ENVIRONMENT THE LAW TROUTMAN SANDERS LLP R E V I E W PIPELINE SAFETY REQUIREMENTS LIKELY TO INCREASE

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1 TROUTMAN SANDERS LLP Spring 2001 Volume XI Number 2 R E V I E W ENVIRONMENT THE LAW & In This Issue: Supreme Court Upholds New Particulate Matter Standard, Remands Ozone to EPA... 1 Pipeline Safety Requirements Likely to Increase... 1 Supreme Court Narrows "Waters" Under the Clean Water Act... 5 NO X Sip Call Update... 8 SUPREME COURT UPHOLDS NEW PARTICULATE MATTER STANDARD, REMANDS OZONE TO EPA Robert G. Dreher robert.dreher@troutmansanders.com Randy E. Brogdon randy.brogdon@troutmansanders.com Robert G. Dreher presented the argument in the D.C. Circuit Circuit Court of Appeals matter while Deputy General Counsel for EPA. On February 27, 2000, the U.S. Supreme Court issued a unanimous decision in Whitman v. American Trucking Association that rejected a challenge by industry groups and several states to EPA s 1997 revised National Ambient Air Quality Standards (NAAQS) for ozone and particulate matter. The 1997 rulemaking revised the averaging time under the existing ozone standard from one hour to eight hours and tightened the standard from 0.12 parts per million (ppm) to 0.08 ppm. The rules also created a new fine particulate matter standard for particles up to 2.5 microns in diameter and revised the existing particulate matter standard applicable to particles of up to (Continued on page 2) PIPELINE SAFETY REQUIREMENTS LIKELY TO INCREASE Eileen M. Moorhead eileen.moorhead@troutmansanders.com Over the last year, concerns regarding pipeline safety have moved into the national spotlight in the wake of deadly pipeline explosions in Bellingham, Washington and Carlsbad, New Mexico. Citizen groups and some members of Congress have expressed concern that pipelines are only loosely regulated and can be made safer. The pipeline industry acknowledges that legislative change is likely but is working to ensure that those changes are cost-effective. Efforts to bolster pipeline regulations are occurring in an atmosphere of increased scrutiny of the pipeline industry. The move for legislative reform began to gather momentum in June of 1999, when a pipeline carrying gasoline exploded in Bellingham, Washington. The explosion killed three people, two of them children. Then, in August 2000, twelve people were killed when a natural gas line exploded near Carlsbad, New Mexico. While pipelines remain by far the safest way to transport fuel, these tragedies strengthened calls for reform. These incidents, and general concern over pipeline safety, may signal a change of direction at the agency that regulates (Continued on page 4)

2 Environment & The Law is a quarterly publication of the Environmental Law Group of Troutman Sanders tracking developing trends in environmental law. The Newsletter is a free service to clients and is not designed to render legal advice or legal opinion. Such advice may only be given when related to actual fact situations. Readers are encouraged to reproduce articles for educational purposes. In doing so, credit must be given to Troutman Sanders LLP and Environment & The Law. Please advise our editor of all reprints. Editor: David M. Moore (404) R E V I E W (Supreme Court Upholds New Particulate Matter Standard, Remands Ozone to EPA, cont. from page 1) 10 microns. In short, the 1997 revised NAAQS significantly increased the stringency of both the ozone and particulate matter standards. The new rules were appealed to the D.C. Circuit Court of Appeals by a variety of industry groups and several states. In 1999, the D.C. Circuit rejected the new standards on several grounds. First, (and most significantly) the court found that 109(b)(1) of the Clean Air Act (CAA) (on which EPA relied in developing the standards) amounted to an unconstitutional delegation of legislative power. 1 Specifically, the court found that the broad statutory authority of 109(b)(1) allowed EPA too much discretion and remanded the standard back to the Agency for a more determinate principle for revising NAAQS. The D.C. Circuit also held that EPA could not implement the new standard except in conformance with Subpart 2 of the CAA, which contains specific provisions governing the implementation of the existing ozone standard. 2 However, the court rejected arguments by state and industry petitioners that EPA must consider the economic costs of compliance in setting NAAQS standards. EPA appealed the D.C. Circuit Court of Appeals decision to the Supreme Court. The Supreme Court s decision has three primary elements: The Court agreed with the D.C. Circuit that CAA 109(b) does not permit EPA to consider the economic impact of implementing new standards in setting NAAQS. The Court largely based this finding on the fact that other sections of the CAA contain express provisions that grant EPA the authority to consider implementation costs, but no such provision is found in 109(b). The Court held that CAA 109(b)(1) does not delegate legislative power to EPA, and therefore overruled the D.C. Circuit s finding that 109 constituted an improper delegation of legislative authority. On this issue, the Court reasoned that statutes such as the CAA need not provide a determinate criterion for how much of a regulated harm is too much to avoid unlawfully delegating the legislative power. The Court found that EPA s implementation policy for the new ozone standard was unreasonable and remanded the policy back to the Agency to develop a new plan. The Court specifically held that it could not defer to EPA s interpretation that would ignore Subpart 2 s (CAA 181) restrictions on EPA discretion in favor of the broader discretion afforded by Subpart 1 (CAA 171). For example, the Court suggested that EPA did not have the authority to reclassify areas at its discretion because Subpart 2 contains a table that reclassifies areas automatically by operation of law. The practical effect of the decision is that 1 Section 109(b)(1) of the CAA authorizes the EPA Administrator to set NAAQS at levels that in the judgment of the Administrator... are requisite to protect the public health with an adequate margin of safety. 2 Subpart 2 (CAA 181) applies specifically to ozone nonattainment areas and provides a table (Table 1), that outlines the classification of ozone nonattainment areas (e.g., Severe, Serious, Moderate) and sets primary standard attainment dates based upon those classifications. Subpart 1 (CAA 171) applies generally to all nonattainment areas. In promulgating the new standards, EPA relied heavily on Subpart 1 and did not substantively address the requirements of Subpart 2. 2 COPYRIGHT 2001 TROUTMAN SANDERS LLP

