Barg Coffin Lewis & Trapp, LLP Articles

March 2004

BACT Pains: Supreme Court Permits EPA To Overturn A State's "Unreasonable" Decision On Air Pollution Control Technology

By Brett S. Henrikson and Brian S. Haughton

It's hard to tell what is more surprising about a recent United States Supreme Court decision: the fact that the Court affirmed the Ninth Circuit; that the Court ruled against a State in a states' rights case; or that the Bush Administration challenged a resource-extraction company and advocated the federal government's power to impose environmental standards more stringent than a State's standards.

In Alaska Department of Environmental Conservation v. Environmental Protection Agency, No. 02-658, 2004 D.J.D.A.R. 597 (U.S. Jan.21, 2004), a sharply divided Supreme Court ruled that U.S. EPA may overrule a State's "unreasonable" determination regarding air pollution control technology required under the Clean Air Act's (CAA) Prevention of Significant Deterioration (PSD) program.

The PSD program was added by the 1977 CAA amendments to protect attainment areas, i.e. areas already meeting the national ambient air quality standards protecting public health and welfare.

The PSD program prohibits construction of any major emitting facility without the application of "best available control technology" (BACT). BACT is defined as "an emission limitation based on the maximum degree of [pollutant] reduction which the permitting authority, on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs, determines is achievable for [the] facility…."

The permitting authority here was the Alaska Department of Environmental Conservation (ADEC). ADEC received a PSD permit application from Tech Cominco Alaska Inc. (Cominco) for its Red Dog Mine, a major emitting facility located in the nitrogen oxide (NOx) attainment area of northwest Alaska. Cominco proposed to expand zinc production at the mine by 40%, which would increase NOx emissions and therefore trigger the need for a PSD permit and the application of BACT to the new electrical generators.

ADEC preliminarily determined that BACT for the generators would be selective catalytic reduction (SCR), which reduces NOx emissions by 90%, because SCR was the most stringent emission-control technology then technically and economically feasible. Cominco proposed using a lower-cost alternative control technology -- "Low NOx" -- that reduces NOx emissions by only 30%. ADEC later changed position and issued draft PSD permits allowing Low NOx as BACT. Without performing an economic analysis of the mine, ADEC stated in the permits that SCR was economically infeasible. EPA objected to each of the permits and urged ADEC to perform a site-specific analysis to support its revised position on SCR. ADEC ultimately issued the final permit with Low NOx as BACT and without performing an economic analysis, as suggested by the EPA, of the impact of SCR on the mine's operations.

EPA then took the extraordinary step of issuing orders (1) prohibiting ADEC from issuing the PSD permit without satisfactorily documenting why SCR was economically infeasible and (2) blocking construction and modification activities at the mine. These orders were issued under CAA sections 113(a)(5) and 167. When EPA finds that a State is not complying with a CAA requirement for construction or modification of a pollutant source, section 113(a)(5) authorizes EPA to "issue an order prohibiting the construction or modification" of the source. Section 167 requires EPA to "take such measures, including issuance of an order …, as necessary to prevent the construction or modification of" a source not complying with PSD requirements.

The Ninth Circuit affirmed that EPA had authority to issue these orders under CAA sections 113(a)(5) and 167 and properly exercised this authority because ADEC failed to provide a "reasoned justification" for its elimination of SCR as a control option.

Alaska's subsequent petition to the Supreme Court drew the attention, and amicus briefs, of several States. In another somewhat surprising facet of this case, while eleven States joined an amicus brief supporting Alaska's position, thirteen States, including California, supported EPA's position that EPA can review a State's BACT determination. These latter States, which included several northeastern States currently suing the EPA over the recent revisions to new-source-review rules, were willing to cede some authority out of concerns over transboundary pollution and the "race to the bottom," where States compete for business through less stringent environmental standards.

The Court's majority opinion, written by Justice Ginsburg and joined by Justices Stevens, O'Connor, Souter, and Breyer, affirmed EPA's actions. The Court's primary focus was on the scope and EPA's usage of the authority conferred by CAA sections 113(a)(5) and 167. The Court held these provisions authorize EPA to determine the reasonableness, in light of the statutory guidelines and administration record, of a State's BACT determination and to issue stop-construction orders when EPA deems the determination unreasonable. The Court also agreed with EPA's conclusion that ADEC had not reasonably justified its finding that SCR was economically infeasible.

The dissent, written by Justice Kennedy and joined by Chief Justice Rehnquist and Justices Scalia and Thomas, strongly disagreed with majority's interpretation of the CAA but devoted most of its rhetorical attention to a subject left largely untouched by the majority: Federalism, or, as described in the dissent's first sentence, the "principles that preserve the integrity of States in our federal system."

The dissent maintained that the CAA invests the State, as permitting authority, with exclusive authority to make BACT determinations, arguing that, if the State considers the appropriate statutory factors, its judgment should not be overturned. The dissent concluded that EPA's sole means of assuring a State's BACT determination is proper should be to participate in the State administrative process and, if necessary, seek judicial review in State court.

The dissent warned that allowing EPA to bypass the state judicial and administrative processes is a "great step backward" and serves to "relegat[e] States to the role of mere provinces or political corporations, instead of coequal sovereigns entitled to dignity and respect." Moreover, according to the dissent, EPA's ability to block a State's BACT determination by "unilateral order" or "fiat" inflicts both "injury" and "insult" to the State court and "degrades" the State environmental agency to the point that it is no longer a "real governing body."

Reading between the lines of these opinions, the key issue dividing the Justices was trust. The majority noted that EPA rarely uses orders to challenge State BACT determinations and saw "no reason not to take EPA at its word" that it would appropriately exercise its oversight powers in the future. The dissent was seemingly unwilling to trust EPA either to continue restraining itself or to correctly assess BACT determinations in any event. Instead, the dissent placed its trust in the States to address not only localized environmental issues but also "race-to-the-bottom" and transboundary-air-pollution concerns. The majority seemed to believe Congress had not entrusted such national concerns solely to the states.

But the majority offered little comfort to those who, like the dissenters, fear that authorizing EPA to block projects on procedural grounds will open the door to EPA review of the substance of State decisions on air issues. EPA stated that it does not intend to walk through that door and that it is willing to accept ADEC's Low-NOx-as-BACT determination if supported by the record, but nothing in the majority opinion would prevent EPA from reneging. Moreover, even if the opinion were so limited, the history of environmental law is replete with examples of procedural attacks used to achieve substantive ends, with litigation under the National Environmental Policy Act being a prime example.

"Chicken-little" headlines about this case warn that EPA can now run roughshod over States' BACT determinations, impliedly on either procedural or substantive grounds. For all the dissent's rhetoric, however, the question presented by this case is one of statutory interpretation, not "Federalism" in the Constitutional sense. If the proverbial sky does fall, therefore, Congress can raise it up again. Meanwhile, our sky's purity will continue to be governed by State and federal regulators in a sometimes-uneasy partnership.

These materials are provided for information purposes only and are not intended as and cannot be considered legal advice. Before taking action based upon this information, you should consult your legal counsel.

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