Washington Report, September 1997





       Eight States File Section 126 Petitions With EPA 


In August, eight northeastern states filed separate
petitions with EPA pursuant to section 126 of
the Clean Air Act.  Those petitions request that
EPA find that major sources in other states are
emitting pollutants which "significantly
contribute" to nonattainment of the national
ambient air quality standards for ozone in the
petitioning states.  EPA's resolution of those
petitions may play a significant part in EPA's
overall strategy in implementing the new ozone
standard and, in particular, may have a substantial
impact on the deadline by which many major
sources may be required to undertake new control
measures.

     Section 126(b) allows any state or political
subdivision to petition EPA for a finding that
major sources or groups of stationary sources in
another state are emitting pollutants in violation of
section 110(a)(2)(D) of the Act.  That provision in
turn states that each state implementation plan
(SIP) must prohibit sources within that state from
"contribut[ing] significantly to nonattainment in,
or interfer[ing] with maintenance by, any other
State with respect to any . . . primary or secondary
national ambient air quality standard . . . ."  If
EPA makes a finding that section 110(a)(2)(D) is
being violated, section 126(c) provides, among
other things, that any major source subject to the
finding must cease operating within three months
unless the source complies with emission
limitations and compliance schedules established by
EPA.  Section 126(c) provides that EPA is to take
final action on a section 126 petition within 60 days
after it is filed.  Compliance must be achieved
within three years of EPA's finding of a violation.

     Section 126 petitions were filed by the
states of Connecticut, Maine, Massachusetts, New
Hampshire, New York, Pennsylvania, Rhode
Island, and Vermont.  Some petitions include a list
of sources alleged to be significantly contributing
to ozone nonattainment in the petitioning state
while other petitions refer to groups of such
sources without listing them individually. 
Although the great majority of the sources listed
are electric utilities, the petitions of two states --
New Hampshire and New York   also list some
non-utility industrial sources.  In maintaining that
the petitions should be granted, the petitioning
states expressly place heavy reliance on modeling
conducted by the Ozone Transport Assessment
Group (OTAG).

                 EPA's Guidance on Section 126
                           Petitions

     Before the states' petitions were filed,
then-Assistant Administrator Mary Nichols sent a
letter to the New Hampshire Attorney General's
Office setting forth "general guidance" regarding
how EPA would address any such petitions.  That
guidance letter of August 8, 1997 contains several
important points regarding EPA's plans for
handling the section 126 petitions:

^G    EPA interprets the statute as authorizing it
     to directly regulate major sources which
     are the subject of a "significant
     contribution" finding under section 126. 
     In other words, EPA believes that it can
     take action against sources without first
     directing upwind states to revise their SIPs
     to address interstate pollution impacts.  

^G    Petitioning states need not identify specific
     sources in upwind states but can merely
     refer to all major sources in a particular
     area.  

^G    In determining whether upwind sources
     contribute significantly to nonattainment,
     EPA will employ a "weight of evidence"
     approach, i.e., an approach under which
     the Agency will consider a number of
     factors without establishing brightline
     criteria.  

^G    EPA will act on the section 126 petitions
     through notice-and-comment rulemaking
     procedures pursuant to section 307(d) of
     the Act.  If requested, the Agency will
     hold a public hearing on the petitions.

^G    If EPA finds that upwind sources are
     contributing significantly to
     nonattainment, it intends to promulgate
     emissions requirements and compliance
     schedules simultaneously with the issuance
     of the finding.  

^G    The emissions requirements will likely
     include a "cap and trade" program
     corresponding to the program which EPA
     plans to set forth in connection with its
     forthcoming SIP call for areas which have
     not attained the "old" ozone standard.  

     Through the guidance letter and informal
discussions, EPA has generally indicated what
timetable it will likely follow in addressing the
petitions.  Although the statute provides that EPA
is to take final action on a section 126 petition
within 60 days of receiving it, the Agency intends
to extend the deadline by six months in accordance
with section 307(d)(10) of the Act.  As a result,
EPA plans to take final action on all eight petitions
by April 1998.  If EPA grants the petitions, sources
which are subject to a "significant contribution"
finding would have three years in which to comply
with new control requirements.  Thus, sources
might be required to comply with the control
requirements by April 2001.  It is unclear when a
proposed decision on the petitions will be
published.

     The Agency is currently considering
various ways in which it can coordinate its actions
under section 126 as closely as possible with its
forthcoming SIP call covering those areas which
have not attained the "old" one-hour ozone
standard.  This coordination would involve both
substantive matters and timing issues.  In
particular, the Agency is exploring means for
having any section 126 requirements become
effective at roughly the same time as new
requirements resulting from the SIP call, which are
currently expected to become effective beginning in
2003.  

