Washington Report, September 1998




             Court of Appeals Dismisses Challenges 
             to Credible Evidence Rule on Ripeness
            Grounds; Petitions for Rehearing Pending



On August 14, 1998, the U.S. Court of
Appeals for the D.C. Circuit issued a
decision dismissing industry petitioners'
challenges to EPA's "Credible Evidence" rule. 
Clean Air Implementation Project v. EPA, Nos.
97-1117 et al. (D.C. Cir.).  The three-judge panel
did not address the merits of industry's
challenges but instead ruled that the issues raised
in the case were not yet ripe for review.  The
Court's decision on ripeness grounds was
surprising in that the issue of ripeness had not
been briefed by the parties and the Court had
not requested supplemental briefing on the issue.

     Under the challenged rule, EPA
authorized the use of any "credible evidence" to
prove violations of numeric emissions limits
under the Act.  Nothing in the rule defines or
limits the possible kinds of evidence included
within the phrase "credible evidence."  

     Industry petitioners' principal argument
was that EPA could not lawfully promulgate
such a rule without undertaking rulemaking
proceedings to determine the effect of the rule on
the stringency and reasonableness of individual
standards.  The industry petitioners maintained
that, as a result of the rule, the reference test
method specified in a particular standard would
no longer be the exclusive means of determining
whether a violation of a numeric limit in the
standard has occurred.  They further argued that,
consideration of "credible evidence" from
continuous emissions monitors would mean that
unavoidable deviations from a limit that had
never been deemed violations would suddenly
become violations.  Thus, the effect of the rule in
numerous cases would be to increase the
stringency of the standards involved without
following rulemaking procedures to consider
whether sources could reasonably comply with
the more stringent numeric limits with the
technology on which the standards were based.

     In holding that the challenges were not
ripe, the panel concluded that the petitioners had
not satisfied either element of the two-part
ripeness test established by the federal courts,
which considers the fitness of the issues for
decision and the hardship to the challenging
parties if review is withheld.  The panel stated
that too many "imponderables" existed for it to
render a decision.  According to the panel,
"[g]iven the universe of all possible evidence that
might be considered  credible,' it is impossible
for us to decide now what impact the rule will
have."  The panel further concluded that
"[p]etitioners cannot point to any great hardship
they would suffer by our deferring judicial
review."  As a result, the panel stated that
industry parties must wait and raise any
challenges to the Credible Evidence rule in
individual enforcement proceedings. 

                Petitions for Rehearing Pending
                        Before the Court

     On September 28, industry parties filed
two separate petitions for rehearing with the
Court and requested that rehearing be conducted
before the entire 12-judge court.  The petitions
maintain that the panel's decision conflicts with
prior precedents of the Court and that the panel
is wrong in critical respects.  

     With regard to the question of the fitness
of the issues for decision, the petitions argue that
the panel incorrectly declined to rule on purely
legal issues where there was no reason to
postpone review.  In particular, the panel failed
to address the legal issue of whether EPA lacked
statutory authority to promulgate the Credible
Evidence rule without undertaking individual
rulemaking proceedings to determine whether
the rule will increase the stringency of numerous
existing standards.  The petitions note that the
industry parties did not request that the Court
determine in this proceeding that particular
standards would be made more stringent.  In
addition, the petitions contend that the panel's
decision contravenes Congress' mandate in
section 307(b)(1) of the Act that the Court
engage in pre-enforcement review of final EPA
rules rather than allowing legal issues to be
addressed on a piecemeal basis in subsequent
enforcement actions.  

     With regard to the question of hardships
that are being suffered by the petitioners, the
rehearing petitions point out that the credible
evidence rule has already had immediate and
pervasive effects on sources regulated under the
Act.  In demonstrating the hardships caused by
the rule, the petitions explain that (1) thousands
of facilities that were in compliance with limits
the day before the rule was promulgated are now
out of compliance; (2) numerous facilities that
previously could certify compliance with the
Act's requirements can no longer do so; and (3)
EPA is already relying on the Credible Evidence
rule in vetoing or threatening to veto state-issued
Title V permits.  To support these points, the
petitions include attachments consisting of letters
and memoranda from EPA showing that the
Agency is already invoking the Credible
Evidence rule to the detriment of numerous
industry parties.

