Opinion ID: 4020089
Heading Depth: 2
Heading Rank: 7

Heading: title v permit exemption for synthetic boilers

Text: The EPA has discretion to exempt one or more area source categories from Title V permitting requirements upon a finding “that compliance with such requirements is impracticable, infeasible, or unnecessarily burdensome on such categories.” 42 U.S.C. § 7661a(a). The EPA originally 115 proposed exempting some area source categories because existing “testing, monitoring, notification, and recordkeeping requirements” rendered Title V permitting cumulative. 2010 Proposed Area Boilers Rule, 75 Fed. Reg. at 31,910. At the time, however, the EPA elected not to exempt synthetic area sources as one of those categories. Id. at 31,913. Synthetic area sources are boilers that “naturally” emit pollutants at a major source level but which qualify as area sources due to the voluntary adoption of air pollution control technologies. Id. Despite its initial stance, the EPA ultimately decided to exempt all area sources—including synthetic area sources— from Title V’s permitting requirements. See 2011 Area Boilers Rule, 76 Fed. Reg. at 15,578. Environmental Petitioners argue the EPA’s decision to exclude synthetic boilers from Title V licensing requirements is arbitrary and capricious for two reasons. First, they say, the EPA arbitrarily concluded synthetic area sources would bear the same level of burden as other area sources in complying with Title V permitting requirements, rather than a lesser one. See No. 11-1141 Envtl. Pet’rs’ Br. 39-43. And second, they contend the EPA arbitrarily dismissed the additional compliance benefits of Title V licensing for these synthetic sources. See id. at 43-47. Under State Farm, “an agency rule [is] arbitrary and capricious if the agency . . . offered an explanation of its decision that runs counter to the evidence before the agency.” 463 U.S. at 43. A court may not accept an agency’s “post hoc rationalizations” for its decisionmaking. Id. at 49. The EPA has authority under the CAA to exempt sources from Title V permitting requirements if those requirements would be “impracticable, infeasible, or unnecessarily burdensome” on the area source. 42 U.S.C. § 7661a(a). The 116 EPA previously developed a four-factor balancing test to determine whether Title V’s requirements are “unnecessarily burdensome.” See Exemption of Certain Area Sources from Title V Operating Permit Programs, 70 Fed. Reg. 75,320, 75,323 (Dec. 19, 2005). Under this test, the EPA considers whether: (1) Title V permitting would result in significant improvements in compliance with emission standards; (2) whether Title V permitting would impose significant burdens on the area source category; (3) whether the costs are justified, taking into account potential gains; and (4) whether there are existing enforcement programs in place sufficient to ensure compliance. See id. at 75,323-26. The EPA also must consider, consistent with the legislative history of the CAA, whether exemption would “adversely affect public health, welfare, or the environment.” Id. at 75,333-34. These factors are considered in combination and not every factor must point in favor of exemption for the EPA to choose that course. See id. at 75,323. In its 2010 Proposed Area Boilers Rule, the EPA applied this balancing test and excluded almost all area source boilers except synthetic boilers that achieved “area” status via installation of a control technology (although it exempted those that achieved “area” status through operational changes). The EPA provided an extensive rationale for its decision to exclude these “natural” area sources from Title V’s permitting requirements. See 2010 Proposed Area Boilers Rule, 75 Fed. Reg. at 31,910-13. With respect to factor one, the EPA found its proposed rule already required “direct monitoring of emissions,” both continuously and periodically, recordkeeping that would allow for additional monitoring, and “semi-annual reporting to assure compliance.” Id. at 31,911. Moreover, under the proposed rule, “records are required to be maintained in a form suitable 117 and readily available for expeditious review” for up to five years. Id. The EPA acknowledged Title V permitting could provide some additional compliance benefits; specifically, that Title V has an every-six-month monitoring and reporting requirement. See id. But the EPA ultimately concluded the monitoring, recordkeeping, and reporting requirements of its proposed rule were sufficient to assure compliance: “Given the nature of the operations at most area sources and the types of requirements in this rule, Title V would not significantly improve those compliance requirements.” Id. As to the second factor, the EPA noted that subjecting most area sources to Title V would “impose[] certain burdens and costs that do not exist outside of the [t]itle V program.” Id. at 31,912. One of the EPA’s major concerns was that “requiring permits for the large number of area sources could, at least in the first few