The Nickel Report

New lawsuits filed in the US Courts of Appeal are seeking to upend a fundamental tenet of the Clean Air Act (CAA or the Act) Title V operating permit program—i.e., that the program does not itself impose new substantive requirements but rather has the purpose of identifying, in a single document, the CAA requirements that apply to a source. These lawsuits have been filed in the D.C. Circuit, the Fifth Circuit, and the Tenth Circuit challenging EPA orders issued in response to various third-party professional environmental advocacy groups’ requests that EPA object to Title V permits proposed for several industrial facilities in Utah and Texas. In the orders, EPA clarified that the Title V permitting and petition process set forth in 42 U.S.C. § 7661d(b)(2) is not the appropriate forum to second-guess preconstruction authorizations issued under Title I of the Act and incorporated into a facility’s Title V permit. 

As background, prior to the 1990 Amendments to the Act, the various requirements that applied to a major source were scattered among the multiple regulations and permits applicable to the source, and there was no single document that catalogued these requirements. If there is any question that Title V is intended to simply be a recording instrument rather than to establish or modify substantive requirements, that was resolved by the fact that when EPA sent the original Clean Air Bill including Title V over to Congress, the estimated cost impacts were “zero.”  Thus, it should be no surprise that when EPA issued the Title V regulations in 1992, the agency stated clearly that Title V’s purpose is to record applicable requirements that are created under the substantive provisions of the statute and that Title V does not generally impose new substantive requirements.

Notwithstanding the purpose of Title V as expressed by both Congress and EPA, environmental advocacy groups’ Title V petitions sought to elicit objections from EPA for doing exactly what the statute and the regulations direct the states to do—record the terms of applicable requirements—here, terms and conditions of preconstruction authorizations issued under the New Source Review (NSR) program. The advocacy groups claimed that (among other things) the NSR permits at issue included terms that were allegedly unlawful.  NSR permits are issued under the authority of Title I of the Act, which sets the substantive parameters for such permits, with Title III of the Act providing an avenue for permittees or members of the public to appeal the terms of the permit if they believe its terms are inconsistent with the statute.  The groups have alleged that the mere incorporation of the terms of NSR construction permits—construction permits that could have been challenged, and sometimes were—into the Title V permit can lead to revision of the NSR terms via a Title V petition.  In essence, these petitions sought to use the Title V process as a forum for conducting a substantive review of the provisions of long-ago issued NSR authorizations—authorizations that permittees relied upon as they proceeded to construct.  The world that the advocacy groups seek to create is one in which companies cannot rely on issued construction permits even where no challenge was ever filed.

EPA’s orders over the past 9 months (including EPA’s Order issued in response to a petition concerning the Title V permit for an Arkansas steel plant owned by Big River Steel, LLC, which was not challenged) categorically rejected the advocacy groups’ characterization of the Title V process, however, declining the petitions’ invitations for EPA to insert itself into the states’ permit process and object to the permits.   In one of these orders, for example, EPA clarified that “title V permitting is not intended to second-guess the result of state preconstruction permit programs” and that applicable requirements derived from preconstruction permitting need not be “re-checked each time [an] operating permit is renewed.”  EPA, In re PacifiCorp Energy Hunter Power Plant, Order Denying a Petition for Objection to Permit (Oct. 16, 2017).

This result is in keeping with congressional intent in enacting Title V and EPA objectives in adopting its federal operating permit program rules, during which the Agency stated on several occasions that “[t]he intent of title V is not to second-guess the result of any State NSR program” but rather to ensure that the determinations made in support of any underlying preconstruction authorizations were “faithfully incorporated into the title V permit.” EPA, Operating Permit Program, 57 Fed. Reg. 32250, 32289 (Jul. 21, 1992). This policy of finality in NSR decision-making is important in that it allows facilities to rely upon the terms and conditions of their previously-issued permits when making capital investments in facility upgrades.  Nevertheless, groups challenging EPA’s recent Title V orders in the DC, Fifth, and Tenth Circuits seek to disrupt this fundamental policy and potentially disincentivize facility modernization, efficiency, productivity, and job expansion by asking these courts to vacate EPA’s recent orders.   The ability of these individual facilities to continue to rely on their permits will be judged by the US Courts of Appeal with jurisdiction over the claims.  More of these cases can be expected as EPA continues to respond to what has been a backlog of Title V objection petitions that the current administration inherited.  In the meantime, the first few cases should proceed to briefing over the next year with a resolution on those matters expected sometime in 2019.