Ozone Transport: Will Midwest and Southeast Utilities Have to Pay to Clean up Air in the Northeast?

Transcription

1 Ozone Transport: Will Midwest and Southeast Utilities Have to Pay to Clean up Air in the Northeast? David M. Flannery and Marcus A. Spatafore Jackson & Kelly Charleston, West Virginia Chapter 4 Cite as 18 E. Min. L. Inst. ch. 4 (1998) Synopsis Introduction The Ozone Problem The Federal Strategy for Reducing Ozone [1] The Clean Air Act [2] Efforts to Resolve Interstate Transport of Ozone [a] The 1990 Amendments to the Clean Air Act [b] The Ozone Transport Assessment Group Post-OTAG World Marked By Controversy [1] Nonattainment States Take Direct Action Against Midwest and Southeast [a] Confrontation: The Section 126 Petitions [b] Historical Basis for Section 126 Relief [c] Modern Section 126: No Avail to Northeast [2] EPA s Proposed SIP Call EPA s Proposed Regulation of the Midwest and Southeast Conclusion Introduction. The growth in population, cars, industry, and power plants has inevitably created increased levels of air pollution. Most of the country is finally reaping the rewards of undertaking air pollution controls for the past quarter of a century to achieve the federal ozone standard. The densely populated Northeast, southern California, and a few large urban areas, however, continue to endure unacceptable levels of smog-producing ozone. Such disparity in air quality has led to recent action by the northeast states and the Environmental Protection Agency (EPA) to shift the burden of costly controls on ozone sources to other regions of the country that already have taken measures to achieve compliance with federal ozone standards. This chapter explains how the acts and inaction on the part of the northeast

2 4.02 EASTERN MINERAL LAW INSTITUTE states and EPA have led to an unprecedented interstate conflict over the responsibility for the northeast s air quality The Ozone Problem. Ozone occurs in two layers in the atmosphere. When found in the stratosphere (six to eight miles above the surface of the earth), ozone is considered good because it blocks ultraviolet radiation from the sun. Ozone in the troposphere or ground level ozone (within six miles above the surface of the earth) is considered bad because at high concentrations it can cause adverse health effects. Unlike most air pollutants, tropospheric ozone is not emitted from any specific source. Instead, it is a product of chemical reactions, called photochemical reactions, in the air that occur between sunlight, nitrogen oxides (NOx) and volatile organic compounds (VOCs). 1 Because the series of ozone-producing reactions are driven by temperature and sunlight, ozone formation varies hourly, daily, and seasonally. There are many natural and manmade sources of these two precursors that produce ozone. Natural sources of NOx and VOCs include soil and vegetation. Manmade sources encompass motor vehicles, electrical power plants, the industrial (non-utility) sector, agriculture, as well as small businesses such as gasoline stations, dry cleaners, and bakeries. According to EPA, in 1994 the contribution to NOx levels from the transportation sector was approximately 45 percent; the electric utilities contribution was 33 percent; and the industrial sector s contribution was 17.3 percent. With respect to the levels of VOCs, the industrial sector contributed 56.9 percent, transportation contributed 36.9 percent, and electric utilities contributed 0.2 percent. 2 1 More precisely, ozone result when radiant energy interacts with nitrogen dioxide (NO2 ) to create nitric oxide (NO) and an atom of oxygen that immediately combines with abundant molecular oxygen (O 2 ) to form ozone (O 3 ). In the absence of VOCs, O 3 can then react with NO to reform NO 2. In the presence of VOCs, ozone production is amplified by the formation of organic radicals (+RO 2 in this case) which react with NO forming NO 2 without the destruction of O 3. The breakup of this new NO 2 by sunlight then leads the production of more ozone. 2 Ozone Attainment, Proceeding in the Right Direction: Will Sound Science and Objectivity Prevail? (Midwest Ozone Group) Dec at

3 OZONE TRANSPORT 4.03 Although the sources of pollution that produce ozone are well known, controlling ground level ozone is more complex than simply reducing emissions from these sources. Reducing NOx in the air in some cases can reduce ozone concentrations. In some situations and at some locations, however, NOx actually consumes or scavenges ozone. As a result, reducing NOx at such locations can increase ozone concentrations. This effect is referred to as NOx Disbenefit The Federal Strategy for Reducing Ozone. [1] The Clean Air Act. The federal Clean Air Act 4 has provided the framework for regulating ground level ozone over the past two decades. The regulatory structure is centered around the National Ambient Air Quality Standard (NAAQS) program. 5 With respect to ozone pollution, the NAAQS involves a Primary Standard as the level or air quality necessary, with an adequate margin of safety, to protect the public health, and a Secondary Standard as the level or air quality necessary to protect the public welfare from any known or anticipated adverse effects. 6 Accordingly, each state has the primary responsibility for assuring that air quality within its borders is maintained at a level consistent with the NAAQS for ozone (referred to as attainment ). 7 This is achieved through a State Implementation Plan (SIP), in which the state establishes limits on specific sources of NOx and VOCs. 8 In addition to measures designed to attain and maintain the NAAQS, a SIP also must contain adequate provisions to prevent the interstate effects of air pollution. 9 Under the Clean Air Act, 10 a SIP must contain provisions [P]rohibiting... any sources or other type of emissions activity within the State from emitting any air pollutant in amounts which will 3 Id. at U.S.C et. seq U.S.C Id U.S.C See 42 U.S.C U.S.C. 110(a)(2)(D). 10 Id. 121

