The Clean Air Act

 

A Brief Review

 

by: William J. Anaya

 

Arnstein & Lehr, LLP

120 South Riverside Plaza

Suite 1200

Chicago, Illinois 60606-3109

Phone:  312-876-7109

Facsimile:  312-876-7309

wjanaya@arnstein.com

 

 

 

            Investors looking to expand into U.S. entities often encounter those peculiarly American environmental regulations.  Chief among those regulations are the strictures imposed by the "command and control" structure of the federal Clean Air Act.  The following is a brief sketch of the scope and authority of that statute, and its impact on entitles involved with emissions that affect the air shed in the Untied States.

 

The federal Clean Air Act (42 U.S.C. Sections 7401 to 7671q) was originally enacted by Congress in 1963, later amended in 1967, then again in 1970, and most recently in 1990.  The 1970 Clean Air Act Amendments established the now familiar command and control regulatory structure, while the 1990 Clean Air Act Amendments significantly expanded the scope of regulated emissions and processes, and provided alternative regulatory and market-based systems. [1] 

 

SCOPE AND PURPOSE OF CLEAN AIR ACT

 

            The Clean Air Act is a clear indication that Congress is concerned about outdoor air pollution.[2]  Pursuant to the Clean Air Act, three categories of sources of emissions are regulated: Stationary Sources, Mobile Sources and Area Sources.  Generally speaking, Stationary Sources are those associated with industrial and commercial processes (e.g., factories, refineries, power plants and printers to name a few).  Mobile Sources are those associated with transportation (e.g., automobiles, trains, trucks and aircraft).  Finally, Area Sources are those that affect the outdoor air shed and which are neither stationary nor mobile sources (e.g., lawnmowers, off-road equipment and consumer products). 

 

Outside of the Clean Air Act, there are a number of other federal environmental laws that address other aspects of outdoor air pollution, but which are outside of the regulatory ambit of the Clean Air Act and which are ancillary to other regulated environmental activity (e.g., air emissions from hazardous waste disposal facilities are regulated under the Resource Conservation and Recovery Act). In addition, the Emergency Planning and Community Right To Know Act requires certain regulated entities to report "toxic" air emissions in the same manner that spills of reportable quantities of materials are reported to local, state and national authorities. Finally, indoor air pollution in the workplace is regulated pursuant to the Occupational Safety and Health Administration Act (OSHA), and various states have enacted laws regulating indoor activities and air quality in  offices and other business settings. 

 

CRITERIA POLLUTANTS AND NATIONAL AMBIENT AIR QUALITY STANDARDS

 

            Broadly speaking, under the authorities of the Clean Air Act, Congress and USEPA have determined that there are six industrial pollutants present in the atmosphere that create adverse health effects.  Specifically, USEPA has identified the following "criteria pollutants:" Ozone (O₃), Particulate Matter (PM_x), Carbon Monoxide (CO), Sulfur Dioxide (SO₂), Lead (Pb) and Nitrogen Dioxide (NO₂) as those air pollutants that needed to be controlled within the air shed.

 

Ozone (O₃), is also commonly known as "smog," and is a produced following a combination of Volatile Organic Compounds (VOCs) and Nitrogen Oxides (NOx) and sunlight.  Recently, science has determined that Ozone is more difficult to regulate because Ozone precursors (VOCs and NOx) are transported into a state in the wind from out-of-state sources.  In Section 184 of the Clean Air Act, Congress recognized the "transport" problem and has authorized USEPA to investigate alternatives. 

 

Particulate Matter (dirt, dust, ash, fines etc.) is regulated both as particulate matter itself (visibility standards) and according to its size (10 microns or less) as measured and collected over a prescribed time.  In 1997 USEPA revised the PM standard to include regulation of Particulate Matter at 2.5 microns or less.  However, the new rules designed to implement the new standard have been delayed pending more study. 

 

Carbon Monoxide (CO) and Nitrogen Dioxide (NO₂) are generally by-products of combustion and regulated accordingly.  Nitrogen Oxides (NOx which includes NO and NO₂) are regulated as a Ozone precursors.  Sulfur Dioxide (SO₂) is regulated pursuant to the so-called Acid Rain Regulations discussed later, and Lead (Pb) has basically been removed from the air shed following its enforced removal from gasoline.[3]

 

            For regulatory purposes, it is important to recognized that the six criteria pollutants are in the atmosphere, and the scope and purpose of the Clean Air Act is to regulate current emissions from various sources so that the presence of each of the criteria pollutants is eventually reduced below the national standard established publicly for each pollutant.  As designed, the Clean Air Act regulates current emissions of those materials that contribute to the presence of the criteria pollutants by command and control rules, regulations and permit restrictions and other regulatory incentives.  The national standard for each of the criteria pollutants are described as the National Ambient Air Quality Standards (NAAQS) and are established by USEPA pursuant to authority provided at Sections 108 and 109 of the Clean Air Act. 

