Docket Memo

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1 MEMORANDUM
TO: Docket for rulemaking, "State Implementation Plans: Response to Petition for

Rulemaking; Findings of Substantial Inadequacy ; and SI P Calls to Amend Provisions Applying to Excess Emissions During Periods of Startup, Shutdown, and Malfunction" (EPA

- HQ

- OAR

- 2012

- 0322)
DATE: December

____ , 2012
SUBJECT: Statutory , Regulatory , and Policy Context for this Rulemaking This memorandum summarizes the legal and administrative context for the proposed action by the U.S. Environmental Protectio n Agency ( EPA ) responding to the Sierra Club’s Petition for Rulemaking (Petition) concerning state implementation plan ( SI P ) issues re lated to excess emissions during periods of startup, shutdown, and malfunction (SSM). **Statutory Requirements Concerning SI Ps Relevant to this Action**  Several key

statutory provisions of the Clean Air Act ( CAA ) are relevant to the EPA's evaluation of the Petition. These provisions relate generall y to the basic legal requirements for the content of SI Ps, the authorit y and respo nsibility of states to develop such SI Ps, and the EPA's authority and responsibility

to review and approve SIP submissions in the first instance, as well as the EPA's authorit y to require improvements to SI Ps if the EPA later determines that to be necessar y for a SIP to meet CAA requirements. In addition, the Petition raised issues that pertain to enforcement of provisions in a SI P. The enforcement issues relate generally to what constitutes a violation of an emission limitation in a SI P, who may seek to en force against a source for that violation, and whether the violator should be subject to monetary penalties as well as other forms of judicial relief for that violation.
Co nsistent with the principle of cooperative federalism, the CAA provides authority t o, and imposes responsibility

on, all states and the EPA to meet the objectives and requirements of the statute. CAA section 110(a)(1) requires each state to have a SIP that provides for “the implementation, maintenance, and enforcement of” the National Ambient Air Quality Standards (NAAQS ) within the state. The state is also obligated to update that SI P from time to time, such as through the infrastructure SI P submissions required within 3 y ears of the promulgation of a new or revised NAAQS. CAA section 11 0(a)(2) requires that “[e]ach such plan shall” meet the requirements listed in sections 110(a)(2)(A) through (M). 1 Under section 110(a)(2)(H)(i), states have a general statutory

duty to revise their SI Ps “from time to time as may be necessary ,” in

1 The EPA notes that SIP submissions must meet the applicable requir em ents of CAA section 110(a)(2), and different types of SIP submissions may trigger different requirements. In general, however, all SIP submissions that contain or reference emission controls must meet the requirements of section 110(a)(2)(A) with respect to enforceable emission limitations, as must existing SIPs as a whole.Docket Memo

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2 order to update them, and under section 110(a)(2)(H)(ii), states have a specific duty to do so in the event that the EPA makes a finding of substantial inadequacy concerning attainment of the NAAQS or an y other requirements of the CAA. Section 107(a) of the CAA p rovides states with both the authority and the primary

responsibility to develop SI Ps that meet applicable statutory and regulatory

requirements for attaining, maintaining, and enforcing the NAAQS. 2 States have discretion in formulating their SI Ps, and the EPA is required to approve a SIP submission that provides for the timely attainment and maintenance of the NAAQS and that satisfies the other applicable requirements of CAA section 110(a)(2) or an y other CAA section relevant to the SI P submission. 3 As the Supreme Court has stated: The Act gives the Agency no authority

to question the wisdom of a State's choices of emission limitations if they are part of a plan which satisfies the standards of §1 10(a)(2). . . . Thus, so long as the ultimate ef fect o f a State's choice of emission limitations is compliance with the national standards for ambient air , the State is at liberty to adopt whatever mix of emission limitations it deems best suited to its particular situation. 4 However, the EPA has both the authority and the responsibility

to assess whether a SIP submission in fact meets applicable CAA and regulatory requirements. CAA section 110(a)(2) provides that each SI P “shall” meet various requirements that address a range of topics including legal author ity , resources, and substantive content. Under CAA section 110(k), the EPA is required to determine whether or not a SIP submission meets all applicable requirements, and the EPA is authorized to approve, disapprove, partially approve and partiall y disappr ove, or conditionally

approve a given SI P submission, as appropriate. When a SIP submission does not meet the applicable requirements, the EPA is obligated to disapprove it. 5

2 See Am

. Lung Ass ’n v. EPA , 134 F.3d 388 (D.C. Cir. 1998); Sierra Club v. EPA , 356 F. 3d 296 ( 2 d Cir. 2004); Latino Issues Forum v. EPA , 558 F.3d 936 (9th Cir. 2009); Natural Res

. Def

. Council v. EPA , 638 F.3d 1183 (9th Cir. 2011).
3 See Union Elec. Co. v. EPA , 427 U.S. 246, 250 (1976) ; Train v. Natural Res

. Def

. Council. , 421 U.S. 60, 79 (1975). The EPA notes that these decisions only addressed certain types of SIP submissions and that they predate substantial amendments to the CAA in 1977 and 1990 that dramatically altered and expanded the requirements of the CAA. Neverthe less, they reflect the fundamental principle that states are accorded broad discretion to develop plans to meet CAA objectives, provided that they also meet all applicable CAA requirements.
4 See Train , 421 U.S. at 79

. See also Navistar Int’l Transp

. Corp. v. EPA , 941 F. 2d 1339 (6th C ir. 1991) (quoting Train ); Fla. Power & Light Co. v. Costle , 650 F. 2d 579, 587 (5th C ir. 1981) ( “T he great flexibility accorded the states under th e Clean Air Act is . . . illustrated by the sharply contrasting, narrow role to be played by EPA. ” ); Michigan v. EPA , 268 F. 3d 1075, 1083 (D .C. Cir. 2001) (the EPA ' s “ overarching role is in setting standards, not in im plementation ” ).
5 See Mont. Sulphur & Chem. Co. v. EPA , 666 F.3d 1174, 1180 (9th Cir. 2012) (“The Clean Air Act gives the EPA significant national oversight pow er over air quality standards, to be exercised pursuant to stat utory specifications, and provides the EPA with regulatory discretion in key respects relevant to SIP calls and determinations about the attainment of NAAQS.”); Mich

. Dep ’ t of Envtl. Quality v. Browner , 230 F.3d 181 (6th Cir. 2000) (“Although states are gi ven broad authority to design programs, the EPA has the final authority to determine whether a SIP meets the requirements of the CAA.”); Luminant Generation Co. v. EPA , No. 10

- 60934, 2012 WL 4841615 (5th Cir. Oct. 12,Docket Memo

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3 In the case of revisions to an existing SI P, CAA sections 110(l) and 193 impose additional requirements upon EPA when evaluating a SI P submission. The former section prohibits the EPA from approving a revision if it “would interfere with any applicable requirement concerning attainment and reasonable further progress . . . or any othe r applicable requirement of [the CAA].” 6 Section 193 prohibits SI P revisions that would affect control measures in effect prior to the 1990 Amendments to the CAA in an y area that is designated nonattainment for an y NAAQS, unless “the modification insures e quivalent or greater emission reductions of such air pollutant.” Thus, both CAA section 110(l) and section 193 add to the EPA's authorit y and responsibility in evaluating SI P submissions for compliance with CAA requirements. In addition to providing the a uthority to evaluate and approve SIP submissions in the first instance, the CAA also provides the EPA with explicit authority to address problems in existing SI Ps. Most relevant to this action, CAA section 110(k)(5) provides the EPA with the authority to i ssue a “SI P call” whenever it finds that a state's existing SI P is “substantially inadequate” to attain or maintain the NAAQS, to mitigate adequately interstate pollutant transport under CAA sections 176A or 184, “or otherwise to compl y with any requirement of” the CAA. The existence of section 110(k)(5) clearly reflects that Congress authorized the EPA to take action to assure that each SIP meets applicable requirements, and to do so even after a prior approval of that same provision by

the EPA. The EPA ha s recentl y used this authority specifically

to rectify SI P deficiencies related to excess emissions during periods of startup, shutdown, and malfunction. 7 , 8 The EPA's authority

under CAA section 110(k)(5) is discussed in more detail in s ection VIII.A of the preamble to this proposed action. The Petition also implicated a number of core CAA provisions that relate to specific required contents of SI Ps, especially sections 110(a)(2)(A) and 110(a)(2)(C). Most relevant to this proposed action, CAA section 110( a)(2)(A) requires that each state's SI P shall: include enforceable emission limitations and other control measures, means, or techniques (including economic incentives such as fees, marketable permits, and auctions of emissions rights) , as well as schedul es and timetables for compliance, as may be necessary

or appropriate to meet the applica ble requirements of this Act...