4 4.03 EASTERN MINERAL LAW INSTITUTE (I) contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any such national primary or secondary ambient air quality standard, or (II) interfere with measures required to be included in the applicable implementation plan for any other State... to prevent significant deterioration of air quality or to protect visibility. 11 In areas where the air is cleaner than the NAAQS require, the SIP may provide for increases in the emissions of the pollutants up to a maximum allocation of concentration. Otherwise, areas which do not achieve or maintain the NAAQS are designated as nonattainment areas and are subject to stringent emission limitations to ensure compliance with the NAAQS as rapidly as possible. 12 As states must ensure that SIPs are adequate to maintain the NAAQS, the SIP requirements constantly evolve in response to changes in federal requirements and local conditions. A finding by EPA that a particular state s SIP is inadequate results in a SIP revision (a SIP call ). 13 The SIP call requires the state to correct the deficiency. EPA is authorized to cut off federal highway funds or require additional emission limitations on new sources seeking permits until the state has corrected the deficiency. 14 [2] Efforts to Resolve Interstate Transport of Ozone Pollution. [a] The 1990 Amendments to the Clean Air Act. Due to the persistent nature of the ozone problem in major urban areas, Congress developed a multifaceted strategy to address the problem in the 1990 Amendments to the Clean Air Act. 15 The strategy was premised on control measures at the national, nonattainment-area, and regional 11 Id U.S.C. 7410(a)(2)(H)(ii). 13 Id. 14 See 42 U.S.C Clean Air Act Amendments of 1990, Pub. L , 104 Stat (1990). 122

5 OZONE TRANSPORT 4.03 levels. Congress ozone attainment strategy at the national or multi-regional level involved a number of measures designed to reduce ozone precursor pollutants everywhere. These measures include tighter tailpipe standards for motor vehicles, the deployment of cleaner motor vehicle fuels, the promulgation of control technology guidance documents by EPA, and clean-fuel vehicle programs. 16 Focusing on nonattainment areas, Congress substantially reformed the ozone standard attainment program. The 1990 Amendments classified ozone nonattainment areas as Marginal, Moderate, Serious, Severe, or Extreme. 17 Recognizing that the nonattainment areas needed more time to attain the ozone standards, attainment deadlines were extended by varying periods based on the area s pollution level. 18 Congress also was aware that ozone and its precursors can be transported through the air across state lines and hinder the downwind state s efforts to achieve attainment. The Clean Air Amendments of 1990 addressed the problem of ozone transport at the regional and subregional levels, particularly in the Northeast. Congress found that a variety of sources in multi-county urbanized areas typically contribute to ozone attainment problems. The committees in both the House and Senate that shepherded the 1990 Clean Air Act Amendments through to enactment explained as follows: A typical ozone pollution episode involves a large stagnant air mass that allows pollutants to build up in the atmosphere. The polluted air mass slowly spreads downwind. For example, in the summer, such air masses commonly build-up over the urban areas along the East Coast, and move into New England. As the air mass moves, ozone levels continue to increase. In part, this is because the pollutants have more time to react and form ozone. The addition of new pollutants, originating in areas passed along the way, is also an important factor U.S.C See 42 U.S.C See 42 U.S.C. 7511a. 19 H.R. Rep. No. 490, 101st Cong., 2d Sess., pt. 1, at 202 (1990). 123