     On October 1, the Court issued an order
directing EPA to respond to the petitions for
rehearing by October 16.  There is no deadline
by which the Court must take action on the
petitions. 


EPA Issues Final NOx SIP
Call

On September 24, 1998, the Administrator
of EPA signed a "SIP call" addressing the
interstate transport of ozone precursors in the
eastern half of the United States.  The SIP call,
which is based in large part on recommendations
made to EPA by the Ozone Transport
Assessment Group (OTAG) in July 1997, directs
22 states and the District of Columbia to revise
their state implementation plans (SIPs) in order
to reduce NOx emissions.  In issuing the SIP call,
EPA found that NOx emissions in those
jurisdictions "contribute significantly" to ozone
nonattainment problems in downwind areas. 
The SIP call is intended to address
nonattainment with the 1-hour ozone standard
as well as with the recently promulgated 8-hour
ozone standard.  

     On the same day, EPA also proposed
two other closely related actions.  First, it issued
a proposed federal implementation plan (FIP)
that would take effect in any states that do not
comply with the SIP call.  Second, it proposed to
take action on petitions submitted by eight
northeastern states pursuant to section 126. 
Those petitions requested that EPA directly
impose requirements on numerous sources in
upwind states that allegedly are significantly
contributing to nonattainment with the ozone
standard in downwind states.  See September
1997 Washington Report at WR-149.

                      Final SIP Call Rule

     One of the principal features of the SIP
call is the establishment of a NOx emissions
budget for each of the states covered by the
proposal.  The emissions budgets are intended to
achieve an overall 35 percent reduction of NOx
emissions in the covered states as compared to
NOx emissions levels otherwise projected for
2007. The overall reductions targets are intended
to generally correspond to OTAG's
recommendation that individual utilities be
compelled to make NOx reductions based on a
control level of .15 lb/mmBtu and that large and
medium non-utility sources also be compelled to
make comparable reductions.  For non-utility
sources, EPA chose a control level that
represents a 60% reduction from uncontrolled
levels for industrial boilers and turbines, a 90%
reduction for stationary combustion engines, and
a 30% reduction for cement kilns.

     For the most part, the final SIP call rule
contains no substantial changes from the
proposed rule.  Individual state budget figures
and cost-effectiveness figures have been modified,
but the overall approach and framework remain
essentially the same.

     The SIP call requires each state to submit
SIP revisions by September 1999 capable of
meeting its specific budget figure.  Control
measures are to be in place by May 1, 2003. The
final rule indicates that each state has discretion
in determining what mix of measures will be
used to meet its applicable budget figure. 
Although the states have flexibility in
determining what strategies to pursue, EPA
expects that most states would primarily target
utilities and large non-utility sources for
additional controls. 

     In response to concerns about the
potential effects of the rule on the availability of
electricity, the final rule creates a pool of
emissions "credits" for each state to use.  States
may issue the emissions credits to sources that
achieve their emissions reductions earlier then
required or to sources that demonstrate a need
for relief from the compliance deadline.

     According to EPA, the key regulatory
element in the SIP call is the creation of state
NOx emissions trading programs focusing
primarily on large combustion sources.  Under
the model "cap-and-trade" approach set forth in
the SIP call, a NOx emissions cap would be set
for each state, and the state would allocate
emissions allowances to sources covered by the
program.  Sources may sell or purchase
allowances from other sources according to
prescribed rules.  States covered by the SIP call
would have the option of adopting the model
program or a similar plan.

     A state choosing to implement a NOx
emissions trading program would allocate
allowances to covered sources based on the
particular allocation system it has adopted. 
During the ozone season, which lasts from May
1 to September 30, a covered source would be
required to meet its allocation figure for that
season.  If a source had not met the figure, it
could purchase needed allowances until
November 30 of that year.  Should the source be
unable to meet the figure by November 30, it
could be cited as having violated the SIP.

                Proposed Federal Implementation
                              Plan

     This proposal states that EPA will
promulgate a federal implementation plan (FIP)
to take effect in any state that fails to revise its
SIP by September 1999 in response to the NOx
SIP call or fails to revise it adequately.  The
proposal would require emissions reductions at
affected sources by May 1, 2003.  The proposed
requirements for the FIP are based on the
approaches taken in the final SIP call and the
proposed rule addressing the section 126
petitions.

