Opinion ID: 3180012
Heading Depth: 2
Heading Rank: 3

Heading: EPA’s Promulgation of the FIP

Text: To remedy the deficiencies it identified in its partial disapproval of Arizona’s SIP, EPA in the same Final Rule promulgated a FIP. As relevant here, EPA concluded that selective catalytic reduction with low-NOX burners and overfire air, “the most stringent available control option” for NOX emissions, was BART for Coronado. 77 Fed. Reg. at 42,864. It thus proposed NOX emission limits of 0.05 lb/mmBtu, based on a rolling 30-boiler-operating day average,15 for Coronado. Id. at 42,865. After receiving 15 “Boiler operating day means a 24–hour period between 12 midnight and the following midnight during which any fuel is combusted at any time in the steam-generating unit. It is not necessary for fuel to be ARIZONA EX REL. DARWIN V. USEPA 35 comments on its proposed rule, EPA’s Final Rule imposed a FIP containing revised NOX emission limits of 0.065 lb/mmBtu, measured as an average of the two Coronado generating units. See 77 Fed. Reg. at 72,514–15. This final emission limit is, of course, very significantly more stringent than the 0.32 lb/mmBtu NOX limit proposed by Arizona in its SIP. As required by the Guidelines, EPA explained its general analytical approach and BART determinations at substantial length in the Final Rule. See id. at 72,526–35. SRP presses a number of substantive challenges to the FIP’s emission limit, as well as to EPA’s analysis underlying that determination. Arizona, on the other hand, challenges EPA’s decision to promulgate a FIP in the same rule in which it disapproved in part Arizona’s SIP. We address these challenges in turn.
Under Section 169A and the Haze Regulations, EPA must perform the same BART analysis when promulgating a regional haze FIP as that performed by states in developing SIPs. See 42 U.S.C. § 7491(b)(2)(A), (g)(2); see also 40 C.F.R. § 51.308(e)(1)(ii)(A)–(B). Challenges to the FIP are reviewed “under the same arbitrary and capricious standard . . . used to evaluate the EPA’s rejection of the SIP.” Oklahoma, 723 F.3d at 1215. But this review requires a “slightly different perspective,” as we “evaluat[e] the EPA’s own choices under the guidelines, as opposed to evaluating its combusted the entire 24–hour period.” 40 C.F.R. § 60.41. At the end of each boiler operating day, emissions are measured and a new 30-day rolling average is calculated. See 40 C.F.R. § 60.48Da(b). 36 ARIZONA EX REL. DARWIN V. USEPA choice to reject [Arizona’s] SIP under the guidelines.” Id. (emphasis added). SRP contends that EPA’s cost and visibility analyses contained in its FIP were arbitrary and capricious. It also maintains that, for a number of reasons, the FIP’s NOX emission limits are neither achievable nor reasonable. Consequently, it argues, the FIP’s BART determinations for Coronado were, on the whole, arbitrary and capricious. For the reasons set forth below, we in the main do not agree, but we leave one issue open because EPA is reconsidering it.
