Fifth Circuit Withdraws PACAN Opinion

In our December 5, 2023, post "Fifth Circuit Rejects 'Demonstrated' as Element of BACT," we reported that the U.S. Court of Appeals for the Fifth Circuit had held, in Port Arthur Community Action Network v. TCEQ, 86 F.4th 653 (5th Cir. 2023), that the TCEQ had "erred" in requiring a demonstration that prior permitted limits actually were achieved in practice as part of BACT. Instead the court reinstated more stringent limits proposed by the Port Arthur Community Action Network (PACAN) based on previously imposed permit limits on similar units that were not yet built. On February 16, 2024, the Fifth Circuit withdrew its opinion and certified the issues to the Texas Supreme Court for resolution.

ANALYSIS

As recounted in NSR Law Blog's article above, Port Arthur LNG sought a permit for a new LNG terminal. Part of its application involved compressor engines. Port Arthur LNG proposed limits at 9 ppm NOx and 25 ppm CO. PACAN intervened in favor of 5 ppm NOx and 15 ppm CO based upon a permit issued previously to Rio Grande LNG for substantially similar engines. Unusually, EPA Region VI had filed a letter with the TCEQ Commission disagreeing with TCEQ's Executive Director's position that BACT must be "demonstrated in practice," instead asserting that a BACT determination included in a permit determination sufficed to fulfill this requirement.  TCEQ rejected PACAN's position after a hearing and PACAN appealed to the Fifth Circuit.

The Fifth Circuit in a November 2023 opinion sided with PACAN, holding that "contrary to the Commission's analysis, both state and federal guidelines direct the agency to adhere to previously imposed emissions limits in evaluating BACT," citing EPA's gloss on the Draft October 1990 NSR Manual that one "may assume" technical feasibility if a permit limit exists and "presume" the limit is applicable if in a permit limit for a similar unit. The Fifth Circuit also found unpersuasive TCEQ's argument that the limits were not demonstrated in practice, finding that TCEQ had not "explained its reasoning why it had departed from its earlier administrative policy" and faulting the TCEQ for not addressing all of the factors its APDG 6110 guidance to depart from an earlier BACT limit. Accordingly, the Fifth Circuit held that TCEQ's insistence upon operating data "departed" from TCEQ policy without adequate explanation.

NSR Law Blog criticized this decision, noting that it was difficult to square with the Clean Air Act, federal or Texas regulations, all of which require the permitting authority, on a "case-by-case basis, taking into account energy, environmental, and economic impacts and costs," to determine whether the proposed technology is "achievable" for the permitted facility. NSR Law Blog was (and is) concerned that the EPA Region 6 memo and the Fifth Circuit's decision in PACAN allow an agency to "assume" what the statute states it must find.

The TCEQ filed a motion for rehearing by the panel or en banc. The Fifth Circuit denied these motions, but in PACAN v. TCEQ, 92 F.4th 1150 (5th Cir. 2024), withdrew its November 2023 opinion. Instead, the Fifth Circuit determined that it is "presented with determinative questions of Texas law having no controlling [Texas] Supreme Court precedent." Accordingly, the Fifth Circuit certified the following question to the Texas Supreme Court:

Does the phrase “has proven to be operational” in Texas's definition of “best available control technology” codified at Section 116.10(1) of the Texas Administrative Code require an air pollution control method to be currently operating under a permit issued by the Texas Commission on Environmental Quality, or does it refer to methods that TCEQ deems to be capable of operating in the future?

The Fifth Circuit deemed this certification to be appropriate "because the resolution of this case impacts the procedures of a major state regulator."

The Fifth Circuit case is now in abeyance until the Supreme Court of Texas acts or declines to act.

COMMENTARY

As readers are aware, NSR Law Blog did not believe that the original Fifth Circuit opinion was well-founded in federal or state law. The certification creates an opportunity for a better reading -- one closer to the requirement for "case-by-case" evaluation and less amenable to manipulation -- to be restored. NSR Law Blog hopes that will be the case.

NSR Law Blog commends the Fifth Circuit for its certification of this issue to the Texas Supreme Court. The Fifth Circuit's opinion relied heavily upon guidance, both from EPA and TCEQ, to interpret a statutory term, arriving at a very broad definition of "achievable" when the state regulator used a narrower one. Given the uncertainty at both the federal and state levels about the deference to be given agencies and guidance, this seems an appropriate case for the Texas Supreme Court to resolve.