                Proposed Decision on Section 126
                           Petitions

     In August 1997, eight northeastern states
filed petitions pursuant to section 126 of the
Clean Air Act seeking to reduce interstate
transport of ozone and its precursors.  The eight
northeastern states requested that EPA directly
impose additional controls on the sources
specified in the petitions.  Section 126(b) allows
any state or political subdivision to petition EPA
for a finding that sources in another state are
"contribut[ing] significantly to nonattainment"
with any primary or secondary NAAQS in the
petitioning state.  The petitions, which were
based in large part on modeling results obtained
by OTAG, primarily targeted electric utility
sources but also sought additional controls on
certain large industrial sources.

     In the section 126 proposed rule signed
on September 24, EPA states that it has
concluded as a preliminary matter that hundreds
of sources in 20 midwestern and eastern states are
contributing significantly to the failure of the
petitioning states to attain the national ambient
air quality standard (NAAQS) for ozone.  EPA
indicates that, as a preliminary matter, it has
concluded that seven of the eight petitions have
"technical merit."  The proposal explains that, in
analyzing the merits of the petitions, EPA is
utilizing the same basic approach set forth in its
NOx SIP call. The proposal also states that, if
the petitions are granted, EPA anticipates
exercising its authority under section 126 to
require the designated sources to participate in a
NOx emissions trading program based on the
model program contained in the final SIP call
rule.  

     According to the proposal, EPA plans to
take final action on the section 126 petitions by
April 30, 1999.  In accordance with an agreement
and consent decree entered into between EPA
and the petitioning states, EPA may postpone
certain actions on those petitions if the NOx SIP
call is moving forward.  See January 1998
Washington Report at WR-169.  In the final rule,
EPA may provide that, if it has not proposed to
approve relevant SIP provisions pursuant to the
NOx SIP call by November 30, 1999, all section
126 petitions found by EPA to have "technical
merit" will be deemed to be granted on that date. 
However, if EPA does propose to approve
relevant SIP revisions by November 30, 1999,
but does not finally approve them by May 1,
2000, all section 126 petitions with "technical
merit" will be deemed to be granted on that date.
 


EPA Releases Final Periodic
Monitoring Guidance

On September 15, 1998, EPA issued its final
"Periodic Monitoring Guidance." That
guidance document is intended to clarify what
constitutes sufficient monitoring for purposes of
Title V permits issued by state or local
permitting agencies.  Although state and local
permitting agencies and industry groups had
expressed numerous concerns with EPA's draft
periodic monitoring guidance of May 11, 1998,
the final guidance document contains no major
substantive changes from that earlier draft.  For
the most part, EPA simply reorganized the draft
document and clarified certain points.

     The final guidance document generally
provides that periodic monitoring will be
required for each emission point that is subject to
an applicable requirement in the source's Title V
permit.  According to the guidance, periodic
monitoring requirements govern all such units
that are not covered by the CAM rule and to
units that will be covered by the CAM rule
during the interim period before the CAM rule
applies to the source in question. 

     The guidance states that the following
types of monitoring will be presumed sufficient
to satisfy the periodic monitoring requirement: 
(1) monitoring required by section 111 or section
112 standards proposed after November 15,
1990; (2) "continuous compliance determination
methods" imposed by federal or SIP emission
limitations or standards; and (3) certain
monitoring requirements found in the Title IV
acid rain regulations.  

     Under the guidance, if units are not
subject to monitoring in the three categories
listed above, additional monitoring will be
required if "the applicable requirement does not
require periodic testing or instrumental or
noninstrumental monitoring sufficient to yield
reliable data from the relevant time period that
are representative of the source's compliance
with the permit." The guidance states that, when
an applicable requirement lacks monitoring or
testing, or when it imposes a one-time testing
requirement, additional monitoring will be
required to satisfy periodic monitoring.  EPA
also states that additional monitoring "may be
necessary where some monitoring exists . . . but
such monitoring does not provide a reasonable
assurance of compliance." 

