Del. Dep't of Natural Res. & Envtl. Control v. Envtl. Prot. Agency

• Decision Date: 01 May 2015
• Docket Number: 13–1104.,Nos. 13–1093,13–1102,s. 13–1093
• Citation: 785 F.3d 1
• Parties: DELAWARE DEPARTMENT OF NATURAL RESOURCES and ENVIRONMENTAL CONTROL, Petitioner v. ENVIRONMENTAL PROTECTION AGENCY, Respondent Electric Power Supply Association, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

785 F.3d 1

DELAWARE DEPARTMENT OF NATURAL RESOURCES and ENVIRONMENTAL CONTROL, Petitioner

v. ENVIRONMENTAL PROTECTION AGENCY, RespondentElectric Power Supply Association, et al., Intervenors.

Nos. 13–1093

13–1102

13–1104.

United States Court of Appeals, District of Columbia Circuit.

Argued Sept. 26, 2014.

Decided May 1, 2015.

As Amended July 21, 2015.

David W. DeBruin argued the cause for petitioners PSEG Power LLC, et al. With him on the briefs were Matthew E. Price, Elizabeth C. Bullock, Shanna M. Cleveland, and Caitlin S. Peale.

Valerie Satterfield Edge, Deputy Attorney General, Office of the Attorney General for the State of Delaware, argued the cause and filed the briefs for petitioner Delaware Department of Natural Resources and Environmental Control.

Ashley C. Parrish, Karen Schoen, David G. Tewksbury, and Stephanie S. Lim were on the brief for intervenor Electric Power Supply Association in support of petitioners.

Austin D. Saylor, Attorney, U.S. Department of Justice, argued the cause for respondent. With him on the brief were Robert G. Dreher, Acting Assistant Attorney General, U.S. Department of Justice, and Michael Horowitz, Attorney, U.S. Environmental Protection Agency.

William L. Wehrum Jr. argued the cause for intervenors-respondent. With him on the brief were Lisa G. Dowden, Melissa E. Birchard, Leslie Ritts, and David M. Friedland. Aaron M. Flynn entered an appearance.

Before: GARLAND, Chief Judge, WILLIAMS and RANDOLPH, Senior Circuit Judges.

Opinion

RANDOLPH, Senior Circuit Judge:

The State of Delaware, industry and environmental organizations, and an industry intervenor challenge a final rule of the Environmental Protection Agency governing the use of certain kinds of power generators. See National Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines; New Source Performance Standards for Stationary Internal Combustion Engines, 78 Fed.Reg. 6,674 (Jan. 20, 2013). A group of trade associations and corporations intervened in support of EPA. The generators are known as Reciprocating Internal Combustion Engines. We refer to them here interchangeably as “backup generators” or “ emergency engines.” They typically run on diesel fuel and expel numerous pollutants. See National Emission Standards for Hazardous Air Pollutants for Stationary Reciprocating Internal Combustion Engines, 69 Fed Reg. 33,474, 33,499 (June 15, 2004).

Delaware raises three issues in its petition for judicial review. First, it argues that EPA acted arbitrarily and capriciously when it modified the National Emissions Standards for Hazardous Air Pollutants for the backup generators pursuant to Section 112 of the Clean Air Act. 42 U.S.C. § 7412. Second, it argues that, while modifying the National Emissions Standards, EPA improperly revised the definition of the same kind of generators in the New Source Performance Standards, violating Section 111 of the Act. See 42 U.S.C. § 7411. And, third, it argues that EPA unlawfully modified the National Emissions Standards to exempt from emissions controls certain non-emergency generators located in low-density areas.

All petitioners and the intervenor raise the first issue. Delaware alone raises the other two. Because we hold that Delaware lacks standing to challenge the exemption from emissions controls for backup generators in low-density areas, we need not address the third issue. For the reasons that follow, we hold that EPA acted arbitrarily and capriciously when it modified the National Emissions Standards and the Performance Standards to allow backup generators to operate without emissions controls for up to 100 hours per year as part of an emergency demand-response program.

I.

Congress enacted the Clean Air Act “to protect and enhance the quality of the Nation's air resources.” 42 U.S.C. § 7401(b)(1). The Act governs the emissions of hazardous air pollutants that present “a threat of adverse human health effects ... or adverse environmental effects.” Id. § 7412(b)(2).

Section 112 requires EPA to promulgate national emissions standards for both “major sources” and “area sources” of hazardous air pollutants. See id. § 7412(d)(1). A “major source” is “any stationary source” that emits “10 tons per year or more of any hazardous air pollutant or 25 tons per year or more of any combination of hazardous air pollutants.” Id. § 7412(a)(1). An “area source” is “any stationary source ... that is not a major source,” id. § 7412(a)(2), which is to say, any stationary source that emits less than ten tons per year of any hazardous air pollutant or less than twenty-five tons per year of any combination of hazardous air pollutants. When promulgating such standards, EPA must consider “the known or anticipated adverse effects of such pollutants on public health and the environment.” Id. § 7412(e)(2)(A).