years of implementation, potentially adversely affect public health, welfare, or the environment by shifting [s]tate agencies[’] resources away from assuring compliance for major sources with existing permits to issuing new permits for these area sources, potentially reducing overall air program effectiveness.” Id. at 31,913. For the third factor, the EPA concluded the costs of compliance would “impose a significant burden on many of the approximately 137,000 facilities affected by this proposed rule” with only “low” potential gains in compliance. Id. at 31,912. Finally, for the fourth factor, the EPA determined that “[s]tate delegated programs are sufficient to assure compliance with this [rule],” and noted that the Agency retains authority to enforce this rule “anytime.” Id. The EPA therefore proposed exempting these area sources from the permitting requirements. See id. Environmental Petitioners are not currently challenging the exemption for non-synthetic area boilers. 118 However, in this 2010 rulemaking, the EPA also explained precisely why it declined to exempt synthetic area sources that installed air pollution controls from Title V requirements. First, the EPA noted these synthetic area sources “represent less than one percent of the total number of sources that will be subject to the final rule.” Id. at 31,913. The EPA also characterized these sources as “much more like the major sources” that are not exempt from Title V permitting requirements. Id. Further distinctions included that “many of these sources are located in cities, and often in close proximity to residential and commercial centers where large numbers of people live and work,” that they “have significantly higher emissions potential when uncontrolled” (even compared to synthetic boilers that adopted operational limits to attain area source status), and that many of these sources “are large facilities with comprehensive compliance programs in place” as opposed to small facilities, like schools or hospitals. Id. Given these distinctions, the EPA concluded additional public involvement and compliance oversight through Title V was “important to ensure that these sources are maintaining their emissions at the area source level.” Id. But the EPA shifted its position in the 2011 Area Boilers Rule by deciding to exempt all area sources, including synthetic sources. See 76 Fed. Reg. at 15,578. The EPA provided only a cursory explanation for this shift, noting how a further review of the record led it to conclude “observations and data we have relied upon in other rulemakings for distinguishing between sources that became synthetic area sources due to controls and other synthetic and natural area sources [do] not necessarily apply to this source category.” Id. (emphasis added). Because the EPA asserted it no longer had “sufficient information” to identify control-technologydependent synthetic sources, it decided to apply the same 119 rationale used to exempt “natural” sources to these synthetic sources. Id. (“[T]he rationale for exempting most area sources subject to this rule . . . is also now relevant for sources which we proposed to permit [under Title V].”). But—even if the EPA truly cannot distinguish between synthetic sources relying on control technologies and other sources—it does not invariably follow that the justifications the Agency relied on for exempting “natural” sources under the four-factor balancing test can be transposed onto these synthetic sources. Cf. Sierra Club II, 479 F.3d at 884 (“We agree with the Sierra Club that EPA’s use of work practice standards instead of emission floors violates section 7412(h). That provision allows EPA to substitute work practice standards for emission floors only if measuring emissions levels is technologically or economically impracticable. Here, EPA never determined that measuring emissions from ceramic kilns was impracticable; it determined only that it lacked emissions data from ceramics kilns. EPA thus had no basis under section 7412(h) for using work practice standards.”). In its next iteration of the rule, the EPA endeavored to further explain its exemption of synthetic sources. The EPA again stated it “lacked sufficient information” to distinguish these synthetic sources from other area sources. See 2011 Proposed Area Boilers Rule on Reconsideration, 76 Fed. Reg. at 80,538. The Sierra Club challenged this exemption in a comment, and the EPA responded with “additional analysis” of the synthetic exemption. Id. In this analysis, the EPA first reiterated the difference in number between the two types: estimating there to be at least 48 control-technologydependent synthetic sources versus 137,000 other area sources, most of which are located at small facilities like schools, hospitals, and churches. See id. The EPA then provided a new rationale for the exemption: that these 120 synthetic facilities “may already have a Title V permit for other reasons.” Id. The EPA also found that “synthetic area sources would likely be subject to