. 2012) (upholding the EPA's approval of som e SIP revisions and disapproval of others with respect to treatment of excess emissions during SSM events).
6 See, e.g. , Luminant Generation Co. v. EPA , No. 10

- 60934, 2012 WL 4841615 (5th Cir. Oct. 12, 2012) (upholding the EPA's authority under CAA se ction 110(l) to disapprove a SIP submission because it would interfere with an applicable requirement of the CAA).
7 See, e.g. , “Action to Ensure Authority To Issue Permits Under the Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Em issions; Finding of Substantial Inadequacy and SIP Call; Final Rule,” 75 FR 77698 (Dec. 13, 2010). In that action, EPA used authority under CAA section 110(k)(5) to find the SIPs of 13 states substantially inadequate to meet CAA requirements w ith re spect to PSD requirements for GHG

- emitting sources. Thus, EPA promulgated a SIP call to request that states rectify this deficiency, even though EPA had previously determined their SIPs to meet CAA requirements.
8 See “Finding of Substantial Inadequacy of Implementation Plan; Call for Utah State Implementation Plan Revision,” 74 FR 21639 (Apr. 18, 2011). The EPA's SIP call action w as challenged and was upheld by the court in US Magnesium, LLC v. EPA , 690 F.3d 1157 (10th Cir. 2012).Docket Memo

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4 The term “emission limitation” is defined in CAA section 302(k) as: a requirement established by the State or the Administrator which limits the quantity , rate, or concentration of emissions of air pollutants on a continuous basis , including an y requirement relating to the operation or maintenance of a source to assure continuous emission reduction, and any design, equipment, work pract ice or operational standar d promulgated under this Act

. (emphasis added). Legislative history

for CAA section 302(k) suggests that Congress was concerned that emission limitations in SI Ps provide continuous emissions reductions: By defining the terms “emission limitation,” “emission standard,” and “standard of performance,” the committee has made clear that constant or continuous means of reducing emissions must be used to meet these requirements. By the same token, intermittent or supplemental control s or other temporary , periodic, or limited sy stems of control would not be permitted as a final means of compliance. 9 Recent court decisions have emphasized the significance of the explicit requirement for emission limitations that apply

on a “continuous” basis as a plain reading of the CAA. 10 To meet various CAA requirements, these enforceable “emission limitations” must be adopted by states for different purposes. For example, states must have SI P provisions designed to meet nonattainment plan requirements under CAA section 110(a)(2)(I) and the more detailed statutory provisions in title I, part D, of the CAA. For this particular purpose, SI Ps must include emission limitations as needed to provide for attainment of the NAAQS in an area designated nonattai nment as expeditiously as practicable. These continuous emission limitations, in turn, provide the basis for other important required components of nonattainment area SIPs, such as accurate emissions inventories and reliable modeling demonstrations. The P etition also raised issues related to the protection of prevention of significant deterioration ( PSD ) increments , as required pursuant to title I, part C, of the CAA . CAA section 110(a)(2)(C) requires that the state include a PSD program to meet CAA requir ements for attainment areas in its SI P: Each implementation plan . . . shall . . . include a program to provide for . . . regulation of the modification and construction of any stationary

source within the

9 See H.R. Rep. 95

- 294, at 92 (1977), reprinted in 1977 U.S.C.C.A.N. 1077, 1170.
10 See, e.g. , Sierra Club v. Johnson , 551 F.3d 1019 (D.C. Cir. 2008), cert. denied , Am. Chemistry Council v. Sierra Club , 130 S. Ct. 1735 (2010) (holding that t he EPA itself is not authorized to issue emission limitations that do not apply continuously given the definition in CAA section 302(k) in conjunction with CAA section 112); see also US Magnesium, LLC v. EPA , 690 F.3d 1157 (10th Cir. 2012) (rejecting a cha llenge that the EPA's prior position w ith respect to the continuous compliance requirement of CAA section 302(k) in its own regulations rendered its SIP call to a state for deficient SIP provisions arbitrary and capricious).Docket Memo

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5 areas covered b y the plan as necessary to assure that [NAAQS] are achieved, including a permit program as required in . . . part C. In addition, CAA section 161 provides that: Each applicable implementation plan shall contain emission limitations and such other measures as may

be necessary

, as determin ed under regulations promulgated under this part [C], to prevent significant deterioration of air quality for such region . . . designated . . . as attainment or unclassifiable. Under CAA section 163, each SIP is required to contain measures assuring that sulfur dioxide and particulate matter concentrations do not exceed designated maximum allowable increases over baseline concentrations. These maximum allowable increases are known as PSD increments. Under CAA section 166, the EPA is authorized to promulgate regulations for other pollutants that include “specific numerical measures against which permit applications may be evaluated,” and such measures may include increments. Thus, applicable EPA regulations require states to include in their SI Ps emission l imitations and such other measures as may be necessary in attainment areas to assure protection of PSD increments. 11 The PSD program requires new and modified major stationary sources to obtain a permit. 12 Such a PSD permit must contain emission limitations that constitute best available control technology for each pollutant subject to regulation. 13 In addition, however, a PSD permit must contain permit terms and conditions to ensure that the source will not cause or contribute to a violation of any increment or NAAQS. 14 These terms and conditions may include emission limitations applicable to the source, as necessary to protect the increments. Such emission limitations must meet the statutory

definition of that term in CAA section 302(k). The EPA's longstandi ng approach to excess emissions in the PSD program is reflected in a 1993 document titled, “Automatic or Blanket Exemptions for Excess Emissions During Startup and Shutdowns under PSD” (the “Rasnic Memo”). 15 The Rasnic Memo explained that the PSD program is part of the SIP, and “that even in states where the PSD program is not SI P approved, the emissions limits are established to protect increments and the [NAAQS].” The EPA has long noted that the requirements for the PSD program include the same statutory o bligation for

11 See 40 CFR 51.166(c).
12 CAA section 165(a)(1); 40 CFR 51.166(a)(7)(iii).
13 CAA section 165(a)(4); 40 CFR 51.166(j).
14 CAA section 165(a)(3); 40 CFR 51.166(k)(1).
15 This memorandum was sent by John B. Rasnic, Director, Stationary Source Compliance Division, Office of Air Quality P lanning and Standards, to Linda M. Murphy, Director, Air, Pesticides and Toxics Management Division, Region 1, on Jan. 28, 1993. The memorandum can be found in the docket for this rulemaking.Docket Memo

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6 emission limitations to be continuous and thus to bar automatic exemptions, in accordance with CAA sections 110(a)(2)(A) and 302(k), as well as section 169(3). 16 Important questions related to enforcement of SIP provisions also pervade the Petition. In particular, the statutory

authority and discretion of courts under CAA section 113(b) to assess monetary penalties is a crucial issue. That section provides, in rele vant part: Any action under this subsection may be brought in the district court of the United States for the district in which the violation is alleged to have occurred, or is occurring, or in which the defendant resides, or where the defendant's princip al place of business is located, and such court shall have jurisdiction to restrain such violation, to require compliance, to assess such civil penalty , to collect an y fees owed the United States under this Act (other than title II) and an y n oncompliance a ssessment and nonpay

ment penalt y owed under section 120 , and to award any other appropriate relief

. (emphasis added). Thus, this provision addresses both the jurisd iction of the court to hear the case and the ty

pes of relief that the court may decide to m ete out for violations, as appropriate. With respect to the court's discretion whether to assess a monetary penalt y, and if so how large a penalty , CAA section 113(e) includes certain statutory criteria. That section provides, in relevant part: In determ ining the amount of any penalt y to be assessed under [section 11 3 or section 304 of the CAA], the Administrator or the court, as appropriate, shall take into consideration (in addition to such other factors as justice may require) the size of the business, the economic impact of the penalty on the business, the violator's full compliance history and good faith efforts to comply , the duration of the violation as established by any credible evidence . . ., pay ment by the violator of penalties previousl y asses sed for the same violation, the economic benefit of noncompliance, and the seriousness of the violation. This provision provides direction from Congress on ty pes of considerations that the EPA and courts should weigh in determining penalties for violation s of emission limitations in SI Ps. As discuss ed in section IV.A of the preamble to this proposed action, a c ore question raised b y the Petition is whether a court may assess any

monetary

penalties under CAA section 113 in an enforcement proceeding if the v iolator has met the requirements of an affirmative defense provision in the SI P that the EPA has previousl y approved as consistent with the requirements of the CAA. 17

16 See, e.g. , In re Indeck

- Elwood, LLC, 13 E.A.D. 126, 174

– 181 ( EAB 2006) (describing and applying the EPA's interpretation of the CAA to bar automatic exemptions from emission limitations in PSD permits because the PSD program is ambient

