Fifth Circuit: Title V Doesn't Allow Review of NSR Permit Conditions

In a significant win for both EPA and the industrial community, the Fifth Circuit Court of Appeals, in Environmental Integrity Project v. U.S. EPA, No. 18-30384 (May 29, 2020), upheld EPA’s determination, first announced in In re PacifiCorp Hunter Energy, that “the Title V permitting process is not the appropriate vehicle for re-examining the substantive validity of underlying Title I preconstruction permits.” The Fifth Circuit upheld EPA on Skidmore deference, which means that the court found EPA's interpretation “independently persuasive.” The Fifth Circuit’s holding increases the likelihood that the EPA’s interpretation may survive a change in administrations.

ANALYSIS

Background

In 2005, the Texas Commission on Environmental Quality (TCEQ) issued a plantwide applicability limit (PAL) permit (PAL6) for ExxonMobil’s Baytown Olefins Plant. PAL6 was incorporated into the facility’s Title V permit in 2006 and renewed in 2014. In 2012 ExxonMobile applied for a minor Title I preconstruction permit to build a new ethylene production facility at the Baytown plant. The Environmental Integrity Project (EIP), Sierra Club and Air Alliance Houston filed comments contesting the case, arguing that the PAL6 permit contravened federal PAL rules and could not shield ExxonMobile from major source permitting that the ethylene production facility would have required but for PAL6. TCEQ rejected this contention and issued a minor NSR permit for the ethylene production facility. ExxonMobile then applied to TCEQ to modify the Title V permit to incorporate the minor NSR permit conditions. EIP and Sierra Club again filed comments. TCEQ issued the revised Title V permit, EPA failed to object, and EIP and Sierra Club petitioned EPA to object. EPA denied the petition, citing Hunter Energy for the proposition that “where the EPA has approved a state’s Title I permitting program, duly issued preconstruction permits will establish the ‘applicable requirements’ and the terms and conditions of those permits should be incorporated into a source’s Title V permit without further review.” EPA said that EIP and Sierra Club should have raised their challenge through the Title I permit process or enforcement authorities. EIP and Sierra Club challenged the denial of their petition in the Fifth Circuit.

Fifth Circuit Analysis

The Fifth Circuit first held that it would review EPA’s dismissal of the petition under the arbitrary and capricious standard and that EIP and Sierra Club must “demonstrate … that the permit is not in compliance with the requirements” of Title V.

The Fifth Circuit next considered whether it must defer to the EPA’s decision. EPA claimed that the Hunter Energy order is subject to Chevron deference. EIP and Sierra Club argued that “applicable requirements” was not ambiguous but was simply “broad and sweeping” and encompassed all of the CAA’s requirements and no Chevron deference was appropriate. The Fifth Circuit avoided deciding whether Chevron deference was appropriate, because it found, independent of Chevron, that the Hunter Energy order was “persuasive” and therefore accorded it the Skidmore “deference ‘its persuasiveness warrants.’” Slip op. at 10 (quoting Union Neighbors United, Inc. v. Jewell, 831 F.3d 564, 580 (D.C. Cir. 2016).

Textual Analysis

The Fifth Circuit reviewed the Hunter Energy order to determine whether it was persuasive. The Fifth Circuit characterized the Hunter Energy decision as relying on an omission from Title V: no where does Title V require that the Title V “’consolidation process…involve a review of the substantive adequacy’ of preconstruction requirements, an undertaking that ‘would entail much more than taking steps to consolidate existing air pollution requirements.’” The Fifth Circuit held that this was persuasive, as “a statute should not be read to include matter it does not include,” citing Lamie v. U.S. Tr., 540 U.S. 526, 538 (2004).

The Fifth Circuit noted that the EPA justified its position in part on the much more detailed provisions found for oversight of Title I permits in Title I and contrasting those detailed provisions with the sparse detail in Title V. The Fifth Circuit also found this position persuasive.