SRP first disputes EPA’s “cumulative” approach. EPA estimated the visibility improvements that would occur at each of the Class I areas potentially impacted by Coronado’s emissions and then aggregated those improvements. SRP contends this analysis resulted in “a large deciview number” that does not represent the actual perception of visibility conditions at any particular Class I area. SRP’s challenge to EPA’s visibility improvement analysis suffers from two substantial defects. First, EPA considered the “cumulative visibility improvement” resulting from various control technologies “[a]s a supplement” to considering deciview improvements at individual Class I areas. For Coronado, specifically, EPA explained that modeling showed that SCR control technology would result in visibility benefits at each of eleven Class I areas—including the Gila Wilderness Area, which EPA faulted Arizona for failing to consider—as well as on a cumulative basis. See 77 Fed. Reg. at 42,863 tbl.23. In response to Petitioners’ comments critiquing EPA’s ARIZONA EX REL. DARWIN V. USEPA 37 cumulative approach, EPA explained in the Final Rule that “[t]he approach is simply one way of assessing improvements at multiple areas, for consideration along with other visibility metrics.” 77 Fed. Reg. at 72,532. SRP’s claim that EPA “focused on this [cumulative] methodology almost exclusively” is simply not supported by the record. Second, SRP’s insistence on “human perception” as the determinative “cornerstone” for the BART determinations for each individual source is overstated. As discussed above, when promulgating the BART Guidelines, EPA explicitly disagreed “that the degree of improvement should be contingent upon perceptibility” when determining BART for an individual source. 70 Fed. Reg. at 39,129. EPA’s Final Rule provided a fully adequate explanation of its application of the deciview concept in the FIP. Again, one deciview is the minimum visibility difference people can perceive. See Guidelines at 39,120 n.32. The Guidelines suggest that states use a minimum threshold of 0.5 deciviews to determine whether a source is subject to BART controls. EPA explained in its Final Rule, however, that “[s]maller improvements from controls should be considered in BART determinations, since they can be beneficial in considering effects from controls on multiple sources.” 77 Fed. Reg. at 72,533 (emphasis added). In conclusion, EPA’s visibility improvement assessment was consistent with the statute and regulatory requirements, and supported by the record. 38 ARIZONA EX REL. DARWIN V. USEPA
SRP also challenges EPA’s cost analysis, arguing that it “diverged” from the Guidelines and was “inadequate” to support its BART determinations for NOX emissions. Additionally, SRP argues that EPA’s cost assessment was flawed “because [EPA] insisted on rigid adherence to the [Cost Manual] irrespective of site-specific costs.” EPA explains that it used the “air pollution control cost development” component of the Integrated Planning Model (“IPM”) to develop its cost estimates. See 77 Fed. Reg. at 72,530. IPM, a model of the United States electric power sector, “relies upon a very large number of data inputs and provides forecasts” of costs and other variables relevant to decisionmaking in that sector. Id. SRP maintains that by using IPM cost estimates, EPA ignored the Coronado facility’s “site-specific characteristics,” and so understated the actual costs of compliance for installing controls at Coronado. In the Final Rule, however, EPA explained that it did not rely on IPM as a whole, but rather on “one component of IPM, specifically, the component that develops the costs of air pollution control technologies.” Id. As EPA explained, that cost development methodology was not “generic” or “generalized.” Id. Rather, it was grounded in databases of actual SCR projects from 2004, 2006, and 2009. Id. At the same time, EPA recognized that “a costly engineering evaluation that included site visits would potentially produce a more refined cost estimate that could be considered more site-specific than our own.” Id. ARIZONA EX REL. DARWIN V. USEPA 39 In addition, in response to Petitioners’ public comments contending that EPA failed to consider site-specific information, EPA conducted supplemental cost analyses that relied upon “cost estimates provided by SRP.” See id. at 72,558–60. Based on this supplemental cost analysis, EPA concluded that “the cost-effectiveness values of SCR . . . [are] not . . . cost-prohibitive” for Coronado. Id. at 72,560. Not satisfied, SRP contends that in its supplemental analysis, “EPA excluded costs it deemed inconsistent with the [Cost Manual]” such as Allowance for Funds Utilized During Construction (“AFUDC”).16 This argument restates Petitioners’ objections to EPA’s reliance on the overnight costing methodology when it partially disapproved Arizona’s SIP. See supra note 14. EPA’s use of