Opinion ID: 395148
Heading Depth: 1
Heading Rank: 5

Heading: Application of EPA Regulations to Waste Heat Boilers

Text: 26 A threshold definitional issue must first be considered. The EPA regulations define a fossil fuel-fired steam generating unit as a furnace or boiler used in the process of burning fossil fuel for the purpose of producing steam by heat transfer. 40 C.F.R. § 60.41(a). PPG contends this definition includes only boilers operating entirely on fossil fuel, and does not include PPG's waste heat boilers which use a combination of fossil fuel and waste heat gases. 27 Neither the language of the definition nor the intent of the steam generating unit regulations supports such a narrow reading. The literal language of the definition includes waste heat boilers, because they are used in the process of burning fossil fuel, in this case fuel oil or natural gas, for the purpose of producing steam. The fact the boilers use waste heat gases as an additional source of heat makes no difference. The intent of the EPA was to control potentially harmful pollutants produced by the burning of fossil fuels in steam generating units. See EPA, Background Information for Proposed New-Source Performance Standards 3-17 (1971). It is undisputed that such pollutants are produced by the fossil fuel used in PPG's waste heat boilers. 28 While the waste heat boilers fall within the definitional requirement of the steam generating unit regulations, it remains to be determined whether they were properly subjected to that part of the regulations, as written, setting forth performance standards for particular pollutants. The performance standard regulation for sulfur dioxide, which is the pollutant of chief concern in this case, provides the following: 29 (a) On and after the date on which the performance test required to be conducted ... is completed, no owner or operator subject to the provisions of this subpart shall cause to be discharged into the atmosphere from any affected facility any gases which contain sulfur dioxide in excess of: 30 (1) 340 nanograms per joule heat input (0.80 lb per million Btu) derived from liquid fossil fuel or liquid fossil fuel and wood residue. 31 (2) 520 nanograms per joule heat input (1.2 lb per million Btu) derived from solid fossil fuel or solid fossil fuel and wood residue. 32 (b) When different fossil fuels are burned simultaneously in any combination, the applicable standard (in ng/J) shall be determined by proration using the following formula: 33 (c) Compliance shall be based on the total heat input from all fossil fuels burned, including gaseous fuels. 34 40 C.F.R. § 60.43 (as revised in 1976). 35 The EPA argues it properly applied this performance standard regulation to PPG's waste heat boilers. It contends that under the express language of the regulation, the performance standard may be applied to that portion of heat input to the boilers derived from fossil fuel, with the remaining portion of the heat input derived from waste heat disregarded. 36 A careful analysis of the new source performance standard regulation, however, indicates it was not drawn to apply to boilers burning a combination of fossil fuel and waste heat. By so applying it, the EPA has acted arbitrarily and capriciously, and arguably beyond its statutory authority. 1. Intent of the Regulation 37 Recognizing that companies often find it efficient to use a combination of fossil fuels in boilers, the EPA drafted section 60.43 so that compliance with the performance standard would be based on the total heat input from a fossil fuel mixture. See 36 Fed.Reg. 24876 (December 23, 1971); 41 Fed.Reg. 51397 (November 22, 1976). Accordingly, separate standards were established for each type of fossil fuel, since different fossil fuels emit different amounts of sulfur dioxide, depending on their sulfur content. Subsection (a)(1) establishes a standard for the portion of the heat input derived from liquid fossil fuel (fuel oil). Subsection (a)(2) provides the standard for the portion derived from solid fossil fuel (coal). Subsection (b) sets forth a proration formula when fuels are mixed, with the standard being based on the combined heat input from the fuel mixture. No standard was established for gaseous fossil fuel (natural gas) because of its very low sulfur content, although under subsection (c) the heat derived from this fuel is added to the total heat input in determining compliance. 38 Section 60.43, then, was intended to establish performance standards only in the context of a mixture of fossil fuels. The language of the regulation and the EPA materials surrounding its promulgation do not suggest it was ever intended to apply to a mixture of fossil fuel and waste heat. 39 2. Arbitrary and Capricious Application of Performance Standard 40 By applying the new source performance standard to PPG's waste heat boilers, the EPA has acted inconsistently with its previous positions on the use of high sulfur fuel in combination with other heat sources. Such inconsistency must be viewed as arbitrary and capricious. 41 In recognition of the cost savings and efficiency that may be achieved through the use of mixtures of fossil fuels, the EPA drafted section 60.43 so that the sulfur dioxide performance standard is based on the total heat input from the fuel mixture. The section thus permits a boiler operator to burn a relatively high sulfur fossil fuel in combination with a very low sulfur fuel (such as natural gas) to obtain a fuel mixture which would meet the standard. See 36 Fed.Reg. 24876 (December 23, 1971). 42 In a 1976 revision of its steam generating unit regulations, the EPA extended this treatment of fossil fuel mixtures to mixtures of wood residue and high sulfur fuel. For such mixtures, the regulations now base compliance with new performance standards on the total heat input from both sources, rather than, as here, solely on the heat input from the fossil fuel. The EPA stated as the basis for its revision: 43 Since Subpart D allows the blending of high and low sulfur fossil fuels, EPA has concluded that it is reasonable to extend application of this principle to wood residue which, although not a fossil fuel, does have low sulfur content.... New facilities will comply with the standards for less cost than at present because they will be able to use wood residue, a valuable source of energy, as an alternative to expensive low sulfur fossil fuels. Also, using wood residue as a fuel supplement instead of low sulfur fossil fuels will result in substantial savings in the consumption of scarce natural gas and oil resources, and will relieve what would otherwise be a substantial solid waste disposal problem. 