- based and designed to protect increments and the NAAQS).
17 Under CAA section 113 (b) and section 113(d), Congress specified statutory judicial and administrative civil penalties for violations of the CAA, including violations of SIP provisions. Currently, the statutory penalty is $37,500 per day, per violation.Docket Memo

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7 Finally , the Petition raised other questions related to effective enforcement of SI Ps pur suant to CAA section 304. This section, commonly referred to as the “citizen suit” provision, provides citizens with the opportunity and the legal right to seek to enforce provisions of a SI P against a violating source in federal court. A core principle of the CAA is that by taking action to approve emission limitations into a SI P, the EPA thereby makes those emission limitations a federall y enforceable component of the SI P that the state , the EPA, or citizens can thereafter enforce in the event of alleged violations. For citizens, this authority to enforce the requirements of the SI P arises through the citizen

- suit mechanism of section 304. As an organization representing citizens, the Petitioner has requested that the EPA reevaluate both: (i) aspects of it s own SSM Policy providing guidance on SI P provisions consistent with the CAA; and (ii) existing SI P provisions in 39 states. The Petitioner alleged that with respect to both topics, citizens are being hindered in their ability

to exercise their statutory right to enforce the requirements of the CAA in court and are thereb y being hindered in obtaining the public health protections afforded by the CAA. **The EPA’s Policy on Excess Emissions During Startup, Shutdown, and Malfunction**
The Petition raised issues related to excess emissions from sources during periods of startup, shutdown, and malfunction, and to the correct approach to these excess emissions in SI Ps. In this context, “excess emissions” are air emissions that exceed the otherwise applicable emissi on limitations in a SI P. In other words, these excess emissions are violations of such emission limitations. The question of how to address excess emissions correctl y during startup, shutdown, and malfunction events has posed a challenge since the inceptio n of the SIP program in the 1970s. The primary

objective of state and federal regulators is to ensure that sources of emissions are subject to appropriate emission controls as necessary in order to attain and maintain the NAAQS, protect PSD increments, pro tect visibility , and meet other statutory requirements. Generally , this is achieved through enforceable emission limitations on sources that appl y, as required b y the CAA, continuously

. Nevertheless, regulators have long recognized a tension between the r equirements of the CAA and the practical realities of controlling source emissions continuously because even the best

designed, best

- maintained, and best

- operated source may have difficult y m eeting a legall y required emission limitation 100 percent of the time. Thus, the need for stringent emission limitations consistent with CAA requirements for attainment and maintenance of the NAAQS can conflict with the reality that some sources may occasionall y have difficulties in meeting those emission limitations during all phases of operations and, in particular, in the case of malfunctions that are genuinely bey ond the sources' control. Even sources that are correctl y designed, operated, and maintained can experience events that they could not reasonabl y anticipate and plan for. 18 Since 1977, the EPA has attempted to resolve this fundamental tension in the SI P program through guidance recommendations concerning how to meet the objectives of the CAA, such as attainment of the NAAQS and protection of PSD increments, while providing for appropriate

18 This issue and the co urt decisions reflecting the early attempts to address this issue are discussed in more detail in section IV of the preamble to this action.Docket Memo

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8 enforcement flexibility . This guidance has consistently recommended the exercise of enforcement discretion for violations due to excess emissions during SSM events. Under this approach, state and federal regulators exercise their normal discretion to decide whether a given violation should be subject to an enforcement action. Considerations such as the seriousness of the violation and the culpability of the violator can play

a role in this exercise of enforcement discretion. A lternativel y, the EPA's guidance has recommended other approaches, such as SI P provisions that provide an affirmative defense to monetary penalties in enforcement actions under certain limited circumstances. The Petition touched upon many aspects of the E PA's guidance for SI P provisions in the SSM Policy , and thus a summary of the evolution of that guidance is warranted here. The EPA has a longstanding interpretation of the CAA with respect to the treatment of excess emissions during periods of startup, s hutdown, or malfunction in SI Ps. This statutory interpretation has been expressed, reiterated, and elaborated upon in a series of guidance documents issued in 1982, 1983, 1999, and 2001. In addition, the EPA has applied this interpretation in individual ru lemaking actions in which the EPA: (i) approved SI P submissions that were consistent with the EPA's interpretation, 19 (ii) disapproved SIP submissions that were not consistent with that interpretation, 20 (iii) itself promulgated regulations in federal implem entation plans (FIPs) that were consistent with that interpretation, 21 or (iv) issued a SIP call requiring a state to revise an impermissible SIP provision. 22 The general parameters of the EPA's longstanding interpretation are well

- known but can be summarize d as follows. In 1982, the EPA issued a guidance document titled, “Policy on Excess Emissions During Startup, Shutdown, Maintenance, and Malfunctions” (the “1982 SSM Guidance”). 23 Inthe 1982 SSM Guidance, the EPA frankl y acknowledged that in the earliest phase of the SI P program in the 1970s, the EPA had not alway s recognized the implications of SI P provisions that explicitly or implicitly

provided automatic exemptions for excess emissions during periods of startup, shutdown, or malfunction. As a result, the EPA had incorrectl y approved some provisions of this ty pe that were inconsistent with the requirements of the CAA. The EPA stated that such exemptions are inappropriate because “SIPs are ambient

- based standards and any emissions above the allowable may

cause or contribute to violations of the national ambient air quality

19 See “ Approval and Promulgation of Implementation Plans; Texas; Excess Emissions During Startup, Shutdown, Mainte nance, and Malfunction Activities, ” 75 FR 68989 (Nov. 10, 2010 )

. 20 See “Approval and Promulgation of State Implementation Plans; Michigan,” 63 FR 8573 (Feb. 29, 1998).
21 See “Federal Implementation Plan for the Billings/Laurel, MT, Sulfur Dioxide Area,” 73 FR 21418 (Apr. 21, 2008).
22 See “Finding of Substantial Inadequacy of Implementation Plan; Call for Utah State Implementation Plan Revision,” 76 FR 21639 (Apr. 18, 2011).
23 This memorandum was sent by Kathleen M. Bennett, Assistant Administrator for Air, Noise, and Radiation, to the Regional Administrators, Regions I

–X on Sept. 28, 1982. The memorandum can be found in the docket for this rulemaking.Docket Memo

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9 standards.” The EPA's 1982 SSM Guidance also noted that starting in 1977, the EPA had taken actions to rectif

y such problematic provisions in SIP submissions on a case

- by

- case basis. 24 In the 1982 SSM Guidance, the EPA articulated its belief that it would be appropriate for regulators to distinguish between degrees of culpability for violations and thus to exerci se enforcement discretion in such a way as to encourage sources to comply by taking responsible actions into account, yet still encouraging compliance at all times, per the requirements of the CAA. The EPA acknowledged that some malfunctions are unavoidabl e: Generally , EP A agrees that the imposition of a penalty for sudden and unavoidable malfunctions caused b y circumstances entirel y be yond the control of the owner and/or operator is not appropriate. However, the EPA was also mindful of its overarching duty under the CAA to protect public health through effective implementation of the NAAQS. From the outset, the EPA has explained that excess emissions are violations, even in the case of unforeseen malfunctions, and that exemptions from SI P emission limitat ions for such events are not consistent with the requirements of the CAA: The rationale for establishing these emissions as violations, as opposed to granting automatic exemptions, is that SI Ps are ambient

- based standards and any emissions above the allow able may cause or contribute to violations of the national ambient air quality standards. Without clear definitions and limitations, these automatic exemption provisions could ef fectively shield excess emissions arising from poor operation and maintenance or design, thus precluding attainment. Additionally

, by establishing an enforcement discretion approach and by requiring the source to demonstrate the existence of an unavoidable malfunction on the source, good maintenance procedures are indirectl y encoura ged. 25 The most salient features of the 1982 SSM Guidance were that: (1) automatic exemptions for emissions above applicable emissions limits during malfunctions are impermissible; (2) an enforcement discretion approach for violations during malfunctions i s permissible; (3) the EPA recommended five criteria that should be considered in exercising enforcement discretion in the

24 The EPA identified in the 1982 SSM Guidance tw o actions in which the EPA finalized rules that applied to specific sources located in Utah and Idaho. In each action, the EPA expressed its views regarding issues such as automatic exemptions from applicable limits, factors for con sideration in the exercise of enforcement discretion, and distinctions in enforcement treatment that might be w arranted betw een excess emissions that result from unforeseen malfunctions versus those from predictable startup, shutdown, or routine maintenanc e. See "A pproval and Prom ulgation of Implementation Plans

– Utah SO 2 Control Strategy," 42 FR 21472 (Apr. 27, 1977); "Approval and Prom ulgation of Implementation Plans

