Navigating a Regulatory Twilight Zone: Sierra Club V. Sandy Creek Energy Associates

By Saunders, E. Nichole | Energy Law Journal, January 1, 2013 | Go to article overview

Navigating a Regulatory Twilight Zone: Sierra Club V. Sandy Creek Energy Associates


Saunders, E. Nichole, Energy Law Journal


I. INTRODUCTION

When courts overrule agency regulations affecting environmental permitting processes, a "twilight zone" can develop for those entities permitted under the invalidated regulatory standards.1 While compliance following such a reversal may be seemingly complicated to define or obtain, a regulated entity should not merely rely on its previous compliant status as satisfactory. When such transition periods occur, a regulated entity's chosen path to compliance may affect its ability to quickly and easily resolve legal conflicts and move forward, while the likelihood of environmental lawsuits may render a wait-and-see approach imprudent. Although ambiguities may develop during this twilight period, and paths to compliance differ as entities seek individual solutions, all paths unambiguously lead to some form of adapted compliance. Simply put, the most efficient strategy in response to such a twilight zone is early action. The question for each entity, however, is when and how? This note will examine this wilight zone phenomenon by analyzing how one coal-fired power plant increased rather than lessened its own regulatory burden by relying on an invalidated status of compliance.

II. BACKGROUND & CASE HISTORY

Oil- and gas-fired power plants were the subject of one of the most recent regulatory flip-flops in enforcement of the Clean Air Act (CAA). In relevant part, the statute at issue, section 112(g)(2)(B) of the CAA, reads

[n]o person may construct or reconstruct any major source of hazardous air pollutants [HAPs],2 unless the Administrator (or the State) determines that the maximum achievable control technology [MACT]3 emission limitation under this section for new sources will be met. Such determination shall be made on a case-by-case basis where no applicable emission limitations have been established by the Administrator.4

In December 2000, the Environmental Protection Agency (EPA) found it "appropriate and necessary"5 to regulate emissions from coal- and oil-fired electric utility steam generating units (EGUs).6 Accordingly, the EPA listed these utilities as a source category under section 112(c)(1),7 subjecting them to section 112(g)'s MACT requirements.8 While the listing process itself was routine, the sequence of events that followed was not.

A. Listing, Delisting, and Vacatur in New Jersey v. EPA9

In March of 2005, five years after initially listing coal- and oil-fired EGUs under section 112, the EPA suddenly delisted them,10 determining that these EGUs would, instead, be covered under section 111 through a new program, the Clean Air Mercury Rule (CAMR). 11 A host of plaintiffs, including fourteen states, sued to challenge the Delisting Rule, claiming that the EPA had not complied with the CAA's statutory delisting procedure.12 In New Jersey v. EPA, the D.C. Circuit found the EPA's Delisting Rule unlawful and vacated it, along with the CAMR.13 Due to this regulatory flip-flop, major coal- and oil-fired EGUs once again fell under the MACT requirements of section 112(g).14 New Jersey closed a three-year twilight zone during which construction permits were legally issued to the delisted EGUs without requiring installation of the maximum achievable control technology for the hazardous air pollutants their plants would emit.

B. The Aftermath of New Jersey and Sierra Club's Ensuing Fifth Circuit 'Success'

Environmental organizations sought to expedite enforcement of the revived MACT requirements by swiftly taking action through citizen suits nationwide.15 After New Jersey, Sierra Club sent notices of intent to sue (NOIs) to plants in Arizona, Georgia, Kentucky, North Carolina, Texas, Missouri, and Wyoming.16 All of these plants were being constructed under permits arguably invalidated by New Jersey because they were issued without MACT determinations under the Delisting Rule.17 A majority of Sierra Club's NOIs resulted in some form of compliance or enhanced mitigation through pre-litigation settlements. …

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