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2 revisions thereof shall become effective upon promu lgation.” 4 That language, however, was part of the Clean Air Act when EPA promulgated the exist ing Subpart AAA standards in 1988, and at that time, the Agency did not interpret it as restr icting its ability to extend the effective dates of standards in that rulemaking. For the reasons set forth in this memorandum, we continue to
believe that EPA can extend the effective date for the proposed warm ai r furnace standards by at least one year.

I. Because BSER Determinations Require Consideration o f Costs and Lead Time, Imposition of a Step 1 Standard Without any Lead Ti me is not BSER.

EPA has consistently recognized that the BSER deter mination requires consideration of lead time for industry. When it proposed the origi nal Subpart AAA in 1987, EPA emphasized that BSER only applies to new sources that can meet standards with a reasonable lead time:

To be [BSER], a technology must be available at a r easonable cost. For wood heaters, an important element of the cost of a technology is the cost of delaying production while models with that technology are designed and certified. Thus, [BSER] applies, and the standards apply, only to those classes of new sources that can meet the standards with a reasonable lead time[.] 5

The preamble to EPA’s current proposal echoes the f oregoing statements by declaring
that “an element of the BSER determination includes reasonable lead time for R&D to develop and certify cleaner units.” 6 The current proposal goes on to state that “impor tant elements in determining [] BSER include the significant costs a nd environmental impacts of delaying production while models with those systems are bein g designed, field evaluated, and certified.” 7

Whether the Step 1 standard for WAFs has been adequ ately demonstrated as achievable, taking into account costs and other considerations, depends in part on whether manufacturers have sufficient lead time. In this rulemaking, the Step 1 standard could very well result in business failures, thereby jeopardizing the very ex istence of the warm air furnace industry. The costs of imposing the proposed Step 1 standard with out any lead time cannot possibly be justified as BSER under these circumstances. Absent an extension of the effective date, the only
defensible BSER for warm air furnaces would be no s tandards or Step 1 standards that are at or near emissions levels achievable by baseline models . Rather than promulgating no standards or going through an essentially meaningless exercise o f requiring certification to levels reflecting baseline conditions, however, EPA has authority pur suant to the overriding imperative that Step 1 standards reflect adequately demonstrated BSER to promulgate the Step 1 standard, while

4 42 U.S.C. § 7411(b)(1)(B).

5 52 Fed. Reg. at 5,000 (Feb. 18, 1987).

6 79 Fed. Reg. at 6,364.

7 Id.Privileged & Confidential / Attorney-Client Communi cation / Attorney Work Product

3 extending the effective date for a modest one-year period. 8 This is an option EPA was obviously contemplating at the time it proposed the new warm air furnace standards earlier this year. And, as explained in the next section, EPA provided this precise transition relief in the 1988 regulations.

II. EPA Extended Effective Dates for Standards When it Promulgated Existing Subpart AAA, and It Again Proposes To Do So for Ste p 2 Standards in the Current Proposal.

EPA’s claim that it lacks statutory authority to ex tend effective dates cannot be reconciled with the fact that: (i) in 1988, EPA ext ended the effective dates of the standards in existing Subpart AAA; (ii) in the ongoing rulemakin g, EPA proposes to extend effective dates for the Step 2 standards by five years.

A. EPA Extended Effective Dates in Two Different Respe cts in the Original Subpart AAA Regulations.

When EPA finalized the existing Subpart AAA in 1988 , it extended the effective date of the new standards by one year for small manufacture rs, 9 and it simultaneously established staggered effective dates for the new standards for all other manufacturers. 10 With respect to the former extension, EPA provided two reasons for doin g so:

The first was to provide an additional means of red ucing a potential logjam problem by delaying for 1 year the complianc e date for many manufacturers. The second was to provide additiona l time to small manufacturers for such purposes as conducting the r esearch and development, obtaining financing, or purchasing com plying designs, necessary to meet the standard. Small manufacturer s would likely be the least able to meet the compliance deadlines, becaus e, as a rule, they have

8 We are aware that, in Portland Cement Ass’n v. Ruckelshaus , the Court discussed the importance of lead time in the BSER determination a nd concluded that, because the standards at issue would take effect immediately, the “latitude” of EPA’s projection of the availability of technology would be “correspondingly narrowed.” 48 6 F.2d 375, 390-92 (D.C. Cir. 1973). In that case, the issue of EPA’s authority to extend e ffective dates was not before the Court; thus,
the Court did not have to resolve the tension betwe en the statutory language governing BSER determinations and effective dates. Moreover, that case involved standards that would apply to traditional site-built sources (by far the predomin ant paradigm for Section 111 standards), not standards that apply to sources manufactured on pro duction lines and subject to a model-line
certification scheme.

