03 June 2019

Sidley Environmental Trends

Topics discussed this week include:

  • EPA to allow sales of higher ethanol fuel in the summer
  • EPA finalizes guidance on PM2.5 requirements
  • Clean Water Rule remanded by one federal court, held in effect by another
  • EPA Administrator issues memo on cost-benefit analysis in rulemakings

EPA to allow sales of higher-ethanol fuel in the summer. On May 30, the Environmental Protection Agency (EPA) released its final rule to allow the sale of gasoline blended with up to 15% ethanol, known as E15, year-round. This final rule effects a 2018 directive from the White House to extend the Clean Air Act one-pound-per-square-inch Reid Vapor Pressure waiver that currently applies to E10 (gasoline containing up to 10% ethanol) during the summer ozone season (i.e., May 1 to September 15). In so doing, EPA is interpreting E15 to be “substantially similar” to Tier 3 E10 certification, under CAA § 211(h)(4), and making several other regulatory changes to allow E15 to be made, sold and distributed in parity with E10. Second, EPA has adopted renewable identification number (RIN) market reforms to discourage the accumulation of market power. EPA will now require public disclosure of RIN holdings by an individual exceeding specified limits and will require reporting of additional price and affiliate data.

EPA finalizes guidance on PM2.5 requirements. On May 30, EPA issued final guidance on fine particulate matter (PM2.5) precursor demonstrations. The guidance is intended to allow state, local and tribal air agencies to develop optional PM2.5 precursor demonstrations in line with the PM2.5 State Implementation Plan (SIP) Requirements Rule for areas designated as nonattainment for any PM2.5 National Ambient Air Quality Standard (NAAQS). Under the PM2.5 SIP Requirements Rule, air agencies could submit an optional precursor demonstration designed to show that precursor emissions from a source within a specific PM2.5 nonattainment area do not contribute significantly to PM2.5 levels that exceed the NAAQS in that area. If EPA approves the demonstration, then that precursor might be excluded from certain control requirements otherwise applicable.

Clean Water Rule remanded by one federal court, held in effect by another. On May 28, the U.S. District Court for the Southern District of Texas held that the Clean Water Rule, or the Waters of the United States Rule (WOTUS), was too different in the final version from the proposed version. In particular, the court noted that the final rule was “the first time that the agencies gave notice that they intended to define adjacency by precise physical distance-based criteria — rather than the ecologic and hydrologic criteria in the proposed rule.” The court called the change “significant [because] it alters the jurisdictional scope of the act.” The court also noted that EPA and the Army Corps of Engineers, the agencies issuing WOTUS, released a final version of a key scientific report after the public comment period for the rule was already closed. According to the court, this report was “the most critical factual material used to support the final rule.” Thus, the public was deprived of a meaningful opportunity to comment, in violation of the Administrative Procedure Act. The rule was remanded to EPA and the Army Corps, who are already working toward replacing the rule by the end of the year. Separately, on May 29, the United States District Court for the Northern District of Oklahoma held that the rule could remain in place in Oklahoma, rejecting arguments that the rule should be stayed in that state because it would cause “irreparable harm.”

EPA Administrator issues memo on cost-benefit analysis. On May 21, EPA Administrator Andrew Wheeler issued a memo directing agency leadership to develop rules for notice and comment that outline how benefit-cost considerations will be applied to future rulemakings. The memo outlines four principles for EPA offices to follow: (i) ensuring the agency balances benefits and costs in regulatory decision-making, (ii) increasing consistency in interpreting statutory terminology (e.g., practical vs. appropriate vs. feasible), (iii) providing transparency in the weight afforded to various factors in regulatory decisions and (iv) promoting best practices in technical analyses following sound economic and scientific principles.

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