such a methodology in its own FIP’s cost analysis is, without doubt, reasonable. See 77 Fed. Reg. at 72,518. In rejecting Arizona’s SIP, EPA explained that the use of the overnight method was “crucial to [its] ability to assess the reasonableness of the costs of compliance.” Id. The agency went on: A proper evaluation of cost-effectiveness allows for a reasoned comparison not only of different control options for a given facility, but also of the relative costs of controls for similar facilities. If the cost-effectiveness of a control technology for a particular facility is outside the range for other similar facilities, 16 “AFUDC primarily represents a tool for utilities to capture their cost of borrowing and return on equity during construction periods.” 77 Fed. Reg. at 72,531. 40 ARIZONA EX REL. DARWIN V. USEPA the control technology may be rejected as not cost-effective. . . . Without an ‘apples-to-apples’ comparison of costs, it is impossible to draw rational conclusions about the reasonableness of the costs of compliance for particular control options. Use of the [Cost Manual] methodology is intended to allow a fair comparison of pollution control costs between similar applications for regulatory purposes. Id. EPA concluded that “it is reasonable for us to insist that the [Cost Manual] methodology be observed in the cost estimate process.” Id. Accordingly, it rejected comments that items like AFUDC should have been incorporated into its cost analysis, as they were “inconsistent with [the Cost Manual] methodology.” Id. at 72,531. EPA’s analysis is reasonable. The purpose of the cost analysis required as part of a BART determination is to foster comparison of the cost of the visibility improvements enabled by various control technologies. As EPA’s comments indicate, cross-facility comparisons of similar sources with regard to the cost-effectiveness of a given control option aid in determining cost-effectiveness at a specific source. Control options are likely to impact similar sources similarly; comparisons assure that the cost and benefit figures used for a particular site are realistic, rather than inflated in one direction or another. Consideration of AFUDC would not further this inquiry, as AFUDC is ultimately reflective of the implementing entity’s financial and logistical situations, grounded in past decisions and in the company’s financial policies and attitudes, not of the hard costs of the equipment and construction, which should be consistent across sites. ARIZONA EX REL. DARWIN V. USEPA 41 While AFUDC and similar concepts are relevant for sales and ratemaking, including them would undermine the sort of “apples-to-apples” comparison that EPA asserts is necessary as part—but only part—of assessing the control options. This approach is consonant with the Guidelines, which specifically advise that “reasonable range[s]” for cost effectiveness are those that are “consistent with the range of cost effectiveness values used in other similar permit decisions over a period of time.” Guidelines at 39,168; see also Oklahoma, 723 F.3d at 1213 (“The guidelines say that states should follow the manual’s methodology so that projects can be more easily compared.”). Moreover, adopting a costing methodology which focuses on achieving consistency and facilitating comparisons aligns with the CAA itself, which empowers EPA to promulgate national regulations concerning BART determinations. See 42 U.S.C. § 7491(a)(4), (b)(1). Accordingly, we reject SRP’s argument that the FIP’s underlying cost analysis was arbitrary and capricious. c. Achievability of the FIP’s NOX emission limits for Coronado The Haze Regulations provide that the BART determination “must be based on an analysis of the best system of continuous emission control technology available and associated emission reductions achievable for each BART-eligible source that is subject to BART.” 40 C.F.R. § 51.308(e)(1)(ii)(A) (emphasis added). The reviewing authority should “take into account the most stringent emission control level that the technology is capable of achieving,” by considering “recent regulatory decisions and 42 ARIZONA EX REL. DARWIN V. USEPA performance data (e.g., manufacturer’s data, engineering estimates and the experience of other sources).” Guidelines at 39,166. SRP argues that the FIP’s NOX emission limit for Coronado — 0.065 lb/mmBtu averaged across the facility — is not achievable. More specifically, it argues that (1) the emission limits are technically infeasible; and (2) EPA did not take into account the Consent Decree binding Coronado Unit 2 when formulating the emission limits. Both of these arguments will be rendered moot if EPA’s recent action proposing to revise the FIP’s NOX emission limit for Coronado results in a final revised FIP consistent with the proposal. See 80 Fed. Reg. 17,010 (March 31, 2015).17 The proposed revision would replace the facilitywide compliance