6 4.03 EASTERN MINERAL LAW INSTITUTE Transport has been documented in the Northeast with EPA time sequence maps. The maps illustrate the typical flow of an ozone plume in the Northeast as it moves from New York City into New England. In the early morning, the plume centers over southern New England. By midday the plume extends to central New England, Cape Cod, and western Massachusetts. By late afternoon, the episode pushes toward northern New England. As it moves north, the plume combines with other emission centers in New England. 20 Consequently, because the Northeast exhibited a regionally interdependent ozone problem, Congress created the northeast Ozone Transport Region (OTR) in the 1990 Amendments. 21 Based on its assessment of the northeastern pollutant transport problem, Congress included in the northeast OTR not only the urbanized areas that had failed to attain the ozone standard, but the remainder of the states that contained those areas along with other nearby states. The result was a congressionally defined ozone transport region extending from Washington, D.C. with its Virginia suburbs, up the coast to Maine, including the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. 22 Congress then tasked the northeast OTR with developing additional control measures to be adopted by OTR states to attain the ozone standard in the region. 23 The group established to manage the OTR is known as the Ozone Transport Commission (OTC). 24 It is led by 12 state Governors or their designees and the representative of Washington, D.C. The OTC was charged with finding the solution to the longstanding ozone problems by 20 S. Rep. No. 228, 101 Cong., 1st Sess., at 49 (1989). 21 See 42 U.S.C. 7511c; see also 59 Fed. Reg. 48,664, 48,665 (1994)(EPA concluded, Congress established the OTR in the 1990 Amendments to the Act based on the recognition that the transport of ozone and ozone precursors throughout the region may render the northeast states attainment strategies interdependent ). 22 In addition to the congressionally established OTR, the states of Illinois, Indiana, Michigan, and Wisconsin already had voluntarily formed the Lake Michigan Air Directors Consortium (LADCo) in 1988 in an effort to resolve the interstate ozone problem in the Chicago area. 23 See 42 U.S.C. 7511c(c) U.S.C. 7506a, 7511c(a). 124

7 OZONE TRANSPORT 4.03 developing a control program to bring the OTR into attainment with the ozone standard. 25 [b] The Ozone Transport Assessment Group. The CAA Amendments of 1990 required all states with serious or worse ozone nonattainment areas to submit plans by November 15, 1994, to bring these areas into attainment by the deadlines specified in the CAA. 26 Even after performing modeling studies of the ozone problems in many of the urban nonattainment areas in an effort to develop plans to bring these areas into attainment, a number of states (primarily located in the northeast) still were unable to meet the November 1994, SIP submittal deadline. 27 As a result, EPA took action to avoid imposing sanctions on 25 The OTC developed a NOx Memorandum of Understanding (MOU) in September, 1994 which has been signed by all of the states that are part of the OTR, except Virginia. The MOU imposed a control program for NOx in multiple phases: (1) Phase I consisted of the implementation of Reasonably Available Control Technology (RACT) by May 1, 1996, in accordance with the CAA Amendments of (2) Phase II, which is to be implemented by May 1, 1999, calls for signatory states within the OTR to require major NOx sources to: (a) reduce their NOx emissions by 65 percent below 1990 baseline levels or to 0.2lb/mmBtu, whichever is less stringent, if they are located in the AMTRAK corridor (Washington, D.C. to Boston); or (b) reduce their NOx emissions by 55 percent below 1990 baseline levels or to 0.2lb/mmBtu, whichever is less stringent, if they are located within the OTR, but outside the AMTRAK corridor. (3) Phase III, which is to be implemented by May 1, 2003, unless intervening modeling or other studies show by December 31, 1998, that this subsequent phase of NOx reductions is not necessary, signatory states will impose NOx limits throughout most of the OTR (both inside and outside the AMTRAK corridor) to reduce NOx emissions by 75 percent below 1990 baseline levels or to 0.15lb/mmBtu, whichever is less stringent U.S.C. 7511a(c)(2)(d). 27 States failure to meet legislatively-mandated attainment deadlines had impeded the ozone attainment program since its inception, especially in the Northeast. EPA seemingly supported this tardiness, as noted by Congress during the formulation of the Clean Air Act 1990 Amendments: In several areas controls that were included in a SIP were not implemented. For example, in New York and New Jersey Stage II programs that were called for in the SIPs were not implemented until courts (not EPA) ordered the States to fulfill the SIP commitments. S. Rep. No. 228, 101 Cong., 1st Sess., at 11 (1989)(emphasis in the original). 125

8 4.03 EASTERN MINERAL LAW INSTITUTE these states by providing administrative relief from the statutory mandated deadline. In a March 2, 1995 Memorandum, EPA granted these states a two-year extension of the SIP submittal deadline. 28 In return for such extension, the states had to meet new criteria set forth in the memorandum which provided that they agree to participate in a consultative process to address the issue of ozone transport. 29 The vehicle for this consultative process became the Ozone Transport Assessment Group, commonly referred to as OTAG. Formed in May, 1995, OTAG eventually consisted of representatives from environmental control agencies of the 37 easternmost states. 30 The purpose of OTAG was set forth as follows: To identify and recommend a strategy to reduce transported ozone and its precursors which, in combination with other measures, will enable attainment and maintenance of the ozone standard in the OTAG region. A number of criteria will be used to select the strategy including, but not limited to, cost effectiveness, feasibility, and impacts on ozone levels. 31 Other participants in the OTAG process included interested parties such as industry organizations and environmental groups. EPA also remained active in the OTAG process by staffing a number of key OTAG positions and providing substantial guidance to the process. Although the 28 On file with author. 29 EPA directed the overdue states to assess regional control strategies and refine local control strategies, using improvements in the modeling process (e.g., more refined emission inventories) to perform further control strategy evaluations that take into consideration potential regional control strategies. Memorandum from Mary D. Nichols, Assistant Administrator, EPA, to EPA Regional Administrators at page 2 (March 2, 1995). 30 The states participating in the OTAG process were as follows: Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, West Virginia, Wisconsin, and representatives from the District of Columbia. 31 OTAG Policy Papers from Policy Group Meeting, March 1, On file with author. 126