44 41 Fed.Reg. 51397-98 (November 22, 1976). 45 If in the present case the EPA had acted consistently with its prior treatment of boilers using fuel mixtures, it would have applied the performance standard to mixtures of fossil fuel and waste heat on the basis of total heat input, rather than on the heat input derived from the fossil fuel alone. The EPA has offered no rational explanation for its refusal to extend this treatment to fossil fuel-waste heat mixtures. 46 The arbitrariness of the EPA action is also reflected by the resulting inconsistent treatment given to two companies whose boilers emit the same quantity of pollutants per unit of heat input. This may best be illustrated by example. Company A maintains a conventional boiler which runs entirely on a combination of fossil fuels and has a total heat input of X British thermal units (Btu). The boiler emits Y amount of sulfur dioxide per Btu of heat input. Assume that in order to meet the EPA's new source performance standard for sulfur dioxide, the company must burn low sulfur fuel in its boiler, which is more expensive than high sulfur fuel, or some other method of pollutant control. 47 Company B PPG maintains a waste heat boiler which burns a combination of fossil fuel and waste heat gases. Even with the same heat input as Company A's conventional boiler because of its efficient use of waste heat, it has less sulfur dioxide emission than the conventional boiler. In order to meet a performance standard based on equal heat input, the boiler could use high sulfur fuel along with the waste heat, and thereby achieve a savings over the conventional boiler in cost and energy efficiency. 48 EPA's action, however, prevents this. By applying the sulfur dioxide performance standard only to the portion of the heat input derived from the fossil fuel rather than to the total heat input, the EPA in effect requires PPG to use low sulfur fuel like the conventional boiler instead of the higher sulfur fuel. The result is that PPG is forced to maintain a higher performance standard than Company A, because the waste heat boiler's use of waste heat and low sulfur fuel produces less sulfur dioxide per Btu of total heat input than the conventional boiler's use of all low sulfur fuel. PPG, then, is subject to stricter performance standards than companies that use conventional boilers. We therefore hold the manner in which the EPA applied the sulfur dioxide performance standard to PPG's waste heat boilers was arbitrary. 49 3. Application of Performance Standard in Excess of Statutory Authority 50 Section 111 of the Clean Air Act, as originally enacted, authorized the EPA to establish standards of performance for new sources. 42 U.S.C. § 1857c-6 (1970). A standard of performance is defined in the Act as 51 a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which ... the Administrator determines has been adequately demonstrated. 52 42 U.S.C. § 1857c-6(a)(1) (emphasis supplied). Thus, standards of performance could be established only in the form of emissions limitations, based on output, and not in the form of work practice or operation requirements. Cf. Adamo Wrecking Co. v. United States, 434 U.S. 275, 98 S.Ct. 566, 54 L.Ed.2d 538 (1978) (under section 112 of the Clean Air Act, whose provisions are analogous to section 111, the EPA had no authority to establish procedures for building demolitions for purpose of controlling asbestos emissions; EPA could only establish emissions limitation). 53 Setting standards which in effect require a use of a certain type of fuel, without regard to other types of emission control, appears to be a work practice or operation standard beyond the statutory authority of the EPA. While Congress subsequently amended section 111 to permit the EPA to establish design, equipment, work practice, or operational standards, see 42 U.S.C.A. § 7411(h)(1), 4 the EPA concedes this amendment was not in effect at the time it issued the determination letters in this case. EPA in effect concedes it could not simply require the burning of low sulfur fuel. 54 The EPA argues it did not require PPG to use low sulfur fuel in its waste heat boilers, but only enforced a performance standard based on an emissions limitation. Even though the EPA did not expressly require the use of low sulfur fuel, however, the manner in which it has applied the emissions limitations achieves the same result. If the EPA had applied an emissions limitation based on the total heat input to the boilers, as it has done with respect to boilers burning fossil fuel mixtures or mixtures of wood residue and fossil fuel, PPG would have had the opportunity to determine whether to comply by using a combination of high sulfur fuel and waste heat, or some other fuel mixtures, or using some other method of emission control. Because the EPA based the emission limitation solely on the portion of the heat input derived from fossil fuel, however, it in effect ruled out any way to achieve the standard in PPG's cogeneration boiler except by the use of low sulfur fuel in order to comply. EPA concedes the use of scrubbers, the only other possible method to meet the emissions limitation, is prohibitively expensive for this cogeneration unit. Thus, the EPA attempts to achieve indirectly in this case what it could not do directly under the Clean Air Act: require the use of a certain type of fuel in order to comply with a performance standard. 55 We hold the EPA erred in applying the new source performance standards to PPG's waste heat boilers. Under the law as it existed at the time of this action, the agency could not, consistent with its regulations, past practices and statutory authority, base compliance with emissions limitations solely on that portion of the heat input derived from fossil fuel. The EPA may revise its regulations so that compliance is based on the total heat input to the waste heat boilers according to a prorated formula, as it has done with respect to both fossil fuel mixtures and mixtures of wood residue and fossil fuel. 56 In the disposition of this case, we assume without deciding that construction commenced prior to the effective date of the EPA regulations, for the purpose of determining the applicability of the new source performance standards. We need not decide whether PPG's new evidence which shows highly favorable emission results in the operation of the plant affects the validity of the EPA's determinations, or whether such evidence was properly presented to this Court without prior submission to the agency. 57 The petition to set aside the EPA determinations is granted. 58 PETITION TO SET ASIDE GRANTED.