– Idaho SO 2 Control Strategy," 42 FR 58171 (Nov. 8, 1977).
25 1982 SSM Guidance, Attachm ent at 1. Even prior to the issuance of the 1982 SSM Guidance , it was the EPA's position that all excess emissions, regardless of cause, should be treated as violations so as to provide sources w ith incentive to design their facilities properly in the firs t instance and to improve their operation and maintenance practices over time. See, e.g. , 42 FR 58171 (Nov. 8, 1977).Docket Memo

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10 case of malfunctions; 26 (4) excess emissions during startup and shutdown are predictable parts of normal operations and should have be en planned for, and thus enforcement discretion is less warranted; and (5) excess emissions during scheduled maintenance are likewise predictable, and thus enforcement discretion is less warranted. In 1983, the EPA issued a second guidance document titled , “Policy on Excess Emissions During Startup, Shutdown, Maintenance, and Malfunctions” (the “1983 SSM Guidance”). 27 Inthe 1983 SSM Guidance, the EPA reiterated and clarified its views about the requirements of the CAA stated in the 1982 SSM Guidance. In particular, the EPA repeated its view that “[i]f a SI P contains a malfunction provision, it cannot be the type that provides for automatic exemption where a malfunction is alleged b y a source.” 28 As in the 1982 SSM Guidance, the EPA emphasized that excess emi ssions during malfunctions “might aggravate air quality so as not to provide for attainment of the ambient air qualit y standards” and referred to the prior 1977 SI P disapprovals in Utah and Idaho for additional explanation. 29 Thus, the 1983 SSM Guidance rei terated the EPA's view that excess emissions during malfunctions are violations and cannot be exempted, consistent with core CAA requirements for SI Ps. Significantl y, the 1983 SSM Guidance further recommended that states could elect to address such violat ions via an “enforcement discretion approach” for malfunctions with state regulatory provisions actually

incorporated into a SI P. 30 The EPA recommended five criteria that states should consider in such SIP provisions for determining whether an enforcement a ction is appropriate. The criteria include considerations such as the maintenance and operation of the source consistent with good practices to minimize emissions, expeditious repairs, and minimization of the amount and duration of the excess emissions. Un der this enforcement discretion approach, a state retains discretion whether or not to bring an enforcement action following a violation, depending upon the circumstances and the criteria previously included in the SI P. 31 At no point, however, did the 1983 SSM Guidance suggest that these SI P provisions

26 The criteria enumerated were, in essence, that the violator: (1) properly maintained and operated the source to minimize emissions; (2) made necessary repairs expeditiously when the operator knew or should have known that the limits were being exceeded; (3) minimized the amount and duration of the excess emissions to the maximum extent practicable; (4) took all possible steps to minimize the impact of excess emissions on ambient air quality; and (5) established that the excess emissions were not part of a recurring pattern indicative of inadequate design, operation, or maintenance. See 1982 SSM Guidance at Attachment 2. Many of these crite ria are analogous to those that the EPA has enumerated in later guidance documents.
27 This memorandum was sent by Kathleen M. Bennett, Assistant Administrator for Air, Noise, and Radiation, to the Regional Administrators, Regions I

–X on Feb. 15, 1983. The me mo randum may be found in the docket for this rulemaking.
28 1983 SSM Guidance, Attachment at 1.
29 See supra not e 23.
30 1983 SSM Guidance, Attachment at 2. The EPA noted that, in general, so called “state only” provisions should not be included in SIPs . Such provisions can lead to confusion about what is or is not necessary to meet CAA requirements and what is or is not a federally enforceable provision.
31 The EPA notes that SIPs must also meet basic requirements for enforcement under the CAA, including those of sections 110(a)(1), 110(a)(2)(A), 110(a)(2)(C), and 110(a)(2)(E). Thus, the EPA could not approve SIP provisions that would unduly limit enfo rcem en t by the state itself to the degree that its enforcement program becomes inadequate for implementation, maintenance, and enforcement of the NAAQS. An enforcement discretion provisionDocket Memo

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11 providing for the “enforcement discretion approach” could appl y to an y other part y who might seek to enforce against the source. Even if a state elects to provide parameters for its own exercise of enforcement discretion, the decision of the state not to enforce cannot be construed to preclude enforcement b y the EPA or citizens. In 1999, the EPA issued a more detailed guidance document that provided additional explanation of its interpretation of statutory requirements relevant to excess emissions. This guidance document was titled, “State Implementation Plans (SI Ps): Policy Regarding Excess Emissions During Malfunctions, Startup, and Shutdown” (the “1999 SSM Guidance”). 32 The primary purpose of the 1999 SSM Guidance was to clarify the EPA's views with respect to an alternative approach to excess emissions, i.e. , SI P provisions that create an affirmative defense for qualify ing sources to utilize in enforcement proceedings under certain circumstances. The 1999 SSM Guidance reiterated the EPA's interpretation of the CAA that excess emissions during SSM events are violations. However, the EPA also recommended that, in addition to the exercise of enforcement discretion, a state could elect to include a narrowl y drawn affirmative defense provision in the SI P. Under this approach, a SI P provision could provide an affirmative defense to monetary

penalties in an enforcement action for violations of SIP emission limitations, but not a defense to injunctive relief. The EPA explained that because periods of excess emissions could undermine important CAA objectives such as attainment and maintenance of the NAAQS and protection of PSD increments, an affirmative defense to an action for in

junctive relief would not be appropriate. In other words, in appropriate circumstances, the source could be excused from liability for monetary

penalties but not excused from a requirement to install additional emissions controls or modify its mode of oper ation as necessary to meet CAA requirements, e.g. , to assure attainment of the NAAQS in a given nonattainment area. A major portion of the 1999 SSM Guidance addressed what forms of affirmative defense provisions might be permissible in SI Ps under certain circumstances in light of the statutory requirements of the CAA. For malfunctions , the 1999 SSM Guidance articulated in detail the ty pes of considerations that would be relevant in assessing an affirmative defense provision. The EPA recommended that, “to b e approvable,” the state should create an affirmative defense provision that would give the violator the burden of proof to establish ten enumerated criteria. 33 For affirmative defense provisions for startup and shutdown events, the EPA recommended that the state should give the violator the burden of proof to establish nine enumerated criteria comparable to those for malfunctions but tailored to apply to startup and shutdown events. As
in a SIP that functionally eliminated the state’s authority and ability t o en force the provisions of the SIP effectively wo uld fail to meet CAA requirements with respect to enforcement.
32 This memorandum was sent by Steven A. Herman, Assistant Administrator for Enforcement and Compliance Assurance, and Robert Perciasepe, Assis tant Administrator for Air and Radiation, to the Reg ional Administrators, Regions I

- X on Sept. 20, 1999. A copy of the 1999 SSM Guidance is located in the docket for this proposal.
33 The EPA emphasizes that given the fact this statement appeared in a guid ance document, from the context it is understood to be the EPA's recommendations with respect to w hat features would make a given affirmative defense provision consistent with CAA requirements. When the EPA takes rulemaking action would be the juncture at which the EPA determines whether the specific affirmative defense provision at issue contains appropriate criteria to meet CAA requirements.Docket Memo

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12 discussed i n section V.B of the preamble to this proposed action , the EP A is proposing to revise its view that affirmative defense provisions would be consistent with the requirements of the CAA in the case of startup or shutdown. An important feature of the 199 9 SSM Guidance relevant to action on the Petition is the emphasis that the EPA put on recommending against the creation of SIP provisions that would provide an affirmative defense in the case of emission limitations applicable to “a source or small group of sources that has the potential to cause an exceedance of the NAAQS or PSD increments.” 34 The EPA explained that the basis for this concern was that, for the lead and sulfur dioxide NAAQS in particular, “attainment problems are caused by one or a few sources” and that “this situation can be particularly aggravated where a short

- term standard . . . is in place.” Thus, the EPA recommended that states rel y on a traditional enforcement discretion approach where the nature of the source or the averaging period of the NAAQS would be of concern. 35 The EPA's guidance indicated th at affirmative defense provisions might still be consistent with CAA requirements for other sources or other NAAQS and thus left open the possibility that such provisions might be acceptable in certain circumstances, even for sources or groups of sources w ith the potential to cause violations of the NAAQS. 36 Another feature of the 1999 SSM Guidance that is particularl y pertinent to the EPA's evaluation of the Petition is the express statement concerning the interrelationship between SIP provisions and citiz en - suit enforcement under CAA section 304. The EPA stated unequivocally that it: does not intend to approve SI P revisions that would enable a State director's decision to bar EP

A's or citizens' ability

to enforce applicable requirements. Such an approach would be inconsistent with the regulatory scheme established in Ti tle I of the Clean Air Act. Thus, the EPA's longstanding view has been that no SI P can have an enforcement discretion provision that could legally bar enforcement against violations of SI P emission limitations by the EPA or by

citizens, because such a provision would be inconsistent with the express requirements of CAA sections 113 and 304. This fundamental principle is also relevant in the context of the “discretionary exemptions” that woul d authorize state personnel to transform violations into exemptions on a case

