MOTIVA ENTERPRISES v. SECRETARY OF DNR

• Decision Date: 17 August 1999
• Docket Number: C.A. No. 98A-07-010-HLA.
• Citation: 745 A.2d 234
• Court: Delaware Superior Court
• Parties: MOTIVA ENTERPRISES LLC, Appellant, Cross-Appellee, v. SECRETARY OF DEPARTMENT OF NATURAL RESOURCES & ENVIRONMENTAL CONTROL, State of Delaware, Appellee, Cross-Appellant.

745 A.2d 234

MOTIVA ENTERPRISES LLC, Appellant, Cross-Appellee, v. SECRETARY OF DEPARTMENT OF NATURAL RESOURCES & ENVIRONMENTAL CONTROL, State of Delaware, Appellee, Cross-Appellant.

C.A. No. 98A-07-010-HLA.

Superior Court of Delaware, New Castle County.

Submitted: May 27, 1999.

Decided: August 17, 1999.

R. Judson Scaggs, Jr., and Megan E. Ward, Morris, Nichols, Arsht & Tunnell, Wilmington, DE, for Appellant/Cross-Appellee.

Kevin P. Maloney, Deputy Attorney General, Department of Justice, Wilmington, DE, for Appellee/Cross Appellant.

OPINION

ALFORD, Judge.

I. INTRODUCTION

This case arises against the backdrop of an extensive regulatory scheme existing at both the federal and state levels designed to address air pollution. This controversy arose when, on December 24, 1997, the Secretary of the Department of Natural Resources and Environmental control ("DNREC" or "the Department") issued an Order which adopted a 1999 Rate-of-Progress Plan ("1999 ROPP") for Delaware under the federal Clean Air Act ("CAA" or "the Act.")¹ The Clean Air Act Amendments of 1990 require States with ground-level ozone attainment areas classified as severe or above to provide for, in addition to a 15% reduction in volatile organic compounds ("VOC") emissions by 1996, a VOC reduction or an equivalent nitrogen oxide reduction of 3%, averaged over each three-year period beginning November 1996.

At the heart of the controversy in this case is DNREC's 1999 ROPP declaring that an additional 3% reduction per year over the 1996 ROPP had been demonstrated, and the subsequent allegation by Motiva Enterprises ("Motiva") that the Department misappropriated reductions in air emissions that belong to Motiva.

II. FACTS AND PROCEDURAL BACKGROUND

This Court has previously stated that the business of air quality regulation is quite complex.² An analysis of the various state and federal statutory schemes is required in view of the fact that the issue before the Court is one of first impression in Delaware.

The Clean Air Act establishes a program jointly administered by the federal government and the states designed to "protect and enhance the quality of the nation's air resources so as to promote the public health and welfare and productive capacity of its population."³ It has been stated that one of the more difficult air pollution problems that the Act addresses is the persistent and high ambient levels of ozone in our nation.⁴ Ozone is the product of chemical and biological reactions in the atmosphere.⁵ Ozone is not a direct pollutant-vehicles do not emit it, and it does not billow out of smokestacks.⁶ It is instead formed from the mixture of two chemical precursors emitted by automobiles and certain industrial plants: Nitrogen oxides (NO subx) and a large group of hydrocarbon pollutants called Volatile Organic Compounds ("VOC").

The industrial sources of ozone pollutants include facilities that handle petroleum products, combustion sources, petroleum fuel-powered engines, as well as biogenic sources.⁷ Ozone has been found to be harmful to human beings, essentially because of its effect on the respiratory system.⁸ Its effect is even more harmful to persons with respiratory illnesses.⁹ This is so because much of the ozone inhaled reacts with sensitive lung tissues, irritating and inflaming the lungs, and causing a host of short-term adverse health consequences including chest pains, shortness of breath, coughing, nausea, throat irritation, and increased susceptibility to respiratory infections.¹⁰ However, the chronic effects from seasonal exposure to ozone have only been studied to a limited degree and most of the current evidence is derived from animal responses to chronic ozone exposure.¹¹

Due to the vast interconnected variables that affect ozone production and transport, designing control mechanisms to address ozone problems has proven to be both difficult and costly.¹² To date, however, efforts to reduce ozone pollution have focused on the restrictions of VOC and Nitrogen emissions.¹³ In order to achieve this goal, the CAA requires the federal Environmental Protection Agency ("the EPA") to establish primary and secondary National Ambient Air Quality Standards ("NAAQS") that represent the maximum acceptable concentration of air pollutants, such as ozone.