9 OZONE TRANSPORT 4.03 process itself lacked formal rules, the participants worked steadily through structured workgroups, mini-workgroups, and task groups, which reported to four subgroups; general oversight and overall policy direction were provided by the OTAG Policy Group. This collaboration of government and stakeholders utilized the most sophisticated and extensive computer modeling studies available to assess the nature and extent of ozone transport on a regional basis. The OTAG process, in effect, was the most comprehensive effort to date to assist states east of the Mississippi River in developing regional strategies to attain the federal standards for ozone. The major conclusions determined by OTAG included: Regional NOx reductions are effective in producing ozone benefits; the more NOx reduced, the greater the benefit. Ozone benefits are greatest in the subregions where emissions reductions are made; the benefits decrease with distance. Both elevated (from tall stacks) and low- level NOx reductions are effective. VOC controls are effective in reducing ozone locally and are most advantageous to urban nonattainment areas. Air quality data indicate that ozone is pervasive, that ozone is transported, and that ozone aloft is carried over and transported from one day to the next. The range of transport is generally longer in the North than in the South. 32 Accordingly, OTAG adopted final recommendations on July 19-20, 1997, and submitted them to EPA on July 8, The OTAG final recommendations are summarized as follows: The need for additional modeling and analysis as the states develop their specific control strategies. Utility NOx controls should fall within a range between those already required by the Clean Air Act and the less stringent of 85 percent reduction from the 1990 rate or 0.15lb/mmBtu in order to mitigate ozone transport and assist states in complying with the 120 ppb ozone standard. 32 OTAG Executive Report 1997, at

10 4.04 EASTERN MINERAL LAW INSTITUTE Non-utility controls should be established in a manner equitable with utility controls. That EPA should continue to develop, adopt, and implement stringent national controls for architectural and industrial maintenance coatings, consumer/commercial products, autobody refinishing, reformulated gasoline, small engines, heavy-duty highway and non-road engines, and locomotives. That EPA should reach closure on the TIER 2 motor vehicle study. Support for continued use of reformulated gasoline and for EPA to assess an appropriate sulfur standard for fuel. Support for EPA to determine the need for a cetane adjustment and new standards for diesel fuel. Support for vehicle emissions inspections and maintenance programs. Support for Ozone Action Days programs to increase public awareness of ozone. Support for establishment of NOx emissions market systems to reduce the cost of compliance Post-OTAG World Marked by Controversy. OTAG was intended to facilitate among the states and stakeholders a workable solution to the longstanding issue of transported ozone through collaboration, cooperation, and ultimately, compromise. After the final recommendations were adopted, however, several of the nonattainment states that fully participated in the OTAG process took action against the other states upwind of the Northeast. Moreover, EPA seemingly disregarded the basic tenets of OTAG s efforts. [1] Nonattainment States Take Direct Action Against Midwest and Southeast. [a] Confrontation: The Section 126 Petitions. OTAG was a success in terms of fashioning recommendations for resolving the transport of ozone. All the OTR states participated in the 33 OTAG Executive Report 1997, at 5, 51-59, reprinted in 62 Fed. Reg. 60,318, 60,376-60,

11 OZONE TRANSPORT 4.04 OTAG process and unanimously approved the OTAG findings and recommendations. Several OTR states, however, subsequently failed to abide by the underlying reason for the OTAG process, and sought to impose controls on upwind sources of NOx through outside mechanisms. Between August 12 and 15, 1997, the states of Connecticut, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, Rhode Island, and Vermont petitioned EPA under Clean Air Act Section for a finding that sources of NOx emissions contributed significantly to their nonattainment problems. The Section 126 petitions were directed primarily at electric utilities across 19 states located in the Midwest and Southeast. The petitioning states relied primarily upon OTAG modeling data and analyses performed on a regional scale to support their claims that individual upwind states significantly contributed to their NAAQS violations. Consequently, the Section 126 petitions in general sought to impose controls under the following approaches: (1) limitations on the upwind states NOx emissions that would be consistent with OTC MOU (55 to 77 percent reductions from 1990 levels); (2) imposing 85 percent NOx reductions from 1990 levels; or (3) NOx reductions equivalent to 0.15 lb/mmbtu. While petitions under Section 126 generally are adversarial in nature (as states seek redress for alleged significant contribution of pollution from other states), EPA determines the merits of the petitions in the context of rulemaking proceedings. 35 Accordingly, EPA must publish a notice of rulemaking concerning the petitions, and establish a rulemaking docket where any person may submit written comments, data, or documentary information. 36 In addition, EPA must hold a public hearing in which interested persons will be given an opportunity to present data, views, or arguments. 37 Consistent with rulemaking procedures, EPA will publish in the Federal Register a Proposed Determination of the Section 126 petitions and solicit comments on the same. 38 A Final Determination which U.S.C U.S.C. 7607(d)(1)(N) U.S.C. 7607(d)(3) U.S.C. 7607(d)(5) U.S.C. 7607(d)(3). 129