- by

- case basis. The EPA believes that SIP provisions that include unbounded discretion for state personnel unilaterally to change or to grant variances from applicable SIP provisi ons are problematic and inconsistent with the requirements of the CAA in general. Provisions that purport to e mpower state personnel unilaterally to grant an exemption from applicable emission limitations of the SI P, when such an exemption would not

34 See 1999 SSM Guidance at 4, and Attachment at 2, 3, and 5.
35 Id . at 2, n.2.
36 The EPA notes that the 1999 SSM Guidance reserved judgment on whether affirmative defense provisions would be appropriate w ith respect to a single source or group of sources with the potential to cause an exceedance of the PM 2.5 NAAQS or PSD increments. 1 999 SSM Guidance at 3, n.3. At this juncture, the EPA has concluded that PM 2.5 is not a pollutant for which it would be necessary to recommend against affirmative defenses for such sources across the board and that such decisions should be made on a case

- b y - case basis, taking into consideration the sources at issue and the facts and circumstances concerning their likelihood to have such impacts through excess em issions during malfunctions.Docket Memo

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13 be con sistent with CAA requirements in the first instance, are particularl y i mpermissible. The practical impact of a director's discretion provision in the SI P that allows case

- by

- case exemptions from the otherwise applicable emission limitations is that it impo ses the enforcement discretion decisions of a state on the EPA and citizens. Such a provision is inconsistent with the requirements of the CAA. Significantl y, the 1999 SSM Guidance did not speak explicitly to how the EPA would proceed to implement its int erpretation of the CAA requirements. The guidance merel y stated that the EPA Regions “should review the SI Ps for their States in light of this clarification and take steps to insure that excess emissions provisions in these SIPs are consistent with the att ached guidance.” 37 Therefore, the document did not clearl y indicate whether the EPA intended to follow this approach when it vetted new SI P submissions prospectively , or intended to reexamine previously

approved SIPs for consistency with this approach retro spectively , or both. Moreover, the EPA's statements concerning the correct interpretation of the CAA with respect to excess emissions during SSM events had the potential to affect other legal requirements. This ambiguity resulted in the EPA's issuance of an additional guidance document to address those issues. In 2001, clarify ing the 1999 SSM Guidance, the EPA issued a guidance document titled, “Re

Issuance of Clarification

– State Implementation Plans (SI Ps): Policy Regarding Excess Emissions During Malfu nctions, Startup, and Shutdown” (the “2001 SSM Guidance”). 38 The EPA emphasized four important points in this guidance. First, the EPA stated that its interpretation of the requirements of the CAA expressed in the 1999 SSM Guidance “was not intended to alte r the status of any existing malfunction, startup or shutdown provision in a SI P that has been approved by EPA.” Second, the EPA indicated that this interpretation was not intended “to affect existing permit terms or conditions regarding malfunctions, star tups and shutdowns that reflect approved SI P provisions” or “to alter the emergency defense provisions at 40 C.F.R §70.6(g),” i.e. , the title V regulations pertaining to “emergency ” provisions in title V permits. 39 Third, the EPA emphasized that it did not intend its interpretation “to be legall y dispositive with respect to any particular proceedings in which a violation is alleged to have occurred.” Fourth, and most importantly for this proposal, the EPA stated that it would consider the 1999 SSM Guidance and the statutory principles on which it is based when undertaking future rulemaking actions such as the SI P approval process. Thus, the 2001 SSM Guidance indicated that the EPA would take later rulemaking actions, if necessary , in order to rectify existing SI P provisions that are inconsistent with the requirements of the CAA. Together, this series of four guidance documents and related rulemaking actions taken by the EPA over the last 30 years reflects the EPA's longstanding interpretation of the CAA with respect to the appropriate treatment of excess emissions during periods of startup, shutdown, and malfunction in SI Ps. For ease of discussion, this memorandum refers in general to these guidance

37 See 1999 SSM Guidance at 4.
38 This memorandum was sent by Eric S chaeffer, Director, Office of Regulatory Enforcement, Office of Enforcement and Compliance Assurance, and John S. Seitz, Director, Office of Air Quality Planning and Standards, Office of Air and Radiation, to the Reg ional Administrators, Regions I

- X on Dec

. 5, 2001. The memorandum can be found in the docket for this rulemaking.
39 This issue is discussed in more detail i n section VII.D of the preambl e to this action.Docket Memo

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14 documents as the EPA's “SSM Policy ,” and where a more specifi c reference is needed, it refers to the relevant guidance document for more specific points, e.g. , to the 1999 SSM Guidance. At this juncture, it is useful to emphasize core principles of the EPA's SSM Policy that are relevant to the proposal. First, EPA guidance has consistently stated that excess emissions during periods of startup, shutdown, and malfunction constitute violations of the applicable SI P emission limits. Automatic exemptions to excuse excess emissions during SSM events from applicable emiss ion limits in SI Ps are not permissible because they are inconsistent with the fundamental statutory

requirements of the CAA. The EPA's longstanding interpretation of the CAA is that broad exemptions from compliance with emission limitations during periods of startup, shutdown, or malfunction prevent a SI P from adequatel y ensuring attainment and maintenance of the NAAQS, protecting PSD increments, protecting visibility , and comply ing with other CAA requirements. For purposes such as demonstrating attainment and maintenance of the NAAQS, states rely on assumed continuous compliance with emission limitations. 40 Second, the EPA has also reiterated that states may elect to exercise traditional enforcement discretion with respect to violations of applicable SI P em ission limitations during periods of startup, shutdown, and malfunction. The EPA likewise has enforcement discretion and may itself elect not to enforce against such violations. The EPA has also made recommendations to states about considerations that may be relevant if a state elects to specify parameters for the exercise of enforcement discretion in SI P provisions, applicable onl y to the state’s own enforcement personnel. However, exercise of enforcement discretion by the state may

not foreclose enforceme nt by

the EPA under CAA section 113 or by others through the mechanism of a citizen suit under CAA section 304. Third, the EPA has also recognized that there are circumstances where, under conditions that are bey ond the control of the source, the source h as done all within its power to prevent the violation and to minimize adverse consequences of the violation. The EPA has long stated that in such circumstances it may

be appropriate for regulators to take various factors into consideration in enforcement p roceedings and has made recommendations for relevant criteria. More recentl y, the EPA recognized that it may be appropriate for states to elect to include narrowly drawn affirmative defense provisions in SI Ps to provide relief from monetary penalties. The EPA believes that this is a reasonable interpretation of the applicable provisions of the CAA and also that this provides incentives for sources to be properly designed, maintained, and operated, and to take action to prevent and to minimize the effects of the excess emissions in return for the possibility

of being shielded from monetary penalties in an enforcement action. For this reason, the 1999 SSM Guidance delineates the t ypes of criteria that EPA considers appropriate in affirmative defense provisions that would be consistent with the requirements of the CAA and thus permissible in SI Ps. As discussed in section V.B of the preamble to the proposed action, the EPA has reevaluated the question of affirmative defenses in SIPs for periods of malfunctions ve rsus planned startup and shutdown. It is important to emphasize that an affirmative defense provision does not negate the fact that excess emissions during a qualifying event are a violation of the applicable emission limitations

40 See, e.g. , CAA sections 110(a)(2)(A) and (C); 40 CFR 51.112; Train , 421 U.S. at 78

– 79 (1 975).Docket Memo

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15 of the SI P. By

this means , the emission limitation in question can meet the cardinal statutory requirement that it be a continuous limit or control on the source. An appropriate affirmative defense provision also does not provide an automatic bar to monetary penalties for violatio ns. An affirmative defense provision merely provides a source the opportunity to assert in an enforcement proceeding, and to prove with requisite facts, that the source should not be subject to monetary

penalties for violations under certain narrow circums tances. Under no circumstances, however, could an affirmative defense provision exempt the violating source from injunctive relief or from any other form of relief that a court may consider appropriate, consistent with the specific provision applicable to the source in the approved SI P. More recentl y, consistent with the 1999 SSM Guidance, the EPA has repeated its earlier recommendations that states adopt a different approach to address emissions that occur during planned startups and shutdowns in their SI Ps. For those sources or source categories for which compliance with the otherwise applicable emission limitations during startup and/or shutdown i s not possible, the state may elect to develop alternative emission limitations or control measures applicable during such events, so that emissions during such events could then be accounted for correctly in SIPs for purposes of meeting CAA objectives, su ch as attaining and maintaining the NAAQS. 41 The EPA previously made this recommendation in the 1999 SSM Guidance for source category

- specific treatment of emissions from sources during startup or shutdown, where that is necessary