 

ATTAINMENT AND NON-ATTAINMENT

 

After setting the national NAAQS standard for each of the criteria pollutants, USEPA then determines whether or not the various states are attaining those national standards for each of the criteria pollutants.  That is, following a county by county analysis, USEPA determines whether the air shed within specific geographic areas in each state has attained the national NAAQS standard for each of the six criteria pollutants or not.  That is, USEPA makes a separate determination for each of the six criteria pollutants in each geographic area.  Indeed, USEPA may determine that particular geographic area has attained the national NAAQS standard for one or more of the criteria pollutants (i.e., that area is "in attainment" for that criteria pollutant), but has not attained the national NAAQS standard for one or more of the remaining criteria pollutants (i.e., that area is "in non-attainment" for that criteria pollutant). 

 

In essence, how the Clean Air Act is implemented and applied to an individual source largely depends on the attainment/non-attainment status of the geographic area where a source is located.

 

In the event that a source is located in an area that is determined to be in attainment for a particular criteria pollutant, then the individual sources emitting that criteria pollutant (or its precursor) will be regulated somewhat more leniently than if the source is located in a non-attainment area.  In other words, sources within non-attainment areas involved in emissions of criteria pollutant(s) that are exceeding the NAAQS standard in that area can expect stronger enforcement and stronger regulatory limits on the volume of emission from that source's operations.  Sections 171-178 of the Clean Air Act provide the authority for the imposition of additional conditions and restrictions on source located within non-attainment areas. 

 

NEW AND EXISTING SOURCES IN NON-ATTAINMENT AREAS

           

New stationary sources in non-attainment areas will be required to control the new emissions at the Lowest Achievable Emission Rate (LAER) if the source emits more than the major source threshold for that criteria pollutant.  According to the LAER rules, emissions from new sources must be offset by reductions elsewhere within the region in direct proportion to the non-attainment problem. 

 

Existing major sources (sources with emissions that exceed a pre-determined value for a criteria pollutant) located within the non-attainment area are required to control emissions (of the criteria pollutant described as non-attainment) pursuant to the Reasonably Achievable Control Technology (RACT) standard.  According to USEPA, RACT is a function of the costs of control per ton of emissions.  That is, it is deemed "reasonable" to require a source to spend only so much on control (a pre-determined amount) – but no more.  If the control costs that are required by the Agency (or the Air Rule) exceed that pre-determined "reasonable" cost amount, then the Air Rule or the Agency's expectation is unfair and should not be enforceable as a matter of law because it "exceeds RACT."[4]

 

NEW AND EXISTING SOURCES IN ATTAINMENT AREAS

           

In those areas that have attained the national NAAQS standard and are classified as attainment areas, the Prevention of Significant Deterioration (PSD) rules are implemented in order to keep and maintain a healthy air shed.  In attainment areas, stationary sources are classified into one of three classes based on an analysis of the source's Maximum Theoretical Emissions (MTE) and the source's Potential To Emit (PTE) ([5]: 

 

1.         Major Sources (sources with MTE and PTE both in excess of 250 tons per year (tpy) of a criteria pollutant) in PSD areas must employ the Best Available Control Technology (BACT) to control emissions, and those sources are required to verify (through sophisticated dispersion modeling) that the expected additional emissions from that new source will not create an exceedence of any criteria pollutant within the relevant air shed currently in attainment. The Major Source Rules in attainment areas are found at Section 161-169 of the Clean Air Act).[6] 

 

2.         Synthetic Minor Sources/Federally Enforceable State Operating Permit (FESOPs) (sources with MTE in excess of 250/tpy but PTE at less than the 250/tpy) are regulated by state permits.  Generally, states require emission restrictions and process restrictions (e.g., limitations on fuel use or hours of operation) to ensure the prevention of significant deterioration standards.

 

3.         Natural Minor Sources (sources with both MTE and PTE less than 250/tpy) are also regulated by state permits negotiated with state regulators to ensure the prevention of significant deterioration standards consonant with the state's general air pollution plan and air rules.  Emissions limitations and process restrictions are common in these permits.

 

4.         De Minimis Sources.  Some states have notification, exemption or registration requirements for de minimis emission sources.  There is no required permit in these instances, but the source may be required to notify the state and report annual emissions so that the state may monitor the source and the emissions in concert with the state's general air pollution plan and air rules.

 

NEW SOURCE PERFORMANCE STANDARDS

 

In addition, Section 111 of the Clean Air Act provides authority for New Source Performance Standards (NSPS) rules for stationary sources.  The NSPS rules are becoming increasingly irrelevant to the extent that other air rules currently regulate emissions more stringently than the NSPS rules. However, NSPS rules cannot be ignored because those rules continue to require additional and independent reporting, monitoring, notification and record keeping obligations. 

