconstruction permits supply additional requirements,” citing EPA’s preamble at 57 Fed. Reg. at 32,276. Because Part (2) provides some additional meeting, it does not “conflict” with Part (1). The court was similarly unimpressed by the qualifying statement “as they apply,” essentially holding it meaningless. The court also rejected EPA’s arguments about intent, pointing out that EPA had quoted the regulatory language in its preamble as well as more limiting language and therefore the preamble was not clear and, in any event “the preamble cannot override the unambiguous meaning of the regulatory language.” Slip op. at 21.

Third, the Tenth Circuit rejected EPA’s argument that the preamble provided a “contemporaneous” interpretation of the regulation. The court dismissed this argument because it found the regulatory language unambiguous, whereas EPA’s “contemporaneous” interpretation conflicted with its long-standing interpretation.

Fourth, the Tenth Circuit briefly considered the Fifth Circuit’s decision in Environmental Integrity Project v. EPA. The Tenth Circuit dismissed the Fifth Circuit’s decision because the Fifth Circuit had construed the statute, but the Tenth Circuit was construing the regulation. In reaching this conclusion, the Tenth Circuit noted that the parties in Environmental Integrity Project basically argued the statute and not the regulation. The Tenth Circuit stated that it declined to reach the statute because “EPA relied on its interpretation of the regulation” and not the statute. The court concluded that “because we determine that the regulation precludes EPA’s interpretation, we need not reach the statutory issue underlying the Fifth Circuit’s recent opinion.” Slip op. at 30.

Utah (permitting authority) and PacifiCorp (permittee) both intervened. On their merits issues, the Tenth Circuit held that because EPA had dismissed the Sierra Club’s petition based on the meaning of “applicable requirements” in the regulation, the court’s review was similarly limited. On timeliness, the court cursorily rejected arguments that the review should have occurred during the first Title V permit (where Sierra Club apparently did not object), but that “Sierra Club did timely object to the 2016 Title V permit, and the EPA must object to a Title V permit if it does not include all ‘applicable requirements,’” slip op. at 33, effectively ruling on timeliness while saying it was not. The Tenth Circuit similarly rejected PacifiCorp’s invocation of the Eighth Circuit decision in Otter Tail that a party cannot initiate a citizen suit after failing to use the Title V process. Here, the court held that Sierra Club was using the Title V process. The court also rejected a laches argument as “disfavored.” Slip op. at 34. Lastly, the court dismissed Utah’s concerns about permit finality as a “policy” concern that must give way to Congress’s prescribed procedure. Slip op at 3.

COMMENTARY

The Tenth Circuit’s decision in Sierra Club is a tremendous blow, throwing into doubt decisions where EPA has followed Hunter Energy and putting all Title I permits at risk. As such, while environmental activists would surely disagree, the decision does substantial damage to the Clean Air Act’s Title I permitting scheme, eliminating regulatory certainty in existing permits. While the Tenth Circuit decision does have a few cautionary notes (it is dealing with major NSR applicability and not implementation), its reasoning that EPA must object to "any" violation of "any" requirement encompassed in the broad regulatory definition provides no limiting principle. And this lack of limiting principle is particularly chilling given that EPA’s decision to object is effectively unreviewable. See 42 U.S.C. §7661d(c) ("No objection shall be subject to judicial review until the Administrator takes final action to issue or deny a permit...").

The Tenth Circuit’s opinion also shows the limits of the narrow “textualist” approach espoused by some judges. Under the guise that the “regulatory text” answers the question, the court completely ignores the effect of its decision on the implementing statute, even after conceding that the Fifth Circuit, which did look at the statute, interpreted the statute to support EPA’s narrow interpretation. In the bizarre world of the Clean Air Act, this means that the Sierra Club’s interpretation of the regulation, backed by the Tenth Circuit, trumps the EPA’s interpretation of the statute, backed by the Fifth Circuit, because regulations cannot be challenged more than 60 days after promulgation.

EPA must now wrestle with objections that “any requirement” of the Clean Air Act and its voluminous implementing regulations are not met, including possibly questions about the process that was used (because the regulations in the various implementation plans discuss process). And EPA must do so within 45 days (for initial objections) or 60 days (after a petition) with no administrative record of the permit about which the complaint is made. How this is to be done in a way that protects the rights of states, permitting authorities and permittees is a nuance about which this panel spares nary a thought.

The final problem with the Tenth Circuit’s analysis is that it fails to heed the Supreme Court’s warning in Whitman v. American Trucking Ass’ns, 531 U.S. 457, 468 (2001), that Congress does not “hide elephants in mouseholes” by “alter[ing] the fundamental details of a regulatory scheme in vague terms or ancillary provisions.” Here, a Tenth Circuit panel allowed a penchant for textualism and an unwillingness to look at the big picture to permit unfettered collateral attacks on decades-old permit decisions under another title and chapter of the Clean Air Act in a forum with no judicial review. What can possibly go wrong? Rise, Leviathan, rise!