1 New Sources in Nonattainment Areas: Citizens Against Refinery’s Effects Action to review EPA approval of Virginia SIP SIP included: Permit for refinery construction in Portsmouth ozone nonattainment area Emissions offset through switching cutback to emulsified asphalt in three highway districts SIP approved by EPA in 1980

2 Citizens Against Refinery’s Effects EPA Offset Rules Original EPA position: no new sources in nonattainment areas 1976 EPA interpretive ruling: Allowed new sources in nonattainment areas, but requires net air quality benefit Achieved by emissions “offsets” Codified by congress in 1977

3 Citizens Against Refinery’s Effects Claim & Holding re Offset Location Claim: geographic area of offsets is arbitrary & violates EPA regulation Area “artificially-developed” by Virginia Held: Approval of offset location not arbitrary, capricious, or outside statute EPA interpretive ruling permits HC & NOx offsets in “broad vicinity,” “usually” within an air quality control region, Does not specify how to determine Note: CO, SO2, PM offsets — must be from immediate vicinity of new source

4 Citizens Against Refinery’s Effects Claim & Holding re Offset Baseline Claim: Base year should be 1975, not 1977 Unusually high asphalt usage in 1977 Held: 1977 was within discretion of agency Interpretive ruling states baseline should be — Year sip approved or Year of permit application 1977 was first year after interpretive ruling issued, and was a logical base year Permit reissued in 1977 with extensive changes

5 Citizens Against Refinery’s Effects Claim & Holding Re “Actual” Reduction Claim: Virginia voluntarily reducing cutback asphalt anyway Cutback asphalt is expensive Thus, not an “actual” reduction Held: offset permissible Voluntary reduction not enforceable Reduction now will be guaranteed

6 New Source Review For Nonattainment Areas, cont’d Key provisions: offsets & LAER Offsets: current requirements: Net air quality benefit Location (as in CARE) Real (emissions baseline; last 2 years in Los Angeles) Enforceable Quantifiable Permanent (during operation of new source) Surplus (reductions not assumed in SIP) Ensure reasonable further progress (§ 173 requirement; >1:1 ratio) “Banking” of credits allowed

7 New Source Review For Nonattainment Areas, cont’d Nonattainment NSR Applicability New major sources (e.g. 100 tpy) Major modification causing significant emissions “increase” (e.g. 40 tpy) “Modification”: physical change or change in method of operation “Increase” calculation: Baseline: in Los Angeles: average of last 2 years Increase: in Los Angeles: past actual to future potential emissions comparison Exemptions; e.g. Routine maintenance & repair federal NSR reform rules

8 “Netting” or “Bubbles” Regulated sources generally support bubbles Avoids NSR Cost efficiency: allocate reductions where cheapest Environmental groups generally oppose bubbles Fewer NSR events Question accounting

9 Bubble Example Assume five units emitting: 100, 100, 100, 100, 100 = 500 tons per year (tpy) Replace two units with one emitting 200 With bubble: focus on emissions from entire facility: 100, 100, 100, 200 = 500 Thus, no increase & no NSR Without bubble: focus on emissions from new unit: from new unit (a new source), so need LAER & offsets for it Total facility emissions after offset of the new unit’s 200 = 300 Shutdown of two old units could create some offsets, but may be limited due to actual baseline

10 The Bubble Rule: Chevron v. NRDC Issue: is bubble rule authorized? The bubble rule is based on EPA's interpretation of the term “stationary source” used in §172(c)(5) That section, with §173, requires permits, offsets and LAER for new or modified “major stationary sources”

11 Chevron Holding re Statutory Interpretation 1. Has Congress directly spoken to the precise question at issue? Result: ends the matter 2.If Congress has not directly spoken: if statute is ambiguous, is agency construction permissible?

12 Chevron Statutes § 111(a)(3) “Any building, structure, facility or installation” which emits air pollution § 302(j) “Except as otherwise expressly provided the terms ‘major stationary source’ and ‘major emitting facility mean any stationary facility or source of air pollutants which directly emits, or has the potential to emit, one hundred tons per year or more of any air pollutant…”

13 Chevron EPA Position No relevant statutory language “Petitioners therefore maintain that there is no statutory language even relevant to ascertaining the meaning of stationary source in the permit program aside from 302(j).

14 Chevron NRDC’S Argument “They contend that the text of the act requires the EPA to use a dual definition — if either the component of a plant, or the plant as a whole, emits over 100 tons of pollutant, it is a major stationary source” (not in case excerpt)

15 Chevron Holding Statutory text not dispositive Legislative history is unilluminating NRDC is waging a policy argument it lost before the agency

16 Chevron Holding, cont’d The reason for the ambiguity doesn't matter Congress tossed the issue to EPA (expertise), Congress didn’t consider, Unable to forge coalition Challenge to wisdom of agency decision within gap left open by congress must fail

17 Recap Of Standard of Review for Factual Issues: Arbitrary & Capricious Standard APA and CAA etc. Review may involve cursory examination or intense scrutiny; latter has become known as hard look approach. Some key holdings — Agency must articulate a rational connection between the facts found and the choice made. Court must examine the record considered by the administrative agency and decide whether the agency considered all relevant factors and whether the agency made a clear error of judgment. The Supreme Court used the phrase “reasoned decisionmaking” to summarize its holdings.