Once the EPA has established NAAQS, it is the responsibility of the states, with oversight by the EPA, to determine which areas are "nonattainment," i.e., do not meet NAAQS standards.¹⁴ Pursuant to the CAA, each state must develop and submit to the EPA, "State Implementation Plans" ("SIP") that contain source-specific limitations and other requirements designed to ensure the attainment and maintenance of air quality consistent with NAAQS.¹⁵

The CAA requires nonattainment areas to continue "reasonable" progress toward attaining NAAQS.¹⁶ This goal is achieved by requiring the nonattainment state to submit a revised SIP which would produce a fifteen percent (15%) reduction of the 1990 baseline VOC emissions that would occur no later than November 15, 1996.¹⁷ This goal is referred to as the 1996 Rate-of-Progress Plan (hereinafter "1996 ROPP") indicating that the nonattainment state is required to demonstrate that it is making the required progress rate toward meeting the NAAQS for ozone.¹⁸ Moreover, for every three year period after November 15, 1996, a state must submit a new rate of progress plan demonstrating an additional three percent (3%) reduction per year in VOC emissions until the state meets the air quality standard for ozone.¹⁹

The CAA mandates that NAAQS must be attained "as expeditiously as possible."²⁰ The Act provides that for primary standards, attainment is required not less than five years after an area is first determined to be nonattainment.²¹ However, the CAA allows the EPA Administrator to extend the attainment date by another five years if it is determined that such an extension is appropriate, considering the severity of the nonattainment and the availability of means to control pollution.²²

After a nonattainment determination for ozone, the CAA requires each area designated as such, to be "classified at the time of such designation" and "by operation of law" pursuant to one of five classifications.²³ The classifications are: (1) Marginal; (2) Moderate; (3) Serious; (4) Severe; and, (5) Extreme.²⁴

In Delaware, VOC emission is regulated under the New Source Review ("NSR") program pursuant to Delaware Air Pollution Regulation 25 ("Regulation 25".)²⁵ The NSR imposes specific requirements and restrictions on VOC emissions from new sources and on increases in VOC emissions caused by modifications to existing sources. A source cannot obtain a construction permit to make a modification to its facility unless it meets the requirements of Regulation 25.²⁶ Motiva²⁷ owns a wastewater treatment plant in New Castle County. The plant is located in a severe ozone nonattainment area.²⁸ Kent and New Castle Counties are classified as severe nonattainment areas, with an attainment date of November 2005.²⁹ As a result, any increase in VOC emissions from a modification to its facility must be offset with VOC emission reductions at a ratio of 1.3 tons per year ("tpy") of reductions to 1 tpy of new emissions.³⁰ The CAA in fact authorizes the creation and use of emission reductions to offset emission increases associated with plant modifications in areas not meeting NAAQS.³¹ The availability of VOC emission reductions for use as offsets is therefore critical to companies such as Motiva where future plant modifications are likely to result in an increase in VOC emissions.

In 1990, the EPA promulgated the Benzene Waste Rule ("the BWR") as a national emissions standard for hazardous air pollutants pursuant to Section 112 of the CAA.³² The BWR, which regulates emissions of benzene is found at 40 C.F.R. Part 61, subpart FF, and became effective on March 7, 1990. In 1991, Motiva met with DNREC officials to discuss Motiva's plan to achieve VOC reductions at its refinery's wastewater treatment plant that would be in excess of those required by the BWR. Motiva, which had several compliance options under the BWR, chose a compliance strategy that would voluntarily reduce benzene and non-benzene VOC emissions.

Under the EPA's rulings, emission reductions must meet four conditions in order to be available for use as offsets. Reductions must be (1) surplus, or "voluntary"; (2) enforceable; (3) permanent; and (4) quantifiable.³³ A reduction is voluntary if it is not required by law. Emission reductions may be used both in a state's ROPP and by a source for offsetting purposes.³⁴ In Delaware, reductions can also be used to bank, sell or trade under Regulation 34, the State's Emission Banking and Trading Program.³⁵ Regulation 34 defines an Emission Reduction Credit ("ERC") as:

[A]n actual emission reduction equal to one (1) whole [tpy] of a particular pollutant from an emission unit that has been certified by the Department as enforceable, permanent, quantifiable, real, and surplus, in accordance with this regulation... [a]n ERC is a limited, contingent, nonvested authorization to emit a certain amount of air pollutants and does not constitute a property right.³⁶

Between August, 1991 and November, 1993, Motiva submitted a series of four construction permit applications to the Department regarding modifications to its wastewater treatment plant ("WWTP") aimed at achieving compliance with the BWR and reducing non-benzene VOC emissions.³⁷ For example, on August 2, 1991, Motiva submitted an application for a construction permit to modify two equalization tanks and one spill diversion tank. Motiva informed DNREC that such modification would produce VOC reductions of 125.5 tpy and that it intended to use such reductions to offset the increased VOC emissions associated with its Ether Project.³⁸ Motiva claims that it proceeded to complete WWTP modifications after DNREC authorized Motiva on July...