9 See 40 C.F.R. § 60.530(d) (1990).

10 Id. § 60.532 (1990).Privileged & Confidential / Attorney-Client Communi cation / Attorney Work Product

4 less technical expertise, more limited investment f unds, and less access to capital markets than large manufacturers. 11

With respect to the latter extension, EPA establish ed “a two-phased standard with the first phase beginning in July 1988 to be followed b y a more stringent standard in July 1990.” 12 Under that rule, the limits under the first phase w ere 5.5 g/hr (catalytic) and 8.5 g/hr (noncatalytic). The phase two limits, which EPA delaye d for a period of two years, were 4.1 g/hr (catalytic) and 7.5 g/hr (non-catalytic). 13 EPA justified the two-phase approach as follows:

Until this time, control technology had been essent ially undemonstrated. The committee concluded, therefore, that a level of control comparable to the Oregon 1988 standard was appropriate and ach ievable in 1988. It was concluded that a more stringent level of contro l as early as 1988 would not necessarily be achievable by those models which otherwise would have met the Oregon 1988 standard. Such a st andard would cause an unmanageable certification backlog, would presen t a moving target to
those manufacturers who had done the research and d evelopment and spent funds for certification in Oregon, and would not be reasonable considering the small environmental gain, if any, t hat might result. A second phase of the standard, requiring more string ent emission controls, would go into effect 2 years later in July 1990.

These extensions reflect the fact that, when EPA pr omulgated the 1988 rule, it interpreted the statutory text in Clean Air Act Section 111 as allowing it to establish NSPS that do not become effective immediately upon promulgation. No tably, the statutory language at that time already provided that Section 111 standards “shall become effective upon promulgation.” 14 EPA has not articulated any explanation for why it now interprets the statute differently. 15

11 52 Fed. Reg. at 5,000.

12 Id.

13 See 40 C.F.R. § 60.532 (1990).

14 42 U.S.C. § 7411(b)(1)(B) (1982 ed.).

15 Even assuming that the only statutory language tha t is in play here is the “effective upon promulgation” language in Section 111(b)(1)(B)—an i ncorrect assumption for the reasons
discussed above—a recent federal court decision inv olving Clean Air Action Section 112 standards provides support for the position that th e language in Section 111 governing the
effective date of standards is not inflexible. See Sierra Club v. Jackson

, 833 F. Supp. 2d 11, 23- 26 (D.D.C. 2012) (holding that EPA has authority to stay the effective date of standards promulgated under Clean Air Act Section 112 pending judicial review even though Section 112(d) states that standards shall be “effective up on promulgation”). Thus, although Section 112 is considerably less flexible than Section 111 rega rding effective date and consideration of costs, even that provision’s command to make standards “ef fective upon promulgation” is not absolute. The same ought to be true with respect to the ident ical language governing effective dates in (Continued...)Privileged & Confidential / Attorney-Client Communi cation / Attorney Work Product

5 B. EPA’s Current Proposal Delays the Effective Dates f or the Step 2 Standards by Five Years.

Consistent with past practice, EPA’s current propos al provides for a five-year extension of the effective dates of the Step 2 standards for all appliance categories. 16 That aspect of the proposal demonstrates that EPA believes it has auth ority to depart from the language in Section 111 that provides that standards “shall become effe ctive upon promulgation.” It is arbitrary for EPA to interpret the same statutory provision as si multaneously (i) prohibiting it from extending the effective date of the Step 1 standard for warm air furnaces by a modest one-year period, while (ii) authorizing it to promulgate Step 2 stan dards in the same rulemaking for all appliance categories that do not become effective for five ye ars. EPA either has the authority to extend effective dates or it does not. If it does not, th en by implication it would seem that the statute requires EPA to remove the Step 2 standards from th e current proposal.

* * *

For these reasons, HPBA and its membership have a s trong legal basis to continue to rigorously advocate for at least a one-year extensi on of the effective date of the proposed Subpart QQQQ standards for warm air furnaces.

Section 111, given the need in the Section 111 cont ext to reconcile effective dates with the overarching imperative that standards reflect BSER.

16 See 79 Fed. Reg. at 6,375 (proposed 40 C.F.R. § 60.532) ; see also 79 Fed. Reg. at 6,384-85 (proposed 40 C.F.R. § 60.5474).