. 42 Finally , it is important to note that many states have already worked with the EPA to revise their SI Ps to resolve concerns about excess emissions during SSM events. Utilizing the recommendations in the 1999 SSM Guidance, these states have thus taken steps to eliminate impermiss ible automatic or discretionary exemptions and to adopt affirmative defense provisions or other approaches to excess emissions during SSM events that are consistent with the requirements of the CAA. 43 **Legal Status of the EPA's SSM Policy**
The EPA's SSM Pol icy

is a policy

statement and thus constitutes guidance. As guidance, the SSM Policy

does not bind states, the EPA, or other parties, but it does reflect the EPA's interpretation of the statutory requirements of the CAA. The EPA's evaluation of any SI P pro vision, whether prospectivel y in the case of a new provision in a SI P submission or retrospectivel y in the case of a previously approved SI P submission, must be conducted through

41 See “Approval and Promulgation of Implementation Plans; Texas; Excess Emissions During Startup, Shutdown, Maintenance, and Malfunction Activities,” 75 FR 68989, at n.6 (Nov. 10, 2010).
42 See 1999 SSM Guidance, Attachment at 4

– 5.
43 For example, at the EPA's request, a number of states have already revised their SIPs in order to eliminate im perm issible provisions applicable to excess emissions during SSM events. These states include: (i) Colorado , which revised its SIP provisions for SSM in 2006 (7 1 FR 8958 ; Feb

. 22, 2006) and 2008 (73 FR 45879 ; Aug

. 7, 2008) ; (ii) Wy om ing , which revised its SIP provision for malfunctions (75 FR 19886 ; Apr. 16, 2010 ) ; and (iii) North Dakota , which revised its SIP provision for malfunctions ( 7 6 FR 68317; Nov. 14, 2011 ).Docket Memo

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16 a notice

- and

- comment rulemaking in which the EPA will determine whether or no t a given SIP provision is consistent with the requirements of the CAA and applicable regulations. 44 For example, the SSM Policy reflects the EPA's longstanding guidance that the CAA does not allow automatic exemptions from emissions limits in SI Ps. Similarly , the EPA's SSM Policy includes recommendations to states concerning appropriate parameters for SI P provisions providing an affirmative defense to monetary penalties for violations that may be permissible under the CAA, but as guidance it is not outcome

- determinative. The actual question of whether a given provision is consistent with the requirements of the CAA must be evaluated and decided through notice

- and

- comment rulemaking. Indeed, in responding to the Petition, the EPA is evaluating the specific existing SI P provisions identified in the Petition for consistency with the requirements of the CAA through notice

- and

- comment rulemaking. The EPA utilizes the SSM Policy as guidance to inform its own actions, whether in the review of a SI P submission or in promulgation of a FIP. For example, in approving a SI P submission from Arizona, the EPA determined that an affirmative defense provision created by the state was consistent with the EPA's interpretation of the CAA even though the state provisions had a feature somewhat different than those recommended in the 1999 SSM Guidance. 45 The EPA explained that al though the state provision did not have an explicit criterion with respect to proving no recurrent pattern of violations indicative of inadequate design, operation, or maintenance, the other criteria for the affirmative defense in the state’s SI P submissio n sufficiently

addressed this issue. Similarly , in the FIP that the EPA itself promulgated to address emissions from several sources in Montana, the EPA included an affirmative defense provision for excess emissions, notwithstanding the fact that the sour ce s in question could have the “potential” to cause a NAAQS violation and thus w ere the t yp e of source for which the 1999 SSM Guidance recommended against inclusion of an affirmative defense. The EPA concluded, however, that an affirmative defense provisio n would be appropriate for the affected source s , given the facts and circumstances of that action, because it “should provide a significant incentive to the facilities to take steps to avoid and reduce flaring whenever possible.” 46 In other words, the EPA c oncluded that providing for an affirmative defense in this specific instance was more likely to result in better source compliance and thus would better support the objective of attaining and maintaining the NAAQS in this particular area. Significantl y, c ourts have already considered the EPA's SSM Policy on a number of occasions. In these decisions, courts have alread y upheld the EPA's interpretation of the CAA with respect to key aspects of the SSM Policy . Even when not directly addressing the substance o f the SSM

44 See generally Catawba Cnty

. , N.C. v. EPA , 571 F.3d 20, 33

– 35 (D.C. Cir. 2009) (upholding the EPA's process for developing and applying its guidance to designations).
45 See “Revisions to the Arizona State Implementation Plan, Arizona Department o f Environmental Quality,” 66 FR 48087 (Sept. 18, 2001).
46 See “ Federal Implementation Plan for the Billings/Laurel, MT, Sulfur Dioxide Area ,” final rule, 73 FR 21418 (Apr. 21, 2008) at pp. 21435

- 21436.Docket Memo

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17 Policy , these decisions help to inform the EPA's action on the Petition at issue in the proposal. Six judicial decisions are particularl y relevant.
In Michigan Department of Environmental Quality v. Browner , the court evaluated whether the EPA h ad appropriately

disapproved a SIP submission from a state that would have created an automatic exemption for excess emissions during periods of startup, shutdown, and malfunction. 47 The court agreed that the CAA requires continuous compliance with emission limitations by

sources, including during periods of startup, shutdown, and malfunction, and does not permit automatic exemptions from such limitations during those periods. The court also agreed that allowing such exemptions from compliance could adversel y i mpact ambient air quality , and thus the attainment and maintenance of the applicable NAAQS, and thereby injure public health. 48 Therefore, the court upheld the EPA's longstanding view, then most recentl y embodied in the 1999 SSM Guidance, that exemptions for excess emissions during SSM events are not consistent with the requirements of the CAA. Another court did not directly rule on the merits of the EPA's interpretation of the CAA embodied in the SSM Policy but did issue an opinion that illustrates the need for EPA to address the issues raised in the Petition. In Sierra Club v. Georgia Power Co. , the court considered issues raised in the context of a citizen suit to enforce against a source for alleged violations of emission limitations in the applicable permit that reflected the underl yi ng SIP. 49 Evidence at trial indicated that the source had itself reported emissions that exceeded the generall y applicable numerical emission limitations “on thousands of occasions.” The core question, however, was whether these exceedances of the emission limitations in fact constituted violations based upon proper interpretation of certain provisions in the SIP relevant to excess emissions during SSM events. The trial court reached the conclusion that the excess emission s were violations because the provisions at issue were merel y enforcement discretion provisions applicable to state personnel. Thus, the trial court ruled that the citizen

- suit plaintiffs could pursue enforcement for the alleged violations and found those excess emissions to be violations. The appellate court, however, reached the opposite conclusion. It held that the excess emissions were not violations, reasoning that the same SI P provisions were instead an affirmative defense available to the source that authorized a complete bar to any liabilit y for violations if the conditions for the defense were met. In so holding, the appellate court observed that the SI P provisions at issue might not be consistent with the EPA's then

- current interpretation of the re quirements of the CAA with respect to SSM events but noted that if the provisions were not consistent, then the EPA would need to take action through a SIP call to address that apparent deficiency in the SI P. 50

47 230 F.3d 181 (6th Cir. 2000).
48 Id. at 185.
49 44 3 F.3d 1346, reversing Sierra Club v. Ga

. Power Co. , 365 F.Supp 2d 1297 (N.D. Ga. 2004).
50 It should be noted that the same principle (no unilaterally revising a SIP) applies w ith respect to a state when it seeks to change its SIP w ithout seeking approval for a SIP revision from the EPA. See Sierra Club v. T enn. Valley Auth. , 430 F.3d 1337, 1346 (11th Cir. 2005) (state regulation that altered the applicable emission lim it in the SIP and made it less stringent without EPA approval w as “an illegal, unilateral modification of the Alabama SIP”).Docket Memo

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18 Thus, the court's decision in Sierra Club v. Georgia Power Co. illustrates the real

- world concern that arises when a state's existing SI P provision is inconsistent with CAA requirements. Such a provision, whether consistent with the CAA or not when originally approved as part of a SI P, remains the op erative legal requirement in the SI P unless and until action is taken by the state or the EPA to rectify

the deficiency

through appropriate administrative process. As a result, the ability of the state , the EPA, or citizens to enforce the correct requireme nts of the CAA in the event of excess emissions during an SSM event will be negated. Other courts have evaluated the EPA's own compliance with the requirements of the CAA and the interpretations of the CAA embodied in the EPA’s SSM Policy when applied in the event of a FIP. In Arizona Public Service Co. v. EPA , the court considered a challenge to the provisions of a FI P promulgated by

the EPA to address the emissions from a specific source. 51 Inthe challenged FIP, the EPA declined to provide an exemption f or excess emissions during malfunctions, consistent with the view that under the CAA such emissions must be treated as a violation. Rather than the automatic exemption sought b y the source, the EPA instead provided an affirmative defense provision for exce ss emissions during malfunctions. The source objected to the lack of an automatic exemption and objected to having to bear the burden of proof to establish that it was entitled to an affirmative defense in an enforcement proceeding. In evaluating the sour ce's challenge, the court considered the EPA's longstanding interpretation that “excess emissions resulting from malfunctions are violations of the Clean Air Act, for such emissions can interfere with attainment of the national air standards” and concluded that the EPA's SSM Policy