12 4.04 EASTERN MINERAL LAW INSTITUTE will grant or deny the Section 126 petitions then will be issued and published. Moreover, EPA s determination may be appealed to the applicable United States Circuit Court of Appeals within 60 days from publication of the Final Determination. 39 [b] Historical Basis for Section 126 Relief. Prior to the 1990 Amendments to the Clean Air Act, Section 126(b) authorized states or local political subdivisions to petition EPA to find that a source of air pollution in another state was violating Section 110(a)(2)(E)(i) of the Act. That specifically referenced provision required every state s implementation plan to prohibit sources from preventing attainment or maintenance with the NAAQS in another state or interfering with another state s efforts to comply with prevention of significant deterioration or visibility program. Upon a finding by EPA of a violation of Section 110(a)(2)(E)(i), the targeted source had to implement control measures to bring it into compliance or shut down. Under this framework, the standard for granting a Section 126 petition required an EPA finding that the sources of air pollution in the targeted upwind states contributed significantly to the nonattainment problem of the petitioning state. 40 What constituted a significant contribution to another state s nonattainment area was fleshed out in earlier judicial and EPA Section 126 proceedings over interstate transport of air pollution. With respect to a single source of air pollution, EPA found that a three percent contribution to the level of ozone in a nonattainment area was not a significant contribution. 41 This determination was upheld by the Court of Appeals for the Sixth Circuit in Air Pollution Control Dist. v. U.S. EPA. 42 When Section 126 petitions concerned sources throughout a region (similar to the current filings), the standard for a significant contribution was defined by the previous Section 126 proceedings that were brought by northeastern states against the Midwest. In the early 1980s, the states of U.S.C. 7607(b). 40 See Air Pollution Control Dist. v. U.S. EPA, 739 F.2d 1071, 1088 (D.C. Cir. 1984) Fed. Reg. 6,624 (1977). 42 Air Pollution Control Dist. v. U.S. EPA, 739 F.2d 1071 (6th Cir. 1984). 130

13 OZONE TRANSPORT 4.04 New York, Pennsylvania, and Maine filed Section 126 petitions that targeted all sources of particulate levels (through sulfate fine particles) and sulfur dioxide in Illinois, Indiana, Kentucky, Michigan, Ohio, Tennessee, and West Virginia. EPA at the outset applied a higher threshold to determine what would constitute a significant contribution from multiple sources in the aggregate. In essence, for a contribution from a very large area to be significant, EPA declared it must have had a distinctly and correspondingly larger impact on nonattainment than a contribution from a single source. 43 Accepting the petitioning states data at face value, EPA determined that the aggregated fine particle contribution from the six-state region amounted to a four to six percent contribution to the petitioners NAAQS violations for particulates, and that this did not constitute a significant contribution. 44 Furthermore, the District of Columbia Circuit Court of Appeals, in State of New York. v. EPA, 45 upheld EPA s decision that the contribution by the states of Ohio and West Virginia of up to 20 percent of the sulfur dioxide nonattainment levels in Pennsylvania was not significant. Thus, prior Section 126 proceedings suggested that unless the aggregated contributions of several states to ozone nonattainment levels in a downwind state exceed 20 percent of the violation, claims of impermissible interstate pollutant transport should be rejected. 46 [c] Modern Section 126: No Avail to Northeast. The 1990 Amendments to the Act changed the authorization and purpose of Section 126. First, the significant contribution interstate transport provision of Section 110 was renumbered from Section 110 (a)(2)(e)(i) to Section 110(a)(2)(D)(i). 47 Section 126(b), however, now only authorizes petitions for relief in reference to violations of Section 110(a)(2)(D)(ii), Fed. Reg. 34,851, 34,864 (1984) Fed. Reg. at 48,152 and State of New York v. EPA, 852 F.2d. 574 (D.C. Cir. 1988). 46 Id. 47 See Clean Air Act Amendments of 1990, Pub. L. No , 104 Stat (codified at 42 U.S.C. 7410(a)(2)(D)). 48 See Clean Air Act Amendments of 1990, Pub. L. No , 104 Stat (codified as amended at 42 U.S.C. 7426). 131