more stringent permit and monitoring requirements than natural area sources” because they have a “legal duty to use the control equipment” to keep them at an “area” level. Id. (emphasis added). Finally, the EPA made several assertions about the similarities between synthetic and natural sources. Specifically, that synthetic sources are “similar in size and sophistication to those that are natural area sources,” that their “uncontrolled emissions are generally on the same order of magnitude as the emissions of natural sources,” and that “the facilities and owners are comparable in size.” Id. The EPA provided no data or examples in support of these assertions, which appear to directly contradict the distinctions the EPA listed in its earlier version of the rule. Compare id., with 2010 Proposed Area Boilers Rule, 75 Fed. Reg. at 31,913. In its final rule, the EPA declined to make any changes to its Title V exemptions—exempting all area sources including synthetic sources using a control technology. See 2013 Area Boilers Rule, 78 Fed. Reg. at 7,497. Based on this record, the EPA’s reasoning has several fatal flaws that render its exemption decision arbitrary. The EPA put forward two primary justifications for exempting synthetic sources: (1) that it could not necessarily rely on existing data for distinguishing the different type of sources, and (2) that these facilities are “similar in size and sophistication” to natural area sources. See 2011 Proposed Area Boilers Rule on Reconsideration, 76 Fed. Reg. at 80,538. The second justification flatly contradicts the EPA’s earlier, extensive discussion about how these synthetic sources have higher emissions potential and are often located on large sites with existing compliance programs, in addition 121 to being uniquely few in number and generally found near cities. 2010 Proposed Area Boilers Rule, 75 Fed. Reg. at 31,912-13. These factors all undercut the EPA’s assertion that synthetic sources are “similar”—in size, sophistication, or otherwise—to natural sources. With respect to the lack of data for distinguishing, the EPA was able to estimate in its proposed rule that 48 synthetic sources would have been affected by this rule—which suggests the EPA possesses some mechanism for distinguishing the types. See 2011 Proposed Area Boilers Rule on Reconsideration, 76 Fed. Reg. at 80,538. Moreover, the EPA does not explain why the data it used in prior rulemakings to distinguish these source types is not accurate in this context. Environmental Petitioners also point out that, “to qualify for area-source status, synthetic area sources must notify the EPA or the state permitting authority of the limits on their emissions,” such that the EPA “need only ask these authorities to identify the sources operating in their states.” No. 11-1141, Envtl. Pet’rs’ Br. 39-40. The EPA never endeavors to explain why that mechanism (or any other existing mechanism) is insufficient for identifying synthetic area sources. Because its justifications for the final rule contradict earlier findings, the EPA must provide some reasoning to explain why its final decision “runs counter to the evidence before the agency.” State Farm, 463 U.S. at 43. The EPA’s proffered explanation fails. This court has “often declined to affirm an agency decision if there are unexplained inconsistencies in the final rule.” See Dist. Hosp. Partners, 786 F.3d at 59; see also Gulf Power Co. v. FERC, 983 F.2d 1095, 1101 (D.C. Cir. 1993) (“[W]hen an agency takes inconsistent positions . . . it must explain its reasoning.”); Gen. Chem. Corp. v. United States, 817 F.2d 844, 846 (D.C. Cir. 1987) (holding agency action to be arbitrary because its 122 analysis was “internally inconsistent and inadequately explained”). The EPA had a duty here to examine and justify the “key assumptions” underlying its decision, and it failed to do so. See Appalachian Power Co. v. EPA, 135 F.3d 791, 818 (D.C. Cir. 1998) (“EPA retains a duty to examine key assumptions as part of its affirmative burden of promulgating and explaining a nonarbitrary, non-capricious rule.” (internal quotation marks omitted)). The EPA’s major oversight was its failure to explain why the rationale it used to exempt natural area sources from Title V could be identically applied to synthetic area sources. One of the Agency’s main justifications for exempting natural area sources was that their prolific numbers might overwhelm state and local regulatory agencies, diverting resources from other important environmental programs, thereby harming public health and welfare. The EPA never explained why requiring 48 synthetic area sources to comply with Title V would strain government resources to a comparable degree as would requiring the 137,000 natural area sources to comply. As discussed above, the EPA also did not explain how it suddenly determined these synthetic area sources were “similar in size and sophistication” to natural sources, when it had previously articulated several key differences. It is particularly unclear how these synthetic sources could have “uncontrolled emissions . . . generally on the same order of magnitude as the emissions of natural area sources.” 