Opinion ID: 501652
Heading Depth: 2
Heading Rank: 2

Heading: Automatic Credit to Formula Height for pre-January 12, 1979 Stacks

Text: 108 The regulations provide credit for heights up to formula levels for sources originally built or subsequently raised before January 12, 1979. 40 C.F.R. Secs. 51.1(ii)(2)(i) and (ii). As now written, the rule shelters such sources not only from the requirement of demonstrations initiated by state or local authorities, 40 C.F.R. Sec. 51.1(kk)(3), but also from the demonstration requirements for stack increases. For purpose of our present discussion, we assume that on remand EPA will look to our analysis in part III.A in deciding to what extent (if any) it will shelter older within-formula increases from the new demonstration requirements. Accordingly we limit our consideration here to the 1979 grandfathering provision only insofar as it shelters stacks from state-initiated demonstration requirements and only insofar as it applies to credit for stacks at or within their original heights. The rules have this effect for (1) credit up to 2.5H for pre-1979 stacks of sources whose owners relied on the 2.5H formula and (2) credit up to H + 1.5L for all pre-1979 stacks regardless of reliance. 109 At the outset, and applicable to both types of grandfathering, is the question whether freedom from the necessity for supplying demonstrations, at the behest of government authorities, is of any great importance to the realization of the goals of the Clean Air Act. We cannot detect much importance. As a practical matter, it seems likely that virtually all such requirements would originate with a state, or with a local entity acting with the authority of the state. But 42 U.S.C. Sec. 7410 leaves states completely free to establish more stringent pollution controls than EPA. See Indiana & Michigan Electric Co. v. EPA, 509 F.2d 839, 844 (7th Cir.1975); Appalachian Power Co. v. EPA, 477 F.2d 495, 498 (4th Cir.1973). Thus no EPA rules on demonstrations could bar a state from insisting on the most onerous demonstration imaginable. The failure to provide for such a demonstration for pre-1979 sources seeking credit within the formulae thus has little practical effect; the statutory interest in retroactive application is modest. On the other hand, the agency must supply some reason for treating pre-1979 sources more leniently than later ones. We now turn to that problem in the 2.5H and H + 1.5L contexts. 110 1. Credit up to 2.5H for pre-1979 sources showing reliance. In Sierra Club, we made clear that the agency was to either justify its faith in the accuracy of the formula or provide a mechanism through which local authorities could force sources within their jurisdiction to prove their need for formula height stacks. As noted in part III.A above, the agency failed to properly validate its formula. It chose instead to promulgate a state-initiated demonstration provision, 40 C.F.R. Sec. 51.1(kk)(3), subject to the grandfathering here at issue. 111 We have no difficulty upholding this limited shelter. We found in Sierra Club that calculation of GEP through use of the 2.5H formula was, until 1979, an established practice and that protection of sources relying on such a practice in their original construction would not maintain a situation that Congress sought to end. 719 F.2d at 468. Moreover, the states' alternative route to control, noted above, further dilutes the interests supporting retroactivity. 112 NRDC first contends that EPA's failure to advance a full substantiation of even the H + 1.5L formula utterly prevents it from allowing automatic credit for stacks originally constructed in reliance on the 2.5H formula. But the environmental petitioners in Sierra Club did not attack the formula at all and attacked the want of demonstrations only for stack height increases and instances where local authorities were concerned that the formula might overpredict GEP. Thus, once the state option to be more severe is recognized, Sierra Club left EPA quite free so far as concerns within-formula original-construction stacks. The sole constraint was that, in grandfathering the difference (for original-construction stacks) between the height yielded by the 2.5H formula and that yielded by the newer H + 1.5L, EPA must afford the benefit only to firms actually relying on the 2.5H figure. 719 F.2d at 468. The agency responded to that aspect of the remand by explicitly conditioning grandfather treatment under the new regulations on such a showing of reliance. 40 C.F.R. Sec. 51.1(ii)(2)(i). 113 NRDC's second objection relates to the exact terms of the reliance requirement. The grandfathering is available where the source owner establishes its reliance on the formula in establishing an emission limitation, 40 C.F.R. Sec. 51.1(ii)(2)(ii), meaning, all agree, that the agency looks to the source's emission rate rather than its actual stack height. See also 50 Fed.Reg. 27,901/2. Thus, if a source built a stack taller than 2.5H, but set its emission limits assuming 2.5H credit, the agency will concede that a convincing demonstration has been made that the source properly relied on the formula. Id. at 27,901/3. Conversely, if such source based its emission limits on some other stack height credit, such as 2.8H, 3.5H or some other number, the agency would infer that it had not relied on the formula. Id. 114 Here NRDC's objection flows from its reading of our decision in Sierra Club. It believes that case to preclude grandfather treatment for sources with stacks taller than 2.5H, relying heavily on the following paragraph, especially its last sentence: 115 We hold that the statute does not prevent EPA from allowing its past rule to be applied to stacks built before its new formula was proposed, but that the agency has erred in allowing sources that did not rely on the old formula to use it. Congress was moved to enact section 123 by evidence that during the 1970's many sources had built tall stacks far above the heights dictated by sound engineering practice. To allow such sources to claim credit for heights up to the 2.5 Rule would be a windfall for them, unjustifiable under either the statute or the equitable considerations that govern retroactivity. 116 719 F.2d at 467. 117 The paragraph taken as a whole simply states that allowing sources with above-formula height stacks to claim 2.5H credit without a demonstration of reliance on the 2.5H formula would be unlawful. That it does not require EPA to deny credit for the dispersion effects of the part of a tall stack fitting within the 2.5H formula is reinforced by the court's discussion of the burden of retroactivity. The court observed that such a burden might take the form of expensive retrofitting of control equipment or renegotiation of coal contracts. Id. at 468. As these consequences derive from the need to change emission limitations, and not from the height of the stack itself, it is clear that the court believed that a source could demonstrate the requisite reliance by demonstrating that it had set its emission limits by reference to the 2.5H formula. As the statute does not regulate actual stack height (and in fact specifically forbids the Administrator from doing so, Sec. 123(c), 42 U.S.C. Sec. 7423(c)), but rather regulates stack height credit, it would be perverse to make grandfathering depend on actual stack height rather than upon emission limitation decisions driven by expectations of allowable credit. 118 2. Credit up to H + 1.5L for pre-1979 sources not showing reliance. As noted above, the states' complete freedom to impose demonstration requirements appears to sap this particular grandfathering of any great significance. Nonetheless, in drawing a distinction between pre-1979 and later stacks, the agency must supply some reason. In this context we cannot identify one. 119 Before EPA introduced the H + 1.5L formula in its 1979 proposal, the 2.5H formula was the only formula sanctioned by the agency. Thus, not only does the agency not impose a reliance requirement in this context, but we cannot understand how a pre-1979 source could have relied on H + 1.5L. Even when the statutory interest in applying a rule retroactively is slight, an agency must articulate some equitable rationale for grandfathering. Although we cannot say that there is none, we cannot uphold the decision in the absence of any explanation. 120