The Nickel Report

[caption id="attachment_291" align="aligncenter" width="300"] Navajo Generating Station[/caption]

In two related decisions issued on March 20, 2017, the Ninth Circuit upheld an EPA plan imposing regional haze requirements on the Navajo Generating Station (NGS).  The rulings suggest a possibility that future haze plans need not be unduly inflexible—sometimes forcing premature unit closures, as many haze plans did during the program’s first round of implementation.

The plan for NGS was unique for a number of reasons.  The facility itself is unlike any other power plant in the nation.  It is the product of a congressional compromise to prevent a project that would have dammed portions of the Grand Canyon.  The facility’s generation is owned by a mix of public and private entities, including the United States through the Department of the Interior (DOI).  Perhaps most significantly, NGS is a major economic driver of employment and revenue for the Navajo Nation and the Hopi Tribe.  Further, because NGS is located on the Navajo Nation, and neither the Nation nor any state has jurisdiction to develop a regional haze plan for the facility, EPA is responsible for implementing the program for NGS.

In February 2013, EPA proposed a haze plan for NGS.  That plan included proposed control requirements for nitrogen dioxide (NOx) emissions based on the Clean Air Act’s (CAA) “best available retrofit technology,” or BART, requirement.   The proposed BART determination would have required costly emission controls to be installed and operated within five years, and many thought it would jeopardize the future of the plant.

Recognizing the importance of NGS, EPA also proposed an alternative to BART, an option EPA’s regional haze rules allow, that would have achieved greater visibility improvement than BART while providing more time for NGS to comply.  Under EPA’s plan, NGS’s three generating units would successively install and operate emission controls in 2021, 2022, and 2023.  The extended timeframe for compliance with the BART alternative was based on early installation and operation of emissions controls at NGS prior to any regulatory requirement to do so.

In response to public comments, EPA proposed a revised BART alternative.  The supplemental proposal consisted of a lifetime cap on NOx emissions from the facility applicable until 2044, covering NGS’s remaining useful life.  At that time, NGS would have to cease conventional coal-fired operations.  The revised alternative also included interim unit shutdown, curtailment, or emission reduction requirements.  The control option that would apply would depend on future ownership scenarios at NGS, which were in flux when the plan was devised and remain so today.  In an August 2014 final rule, EPA adopted this BART alternative.

The NGS BART plan is arguably the most comprehensive and detailed haze plan adopted to date.  Nevertheless, the Hopi Tribe objected to plan provisions that called for phased unit shutdowns and the 2044 end date for coal combustion.  Some nongovernmental organizations (NGOs), on the other hand, objected to the fact that the plan did not require all emission reductions to occur within five years, as well as other specific aspects of the plan.  The Ninth Circuit litigation followed with two sets of cases heard by Judges Schroeder, Trott, and Owens on November 18, 2016.  Hunton & Williams LLP represented a party to that litigation.

The arguments in Hopi Tribe v. EPA and the Ninth Circuit’s decision in that case focused primarily on the federal government’s duty to consult with the Tribe while preparing the NGS plan.  Although some judges seemed open to the Hopi Tribe’s position during oral argument, the court held that EPA satisfied its consultation obligations regardless of the scope of its duty.

The court’s decision in Yazzie v. EPA is more significant in terms of CAA jurisprudence.  Those consolidated cases included challenges to the NGS plan by an individual petitioner, tribal NGOs, and a coalition of national environmental groups.  There is likely much to mine from the court’s comprehensive, though relatively succinct, decision.  A few key elements of the holding, however, suggest that states and EPA may have considerable flexibility when implementing the regional haze program in the coming years.

For example, the panel’s ruling confirmed that EPA’s rules provide three independent tests by which to evaluate whether a BART alternative achieves greater visibility improvement than BART.  The petitioners attempted to blend requirements from the various tests contained in EPA’s rules.  By rejecting that approach, the court preserved state and EPA discretion to select the most appropriate pathway for approving a BART alternative.

The court also rejected petitioners’ arguments that the five-year deadline for implementing BART also applies to BART alternatives.  The court similarly concluded that one prong of the BART alternative test that EPA invoked in this rulemaking—the requirement to determine that the “distribution of emissions” would not be “substantially different” under the alternative as compared to BART—was only geographic in nature and did not include a “temporal” distribution element.  Petitioners’ approach would have defeated the flexibility EPA intended BART alternatives to provide.

Also significant, the petitioners argued that the NGS BART alternative did not satisfy the regional haze rules’ requirement that all necessary emission reductions occur by July 31, 2018.  EPA justified its decision to evaluate overall emission reductions out to 2044 on its discretion under CAA § 301(d)(4), as implemented by the Tribal Authority Rule (TAR).  Those provisions authorize EPA to determine which CAA provisions are “necessary or appropriate” for facilities located on tribal lands.  The court rejected petitioners’ arguments attempting to limit application of the TAR and instead held that it grants EPA “wide discretion” to tailor CAA requirements to the needs of the tribes.

Overall, the court’s decision in Yazzie is a clear recognition that BART alternatives are not rigid and unforgiving requirements, but mechanisms to achieve significant environmental goals through means that best fit the needs of individual facilities.

So what impact might these decisions have going forward?  There are a dwindling number of BART or BART alternative decisions left to be made, yet there are at least two important lessons to draw from Hopi Tribe and Yazzie.  First, the court’s decision with respect to the TAR will apply to EPA’s implementation of any CAA requirement on tribal lands.  Tribes and affected facilities thus have a powerful tool they can use in future rulemakings.  Second, although EPA has properly made clear that it will not revisit BART in the next round of regional haze rulemakings, sources will be further regulated to achieve “reasonable progress” toward natural visibility conditions.  Significantly, the basis for adopting BART alternatives instead of BART is the fact that the BART requirement is subsumed in the CAA’s overall reasonable progress requirement.  For that reason, the flexibility the Ninth Circuit recognized in these cases could be extended in future haze plans to the CAA’s reasonable progress requirement.  If that happens, the future regional haze plans could prove to be more workable and less contentious than they have been so far.