As detailed in our
previous article, EPA proposed a Federal Implementation Plan (FIP) on July 9, 2024, for the Nonattainment New Source Review (NNSR) regulations for the Mojave Desert Air Quality Management District (MDAQMD) portion of the West Mojave Desert ozone nonattainment area and the San Bernardino County and Trona Planning Area PM10 nonattainment areas. The
proposed FIP was in response to EPA’s
limited approval and limited disapproval of MDAQMD’s portion of the California State Implementation Plan (SIP) related to MDAQMD’s NNSR rules.
In EPA’s limited approval and limited disapproval action, EPA identified six deficiencies in MDAQMD’s NNSR regulations that, per EPA, did not fully satisfy the relevant requirements for preconstruction review and permitting under the Clean Air Act (CAA). As of August 2024, five of the six deficiencies were remedied through collaboration with the EPA, amendment of MDAQMD’s NNSR rules, and the California Air Resources Board’s submission of the revised SIP to EPA incorporating the amendments to MDAQMD’s NNSR rules.
The unresolved sixth deficiency was related to MDAQMD Rule 1304(C)(2)(D), which currently allows offsets for certain modifications at major sources to be calculated as the difference between the pre- and post-modification potential to emit (PTE) of a pollutant, provided the source’s pre-modification PTE was fully offset, rather than requiring pre-modification historic actual emissions to be the pre-project baseline for offsets determination, as required under
40 CFR 51.165(a)(3)(ii)(J). Per MDAQMD’s
news release on the proposed FIP, “the portion of the rule at issue dates back to 1996, when EPA approved the clause in question, but has now reversed course in its 2023 determination.” MDAQMD went on to say that “EPA has yet to provide good reasons for reversing its position, given that the relevant law has not changed since 1996.” Following this reasoning, MDAQMD petitioned the U.S. Ninth Circuit Court of Appeals review EPA’s disapproval of MDAQMD Rule 1304(C)(2)(D) on the basis that EPA’s action was “arbitrary and capricious” because EPA inadequately explained the reversal of its prior approval.
MDAQMD’s Litigation Case and Outcome
On August 20, 2024, the U.S. Ninth Circuit Court of Appeals heard
oral arguments on the matter. Throughout the hearing, MDAQMD maintained two arguments consistent with the above: First, EPA had previously reviewed and approved MDAQMD Rule 1304(C)(2)(D) in 1996; Second, EPA’s disapproval of MDAQMD Rule 1304 was arbitrary and capricious. MDAQMD highlighted that EPA had previously approved the contentious portion of MDAQMD Rule 1304 back in 1996 citing that the EPA, “found that the rules m[e]t the applicable EPA requirements,” including “sections 172 and 173 of the [Act] and EPA’s NSR’s regulations at 40 CFR 51.160 through 51.165” (MDAQMD v. USEPA,
Case No. 23-1411 [9
th Circuit]).
In turn, EPA argued the 2002 updates to 40 CFR 51.165(a)(3)(ii)(J), which states that “the total tonnage of increased emissions, in tons per year, resulting from a major modification that must be offset in accordance with section 173 of the Act shall be determined by summing the difference between the allowable emissions after the modification…and the actual emissions before the modification…for each emissions unit” demonstrates EPA’s change in reasoning. EPA further stated that this section clearly outlines that emissions increases must be calculated using actual emissions. However, MDAQMD rebutted this argument noting that Subsection J only sets forth the calculation methodology for emissions increases and fails to mention the methodology used to offset the emissions increase.
Following these arguments, on September 5, 2024, the U.S. Ninth Circuit Court of Appeals
ruled in favor of MDAQMD’s petition and agreed that “EPA did not sufficiently articulate its change in position, and therefore its reasons for why Rule 1304(C)(2)(D) is allegedly improper” and concluded that “EPA’s disapproval was arbitrary and capricious” and therefore violated the Administrative Procedures Act under 5 U.S.C. 706(2)(A). In this ruling, the U.S. Ninth Circuit Court of Appeals remanded for the EPA to “sufficiently articulate its reasons for the change, should they exist”.
This ruling represents a huge win for subject major sources in MDAQMD, as there were numerous negative implications resulting from EPA’s proposed FIP. Most notably, the proposed FIP would have required subject facilities to obtain two permits, one permit from EPA under the FIP and one permit from MDAQMD under the NNSR rules in the SIP when a project was considered a new major facility or a major modification for the nonattainment pollutants. With the U.S. Ninth Circuit Court of Appeals ruling, the proposed FIP will not be codified, as it was specifically related to EPA’s disapproval of the contentious portion of MDAQMD Rule 1304(C)(2)(D), which is invalidated with the ruling. Should EPA sufficiently demonstrate its reasons for the reversal of its prior approval, it is possible that additional litigation could occur. That being said, it is in the best interest of regulated facilities for MDAQMD and EPA to work together to reach a solution internally and allow MDAQMD to continue to implement its own NNSR program. In MDAQMD’s
recent news release on the ruling, MDAQMD stated that “the District looks forward to working with EPA in the future to cooperatively achieve their shared goal of improving air quality in the region”.