"Reactivation" Deactivated [updated 12/6/23]

[Updated December 6, 2023] Readers of this blog are familiar with the struggles over the fate of the St. Croix refinery built and operated by HOVENSA until 2012 when operations were suspended, sold to Limetree Bay Terminals, and purchased out of bankruptcy by Port Hamilton Refining & Transportation (PHRT). After PHRT purchased the refinery, in November 2022 EPA issued a determination letter to PHRT that restart of the refinery would require a PSD permit, reversing a contrary 2018 determination. PHRT petitioned for review and, on July 25, 2023, the U.S. Court of Appeals for the Third Circuit held in Port Hamilton Refining & Transp. v U.S. EPA, No. 23-1094, that the EPA’s “Reactivation Policy” violates Clean Air Act section 7475 and vacated EPA’s determination letter requiring a PSD permit for restart. This ruling likely brings the Reactivation Policy to an end.

ANALYSIS

The struggle between the owners of the troubled St. Croix refinery, the EPA, and local residents exposed to emissions from the facility is recounted in three earlier blog entries: “Harbinger of Things to Come: Limetree Bay Terminals,” which discusses Limetree Bay Terminal’s request to reopen the facility and hinted that EPA might drop the Reactivation Policy; “EPA Drops Reactivation Policy,” which discusses the 2020 decision to drop the Reactivation Policy; and “EPA Withdraws Limetree Bay PAL,” which discusses the Biden Administration EPA’s decision to withdraw the PAL. Since those articles, EPA has issued a Section 303 emergency order due to releases from the refinery flare that contaminated residents’ water supplies; a consent order was issued to resolve the Section 303 order and set a path for decontamination and cleanup; PHRT bought the facility and announced an intent to reopen; and EPA issued is November 2022 determination letter reinstating the Reactivation Policy and informing PHRT that the facility was, in EPA’s eyes, a “new” facility for PSD purposes and would require a PSD permit.

In response to EPA’s November 2020 letter, PHRT sought review from the Third Circuit, arguing first that EPA’s Reactivation Policy violated the plain language of the Clean Air Act and second that EPA’s actions reversing its earlier decisions was arbitrary and capricious. In essence, PHRT argued that “new” is not ambiguous and does not apply to an “existing” facility that has shut down but is still in existence. In its November 2020 letter, EPA contended that “new” is ambiguous and can mean either “brand new” or “refreshed” and that it was reasonably interpreting it to mean both definitions. In the Third Circuit, EPA argued first that construction was ambiguous and that it could include construction in preparation for restart. The Third Circuit dismissed this argument, noting that the statutory language states that no major emitting facility “may be constructed” in an attainment area if the construction is commenced after 1977 and that “the type of construction that requires a PSD permit is construction commenced after 1977 that brings a major emitting facility into existence.” Slip op. at 15. The court then turned to EPA’s contention that the statutory definition’s inclusion of the term “includes” renders the term as capable of including more than construction and modification and therefore it should include construction necessary for restart. The statutory definition reads: “The term ‘construction,’ when used in connection with any source or facility, including the modification (as defined in section 7411 of this title) of any source.” The Third Circuit rejected EPA’s argument, noting that in United States v. EME Homer City Generation, it had held the “PSD permitting provisions unambiguously extended the PSD program to construction and modification alone, and not ‘operation’ as EPA had argued.” The court held that because Congress, in section 7491 had extended “best available retrofit technology” to older existing sources but then had not used similar language in section 7475, there is no ambiguity. Finally, the Third Circuit noted that no party argued that the St. Croix refinery was modified.

In summary, the Third Circuit held that “The Clean Air Act unambiguously limits the PSD’s program’s application to newly constructed or modified facilities. The Refinery is not new and has not undergone a ‘modification’ as the Act defines that term. The EPA therefore exceeded its authority by requiring Port Hamilton to obtain a PSD permit for the Refinery.” Slip op. at 13.

[Update] On September 29, 2023, EPA filed a request for rehearing not to challenge the Third Circuit's vacatur of its decision requiring a PSD permit but rather the "best available retrofit technology" discussion and two factual errors, all of which EPA characterized as "non-outcome determinative." The Third Circuit granted the request and issued a corrected order which omitted the argument based upon best available retrofit technology now shown in bold green font above.

COMMENTARY

The Reactivation Policy has been EPA’s tool of choice to preclude the restart of long-dormant facilities, particularly when air pollution control authorities had assumed that the facilities were no longer active and contributing to the emissions inventory. EPA strengthened the Reactivation Policy in its Entergy, Monroe Title V objection decision and then resuscitated it after its apparent demise at the hands of the Trump Administration in Limetree Bay Terminals. The tenure and apparent usefulness of the policy, however, could not save it from its lack of a statutory basis and conflict with the clear language of section 7475, at least as interpreted by the Third Circuit.

NSR Law Blog is happy to see the Reactivation Policy consigned to history. In practice, its execution was unpredictable and violated due process norms. An agency official, sometimes on their own initiative, reviewing an uncertain record, would reach a determination that a facility had “forfeited” its permit by inactivity without a formal evidentiary hearing typically required for permit revocations or terminations for cause or for forfeiture proceedings generally. No notice was required by the policy, although EPA often gave notice. Too often, the Reactivation Policy was invoked in the shadows of interagency guidance and Title V objections, where judicial review is effectively unavailable and the temptation to create new requirements becomes intense. Port Hamilton rightly closes the chapter on the Reactivation Policy. We will see if it has a similar impact on EPA’s shadow rulemaking and adjudication practices.