MEMORANDUM

From: The Office of Air Qu ality Planning and Standards U.S. Environmental Protection Agency

To: Combustion Turbine NSPS Docket (EPA-HQ-OAR-2004-0490)

Date: June, 2012

Subject: Malfunction Affirmative Defense

Malfunction Affirmative Defense

Consistent with Sierra Club v, EPA , the EPA has proposed standards in th is rule that apply at all times. In proposing the standards in this rule, the EPA ha s taken into account startup and shutdown periods and, for the reasons explained in this preamble, ha s proposed different standards for those periods.

Periods of startup, normal operations and shutdown are all predictable and routin e aspects of a source’s operations. However, by contrast, ma lfunction is defined as a “sudden, infrequent, and not reasonably preventable failure of air pollution control equipment, process equipmen t or a process to operate in a normal or usual manner * * *’’(40 CFR 60.2). The EPA has determined that Clean Air Act (CAA) section 111 does not require that emissions that occur during periods of malfunction be factored into development of CAA section 111 standards.

Further, accounting for malfunctions would be difficu lt, if not impossible, given the myriad different types of malfunctions that can occur across all sources in the category and given the difficulties associated with predicting or accounting for the fre quency, degree and duration of various malfunctions that might occur. As such, the performance of units that are malfunctioni ng is not “reasonably” foreseeable. See, e.g., Sierra Club v EPA , 167 F. 3d 658, 662 (D.C.Cir. 1999) (“[T]he EPA typically has wide latitude in determining the extent of data-g athering necessary to solve a problem. We generally defer to an agency's decision to proceed on the basis of imperfect scientific in formation, rather than to
"invest the resources to conduc t the perfect study."). See also, Weyerhaeuser v Costle , 590 F.2d 1011, 1058 (D.C. Cir. 1978) (“ In the nature of things, no ge neral standard, individual permit or even any upset provision can anticipate all upset situations. After a certain point, the transgression of regulatory limits caused by ‘uncontrollable acts of third parties,’ such as strikes, sabotage, operator intoxication or insanity and a variety of other eventualities, must be a matter for the administrative exercise of case-bycase enforcement discretion, not for specification in advance by regulation.”). In addition, accounting for malfunctions when setting stan dards of performance under section 111 which reflect the degree of emission limitation achievable through “the application of Best System of Emission Reduction” that the EPA determines is adequately demonstrated could leadto standards that are significantly less stringent than levels that are achieved by a well-performi ng non-malfunctioning source. The EPA’s approach to
malfunctions is consistent with section 111 and is a reasonable in terpretation of the statute.

In the event that a sourcefails to comply with the applicable CAA section 111 standard as a result of a malfunction event, the EPA would determine an appr opriate response based on, among other things, the good faith efforts of the source to minimize emissions during malfunction periods, including preventative and corrective actions, as well as root cause analyses to ascertain and rectify excess
emissions. The EPA would also consid er whether the source's failure to comply with the CAA section 111 standard was, in fact, “sudden, infrequent, not r easonably preventable” and was not instead “caused in part by poor maintenance or careless operation.” 40 CFR §60.2 (defini tion of malfunction).