EPA Objects to Final Title V
Permits Issued to Shintech

In response to a series of citizen petitions, EPA
formally objected on September 10 to three final
Title V permits that the Louisiana Department of
Environmental Quality (LDEQ) had issued in May
of this year to Shintech Inc. for a proposed
polyvinyl chloride facility.  The petitions alleged
that the issuance of the Title V permits violated the
Clean Air Act and Executive Order No. 12898,
which addresses environmental justice issues.  59
Fed. Reg. 7629 (Feb. 16, 1994).  A subsequent
citizen petition claimed that the permit issuance
violated Title VI of the Civil Rights Act of 1964. 
Two days before EPA announced its decision to
object to the final permits, LDEQ notified
Shintech and EPA that it was reopening the
permits to address a number of technical issues
raised by the petitioners and to continue a dialogue
with the citizen groups on their environmental
justice concerns.  The objection and reopening of
the permits have effectively halted construction of
the new Shintech facility even though the company
has received all necessary air permits for the
project.

     EPA's decision to object to Shintech's
Title V permits is apparently the first instance in
which EPA has vetoed any Title V permit in
response to a citizen petition and raises important
issues that will be of interest to all Title V permit
applicants.  Below we summarize the procedures
involved in the citizen petition process, the
technical issues raised by EPA, and the disposition
of the environmental justice issues. 

                    Part 70 Citizen Petition
                           Procedures

     The decisions by EPA and LDEQ to
reopen the final Title V permits evidence the
powerful impact that citizen petitions can have in
the Title V permitting process.  Under current Part
70 procedures, EPA has 45 days in which to review
a proposed permit before it is made final.  The
Agency is to make any objection it has to the
issuance of the proposed permit during the 45-day
period.   However, under section 70.8(d), parties
are allowed up to 60 days after the close of EPA's
review period to file a petition requesting that the
Administrator object to the issuance of a Title V
permit.  

     In this case, the Agency did not object to
the issuance of Shintech's Title V permits during
the official review period.  In fact, the Agency did
not provide written comments on technical issues
concerning the proposed permits.  The citizen
petitioners filed their first petition 49 days after
EPA's review period expired and one day before
LDEQ issued the final permits.  During its
consideration of the petitions, EPA determined
that one of the technical issues raised by the
petitioners provided grounds for an EPA objection
to the permits.  As a result, EPA objected to the
Title V permits even though LDEQ had already
issued them as final permits. 

     Under section 70.7 of the regulations,
LDEQ must now terminate, modify, revoke or
reissue the permits in a manner that resolves EPA's
objection.  If LDEQ does not take actions that
address the objection, the section provides that
EPA is to terminate, modify, revoke or reissue the
permits. The  procedural requirements that apply
to initial permit issuance, including public
comment and opportunity for a hearing, apply to
all actions taken to revise the permits in this
reopening. 

                       The Scope of EPA's
                   Consideration of Technical
                            Issues  

     The scope of EPA's analysis of the permits
went far beyond the issues expressly raised by the
petitioners.  EPA determined that the alleged
technical deficiencies asserted in the petitions
justified the Agency's objection to only one of the
three Shintech permits.  However, EPA issued 49
additional detailed comments on all three permits
(including nine comments on the PSD aspects of
the permits) and ordered that LDEQ reopen all
three permits to address these issues.  EPA's
comments on the permits include expansive
interpretations of key provisions of the hazardous
organics NESHAP rule and the Part 70 permit
regulations.

                  Continuing Investigation of
                  Environmental Justice Claims

     Although the Administrator's order denied
the petitioners' request that the Agency object to
the permits on environmental justice grounds,
certain aspects of those claims will be investigated
further by EPA's Office of Civil Rights.  EPA
pointed out that section 505(b)(2) of the Act
provides that it may object only if a permit is not
in compliance with applicable requirements of the
Act.  EPA stated that "[w]hile there may be some
authority under the CAA to consider
environmental justice issues in some circumstances,
Petitioners have not shown how their particular
environmental justice concerns demonstrate that
the Shintech Permits do not comply with
applicable requirements of the Act."  Despite the
Administrator's determination that the Act does
not authorize it to object to the Title V permits on
environmental justice grounds, she nonethless
referred the petitions to EPA's Office of Civil
Rights.  In accordance with procedures EPA had
previously established for reviewing environmental
justice claims, the Office of Civil Rights will
investigate whether the issuance of the permits
violates Title VI of the Civil Rights Act of 1964.   
 