“is a reasonable interpretation of the Clean Air Act.” 52 Thus, the court in Arizona Public Service Co. v. EPA upheld core principles of the EPA's SSM Policy interpreting the requirements of the CAA, including that it is not permis sible to exempt excess emissions during malfunctions but that it may be appropriate to allow narrow affirmative defense provisions. The EPA's interpretation of the CAA to prohibit exemptions for excess emissions during SSM events in SI P or FIP provisions, but to allow appropriately drawn affirmative defenses, was also tested in a recent challenge to a SI P call and a FIP in Montana. In Montana Sulphur & Chemical Co. v. EPA , the court evaluated an industry challenge to various aspects of a SI P call and FI P a pplicable to a specific source. 53 The EPA had issued the initial SI P call, disapproved the resulting SIP submission, and ultimately promulgated the FIP, inter alia , because the state had exempted sulfur dioxide emissions from a stationary source that were r eleased from flares. 54 Among other challenges, the source argued that emissions from flares at the source should not be subject to any

emission limitation and should be totally exempt as excess emissions that occur during SSM events. The EPA disagreed that a total exemption for such flare emissions was allowable under the CAA, imposed a numerical emission limitation that it considered appropriate

51 See 562 F.3d 1116 (10th Cir. 2009).
52 Id

. at 1128.
53 See 666 F.3d 1174 (9th Cir. 2012)

. 54 The “flares” at such sources are equipment used to release gases to a device for incineration. Sources use such devices during malfunctions but also in more routine circumstances such as startup and shutdown.Docket Memo

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19 for the flares at this source, and also created an affirmative defense for violations of the emission limitation intended to provide relief for trul y unavoidable excess emissions. The court considered the source's arguments that numerical emissions on flares would be infeasible, that the EPA was acting inconsistently with other exemptions for excess emissions during SSM events, that the specific emission limitation at issue was unsupported technically , that EPA's SSM Policy

should be accorded no deference as mere guidance, and that enforcement discretion cannot compensate for infeasible emission limitations. 55 The court rejected each of these arguments in turn and held that “the EPA reasonably interpreted the Clean Air Act to require continuous limits on emissions and that the actual numerical limits imposed by the FIP are neither arbitrary

nor capricious.” 56 Significantly , the court specificall y addressed the issue of whether the EPA should have provided an affirmative defense for excess emissions during malfunctions to a single source that has the potential to cause attainment problems through excess emissions. The court reasoned that even though the EPA's own 1999 SSM Guidance recommended against affirmative defense provisions for sources with this potential, the EPA had adequatel y explained the basis for this “deviation” from its guidance. The latter point again illus trates that the SSM Policy is guidance and that the EPA must evaluate specific SIP or FI P provisions relative to the requirements of the CAA through individual rulemaking. The EPA's interpretation of the CAA to allow SI P provisions that create an affirmat ive defense to monetary

penalties for violations in the case of unplanned events like malfunctions, but not in the case of planned events like maintenance, was directly addressed in another recent decision. In Luminant Generation Co. v. EPA, the court eval uated challenges to the EPA's approval of an affirmative defense provision applicable to excess emissions that resulted from “unplanned” SSM events and also evaluated challenges to EPA's disapproval of a comparable provision that provided an affirmative de fense applicable to excess emissions that result from “planned” SSM events. 57 With respect to the affirmative defense provision for unplanned events, environmental group litigants challenged the partial approval of the state's SIP submission as inconsisten t with the CAA requirements of sections 110(k)(3), 110(l), and 113(b) and (e). The court rejected these arguments, however, because the EPA's partial approval was consistent with longstanding guidance, was decided through an appropriate notice

- and

- comment rulemaking process, and was based upon a permissible reading of the CAA consistent with the principles of Chevron deference. A significant aspect of the court's opinion concerning the partial approval is the court's agreement with the EPA's view that the statutory provisions in CAA section 113 concerning monetary penalties do not explicitly bar a SI P provision allowing “the availability of an affirmative defense for certain unplanned SSM events under narrowl y defined circumstances.”

55 Id. at 1190.
56 Id. at 1193.
57 See Luminant Generation Co. v. EPA , No. 10

- 6093 4, 2012 WL 4841615 (5th Cir. Oct. 12, 2012) (upholding the EPA's approval of some SIP revisions and disapproval of others with respect to treatment of excess emissions during SSM events).Docket Memo

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20 As the court noted, the EPA has long recognized that the imposition of monetary penalties for “sudden and unavoidable” excess emissions may not be appropriate. With respect to the affirmative defense provision for planned events, industry litigants challenged the EPA's partial d isapproval of the state's SI P submission as inconsistent with the requirements of the CAA. The court evaluated whether the partial disapproval was consistent with the EPA's guidance for such provisions, was decided through an appropriate notice

- and

- comment rulemaking process, and was based upon a permissible reading of the CAA consistent with the principle of Chevron deference. The court specificall y held that the EPA’s interpretation of CAA section 113 was a reasonable one, and deserving of deference, both as to the approval of the provision applicable to unplanned events and as to the disapproval of the provision applicable to planned events. The EPA disapproved the portion of the SI P submission that pertained to planned SSM events for a number of reasons, including its coverage of excess emissions during planned maintenance, the inclusion of planned maintenance together with startup and shutdown, and ambiguities about which specific elements a source would have to establish to meet the requirements for an affirmative defense during planned SSM activities. As noted by the court, however, important reasons for the EPA's disapproval were the EPA's view that SI Ps should be designed to deter avoidable excess emissions in order to meet CAA objectives such as attainment and maintenance of the NAAQS and the EPA's determination that affirmative defenses for planned SSM activity would undermine the enforceabilit y of the CAA. “ [A]n effective enforcement program must be able to collect penalties to deter avoidab le violations .” 58 Another significant aspect of the court's opinion in Luminant Generation Co. v. EPA is its rejection of the challengers' argument that under CAA section 110(l), the EPA must definitively “prove” that a legall y deficient affirmative defens e provision would cause a violation of the NAAQS in order to justify disapproval of that SI P provision. Under the standard of CAA section 110(l) that the EPA may not approve a SI P revision that “would interfere” with CAA requirements, the court held that the EPA is only required “to provide reasoning supporting its conclusion that the disapproved provision would interfere with a n applicable requirement of the Act.” 59 The EPA believes that it is not necessary to prove the specific impacts of an impermissible SI P provision and that it is sufficient for the EPA to establish that the provision is inconsistent with the fundamental requirements of the CAA and thus could have adverse impacts, such as interference with attainment and maintenance of the NAAQS, protect ion of PSD increments, protection of visibility , or in meeting other CAA requirements. Finally , in the most recent decision concerning the EPA's approach to excess emissions during SSM events, the court in US Magnesium, LLC v. EPA upheld the EPA's issuanc e of a SI P call to a state addressing an automatic exemption provision and an impermissible director's discretion exemption. 60 Inthe underly ingaction, the EPA issued a SI P call to the state in order to rectify three distinct SI P deficiencies related to ex cess emissions during SSM events: (i) a provision that provided an automatic exemption for excess emissions during “breakdowns,” i.e., malfunctions; (ii) the fact that this exemption was applicable to federal regulations approved into the SI P

58 Id. at *13 (emphasis added).
59 Id. at *16.
60 US Magnesium, LLC v. EPA , 690 F.3d 1157 (10th Cir. 2012).Docket Memo

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21 thereb y addin g exemptions that are not permissible in those standards; and (iii) an ambiguous enforcement discretion provision that was worded in a way that could conflict with CAA requirements concerning enforcement. In reaching this decision, the court evaluated sev eral important questions related to the EPA’s authority to issue a SIP call under CAA section 110(k)(5) for such SIP deficiencies. First, the court rejected the challenger’s argument that in order to issue a SI P call, the EPA has to make specific factual s howings that the excess emissions that resulted from the impermissible SI P provisions had a particularized environmental impact. Based on the EPA’s reasonable interpretation of CAA section 110(k)(5), under Chevron step 2 analy sis, the court concluded that the EPA had authorit y to issue a SI P call in “a situation like this, where the EPA determines that a SI P is no longer consistent with the EPA’s understanding of the CAA” and that it was not necessary to make “specific factual findings to support the SI P Ca ll.” 61 Second, the court specifically evaluated and rejected the challenger’s argument that the EPA had no basis for the SI P call because it relied on interpretations of the CAA expressed onl y in a guidance document, the 1999 SSM Guidance, rather than in a rule that had undergone notice

and

- comment rulemaking. The court agreed that the EPA had issued the SIP call, informed by its interpretation of the CAA reflected in the 1999 SSM Guidance, through notice