14 4.04 EASTERN MINERAL LAW INSTITUTE which requires state implementation plans to meet the requirements of Section 126 and the international pollution provision of Section Accordingly, the only substantive requirement of Section 126 prohibits the construction of new sources which may contribute significantly to the NAAQS of another state before 60 days notice to the affected state. The deliberate change in the cross reference of Section 126 from Section 110(a)(2)(E)(i) to Section 110(a)(2)(D)(ii) effectively altered the relief available under Section 126. In essence, the plain reading of the applicable Section 126 provision only authorizes states to petition EPA for relief from new sources of air pollution which may significantly 49 The cross-reference in Section 126(b) is as follows: Any State or political subdivision may petition the Administrator for a finding that any major source or group of stationary sources emits or would emit any air pollutant in violation of the prohibition of section 7410(a)(2)(D)(ii) of this title or section. Within 60 days after receipt of any petition under this subsection and after the public hearing, the Administrator shall make such a finding or deny the petition. 42 U.S.C. 7426(b). The cross reference to Section 110(a)(2)(D)(ii) of the Clean Air Act provides as follows: (2) Each implementation plan submitted by a State under this chapter shall be adopted by the State after reasonable notice and public hearing. Each plan shall... (D) contain adequate provisions... (ii) ensuring compliance with the applicable requirements of sections 7426 and 7415 of this title (relating to interstate and international pollution abatement). 42 U.S.C. 110(a)(2)(D)(ii). Consequently, the requirements of section 126 are found in its subsection (a) as follows: Each applicable implementation plan shall (1) require each major proposed new (or modified) source [which may contribute significantly to another state s NAAQS violation] to provide written notice to all nearby States that air pollution levels of which may be affected by such source at least sixty days prior to the date on which commencement of construction is to be permitted by the State providing notice, and (2) identify all major existing stationary sources which may have the impact described in paragraph (1) with respect to new or modified sources and provide notice to all nearby States of the identity of such sources not later than three months after August 7, U.S.C. 7426(a). 132

15 OZONE TRANSPORT 4.04 contribute to a NAAQS violation without the required notification. 50 Since the current northeast filings under Section 126 are directed at existing sources in other states, such petitions likely are invalid. [2] EPA s Proposed SIP Call. On November 7, 1997, EPA issued a proposed SIP call to many states in the OTAG region that were found to significantly contribute to nonattainment in, or interfere with maintenance by, a downwind state under both the 1-hour NAAQS and also the revised 8-hour NAAQS. 51 Accordingly, EPA proposed to require the identified states 52 to submit SIP measures that would reduce NOx emissions. 53 After a 120-day 50 The change in Section 126 merely comports with the congressional intent of the 1990 Amendments to the Act of shifting the responsibility for interstate transport from EPA to the states affected by such air pollution. For instance, Congress provided procedures for a commission to be formed of one or more states that may contribute significantly to a NAAQS violation in another state. 42 U.S.C. 7506a. Once established, the commission is to assess the interstate transport problem and formulate recommendations towards its resolution. Also, the courts have recognized that the clear intent of Congress is for the states determine the specific measures for achieving compliance with the Clean Air Act. See Union Electric Co. v. EPA, 427 U.S. 246, 269 (1976)(declaring that the Clean Air Act gives the states the power to determine which sources would be burdened by regulations and to what extent ); Virginia v. EPA, 108 F.3d 1397, 1410 (D.C. Cir. 1997)(holding that the state responsibility of selecting emission limitations best suited to its particular situation in complying with national air quality standards was not altered in any of the subsequent amendments to the Act) Fed. Reg. 60,318 (1997). On July 18, 1997, EPA replaced the 0.12 ppm/1-hour ozone standard with a more stringent 8-hour standard set at 0.08 ppm, which took effect September 16, Fed. Reg (1997). The new NAAQS would be met when the third highest daily maximum 8-hour average ozone concentration recorded each year by a monitoring station in a designated area, averaged over a three year period, is less than or equal to 0.08 ppm. 52 The states affected by the proposed SIP call are as follows: Alabama, Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, West Virginia, and Wisconsin Fed. Reg. at 60,

16 4.04 EASTERN MINERAL LAW INSTITUTE comment period, EPA is committed to publish the final rulemaking within 12 months of the issuance of the proposed SIP call. 54 Subsequently, the called states then would have 12 months to develop and submit SIPs containing control measures that would meet the assigned statewide emissions budget. 55 EPA determined such states contribute significantly under a weight of evidence test devised specifically for ozone. This proposed significant contribution test is not a bright line test, but rather involves the consideration of several factors: The level of emissions in the area upwind of a nonattainment area; The amount of contribution (ppb above the level of the standard) made to the downwind nonattainment area; The transport distance between upwind source area and the downwind problem area; and The geographic extent of the contribution downwind. Possibly other factors, including the relative costs of controlling downwind emissions. 56 This weight of evidence test, consequently, disregards previous rulemaking and court decisions that interpreted significant contribution in the context of Section 126 actions. 57 EPA justifies its deviation from precedent by distinguishing the issues involved in the regulation of ozone from the pollutants that were the subject of the previous Section 126 proceedings. 58 The following statement by EPA was made in support of its proposed application of the proposed weight of evidence test for substantial contribution: The significant contribution test is a facts-and-circumstances analysis that depends on [several listed] factors, and differences among these factors may yield different results under this test. Accordingly, the differences in the key factors between the earlier decisions and today s proposal [the SIP 54 Id. 55 Id. at 60, Fed. Reg. at 60, E.g., New York v. U.S. EPA, 852 F.2d 574 (D.C. Cir. 1988) Fed. Reg. at 60,326 (1997). 134