Finally, the EPA recognizes that even equipment that is proper ly designed and maintained can
sometimes fail and that such failure can sometimes cause a violation of the relevant emission standard.(See, e.g. , State Implementation Plans: Policy Regardi ng Excessive Emissions During Malfunctions, Startup, and Shutdown (Sept. 20, 1999); Policy on Excess Emissions Duri ng Startup, Shutdown, Maintenance, and Malfunctions (F eb. 15, 1983)). The EPA is, therefore, proposing to add an affirmative defense to civil penalties for viol ations of emission standards that are caused by malfunctions. See 40 CFR 60.4334 (defining “affirmative defe nse” to mean, in the context of an enforcement proceeding, a response or defense put forward by a defendant, regarding which the de fendant has the burden of proof, and the merits of which are independently and obj ectively evaluated in a j udicial or administrative proceeding.). We also have added other regulatory pr ovisions to specify the elements that are necessary to establish this affirmative defense; the source mu st prove by a preponderan ce of the evidence that it
has met all of the elements set forth in 60.4334. (See 40 CFR 22.24). The criteria ensure that the affirmative defense is available only where the event that causes a violation of the emission standard
meets the narrow definition of malfunction in40 CFR 60.2 (sudden, infre quent, not reasonable preventable and not caused by poor ma intenance and or careless operation) . For example, to successfully assert the affirmative defense, the source must prove by a preponderance of the evidence that the violation “[w]as caused by a sudden, infrequent, and unavoidable failure of air pollution control, process equipment or a process to operate in a normal or usual manner....” The criteria also are designed to ensure that steps are taken to co rrect the malfunction, to minimize emi ssions in accordance with section 60.11 and to prevent future malfunctions. For example, the source must prove by a preponderance of the evidence that “[r]epairs were made as expeditiously as possible whena violation occurred...” and that “[a]ll possible steps were taken to minimize the imp act of the violation on ambient air quality, the environment and human health....” In any judicial or administrative proceedi ng, the Administrator may challenge the assertion of the affirmative defens e and, if the respondent ha s not met its burden of proving all of the requirements in th e affirmative defense, appropriate penalties may be assessed in
accordance with section 113 of the Clean Air Act (see also 40 CFR part 22.27).

The EPA is proposing an affirmative defense in this ru le in an attempt to bala nce a tension, inherent in many types of air regulation, to en sure adequate compliance while simultaneously recognizing that despite the most diligent of efforts, emission standards may be violated under circumstances beyond the
control of the source. The EPA mu st establish emission standards th at “limit the quantity, rate or concentration of emissions of air pollutants on a continuous basis.” 42 U.S.C. §7602(k) (defining “emission limitation and emission standard”). See generally Sierra Club v. EPA , 551 F.3d 1019, 1021 (D.C. Cir. 2008) Thus, the EPA is required to en sure that section 111 emissions standards are
continuous. The affirmative defense for malfunction even ts meets this requirement by ensuring that even where there is a malfunction, the emission standard is still enforceable through injunctive relief. While “continuous” standards, on the one hand, are required, there is also case law indicating that in many situations it is appropriate for th e EPA to account for the practical re alities of technology. For example,
in Essex Chemical v. Ruckelshaus , 486 F.2d 427, 433 (D.C. Cir. 1973), the D.C. Circuit acknowledged that in setting standard s under CAA section 111 “variant provisi ons” such as provisions allowing for upsets during startup, shutdown and equipment ma lfunction “appear necessary to preserve the
reasonableness of the standards as a whole and th at the record does not s upport the ‘never to be exceeded’ standard currently in force.” See also , Portland Cement Association v. Ruckelshaus, 486 F.2d 375 (D.C.Cir. 1973). Though interv ening case law such as Sierra Club v. EPA and the CAA 1977 amendments call into question the relevance of these cases today, th ey support the EPA’s view that a system that incorporates some level of flexibility is reasonable. The affirmative defense simply provides for a defense to civil penalties for violations that are proven to be beyond the control of the source. By incorporating an affirmative defense, the EPA has fo rmalized its approach to upset events. In a Clean Water Act setting, the Ninth Circuit required this typeof formalized approach when regulating “upsets beyond the control of the permit holder.” Marathon Oil Co. v. EPA , 564 F.2d 1253, 1272-73 (9th Cir. 1977). See also , Mont. Sulphur & Chem. Co. v. United St ates EPA, 2012 U.S. App. LEXIS 1056 (Jan 19, 2012)(rejecting industry argument that reliance on the affirmative defense was not adequate). Butsee, Weyerhaeuser Co. v. Costle , 590 F.2d 1011, 1057-58 (D.C. Cir. 1978) (holding that an informal approach is adequate). The affirmative defense provi sions give the EPA the flexibility to both ensure
that its emission standards are “continuous” as required by 42 U.S.C. §7602(k), and account for unplanned upsets and thus support the reas onableness of the standard as a whole.