ELR Citation: ELR 20519
No(s). s. 85-1488 et al (D.C. Cir. Jan 22, 1988)

The court generally upholds the Environmental Protection Agency's (EPA's) amended regulations issued pursuant to Clean Air Act §123 governing pollution control credit for tall smokestacks. The regulations establish the credit that sources receive toward compliance with local air quality standards for dispersion of pollution with tall stacks. Clean Air Act §123 provides that sources receive no credit for stack height exceeding good engineering practice (GEP), which the statute defines as the height necessary to insure that downwash of emission does not cause "excessive concentrations" of pollutants in the area.

The court first holds that §123 does not require EPA to use a "control-first" method in setting the baseline emission rate for calculating the stack height that is necessary to avoid excessive concentrations. EPA had decided to use existing emission levels or emission levels required under state implementation plans (SIPs) as the baseline for increases in stack height up to the level calculated under EPA formulas that relate stack height to the height and width of upwind obstacles (within formula increases). Under the control-first method, EPA would be required to set the baseline at the emission rate that would result from a source using all available control methods. The court notes that it is unlikely that Congress in §123 intended EPA to use the lowest feasible emissions level as the baseline in light of Congress' explicit inclusion of similar strategies in other sections of the Act. Although §123 provides that GEP is the height "necessary" to control ground level pollution, it does not follow that a stack height cannot be necessary unless the source has employed all feasilble control alternatives. This conclusion is not contradicted by legislative history indicating that §123 was intended to ratify the general thrust of court decisions holding that §110 established a hierarchy among control techniques under which dispersion techniques are considered necessary only when further limits on emissions are infeasible. These courts did not consider the issue of calculating GEP height under §123. The court holds that EPA's decision to requirea control-first baseline for above-formula stack height increases but not for within-formula increases was not arbitrary and capricious.

The court holds that EPA's use of existing emission rates in the conduct of demonstrations to support within-formula stack height increases is not arbitrary and capricious. The court also upholds EPA's use of new source performance standards (NSPS) as the baseline emission rate for demonstrations to justify above-formula stacks. Section 123 gives EPA broad discretion to limit the credit for above-formula stacks. Although the use of the NSPS presumption only for above-formula demonstrations has a disproportionate impact on sources in mountainous areas, where above-formula stacks are most likely to be found, Congress was aware of this impact and even intended to discourage utilities from locating in hilly areas. The court holds that industry petitioners were not denied an opportunity to comment on EPA's final decision to adopt a uniform NSPS presumption for above-formula demonstrations, since the final rule was a logical outgrowth of the proposed rule. Although the proposed rule included three separate presumptions depending on whether the source was subject to technology-based emission limits, the germ of NSPS was present and public comments raised the possibility of a single, technology-based limit.

The court holds that EPA improperly grandfathered pre-October 1, 1983, within-formula stack height increases from the demonstration requirement. EPA has not followed a well-established practice, but has made numerous policy shifts since 1973, undercutting any claim of reliance by industry. Grandfathering of most of the affected sources could frustrate the statutory goal. That demonstrations by all sources that have increased stack height since 1970 would tax EPA's capacity does not justify grandfathering, since EPA could have adopted a formula valid enough to dispense with demonstrations. The court upholds EPA's grandfathering of the difference between the height yielded under its original formula and its revised, more restrictive formula for those firms that relied on the original formula. The court, however, holds that EPA has not supported its decision to grandfather stacks in existence when the new formula was proposed up to the level under the new formula, regardless of reliance. The court holds that EPA is not required to revise its definition of stacks "in existence" on December 31, 1970, which are explicitly grandfathered in §123. Although EPA's 1982 regulations broadened the definition of "in existence" to encompass more sources than originally contemplated, the number of plants affected did not influence EPA's choice of a broader definition. The court holds that EPA did not abuse its discretion in refusing to provide grandfathering from new demonstration requirements for plants that have completed demonstrations under previous rules to justify above-formula stacks. The court has jurisdiction to hear this claim under Clean Air Act §307(b)(1), since the regulation is national in scope and EPA has made a final decision not to exempt these sources. EPA's failure to honor the stack height credit granted under the old rules is not governed by the doctrine of repose, but by the less restrictive analyses governing retroactive application of rules. EPA adequately articulated its rationale under the retroactivity analysis by observing in the preamble to the final rule that §123 was intended to alter industry reliance on above-formula heightstacks. Petitioners have not shown that retroactive application of the new demonstration requirements will be overly burdensome, since they can rebut the NSPS presumption by a showing of infeasibility.

The court holds that environmental petitioners' challenge to EPA's adoption of an intent-based test for defining "dispersion technique" in §123 is barred by res judicata. The court previously accepted petitioners' argument that dispersion techniques should include all measures intended to gain emissions credit for greater dispersion. Petitioners' could have then raised their current contention that all features having dispersive effects should be covered. The court holds that EPA did not adequately explain its exemption of original construction single stacks from the definition of dispersion techniques. EPA's argument that original design characteristics do not increase plume rise and therefore cannot be dispersion techniques is flawed, since nothing prevents the term "dispersion technique" from including a practice adopted during the facility design phase and EPA has not attempted to substantiate its interpretation of the term "increase." EPA's claim of undue enforcement difficulty in determining what stack configuration a firm would have adopted in lieu of a unified stack is insufficient, given the agency's failure to respond to the solutions proposed by others and itself. Further, the fact that stacks are often merged for legitimate economic or engineering reasons does not justify the exemption, since this contradicts EPA's own interpretation that a source characteristic should be presumed a dispersion technique if dispersion purposes alone provide a sufficient motivation. The court holds that EPA did not abuse its discretion in exempting from its definition of dispersion techniques stack mergers occurring as part of a change in operations that includes the installation of pollution controls and a net reduction in allowable emissions of a pollutant. The court upholds EPA's partial grandfathering of stacks merged before July 8, 1985, the date the new rules appeared in the Federal Register.

The court holds that EPA's multi-point rollback system of calculating emission limitations is not a form of intermittent control system prohibited under §123(b). The court upholds EPA's definition of "nearby" as used in its demonstrations provision. In adopting a one-half-mile definition, EPA did not erroneously assume that a previous court decision precluded it from choosing other figures.

Counsel for Petitioners
David G. Hawkins
Natural Resources Defense Council, Inc.
1350 New York Ave. NW, Suite 300, Washington DC 20005
(202) 783-7800

Counsel for Respondents
Charles Carter, Ass't General Counsel
Environmental Protection Agency
401 M St. SW, Washington DC 20460
(202) 475-8040

Before: RUTH B. GINSBURG and WILLIAMS, Circuit Judges, and AUBREY ROBINSON, Chief Judge, U.S. District Court for the District of Columbia.^[*]