17 OZONE TRANSPORT 4.05 call] means that those earlier decisions are not determinative for today s proposed action. 59 The proposed control strategy involves imposing seasonal budgets that would determine the amount of NOx emissions permissible from each affected state. 60 Included in each state s proposed total budget are separate proposed budgets that reduce NOx emissions from electricity generation and nonutility sources in the state. 61 For the electric power industry as a whole, the NOx emissions budget is proposed at a level which is equivalent to an average NOx emission rate of 0.15lb/mmBtu EPA s Proposed Regulation of the Midwest and Southeast. Before OTAG had completed its modeling efforts and analyses, EPA indicated on November 9, 1996, that the Agency intended to call the SIPs of the OTAG states concerning interstate transport of ozone. EPA formally announced its position to proceed with an eastern United States SIP call in an advance notice of proposed rulemaking on January 10, EPA viewed such action as necessary due to the delays that were occurring in the OTAG process. In the advance notice, EPA indicated that it would identify the amounts by which each state would be required to further reduce NOx and VOCs from sources within their borders. 64 The identified states would either have to dispute EPA s determination of SIP inadequacy or develop source-control strategies to attain the required reductions. EPA also suggested that states might be provided with less than the 18-month period allowed by the Clean Air Act to develop control strategies in revised SIPs. 65 On April 16, 1997, EPA reversed its position and announced that it had decided to delay the SIP call rulemaking until after it made a decision 59 Id. 60 Id. 61 Id. at 60, Id. at 60, Fed. Reg. 38, Id. 65 Id. 135

18 4.05 EASTERN MINERAL LAW INSTITUTE on the revisions to the ozone and particulate matter air quality standards that were proposed in The previous announcement by EPA suggested that the efforts of OTAG would not influence EPA s position that substantial reductions in ozone levels throughout the eastern United States were necessary for the nonattainment areas to attain the ozone standard. Under pressure to complete the assessment, OTAG s analytical work and final recommendations did not resolve the issues related to ozone transport on a state-by-state basis. OTAG essentially placed the responsibility for resolving these issues on the states responding to EPA s proposed SIP call. Despite EPA s repeated expressions that it considered the technical analyses and conclusions of OTAG, the proposed SIP call itself was inconsistent in many respects to final recommendations resulting from the two-year OTAG process. For example, OTAG recommended that states should have the opportunity for additional modeling over 12 months to ascertain an individual state s level of contribution to nonattainment areas (OTAG modeling only involved regional-scale modeling). 67 The proposed SIP call provided only 120 days for comment. Such a short time period effectively precluded the states from completing any additional modeling and analyses in response to EPA s finding of significant contribution and proposed budgets. OTAG had also recommended a range of control levels. EPA, however, had proposed budgets which reflected the extreme end of the spectrum for imposing controls. Moreover, the proposed SIP call did not take into account the geographic variability of ozone transport as recognized by OTAG. EPA proposed that the budget for each state be calculated using the same control measure assumptions regardless of the differences noted by OTAG between the range of transport in the North and South. This far-reaching regulation, moreover, is focused heavily upon electric utilities as opposed to mobile sources of NOx emissions (e.g., automobiles, buses) that are concentrated in the large urbanized nonattainment areas of 66 An April 16, 1997 letter to Mary Gade, OTAG Chair, from Mary D. Nichols, Assistant Administrator, EPA, stated that EPA s new schedule for the SIP call would allow the Agency to fully consider all of OTAG s technical work and deliberations. On file with author. 67 On file with author. 136