method with “a unit-specific compliance method for determining compliance with . . . BART [] emission limits for nitrogen oxides,” and would establish “unit-specific limit[s]” of 0.065 lb/mmBtu for Coronado Unit 1 and 0.080 lb/mmBtu for Coronado Unit 2. Id. SRP’s technical feasibility argument was largely based on the assertion that a 0.050 lb/mmBtu emissions limit — which SRP contended Coronado Unit 1 would have to satisfy — was “infeasible” for SCR retrofits to coal-fired electric generating units. Even though EPA based its BART determinations for Coronado on modeling showing that SCR controls could achieve a 0.050 lb/mmBtu NOX emission rate with an 80%–90% control efficiency, see 77 Fed. Reg. at 42,853, and has imposed a NOX emission limit in the 0.050 17 EPA has recently informed us that it expects to issue the final revised FIP by March 2016. ARIZONA EX REL. DARWIN V. USEPA 43 lb/mmBtu range in other, similar rulemakings, see 77 Fed. Reg. at 72,544 tbl.7, the proposed revised FIP’s limits for Coronado Unit 1 are now 0.065 lb/mmBtu.18 Likewise, although SRP initially argued that the FIP’s emission limits were inconsistent with the limits prescribed by a pre-existing Consent Decree as to Coronado Unit 2, EPA’s proposed FIP revision establishes the same emissions limit as that prescribed by the Consent Decree: 0.080 lb/mmBtu. See 80 Fed. Reg. at 17,016–18. Consequently, these arguments, whatever merit they may have had as to the original FIP, will not carry force if the proposed revised FIP is adopted. Additionally, SRP argues that the FIP’s emissions limits are in conflict with EPA’s own “presumptive” limits. The BART Guidelines provide a list of “presumptive NOX limits,” based on boiler and coal type, for certain coal-fired generating units operating without post-combustion controls. Guidelines at 39,171. Under the Guidelines, the reviewing authority “should require such [facilities] to meet the [presumptive] NOX emission limits, unless [it] determine[s] that an alternative control level is justified based on consideration of the statutory factors.” Id. The presumptive NOX limits for Coronado are 0.32 lb/mmBtu for bituminous coal and 0.23 lb/mmBtu for sub-bituminous coal. Id. tbl.1. Arizona’s SIP proposed a NOX emission limit for Coronado within the presumptive limit range, while the FIP imposes a far lower facility-wide limit. SRP argues that EPA, unlike Arizona, did not consider the presumptive limits, and therefore violated the Guidelines. 18 A 0.065 lb/mmBtu emissions limit may also be, in SRP’s view, technically infeasible, and SRP is entitled to petition for review of EPA’s action finalizing the FIP revision when it is issued. See 42 U.S.C. § 7607(b). 44 ARIZONA EX REL. DARWIN V. USEPA As the Final Rule explains, EPA did consider the presumptive limits but found there is “no single presumptive NOX limit that applies to any of these units,” as each of the facilities “historically burned both bituminous and subbituminous coal.” 77 Fed. Reg. at 72,529. Accordingly, EPA instead “considered the technological basis for presumptive NOX BART limits . . . as part of the five-factor analysis [it] performed for each facility.” Id. In any event, SRP’s argument that the “law requires [the presumptive] limits to be taken into account in any BART determination” is belied by the Guidelines. The presumptive emission limits are “rebuttable” and “do[] not preclude states or EPA from setting limits that differ from those presumptions.” 77 Fed. Reg. at 72,529. Instead, the Guidelines expressly allow for an alternative control level to be formulated based on the statutory factors, provided that the alternative limits are based on a reasoned BART analysis. 70 Fed. Reg. at 39,171. Moreover, the presumptive emission limits are presumed to be cost-effective, not presumed to be BART in every case. See 77 Fed. Reg. at 51,620, 51,633 (Aug. 24, 2012); 77 Fed. Reg. 14,604, 14,665 (Mar. 12, 2012). In sum, EPA acted reasonably in departing from Guidelines’ rebuttable presumptive limits. But, because EPA has not yet completed its proposed revised FIP, we decline to rule on the reasonableness of its emissions limits, as they are likely to be altered. This aspect of these proceedings is therefore stayed until EPA concludes the administrative process and issues its final revised FIP. ARIZONA EX REL. DARWIN V. USEPA 45