- and

- comment rulemaking that interpreted the requirem ents of the statute and applied them to the facts. Thus, the court concluded that the EPA had not inappropriately relied on the SSM Policy

. 62 Finally , the court agreed that the EPA has authority to issue a SIP call “in order to clarify language in the SI P that could be read to violate the CAA, when a court has not y et interpreted the language in that way .” The provision at issue appeared to give state officials the authorit y to determine unilaterally

that a given excess emissions event should not be treated as a “violation,” and this could be interpreted by a court to preclude enforcement by the EPA or citizens for those excess emissions. In light of the “potential conflicts” between the provisions of the SI P and the requirements of the CAA, the court held that “seeking revision of the SIP was prudent, not arbitrary and capricious.” 63
The US Magnesium, LLC v. EPA decision is an important precedent for the EPA’s action on the Petition as it embodies a number of similar issues. In addition to addressing key asp ects of the EPA’s SSM Policy , such as interpretation of the CAA to bar automatic exemptions for excess emissions during SSM events in SI P provisions, the decision also illustrates that the SSM Policy is a guidance document that serves to reflect the EPA’s interpretation of the CAA that the EPA must apply

through rulemaking to evaluate an existing SI P provision. This is precisel y the process that the EPA is undertaking in its evaluation of the specific SIP provisions identified in the Petition as inconsisten t with CAA requirements.

61 Id. at 1168.
62 Id

. 63 Id. at 1170.Docket Memo

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22 **Regulatory Impacts of Deficient SIP Provisions** The Petition raised issues related to excess emissions from sources during periods of startup, shutdown and malfunction, and the consequences of failing to address these emissions co rrectly in SI Ps. In broad terms, the Petitioner expressed concerns that the exemptions for excess emissions and the other types of alleged deficiencies in existing SI P provisions “undermine the emission limits in SI Ps and threaten states’ abilities to achi eve and maintain the NAAQS, thereb y threatening public health and public welfare, which includes agriculture, historic properties and natural areas.” 64 The Petitioner asserted that such exemptions for SSM events are “loopholes” that can allow dramaticall y h igher amounts of emissions and that these emissions “can swamp the amount of pollutants emitted at other times.” 65 Inaddition, the Petitioner argued that these automatic and discretionary exemptions, as well as other SIP provisions that interfere with the enforcement structure of the CAA, undermine the objectives of the CAA. The EPA notes that the alleged SIP deficiencies are not mere legal technicalities. Compliance with the applicable requirements is intended to achieve the air quality protection and imp rovement purposes and objectives of the CAA. The EPA believes that the results of automatic and discretionary exemptions in SI Ps, and of other provisions that interfere with effective enforcement of SI Ps, are real

- world consequences that adversel y affect p ublic health. First, the EPA is concerned about the amounts of excess emissions that occur during these exempt periods. SI Ps contain emission limitations that the statute requires to apply continuously

. Sources meeting those limits would under normal circ umstances emit at levels that the state had determined were appropriate to meet CAA requirements, such as attainment and maintenance of the NAAQS, protection of PSD increments, and protection of visibility . However, SIP provisions that include automatic or discretionary exemptions potentially

allow large amounts of additional emissions that are above and bey ond the levels assumed in the SI P. Precise data on the extent and amounts of the extra emissions that result from these exemptions are hard to obtain, i n large part for the very

reason that these extra emissions are treated as exempt from the applicable emission limitations and thus may not be tracked carefully

or consistently . Available evidence suggests that the amount of extra emissions that occurs dur ing these exempt periods is potentially large. For example, in connection with the EPA’s issuance of a SIP call to address an exemption for excess emissions during malfunctions in Utah, the EPA illustrated the practical consequences of such exemptions by

n oting the large amount of additional emissions during malfunctions at individual sources, e.g. , one malfunction that was estimated to emit 11,000 pounds of SO 2 over a 9

- hour period when the applicable limit was 3,200 pounds per day . These excess emissions often occur in geographic areas in which any additional emissions could interfere with attainment and maintenance of the NAAQS, protection of PSD increments, protection of visibility , or other CAA objectives. Further, they often occur near communities in which any additional emissions could interfere with protecting the public health and environment as required by the CAA. 66

64 Petition at 2.
65 Petition at 12.
66 See "A pproval and Promulgation of Implementation Plans

– Utah SO 2 Control Strategy," 42 FR 21472 at 21643 (Apr. 27, 1977)

.Docket Memo

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23 Second, the EPA is concerned that the excess emissions that occur during these exempt periods are not adequatel y reflected in emission s inventories and therefore interfere with the states' ability to design air quality

plans adequate to address emissions. Precisely because these emissions during SSM events are treated as exempt from the otherwise applicable emission limitations, these em issions may not be counted, or counted accuratel y, in the tally of emissions from all sources in an area. Emissions inventories often rel y on hard data gathered from sources with more precise monitoring mechanisms, such as continuous emissions monitors (CE Ms) for SO 2 at electric generating units covered b y the EPA’s Acid Rain Program, combined with estimated emissions that rely on “emissions factors” for source categories for which no such precise monitoring mechanisms are available or required. Ty picall y, however, emissions inventories include emissions estimates that presume compliance b y sources at all times throughout the ye ar, and the inventory is not adjusted to include excess emissions that occur as a result from SSM events, whether retrospectively to account for what has occurred or prospectivel y to estimate what might occur. As a result, the cumulative extra emissions due to excess emissions during exempt SSM events could render the emissions inventory for an area inaccurate in way s that would interf ere with achieving the required objectives of the CAA. Third, the EPA is concerned that the failure to include these excess emissions in emissions inventories has effects that ripple throughout the SIP planning process. For example, emissions inventories are an important building block for developing an attainment plan for an area for reaching attainment of a NAAQS. Such inventories inform basic decisions about attainment strategies for a given area, such as evaluation of which source categories to regulate for which pollutants, by

what form of emissions contro l, and on what schedule, in order to attain the NAAQS as expeditiously as practicable. In turn, these decisions affect attainment demonstration modeling, which is intended to be an accurate evaluation of the efficacy of the control strategy and an accurate projection of whether the area will attain the NAAQS at the required time in the future. Inaccuracies about the reported level of total emissions in an area, exacerbated b y exemptions for excess emissions during SSM events, can adversel y affect each step of the SI P planning anal ys is and thus adversel y impact the intended objectives. Depending upon the form and averaging time of the NAAQS in question, failure to account accuratel y for excess emissions that occur during SSM events could have even more pronounced adverse impacts. This is merely one example of how failure to regulate, and thus failure to account for, excess emissions during SSM events could have adverse consequences; this ty pe of problem could arise in any number of regulatory

contexts where ac curate information about emissions is necessary to meet the CAA objective at issue. Fourth, the EPA is concerned that SI P provisions that operate to preclude enforcement by the EPA or citizens for violations, whether through impermissible exemptions or other SI P provisions that function to bar effective enforcement, not only undermine the enforcement structure of the CAA in a technical sense but undermine effective enforcement in reality

. Congress provided states , the EPA, and citizens with independent statutory enforcement authority to ensure compliance with CAA requirements. By empowering states , the EPA, and citizens to make their own enforcement decisions with respect to violations, the CAA provides deterrence and helps to assure better source complianc e. SIP provisions that transform what should be considered violations into exempt emissions, or that impose the enforcement discretion decisions of a state on the EPA or citizens, undermine enforcement of the CAA.Docket Memo

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24 Fifth, affirmative defense provisions that are not narrowl y drawn to provide relief from monetary penalties only

under appropriate circumstances are not merely inconsistent with the overarching requirements of the CAA but also undermine the enforcement structure of the CAA in practical way s. I mproperly

drawn affirmative defense provisions include those that purport to bar enforcement for injunctive relief, those that provide insufficient criteria to assure that they are used only in appropriate circumstances, and those that shield sources from potential penalties in circumstances where the source could have predicted and prevented the emissions because the event in question was a part of normal source operation. The CAA specifically authorizes monetary penalties for violations, and the EPA belie ves that relief from such penalties is only appropriate in narrow circumstances when the event was bey ond the control of the source. Elimination of the possibility of monetary

penalties in other circumstances not only violates the requirements of the CAA b ut, as a practical matter, it also reduces the incentive for sources either to comply

with the law or to take special precautions to comply in order to be qualified to assert a defense to those penalties.

***