19 OZONE TRANSPORT 4.05 the Northeast. Moreover, the OTAG modeling indicates that none of the existing serious and severe ozone nonattainment areas of the Northeast will attain the ozone standards even if the most stringent regional control strategy the elimination of all upwind emissions is deployed. 68 In other words, if all power plants, industries, and motor vehicles cease operating in upwind states, the ozone standards still will not be attained in the serious and severe nonattainment areas that were the impetus for OTAG s creation. Thus, EPA has responded to the northeast states failure to address their own air quality problems by shifting the expense of costly control measures over entire regions of the United States. In addition to undermining the very reason for OTAG, the Section 126 petitions filed by the Northeast states subvert the OTAG purpose in another respect: using an environmental Trojan Horse to gain economic advantage in the continuing deregulation of the electrical utility industry. The industry structure is changing from a local monopoly on utility services to a competitive-based market system. In this new open market environment, retail sellers of electric power are expected to purchase the lowest priced power for resale. As utilities in the Midwest and Southeast provide electric power for less cost than comparable Ozone Transport Region utilities, the petitioning states essentially are requesting relief under Section 126 in order to level an economic playing field. In essence, the petitions seek to have EPA impose capital-intensive NOx emissions controls on those regions of the United States with disparate utility costs. 69 The Section 126 process serves as a powerful vehicle for the Northeast to exact additional operating expenses on future competitors. Should EPA grant the petitions filed by the OTR states and impose the most stringent level of controls sought, the electric utilities in the states targeted by such petitions would incur tremendous increases in costs as follows: On file with author. 69 See e.g., Petition of the State of New York for a Finding Pursuant to 126(b) of the Clean Air Act, 42 U.S.C. 7426(b), p. 57 (August 12, 1997); Petition of The Commonwealth of Pennsylvania for Abatement of Excess Emissions, p. 4 (August 14, 1997). 70 Thomas A. Hewson, Jr. & John B. Stamberg, Energy Ventures Analysis, How Much More? Evaluation Of Three Proposed NOx Control Programs For Utilities In 37 State OTAG Regions (1997). The estimated electric utility compliance costs are based on

20 4.06 EASTERN MINERAL LAW INSTITUTE Annual Target State Capital Cost Compliance Cost Alabama $ 929,206,000 $ 190,790,000 Arkansas 317,581,000 65,477,000 Georgia 943,087, ,904,000 Illinois 1,488,707, ,334,000 Indiana 1,688,716, ,688,000 Iowa 477,084,000 91,506,000 Kentucky 1,357,586, ,698,000 Louisiana 487,807, ,166,000 Michigan 946,756, ,759,000 Minnesota 442,372,000 94,354,000 Mississippi 284,327,000 55,965,000 Missouri 861,764, ,773,000 North Carolina 351,258,000 82,555,000 Ohio 1,836,358, ,751,000 South Carolina 399,399,000 80,134,000 Tennessee 752,080, ,293,000 Virginia 482,454,000 95,514,000 West Virginia 1,162,589, ,347,000 Wisconsin 577,862, ,318, Conclusion. Massive amounts of resources have been expended in developing strategies that rely upon regulating the Midwest and Southeast in order to address the Northeast s air quality problems. The same vigor and devotion has not been found on the part of the Northeast states with respect to sources of ozone generating emissions within their own borders. Since the enactment of the 1990 Amendments to the Clean Air Act, the Northeast states have demonstrated a consistent reluctance to undertake many of the required steps that would reduce ozone in their urban nonattainment areas. percent NOx reduction from the 1990 rate or 0.15lb/mmBtu with no trading of emission allowances. 138

21 OZONE TRANSPORT 4.06 The Clean Air Act requires Serious and Serious, Severe, and Extreme ozone nonattainment areas to devise and implement enhanced vehicle inspection and maintenance (I/M) programs to bring about needed reductions in urban smog. 71 Several states in the OTR, however, repeatedly fail to fulfill the I/M requirement. 72 Another example is the State of Connecticut s tardiness in establishing control measures as part of a down payment toward ozone attainment in return for extension of Clean Air Act deadlines. Consequently, tracing the cause of the Northeast s lack of progress in attaining the ozone standard actually may lead full circle to the region s own history of resistance to local control measures. The conflict over the responsibility for the Northeast s ozone violations has both the problem-states and EPA looking primarily to electric utilities in the Midwest and Southeast for a solution. While the OTAG process provided a foundation for determining the upwind contribution of ozone to the Northeast, it was never intended support counterproductive Section 126 petitions that ensued. Furthermore, the OTAG findings and final recommendations are in stark contrast to the extreme level of regulation of the Midwest and Southeast selected by EPA to mitigate interstate ozone transport. Consequently, the controversy over ozone transport is being resolved through burden shifting, rather than by addressing the undisguised economic aims of the Northeast states. 71 Clean Air Act 182, 42 U.S.C. 7511a. 72 An illustration is found in EPA s notification to Massachusetts: On October 6, 1997, I wrote to you regarding the Commonwealth s failure to implement a vehicle inspection and maintenance (I/M) program as part of its Clean Air Act (Act) implementation plan. Regrettably, needed I/M legislation still has not been enacted... the Commonwealth is not on schedule to implement its I/M program, and EPA sees no prospect that the program will commence by either November 15, 1997 or January 1, Letter from John P. DeVillars, Regional Administrator, EPA, to Sidney Holbrook, Commissioner, Department of Environmental Protection, Connecticut (July 1, 1996). On file with author. 139