EPA Releases Draft Proposal
to Revise Section 112(l)
Program

On September 15, EPA released a draft version
of a proposal to revise its regulations
implementing section 112(l) of the Clean Air Act. 
Section 112(l) allows EPA under certain conditions
to delegate to a state its authority, in whole or in
part, to implement and enforce emissions standards
and other requirements under the section 112 air
toxics program.  EPA indicated that the draft
proposal, which contains a 207-page preamble in
typewritten form, is the result of extensive
discussions with state and local officials aimed at
improving the existing section 112(l) regulations. 
Those regulations have been criticized by state and
local officials as being too inflexible and
complicated for states to use in obtaining EPA's
approval of their submissions seeking delegation
under section 112(l).

     Although certain measures in the draft
proposal might increase the flexibility of some
states in obtaining section 112(l) approval, the draft
does not address industry's principal concerns with
EPA's section 112(l) regulations.  In particular, the
draft proposal does not address the issue of
whether EPA is authorized to approve, and
thereby make federally enforceable, state standards
which are significantly more stringent than the
federal standards being replaced.  The draft
proposal likewise does not address serious
compliance deadline issues which industry has
raised.  The current regulations unreasonably
provide that the compliance deadline for a
substituted state standard will be the same as the
deadline for the federal standard being replaced,
regardless of the timing of EPA's approval and the
feasibility of meeting the substituted state standard
by that deadline.

                   Use of a Holistic Approach

     The draft proposal expresses EPA's intent
to adopt a "holistic approach" to determining
whether a state standard is equivalent to a federal
standard for purposes of obtaining EPA approval
under section 112(l).  In contrast to the current
section 112(l) regulatory approach, the draft
proposal indicates that an equivalency
determination will not be based on a line-by-line
comparison of the state and federal standards and
that the state standard need not be in the same
form as the federal standard.  Under the draft
proposal, the key factor in determining equivalency
is whether the emission limits and the monitoring,
recordkeeping, and reporting provisions of the
state rule, when considered as a whole, will result
in the same overall reductions as the federal
standard.  At the same time, the preamble states
that EPA "would not approve a less stringent
emission limit with very stringent [monitoring,
recordkeeping, and reporting requirements]. 
[State] emission limits must be as stringent as the
Federal emission limits."  The draft expressly states
that it does not reflect ongoing discussions with
California regarding flexible monitoring,
recordkeeping, and reporting measures.

     Despite EPA's stated acceptance of a
holistic approach, the draft proposal raises
questions regarding whether the equivalency
comparison can be carried out in a manner
consistent with that objective.  The draft language
provides that, to gain section 112(l) approval, a
state standard must achieve emissions reductions
from each "affected source" that are no less
stringent than would result under the federal
standard.  However, the current definition of
"affected source" could be read to require that the
equivalency comparison be made on an emission
point-by-emission point basis, thereby dramatically
reducing the flexibility that a state would have in
demonstrating equivalency.  

                    Two New Approval Options

     One of the main changes contained in the
draft proposal is that EPA would add new options
to the list of options which a state may pursue in
seeking section 112(l) approval.  Under the current
regulations, a state may pursue one or more of the
following options:

^G    Straight Substitution   approval to
     implement and enforce the federal
     standard as written.

^G    Rule Adjustment   approval to
     implement and enforce the federal
     standard with minor changes.

^G    Rule Substitution   approval to replace
     the federal standard with an equivalent
     state standard.

^G    Program Substitution   approval to
     implement federal standards through
     development of terms and conditions in
     Part 70 permits, rather than approval of
     substantive rules.

     The draft proposal would add two new
options in place of the existing program
substitution option      an Equivalency By Permit
(EBP) option and a State Program Approval
(SPA) option.  According to the draft proposal,
both of these options are intended to provide more
streamlined procedures for obtaining section 112(l)
authorization from EPA.

     Under the new EBP option, a state would
be able to implement section 112 requirements
through Part 70 permit terms developed on a
source-specific basis.  After obtaining "upfront"
approval by EPA, the state would submit draft
Part 70 permit terms to EPA for its approval and
then subsequently submit a proposed permit for
EPA review in accordance with existing Part 70
permit review procedures.  However, the draft
proposal would limit the extent to which the EBP
option could be employed by providing that a state
could use the EBP option for no more than five
sources in each source category.  The preamble
explains that EPA intends to restrict use of this
option because it lacks the resources to review
great numbers of such EBP submissions.