     The guidance indicates that existing
testing and monitoring are inadequate to satisfy
the periodic monitoring requirement "if the data
are not reliable, if data collection frequency is
not specified, or if the data collected are not
representative of the emission unit's compliance
performance." The use of emissions factors is an
example discussed in the guidance. The Agency's
position is that, while AP-42 or other factors are
"helpful for estimating emission levels, they are
generally not appropriate for determining
compliance with an applicable requirement." 

     Following is a summary of some of the
important issues discussed in the guidance.
 
              Definition of "Relevant Time Period"

     Under the Part 70 regulations, periodic
monitoring is to be "sufficient to yield reliable
data from the relevant time period that are
representative of the source's compliance with
the permit."  In the guidance, EPA defines
"relevant time period" to mean "the averaging
period of the applicable requirement." As an
example, the Agency states that the relevant time
period for many opacity requirements is six
minutes.  According to the guidance, the
monitoring results need to "relate to, that is, to
provide an assurance of compliance during, the
relevant time period." 

                Continuous Emissions Monitoring

     The guidance encourages permitting
authorities to require sources to use continuous
emissions monitoring.  However, the Agency
provides that even in situations where
continuous emissions monitoring is technically
and economically feasible, another type of
periodic monitoring may be selected instead if it
is consistent with the policy.  
 
                     Parametric Monitoring

     EPA indicates that, under certain
circumstances, parametric monitoring may be
appropriate to satisfy the periodic monitoring
requirement.  When parametric monitoring is
used, the permit is to specify a range that will
assure that the source is in compliance with the
underlying requirement. The Agency states that
such a range "should be supported by
documentation indicating a correlation between
the parameter(s) and compliance with the
emission limit."  EPA also provides that the
permit should specify whether an excursion
from an indicator range is a violation of the
permit, or simply a trigger for corrective action. 

                  Other Periodic Monitoring  
                  Including Records and Permit
                          Limitations

     The guidance provides that
recordkeeping (including emissions calculations,
fuel content, or other relevant information) may
be sufficient periodic monitoring for certain
devices, emission units, and applicable
requirements.  Also, enforceable permit limits
may satisfy the periodic monitoring requirement
under certain circumstances.  EPA explains that
such a situation could include an enforceable
opacity standard for a boiler that fires natural
gas.  For this requirement, appropriate periodic
monitoring might "consist of maintaining
adequate records of fuel type and making the fuel
type and proper maintenance of the unit
enforceable conditions of the permit."

                 Insignificant Emissions Units

     The Agency acknowledges that there is
a small class of "insignificant emissions units"
(IEUs) for which no additional periodic
monitoring should be necessary because the
monitoring would not significantly enhance the
ability to assure compliance with applicable
requirements.  However, if an IEU has the
potential to violate the applicable requirement,
EPA states that the permitting authority should
consider adding monitoring. 

             Enforceability of Periodic Monitoring
                           Provisions

     The guidance provides that the
monitoring must result in information that is
enforceable as a practical matter.  EPA indicates
that adequate frequency of the data collection is
an important aspect of practical enforceability.  

                          EPA's Focus 

     The guidance indicates that EPA, and the
Regions in particular, will continue to be
involved in approving the adequacy of periodic
monitoring.  According to the guidance, because
of limited resources, the Agency's review of
periodic monitoring will focus on the following
types of units:

    those units having uncontrolled or pre-control potential emissions greater than
     or equal to the relevant major source
     thresholds

    other units with control devices 

    units in areas with environmental justice
     concerns 

    units in areas where toxic emissions
          could impose health risks

    units for which the public raises
     significant concerns

    units for which the proposed Title V
     permit contains no monitoring   


EPA Corrects Key
Interpretation in the CAM
Rule Preamble

On August 6, 1998, EPA issued a letter
acknowledging that an interpretation
regarding applicability of the Compliance
Assurance Monitoring (CAM) rule in the final
rule preamble was erroneous.  EPA had stated in
the preamble that CAM would apply whenever
a source supplements an already-complete Title
V application to include a change that "would
have been subject to the significant permit
revision process" if the Title V permit had been
issued.  62 Fed. Reg. 54,900, 54,927 (1997). 
Under Part 70, changes that would be significant
permit revisions would include not only the
addition of significant new units and significant
modifications, but virtually any change or
addition to periodic monitoring provided for in
the initial complete Title V application.  Thus,
the interpretation would have resulted in the
CAM rule applying to numerous sources much
earlier than provided for under the phased-in
approach contained in the rule.