Promulgation of a FIP Apart from its substantive challenges to the FIP, Arizona contends that EPA procedurally erred in promulgating the FIP in the same rule as its partial disapproval of the SIP. That is not so. Under the Act, EPA shall promulgate a FIP “at any time within 2 years” after EPA disapproves a SIP in whole or in part or finds that a state has not made a required submission. 42 U.S.C. § 7410(c) (emphasis added). A state may forestall the promulgation of a FIP if it “corrects the deficiency, and [EPA] approves the plan or plan revision, before [EPA] promulgates such [FIP].” Id. Furthermore, a state may submit a SIP revision to EPA at any time, and EPA must act on it within twelve months of submission. Id. § 7410(k). The Final Rule’s partial disapproval of Arizona’s BART determinations constituted a trigger under the Act for promulgating a FIP replacing those elements. The Act expressly authorizes EPA to promulgate a FIP “at any time” within two years of disapproving a SIP. “At any time,” of course, includes simultaneously with the SIP’s disapproval. See Oklahoma, 723 F.3d at 1223. Arizona ultimately recognizes that EPA had the authority to promulgate the FIP simultaneously with its partial disapproval, but maintains that EPA did not realize that it had discretion to provide Arizona up to two years to correct any deficiencies. EPA, Arizona posits, harbored the erroneous belief that its obligations under the Consent Decree required it to act when it did. 46 ARIZONA EX REL. DARWIN V. USEPA Some procedural background is required to understand the thrust of Arizona’s argument. After EPA did not promulgate FIPs within two years of its January 2009 finding that many states, including Arizona, had not submitted required SIPs, it entered into a Consent Decree requiring the federal agency to approve a SIP or promulgate a FIP by November 15, 2012. See supra, p. 13–14. In the Final Rule, EPA stated that the Consent Decree “required [it] to issue a FIP for any portion of the Arizona SIP that we cannot approve.” 77 Fed. Reg. at 72,569. EPA further explained that “while . . . in the absence of an expired statutory duty and a court-ordered deadline to issue a FIP, it would be preferable for us to give Arizona additional time to revise its Regional Haze SIP prior to promulgation of a FIP, we simply do not have this option under these circumstances.” Id. at 72,571. Arizona contends that the January 2009 finding constituted only a determination that Arizona failed to submit a Section 309 SIP, and that the correct remedy for Arizona’s asserted deficiency “was to impose a FIP supplying the missing Section 309 elements, not to impose a FIP under Section 308, as it did here.” But, as we explained earlier, see supra, p. 11–12, Section 309 provides an alternative mechanism for western states to comply with the CAA’s visibility requirements for certain Class I areas. Such states must include Section 308 components for other Class I areas, and they remain subject to Section 308’s requirements if they do not submit a Section 309 SIP. See 40 C.F.R. § 51.309(a), (e), (g)(2). Arizona expressly acknowledged that its Section 309 SIP submission lacked certain requirements under sections 51.309(d)(4)(viii) and (g). Because the State did not submit an adequate Section 309 SIP, it did not submit an adequate regional haze SIP. EPA was required to promulgate ARIZONA EX REL. DARWIN V. USEPA 47 a FIP to fill in the gap. See 42 U.S.C. §§ 7410(c)(1), 7491(b)(2)(A). More practically, it is unlikely that a different outcome would have resulted if EPA had provided Arizona with additional time to correct its Section 308 SIP. EPA had expressed a number of its concerns to Arizona after reviewing its proposed SIP in late 2010. EPA also identified the basis for its proposed partial disapproval in its July 2012 proposed rule. Arizona made no effort to correct its SIP in light of these comments. There is no reason to think it would have done so after the Final Rule disapproving the SIP issued either. In sum, EPA properly promulgated its FIP in the same rule as its partial disapproval of the SIP. Further, as EPA stated in the Final Rule, the State remains free to, at any time, “submit a revised SIP to replace the FIP.” 77 Fed. Reg. at 72,571. IV. CONCLUSION For the reasons set forth above, we deny Arizona’s and SRP’s petitions for review of EPA’s Final Rule as to EPA’s disapproval of Arizona’s SIP. Our ultimate review of EPA’s FIP, however, must await EPA’s final action on its proposal to revise the FIP in specific respects. As noted, EPA has stated that it expects to finalize the revised FIP by March 2016. Accordingly we stay these proceedings as to evaluation of the FIP’s technical feasibility until the administrative process is complete. PETITIONS DENIED. 48 ARIZONA EX REL. DARWIN V. USEPA GLOSSARY OF ACRONYMS AFUDC – Allowance for Funds Utilized During Construction APA – Administrative Procedure Act CAA – Clean Air Act BACT – Best Available Control Technology BART – Best Available Retrofit Technology EPA – Environmental Protection Agency FIP – Federal Implementation Plan IPM – Integrated Planning Model LNB – Low NOX Burner NOX – Nitrogen Oxides OAQPS – Office of Air Quality Planning and Standards OFA – Overfire Air PSD – Prevention of Significant Deterioration SCR – Selective Catalytic Reduction SIP – State Implementation Plan SO2 – Sulfur Dioxide ARIZONA EX REL. DARWIN V. USEPA 49 SRP – Salt River Project Agricultural Improvement and Power District