“Applicable Requirements” Analysis

The Fifth Circuit then picked up the crux of EIP’s and Sierra Club’s contention: that the term “applicable requirements” encompasses “all the Act’s requirements as applied to a particular source and not simply requirements that happen to be contained in a Title I new-source permit.” EIP and Sierra Club argued that the Supreme Court has held that “statutes written in broad, sweeping language should be given broad, sweeping application, citing New York v. FERC, 535 U.S. 1 (2002). EPA countered that the broad terms did not “clearly or specifically” require revisiting prior permitting decisions and that there is no “clear indication” that Congress had “intended Title V to ‘alter the [agency’s] balance of oversight’ over state permitting processes” – Congress did not “hide elephants in mouseholes” by “alter[ing[ the fundamental details of the regulatory scheme in vague terms or ancillary provisions.”

The Fifth Circuit held that EPA had the better of this argument, holding that the phrase “such other conditions as are necessary to assure compliance with applicable requirements of this chapter” cited by EIP and Sierra Club is “residual to the three listed contents” of enforceable emission limitations and standards, a compliance schedule, and a periodic monitoring report. The court noted that “residual clauses are often phrased broadly; wrenched out of context, they might appear to encompass for more than the preceding terms.” The Fifth Circuit held that the reading proposed by EIP and Sierra Club “would effectively rewrite the clause to read: a de novo reconsideration of the source’s preconstruction permitting” and that “Congress would not have hidden that regulatory elephant in this residual mousehole.” Slip op at 15-16.

Structure and Purpose Analysis

The Fifth Circuit also found persuasive EPA’s argument that its interpretation “is better aligned with the structure and purpose” of Title V. EPA argued, and the court accepted, that Title V was not intended to “add new substantive requirements” to the Act, but to streamline them into a single document. The Fifth Circuit agreed with EPA that the original Part 70 preamble was “probative” of the intent of Title V overall and the preamble states that “Title V permits are to ‘incorporate’ the standards contained in Title I preconstruction permits without further review.’” 56 Fed. Reg at 21,738-39 (emphasis added by Fifth Circuit). Finally, the Fifth Circuit found that the EIP’s and Sierra Club’s view of how EPA’s Title V objection authority should be used was “at odds with the ‘abbreviated’ timeline Congress gave EPA,” noting that EPA only had 45 days to conduct independent review and an additional 60 if there was a petition. The court stated “we agree that these timelines are ‘inconsistent with an in-depth and searching review of every’ permitting decision regarding a given source,” slip op. at 18, and noted that “subjecting a source’s preconstruction permit to periodic new scrutiny, … would be inconsistent with Title V’s goal of giving sources more security in their ability to comply with the Act,” slip op. at 18.

In closing, the Fifth Circuit noted that it was also persuaded that “EPA’s construction of Title V ‘respects the finality’ of state preconstruction permitting decisions, which is consistent with the Act’s ‘cooperative federalism.’” It stated that EIP and Sierra Club could continue to enforce the Act’s substantive requirements within its bounds. Nevertheless, because it found that EPA’s view “that Title V permitting is not the appropriate vehicle for reexamining the substantive validity of underlying Title I preconstruction permits” was persuasive, it dismissed EIP’s and Sierra Club’s petition.

COMMENTARY

The EIP v. U.S. EPA decision is an important win for the Trump Administration and its goal of greater “cooperative federalism” with the states. The Fifth Circuit held that EPA’s interpretation is not only “permissible” (which would meet the Chevron test), but also that it is “persuasive” concerning the intent and structure of the Clean Air Act. The Fifth Circuit’s decision is a far more robust endorsement than a mere Chevron affirmance and increases the likelihood that Title V objections will not, again, become a method of supervising the NSR program. It is not, however, the final word as the Hunter Energy decision, which is the foundation, is still on appeal in the Tenth Circuit.

The expansion of Title V objections to NSR permits and permit conditions worked substantial damage to the Clean Air Act’s regulatory design. Objections are unreviewable. Petitioners could assert any number of reasons for why a prior NSR permit was defective. EPA did not have the original record before it and so could not ascertain whether the petitioners’ comments had been appropriately rejected. States and permittees were not clearly parties in the process. The whole process was fraught with delay, unfairness and, if broadened as the environmental parties sought, likely violative of constitutional due process. In effect, the environmental community sought to place every NSR permit “in play” in every Title V renewal. Fortunately, the court declined that invitation. We hope other courts will be as wise.

Use of Title V objections to supervise the NSR permit program was never the congressional design. Let us hope that EIP v U.S. EPA has consigned that practice to the dustbin of history.