2011 Proposed Area Boilers Rule on Reconsideration, 76 Fed. Reg. at 80,538. Given that synthetic sources are defined as “major” sources that have artificially reduced their emissions to an “area” level, it is difficult to understand how the uncontrolled emissions of these sources would be similar to natural area sources. Additionally, the EPA asserted that synthetic source “facilities and owners are comparable in 123 size” to natural sources. Id. This contradicts earlier findings that synthetic sources tend to be large, located on sites with existing compliance plans, and near population-dense areas. The EPA provides no data or explanation to support this shift. The EPA relies on another problematic premise when it claims the potential benefits of subjecting synthetic area sources to Title V requirements are low. Both the EPA and Industry Intervenors argue that the added benefits of Title V would be minimal for these synthetic sources, relying solely on the rationale given for natural sources. But the EPA originally asserted “additional public involvement and compliance assurance requirements through title V [are] important to ensure that these sources are maintaining their emissions at the area source level.” 2010 Proposed Area Boilers Rule, 75 Fed. Reg. at 31,913 (emphasis added). The EPA never explains why these additional benefits were considered “important” before but are now “not important” simply because it allegedly determined that synthetic sources may be hard to distinguish from natural sources. The difficulty in identifying synthetic sources says nothing about the benefits that may be gained by requiring Title V permits, assuming the sources can be identified. Synthetic sources retain the attributes which first motivated the EPA to subject them to Title V permitting: they tend to be near cities, specifically near large residential populations, and they have greater emission potential if their control technology is removed, turned off, or not kept up to standards. The EPA arguably finds Title V’s additional compliance benefits unnecessary because synthetic sources have “a legal duty to use the control equipment” and that use is “not optional.” 2011 Proposed Area Boilers Rule on Reconsideration, 76 Fed. Reg. at 80,538. But that observation does not speak to the need for public oversight; just because facilities are obligated 124 to use the control technology does not mean they will always do so. Title V’s process requires facilities to submit compliance documentation every six months—far more frequently than under the EPA’s current rule—which expands the opportunity for public oversight and compliance. Perhaps this “legal duty” provides a stronger incentive for compliance than public oversight but, if so, the EPA still fails to explain how. Similarly, for factor three’s balancing of costs and benefits, the EPA never justifies applying to natural sources— which tend to be small sites like schools, hospitals, and churches—the same rationale it applies to these larger synthetic sources, which tend to be located at refineries, chemical plants, and factories. Given these distinctions, it is at least possible this balancing would lead to a different outcome for synthetic sources. Taken as a whole, the EPA’s analysis fails to explain why several of the facts and characteristics it relied on for its initial assessment are no longer relevant—creating several glaring inconsistencies in the rulemaking record. The EPA offers no plausible reason for applying the results of the four-factor test for natural sources wholesale to these control-technology-dependent synthetic sources. We do not hold, however, that the EPA can never remove synthetic area sources from the ambit of Title V compliance. The outcome the EPA ultimately reached may be reasonable; however, “[n]ot only must an agency’s decreed result be within the scope of its lawful authority, but the process by which it reaches that result must be logical and rational.” Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 374 (1998). The EPA should have applied its fourfactor balancing test directly to synthetic sources or, at a minimum, provided an explanation for adopting the natural 125 source balancing test that is not premised on inconsistencies in the record. With respect to remedy, there is a strong possibility that the Agency can properly explain its decision to exclude synthetic boilers from the Title V permitting requirement; moreover, vacating the decision would be unnecessarily disruptive for synthetic boiler operators who, in the interim, would not know whether they needed to begin the expensive, time-consuming process of obtaining a Title V permit. See Allied-Signal, Inc. v. U.S. Nuclear Regulatory Comm’n, 988 F.2d 146, 150-51 (D.C. Cir. 1993). We therefore remand this issue (without vacating) for further explanation by the EPA.