Under Section 112, EPA “first sets emission floors for each pollutant and source category and then determines whether stricter standards, known as ‘beyond-the-floor’ limits, are achievable in light of the factors listed in section 7412(d)(2).” Cement Kiln Recycling Coal. v. EPA, 255 F.3d 855, 858 (D.C.Cir.2001) (per curiam). Notably, these factors include the “consideration [of] the cost of achieving such emission reduction, and any non-air quality health and environmental impacts and energy requirements.” 42 U.S.C. § 7412(d)(2).

Section 111 directs EPA to set emissions standards for new and newly modified sources. Id. § 7411(d). A modified source is one that has undergone “any physical change in, or change in the method of operation[,] ... which increases the amount of any air pollutant emitted by such source or which results in the emission of any air pollutant not previously emitted.” Id. § 7411(a)(4). Under Section 111, EPA must set standards for emissions that “reflect[ ] the degree of emission limitation achievable through the application of the best system of emission reduction.” Id. § 7411(a)(1).

In rulemakings over the past decade, EPA has established National Emissions Standards and Performance Standards for pollutants emitted by backup generators.¹ Such pollutants include “[f]ormaldehyde, acrolein, methanol, and acetaldehyde.” 69 Fed Reg. at 33,475. “[T]hese pollutants have been associated with several health-related concerns, including cancer

, respiratory problems, and premature death.”

Emission Standards for Stationary Diesel Engines, 73 Fed.Reg. 4,136, 4,138 (Jan. 24, 2008).

Backup generators have traditionally been used in emergency situations “to produce power for critical networks or equipment ... when electric power from the local utility is interrupted.” 69 Fed.Reg. at 33,512. For years, they were not subject to the same level of regulation as larger generators. See id. at 33,477.

That began to change in 2004, when EPA promulgated a rule allowing backup generators to operate without emissions controls for unlimited periods “in emergency situations and for routine testing and maintenance.” Id. at 33,512. It also allowed them to operate without emissions controls for “an additional 50 hours per year in non-emergency situations.” Id. Four years later, EPA became “concerned that if stationary emergency engines are allowed to operate in non-emergency situations[,] they may be inappropriately used for peaking power” that is, to supply power to an energy grid during periods of high demand and, accordingly, EPA specified “that the 50 hours allowed for non-emergency situations cannot be used to generate income for a facility to supply power to an electric grid or otherwise supply power as part of a financial arrangement with another entity.” 73 Fed.Reg. at 3,583.

In two separate rules in 2010, EPA promulgated standards for hazardous air pollutant emissions from backup generators. The regulations allowed backup generators to operate without emissions controls for fifteen hours each year as part of “demand response programs” during “emergency conditions that could lead to a potential electrical blackout.” 75 Fed.Reg. 9,648, 9,667, 9,677 (Mar. 3, 2010) (rule for compression ignition engines); see also 75 Fed.Reg. 51,570, 51,591 (Aug. 20, 2010) (rule for spark ignition engines) (collectively, the “2010 Rule”). Demand response programs, which we discuss more below, are programs through which customers reduce their consumption of electric energy from the grid in response to high prices or other incentives. See 18 C.F.R. § 35.28(b)(4).

“Soon after the 2010 rule was final, the EPA received petitions for reconsideration of the 15–hour limitation for emergency demand response....” 78 Fed.Reg. at 6,679. On June 7, 2012, as a result of these petitions, EPA proposed amendments for National Emissions Standards for stationary backup generators and amendments to the Performance Standards for stationary internal combustion engines. See 40 C.F.R. Ch. I, Subch. C., Pt. 63, Subpt. ZZZZ (National Emission Standards); 40 C.F.R. Ch. I, Subch. C., Pt. 60, Subpt. IIII & JJJJ (Performance Standards).

EPA's final rule, issued on January 30, 2013, radically revised the fifteen-hour limit. The rule's preamble described its purpose as addressing the “use of existing engines for emergency demand response and system reliability” and noted that using such generators “as part of emergency demand response programs can help prevent grid failure or blackouts.” 78 Fed.Reg. at 6,679. Under the new rule, backup generators are permitted to operate exempt from emissions controls for “emergency demand response” for up to 100 hours each year, in addition to actual emergency situations and maintenance. Id. at 6,679 –80, 6,704–05; see also id. at 6,681, 6,695 –97 (modifying Performance Standards for consistency). The rule limits emergency demand response operation to two circumstances: first, when a “Reliability Coordinator” (such as an independent electric grid operator) “has declared an Energy Emergency Alert Level 2,” or, second, when “there is a deviation of voltage or frequency of [five] percent or greater below...