     The new State Program Approval option
is primarily intended to provide states greater
flexibility in obtaining approval for elements of an
already well-developed state air toxics program. 
Under that option, a state could obtain approval
for a program to be implemented in lieu of
specified standards promulgated under section 112. 
After obtaining "upfront" approval for the general
structure and legal authority for its program, a state
would submit alternative requirements for EPA's
approval in the form of regulations or permit
terms.  EPA would act on those submissions
following notice-and-comment rulemaking.  A
significant difference between this option and the
existing program substitution option is that, while
the existing program substitution option requires
equivalency demonstrations to be made through
Part 70 permit terms in the form of the federal
standard, the SPA option would provide for
advance approval of alternative requirements
outside the Part 70 context and would not require
that the requirement be in any particular form.

     EPA has acknowledged that the draft
proposal is very much a "work in progress" and
that significant issues have not yet been resolved. 
It remains to be seen whether the scheme set forth
in the draft proposal would simplify the section
112(l) process sufficiently so that more states would
attempt to obtain section 112(l) approval for state
rules and programs or whether the new approach
will be viewed as just as complicated and unwieldy
as the current regulatory scheme.  

Court of Appeals Establishes
Final Briefing and Argument
Schedule in "Credible
Evidence" Litigation

The U. S. Court of Appeals for the District of
Columbia Circuit recently issued a series of
orders establishing the format for briefing the
challenges to EPA's "credible evidence" rule and
related regulations, setting forth a briefing
schedule, and providing a date for oral argument. 
Clean Air Implementation Project v. EPA, Nos. 97-1117 et al. (D.C. Cir.).  That rule authorizes
federal
and state enforcement agencies, as well as citizens,
to rely on "any credible evidence" to prove Clean
Air Act violations.  
 
     As a result of the D.C. Circuit's orders, the
current round of briefing will be limited to those
petitions directly challenging the "credible
evidence" rule.  The petitions for review which
challenge various NSPSs or NESHAPs amended by
the rule have been severed and will be addressed
later.  The Court has also directed the industry
petitioners and those intervenors supporting the
industry petitioners to file opening briefs totalling
about 84 pages by November 12, 1997.  Oral
argument will take place on March 17, 1998 before
a three-judge panel consisting of Circuit Judges
Wald, Silberman, and Rogers. 

     The Court's most recent orders of
September 25, which set forth the final briefing and
argument schedule, are the latest in a series of
sometimes confusing orders concerning these cases. 
Following the filing of 82 petitions for review
challenging either the "credible evidence" rule or
NSPS and NESHAP standards amended by the
rule, industry petitioners submitted a proposed
briefing schedule and format that would have
provided for four main briefs totaling more than
200 pages.  However, on May 7, 1997, the Court
denied this request "without prejudice" to refiling
once the Court had ruled on any dispositive or
procedural motions filed by the parties.  EPA
subsequently moved to dismiss those petitions for
review which challenge the "credible evidence"
rule's revision of numerous NSPSs and NESHAPs. 
This led to the Court's order severing these
petitions from the attack on the rule itself.

     The Court's rulings have thus far not
addressed the merits of industry petitioners' claims
but have made it more difficult for industry
petitioners to fully present those claims.  The
challenge for industry petitioners will be to address
all the key issues, including those concerning
revisions to the NSPS and NESHAP standards,
within the limitations contained within the briefing
schedule.  Among other things, industry
petitioners plan to coordinate closely with the
intervenors supporting them in order to use the
limited number of pages in the two opening briefs
as efficiently as possible.  

Recent Case Shows
Difficulties in Getting Early
Dismissal of Citizen Suits

In a recent Clean Air Act citizen suit decision, a
federal district court judge in Louisiana rejected
a series of arguments that were made in an attempt
to the case dismissed.  U.S. Public Interest Research
Group, et al. v. Bayou Steel Corp., Civ. No. 96-0432
(E.D. La. Sept. 16, 1997).  The judge's opinion
illustrates some of the obstacles a company may
face in seeking to persuade a court to dismiss a
citizen suit complaint in the early stages of a case. 
The case also provides another example of efforts
by environmental groups to recover substantial
civil penalties against sources for alleged violations
of opacity standards and continuous monitoring
requirements.  The judge did not address the merits
of the plaintiffs' claims but did rule that the
plaintiffs' allegations of harm from violations at the
company's facility were sufficient to allow the case
to proceed. 

     The case was brought by a national citizen
advocacy group (U.S. Public Interest Research
Group), a local citizen group interested in
environmental justice issues, and two individual
citizens.  Their complaint alleges that from April
1992 to the present time the company's facility in
LaPlace, Louisiana has violated numerous
emissions standards and related requirements.  The
alleged violations involve requirements to comply
with a three percent opacity standard, to maintain
and operate a continuous opacity monitoring
system, to continuously operate continuous
emission monitors, to maintain and operate the
facility in accordance with "good air pollution
control practices," and to submit excess emission
reports to the state agency.  The plaintiffs sought
injunctive and declaratory relief in addition to civil
penalties.