 

FEDERAL AND STATE ROLES IN IMPLEMENTING THE CLEAN AIR ACT

 

The job of implementing and applying the Clean Air Act program, rules and permit restrictions has been largely delegated to the states or to smaller units of local government (such as local Air Quality Boards in California or to a county, such as Mecklenburg County in North Carolina).  Each participating state or local unit of government has some flexibility in establishing its air rules as part of its regulatory structure.  However, the local air rules must be designed to achieve the National Ambient Air Quality Standards established by USEPA and described above.  The local air rules are codified in each jurisdiction and submitted to USEPA for approval as part of the State Implementation Plan (SIP) described and authorized at Section 110 of the Clean Air Act. 

 

USEPA reviews the individual SIPs and determines whether or not the SIP will be effective in achieving the National Ambient Air Quality Standards and whether the SIP will interfere with the efforts of another state.  In the event that a SIP is rejected by USEPA, or in the event that the state opts out of the federal regulatory program, then USEPA will prepare a Federal Implementation Plan (FIP) and apply the FIP rules to sources within that jurisdiction. 

 

USEPA and the local governments are in constant contact concerning the SIP.  Section 110(k)(5) of the Clean Air Act authorizes USEPA to call for a SIP revision (referred to as a "SIP Call") whenever USEPA determines that the existing SIP is "substantially inadequate to attain or maintain the relevant [NAAQS]" or is not adequate to mitigate interstate transportation of pollutants, or is not adequate to comply with the Clean Air Act in general.[7]

 

 

CONSTRUCTION PERMITS AND OPERATING PERMITS

 

Before a source may construct or operate a process that will emit Clean Air Act regulated material, that source must apply for and receive a Construction Permit.  In many cases, an Operating Permit will be required after construction is completed and before operation of the industrial process is allowed. 

 

The Operating Permit program for Major Sources is described in Title V of the Clean Air Act.  The Construction Permit Program for Major Sources is described in the Prevention of Significant Deterioration (PSD) regulations promulgated at 40 CFR Part 51.  Generally speaking, a Major Source is a stationary source with the potential to emit a criteria pollutant (or its precursor) in excess of a predetermined value measured in tons per year.  And, each criteria pollutant has its own threshold value, and the threshold values may be different depending on whether the source is located within an attainment or a non-attainment area, and is subject to PSD Permit Rules or Title V Permit Rules. 

 

            Title V of the Clean Air Act requires the regulatory agency implementing the Clean Air Act to require permits for the following sources:

 

            A.        Major Sources

 

                        1.         Major sources defined as such under §112 of the Act.

 

2.         A major source emitting (or with PTE) over 100/tpy of regulated materials, or

 

                        3.         A major source under PSD non-attainment rules

 

B.        Sources subject to the New Source Performance Standards identified at Section 111 of the Clean Air Act.

 

C.        Sources permitted to emit more than 10/tpy of a single Hazardous Air Pollutant (HAPs) regulated under Section 112 of the Clean Air Act (see below), or emitting more than 25/tpy of two or more such HAPs.

 

D.        Any source regulated pursuant to the Acid Rain regulations at Title IV of the Clean Air Act.

 

            E.        Any other source described in a regulated industry by USEPA.

 

            Prospective/Potential Permitees institute the permit process by submitting a detailed Permit Application describing all of the emissions associated the industrial process under consideration, as well as a description of all points of emissions, rates of emissions, a description of controls and control requirements under the rules, and a detailed description of the monitoring and measurement techniques the source will employ to show compliance.  Finally, all applications for permits require the a statement, under oath, of current compliance with the Clean Air Act.

 

            Approved permits will have no more than a 5 year term, and will describe:  all applicable emission limitations and standards; all monitoring, record keeping and reporting obligations, as well as an admonishment to report (promptly) deviations from the plan.  If applicable, the Permit will address SO₂  emissions and conditions.  In addition, the final Permit will indicate that the obligations described in the permit are severable, modifiable and terminable.  The permit fees and methods and means of payments will be identified also. 

 

Section 504(f) of the Clean Air Act provides that compliance with the specific terms of a permit shall be deemed compliance with the applicable provisions of the Clean Air Act (i.e., the so-called "permit shield").     