     EPA's letter was a response to a July 6
letter from the Clean Air Implementation
Project (CAIP).  CAIP's letter pointed out that
the preamble interpretation conflicts with the
plain language of the CAM  rule.  The rule only
provides for CAM applicability where the
"application for an initial part 70 or 71 permit. .
. [h]as not been determined to be complete" by
April 20, 1998.  40 C.F.R.  64.5(a)(1)(ii).  Under
Parts 70 and 71, there is only one determination
that an application for an initial permit is
complete.  Once an application is submitted and
deemed complete, any changes that are to be
made in the information initially provided are to
supplement or correct the existing application. 
There is no provision for a further application
and completeness determination until the Title V
permit has been issued even where significant
new units or significant modifications are to be
added to the application for an initial permit.  

     In EPA's August 6 letter, the Agency
agrees that the CAM preamble is in error and
that there is no second completeness
determination when the Title V source makes a
"subsequent submission of supplementary facts,
corrected information, or additional information
as to new requirements."  The Agency
acknowledges that such a submission "does not
trigger CAM rule submittal requirements." 
However, EPA indicates that it still intends to
interpret the CAM rule to require compliance
with CAM when revisions to a permit
application are submitted that address large "new
or significantly modified units," i.e., units with
potential emissions after controls greater than
the relevant major source threshold.  EPA's
rationale is that such revisions would be
tantamount to the filing of a new initial
application as to the affected units. 

     EPA also commits to issuing guidance to
correct the CAM preamble in accordance with
its letter.  This correction will significantly
reduce the application revisions that would have
triggered CAM under a literal reading of the
preamble.  For the new large units and
significantly modified ones to be made subject to
CAM, it is likely that monitoring sufficient to
satisfy CAM would, in any event, be required
pursuant to the periodic monitoring
requirements.  Thus, the principal practical
implication of EPA's legally suspect
interpretation of the CAM applicability
provisions is that CAM plans and compliance
with CAM also will be required for those units
prior to renewal. 


EPA Issues Proposed
Implementation Guidance
for Ozone/PM/Regional
Haze Programs

On August 24, 1998, EPA published for
public comment its "Proposed
Implementation Guidance" for the
ozone/PM/regional haze programs.  63 Fed.
Reg. 45,060.  That guidance document, which
EPA intends to finalize in December 1998, sets
forth the main elements of EPA's
implementation scheme for those programs. 
The principal points in the proposed guidance
with regard to the ozone standard are
summarized below.

     For the revised ozone standard, the
proposed guidance covers five areas: 

    a new, three-tier classification scheme for
     ozone nonattainment areas; 

    a policy clarifying that states must
     incorporate requirements addressing
     "reasonably available control measures"
     and "reasonably available control
     technology" (RACM/RACT) into their
     ozone nonattainment SIPs; 

    details on SIP requirements for
     transitional ozone nonattainment areas; 

    initial guidance on the reasonable further
     progress (RFP) requirement for
     traditional ozone nonattainment areas;
     and 

    placeholders for elements that EPA
     intends to include in the December 1998
     final guidance, e.g., a new NSR approach
     for transitional areas

     The proposed guidance explains that
EPA plans to regulate areas that are designated as
nonattainment for the new 8-hour ozone
standard under the general nonattainment
requirements of Subpart 1 of Part D.  Under this
authority, EPA plans to establish a classification
scheme for the 8-hour standard that has three
formal classifications: transitional, traditional,
and international transport.  For all three types
of areas, final designations and classifications are
to occur by July 18, 2000.