     In its motions to dismiss the complaint,
the company argued, among other things, that the
plaintiffs lacked standing to bring the action under
Article III of the Constitution.  The company
maintained that, despite plaintiffs' allegations that
numerous violations had occurred at the facility,
the plaintiffs had not adequately alleged that they
had suffered any specific harm in terms of disease,
injury, or property damage. 

     In denying the motions to dismiss for lack
of standing, the district judge noted that the
complaint alleges that the particulate matter being
emitted by the facility is known to be harmful to
health and that the individual plaintiffs had
submitted declarations stating that they are
concerned about health hazards arising from the
facility's emissions and that large amounts of "dust"
had been deposited on their property.  Without
any elaboration, the judge ruled that these
allegations were sufficient to establish injury-in-fact
as required by Article III.  She further concluded
that the plaintiffs had satisfied the remaining
requirements for Article III standing   that the
injury be traceable to the defendant's actions and
that it be redressable by a favorable decision.

     The district judge also denied the
company's motion to dismiss the complaint for
failing to state claims upon which relief could be
granted.  The judge ruled that the company's
arguments in this regard focused on the sufficiency
of the evidence that might be presented or the
plaintiffs' method of proving their claims rather
than on whether the plaintiffs' allegations, if
assumed to be true for purposes of the motion,
would entitle them to any relief.  The judge's
opinion indicates that a number of important
evidentiary issues, including the use of allegedly
"credible evidence," will likely be addressed in
subsequent stages of the litigation.  

     ALJ Rules That EPA May
Not Prevail in Enforcement
Action Without Required
Test Data

An EPA Administrative Law Judge (ALJ)
recently ruled that the Agency could not
enforce certain Clean Air Act regulatory
requirements against a company because the
Agency had failed to obtain test results required by
the regulations to demonstrate noncompliance.  In
the Matter of Commercial Cartage Co., No. CAA-93-H-002 (EPA) (August 19, 1997). 
According to the
ALJ, the Agency's reliance upon documentary
evidence to establish violations of certain mobile
source regulations was insufficient in light of
regulatory language indicating that violations must
be based on tests made at the company's "facility." 

     Because EPA's recently promulgated 
"credible evidence" rule specifically applies to
alleged violations of SIP provisions, new source
performance standards, and national emissions
standards for hazardous air pollutants rather than
mobile source regulations like those involved here,
that rule apparently was not directly at issue in this
case.  However, the ALJ's decision clearly supports
the position that a testing procedure or other
compliance method specified in a regulation should
be the sole means of determining whether a
violation of that regulation has occurred.  It
thereby implicitly rejects the rationale underlying
the "credible evidence" rule.

     This case involved EPA's enforcement of
its gasoline volatility regulations against a trucking
company which delivered gasoline to retail outlets
in the St. Louis area.  The Agency, acting through
the Office of Enforcement and Compliance
Assistance (OECA), alleged that the company had
delivered high volatility gasoline to a retail gasoline
station in a county where the volatility of gasoline
sold is restricted to a lower level by EPA's
regulations.  OECA's contention that the volatility
regulations had been violated was based on two
elements: (1) tests conducted by EPA on gasoline
contained in tanks at the gasoline station and (2)
various documents indicating that the trucking
company had delivered gasoline to the station
during the relevant time period.   EPA had not
tested gasoline in the company's tank trucks.

     Rejecting OECA's position that
documentary evidence linking the company to the
high volatility gasoline was sufficient to establish a
violation, the ALJ ruled that the plain language of
the pertinent regulation was determinative of what
constituted compliance or noncompliance with
that regulation.  The ALJ noted that the regulation
provides that a carrier is liable for a violation of the
volatility restrictions "where a violation of the
applicable standard . . . is detected at a carrier's
facility, whether in a transport vehicle, in a storage
facility, or elsewhere at the facility."  The ALJ
ruled that, because the carrier had simply
transported gasoline from an independent
distributor to the retail station, any violation must
be detected in one of the company's tank trucks. 
He further interpreted "detected" to mean that the
violation is discovered through sampling and
testing procedures.  Since EPA had never tested the
volatility of the gasoline in the company's tank
trucks, the ALJ ruled that EPA's documentary
evidence was not sufficient to establish a violation.

     Indications are that OECA will likely
appeal the ALJ's decision to the Agency's
Environmental Appeals Board (EAB).