 

HAZARDOUS AIR POLLUTANTS AND SECTION 112 OF CLEAN AIR ACT

 

In 1992 USEPA published a list of Hazardous Air Pollutants (HAPs) and a schedule of control standards to be applied for HAPs emissions.  Congress intends to control HAPs to the "maximum degree of reductions" that are achievable when considering energy and other environmental considerations.  This control standard is referred to as the MACT standard (Maximum Achievable Control Technology).[8] 

 

One of the first set of MACT Standards involved the so-called Hazardous Organic NESHAP (HON) standard, which addresses some 112 air toxics from some 370 organic chemical manufacturers and 940 chemical processes.  MACT Standards also apply to a variety of other industrial processes, such as coke ovens, industrial cooling towers, halogenated solvent cleaning operations, magnetic tape manufacturing operations, gasoline terminals and pipeline breakout stations, as well as petroleum refineries, aerospace manufacturing operations, wood furniture manufacturing operations, printing and publishing operations, as well as polymer and resin production processes.  See 40 CFR Part 63; Section 112 of the Clean Air Act. 

 

Section 112 of the Clean Air Act requires USEPA to promulgate and enforce HAPs rules that provide an "ample margin of safety to protect the public health."  Initially, USEPA makes a determination of what is "safe."  However, "safe" does not necessarily mean "risk free." The Courts have criticized USEPA's decisions unless the determination of "safe" is well considered and based solely upon risks to public health. 

 

 

 

 

ACID RAIN, STRATOSPHERIC OZONE, AND OZONE TRANSPORT

 

            Sulfur emissions are regulated pursuant to the so-called "Acid Rain Regulations" authorized pursuant to Title IV of the Clean Air Act. In addition, chlorofluorocarbons emissions that affect the stratospheric ozone[9] layer are regulated in Title VI of the Clean Air Act.

MOBILE SOURCES

 

Mobile sources are significant contributors of carbon monoxide, nitrogen oxides, volatile organic compounds and lead.  Mobile sources are regulated by the contents of the fuels burned and the emissions standards established for new vehicles (Section 202-234 of the Clean Air Act).  In addition, states have the authority to implement Transportation Control Plans (TCP) that encourage the use of mass transit.  TCP programs have met with little success.   In addition, in Ozone non-attainment areas, states are required to implement Inspection and Maintenance (I/M) programs for automobiles in order to ensure that motor vehicles meet federal emissions standards, and, reformulated gasoline is mandated to lower VOC emissions (an Ozone precursor).  In addition, oxygenated gasoline is mandated in CO non-attainment areas.

 

ENFORCEMENT OF CLEAN AIR ACT

 

            The 1990 Clean Air Act Amendments provide USEPA with the power to enforce the Clean Air Act under the threat of strict civil and criminal penalties for violations.  In addition to civil enforcement options involving the courts, USEPA may chose to initiate  administrative enforcement actions without going through the Department of Justice or through the courts.  The administrative enforcement actions are similar to those available under the Clean Water Act. In the administrative forum, USEPA is authorized to impose administrative penalties of up to $200,000 or more.  The administrative process does have notice and due process proceedings, including an adjudicatory hearings. 

 

            In addition, USEPA may issue administrative citations (similar to traffic tickets) for minor violations with fines up to $5,000 per day per violation.  In certain instances, individual citizens suits are available against violators, and against the Administrator of USEPA to enforce non-discretionary acts otherwise required of the Administrator under the Clean Air Act.

 

CRIMINAL PENALTIES

 

            The Clean Air Act authorizes USEPA to pay a bounty of up to $10,000 to anyone who provides information that leads to a criminal conviction or a civil penalty against a violator.  Moreover, at Section 113(c) the Clean Air Act imposes criminal liability on any person who knowingly violates the statute.  The criminal penalties are available against individuals as well as corporations and partnerships, and may even be enforced against senior management personnel or corporate officers.  The criminal penalties may be $250,000 per day per violation and up to five years in jail.  Corporations are subject to even higher fines of up to $500,000 per day per violation.

 

            Record keeping violations are subject to fines of up to $250,000 and two years in jail for making false statements to USEPA and also for failing to file or maintain records or reports otherwise required under the Clean Air Act.  Corporations also face similar liability up to $500,000 for a similar violation.

 

            Any failure to pay a fee owed under the Act is also a criminal act and may be punishable by fines up to $100,000 and one year in jail (individuals) and $500,000 for corporations.  In addition, penalties are doubled for recidivists.

 

            A person is also subject to criminal penalties for knowingly or negligently releasing air toxics that place any other person in "imminent danger of death or serious bodily injury."  The fines for such a violation are up to $250,000 per day and up to a 15-year imprisonment.  Corporations may be fined up to $1 million per day.  Negligent releases of air toxics under similar circumstances may also be subject to fines up to $100,000 and one year in jail for individuals.  Corporations face up to $200,000 for the same violation. 

 

            Privileges, immunities and other defenses may be available, but are beyond the scope of this note. 

 

 

 

 

 

 

 

 

 

 

 

 

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