                Transitional Nonattainment Areas

     Transitional nonattainment areas are
those areas that have had the 1-hour standard
revoked but do not attain the 8-hour standard. 
Areas seeking to be classified as transitional must
submit a SIP by 2000.  Those transitional areas
located within the NOx SIP call region (22
eastern states and the District of Columbia) must
adopt regional NOx controls in accordance with
the final SIP call.  EPA also plans to establish
modified NSR and conformity requirements
applicable to transitional areas that will
purportedly enable affected states to comply by
making only minor revisions to their existing
programs.  According to the proposed guidance,
"[i]n transitional areas in the East, few, if any,
local control measures will be necessary since
their ozone problem is significantly due to
regional ozone transport."  For such transitional
areas, EPA anticipates that the SIPs will be due
by September 1999.  For those transitional areas
that will need to implement additional measures
to attain the 8-hour standard, a nonattainment
SIP would also be due by May 2000.  Many states
believe that additional control measures will be
required. EPA anticipates that it will establish
December 31, 2003 as the attainment date for
almost all transitional areas.

                Traditional Nonattainment Areas

     Traditional nonattainment areas are
generally all areas not classified as either
transitional or international transport areas. 
This classification would include areas that have
had the 1-hour standard revoked and do not
attain the 8-hour standard, and either do not
qualify for, or elect not to pursue, the
transitional classification.  It would also include
those areas where the 1-hour standard has not
been revoked and the area does not attain the 8-hour standard.  EPA plans to finalize the
nonattainment designations, SIP submission due
dates, and classifications for traditional areas by
July 2000.  The Agency tentatively plans to
establish July 18, 2003 as the submission deadline
for traditional area SIPs and December 31, 2005
as the attainment date for traditional areas that
have had the 1-hour standard revoked but which
do not attain the 8-hour standard.

                    International Transport
                      Nonattainment Areas

     According to the guidance, EPA will
establish an international transport classification
for those areas that can show that they would
attain the 8-hour standard "but for" emissions
originating outside the United States.  EPA plans
to establish July 18, 2003 as the deadline for
international transport area SIPs and December
31, 2005 as the attainment date for such areas.

                Particulate Matter and Regional
                         Haze Programs

     In the proposed guidance, most of the
key elements concerning implementation of the
PM and Regional Haze programs are filled with
placeholders. The proposed guidance explains
that those elements will be fleshed out in the
December 1998 final guidance.  


Federal Court Rules That
Citizen Suit Is Precluded by
State Administrative
Enforcement

A federal district court has ruled that
plaintiffs are precluded from pursuing a
Clean Air Act citizen suit against a company
where the state regulatory agency is diligently
prosecuting an administrative enforcement
action concerning the same alleged violations. 
Texans United for a Safe Economy Education Fund
v. Crown Central Petroleum Corp., Civil No. H-97-2427 (S.D. Texas, August 3, 1998).  The
effect
of the decision is to narrow significantly the
circumstances under which plaintiffs may bring
citizen suits where a state agency is addressing
alleged violations.

     The district court's decision is based on
section 304(b)(1)(B) of the Act, which provides
that plaintiffs may not pursue a citizen suit if the
state agency "has commenced and is diligently
prosecuting a civil action in a court of the United
States or a State to require compliance with the
standard, limitation, or order . . . ."  Although
the state agency here   the Texas Natural
Resource Conservation Commission (TNRCC)
  had not filed a separate action in federal or
state court, it had already ordered the company
to take corrective action and was preparing to
impose civil penalties and additional injunctive
relief through administrative means.  Relying on
the Third Circuit's decision in Baughman v.
Bradford Coal Co., 592 F.2d 215, 217 (3rd Cir.),
cert. denied, 441 U.S. 961 (1979), the district
court concluded that the agency itself could
qualify as a "court" for purposes of the citizen
suit provision if the following conditions were
satisfied: (1) the agency is empowered to grant
relief which is substantially equivalent to that
which could be granted by a court; (2) the
agency's procedures provide for effective
participation by citizens; and (3) the agency is
diligently prosecuting the matter.  

     After examining the TNRCC's
enforcement authority and its actions in this
matter, the district court concluded that the
TNRCC satisfied the requirements set forth
above.  Accordingly, the district court ruled that
the citizen suit was precluded under the statute
and entered a judgment for the defendant
company.

     In an unusual step, the Department of
Justice and EPA have filed a brief before the
district court supporting the plaintiffs' request
for reconsideration of the ruling.  It is likely that
the plaintiffs will appeal any adverse decision to
the U.S. Court of Appeals for the Fifth Circuit.