3 EPA s revised NAAQS remain intact, but the policy to implement the new ozone standard has been remanded to EPA. While the Agency has not released a statement regarding its strategy for addressing the remand, the Agency is likely to adopt a version of an implementation plan suggested by Judge Tatel in his concurring opinion on EPA s motion for rehearing before the D.C. Circuit. In that opinion, Judge Tatel reasoned that the specific requirements of Subpart 2 should continue to apply to areas until they reach attainment of the existing 1-hour ozone standard. At that point, Judge Tatel concluded that EPA would be free to implement the new 8-hour standard on the normal implementation time-frame set by Subpart 1 of CAA. If EPA adopts this approach, it would have to wait for areas currently in nonattainment for the 1-hour ozone standard to come into compliance with that standard, and could not force them to adopt control measures to meet the 8-hour standard sooner than the statutory schedule set by Subpart 2. However, unless the new ozone standard is stayed or vacated by the D.C. Circuit, EPA could proceed immediately with implementation of the 8-hour standard for areas that have already attained the 1-hour standard. Such areas could be designated as attainment or nonattainment for the 8- hour standard immediately, since the States have already been required to propose designations. If this occurs, states would be required to develop implementation plans for nonattainment areas within 3 years from their designation, and to come into compliance with those designations within 10 years (with the possibility of two 1-year extensions). Implementation of the new particulate matter standard appears to be delayed at least for several years. Pursuant to an implementation strategy announced in 1997, EPA is collecting monitoring data on fine particulate matter and will use that information to designate areas as attainment or nonattainment beginning in 2002 (at the earliest). EPA revised the existing PM-10 standard in 1997 to reflect its promulgation of a fine particle standard, but the revised PM-10 standard was remanded by the D.C. Circuit Court of Appeals. EPA has not yet acted on the revised particulate matter standards. The Supreme Court s decision does not end the larger dispute over whether EPA properly promulgated the new standards. States and industry petitioners currently are evaluating strategies for challenging the revised NAAQS standards in the D.C. Circuit on other grounds. For example, the new NAAQS still could be challenged on the grounds that the new standards were not adequately supported in the record and/or that EPA s rationale for the new standards was not adequately explained in the applicable preambles. Environmental Practice Group: Gordon Alphonso Greg Blount Charles Bonner Sam Brock Randy Brogdon John Burke Margaret Campbell Mac Carlton Debbie Cline John Cline Jim Crockett John Daniel Melanie Davenport Art Domby Robert G. Dreher William Droze Marshall Dukes Christopher D. Fontecchio Allison S. Gassner Sherri Graves Scott Hart Doug Henderson Steve Hewitson Holly Hill Tom Jensen John Johnson Andy Mauck John Molm David M. Moore Eileen Moorhead Tom Penland Dan Reinhardt Andrea Rimer Harvey Rosenzweig Jim Ryan Gary Sheehan George Somerville Michael Sweeney Eric Szweda Norman Underwood Shannon Varner Fitz Veira COPYRIGHT 2001 TROUTMAN SANDERS LLP 3

4 R E V I E W (Pipeline Safety Requirements Likely to Increase, cont. from page 1) Troutman Sanders LLP invites you to visit our web site at Troutman Sanders LLP 600 Peachtree St., NE Suite 5200 Atlanta, Georgia Telephone: Facsimile: Peachtree St., NE Suite 750 Atlanta, Georgia Telephone: Facsimile: Suite 3503A Two Exchange Square 8 ConnaughtPlace Central, Hong Kong Tel: Fax: Ninth Street, NW Suite 1000 Washington, D.C Telephone: Facsimile: E. Main Street P.O. Box 1122 Richmond, VA Telephone: Facsimile: Dominion Tower 999 Waterside Drive, Suite 2525 Norfolk, VA Telephone: Facsimile: Corporation Lane, Suite 420 P.O. Box Virginia Beach, VA Telephone: Facsimile: International Drive Suite 600 McLean, Virginia Telephone: Facsimile: pipelines, the Office of Pipeline Safety ( OPS ). OPS (an office within the Department of Transportation ( DOT )), is vested with the responsibility for all areas of pipeline oversight, with the exception of rates charged by pipelines for transporting products, which must be approved by the Federal Energy Regulatory Commission. Before a pipeline may be used to transport petroleum products, its operator must submit a plan to OPS detailing how the pipeline operator will respond to a hazardous release. Pipeline operators also prepare an operations manual, which OPS may review. Operators must alter the manual to address any safety concerns raised by OPS. Although subject to some uniform safety standards, the pipeline industry is less strictly regulated than many other industries that handle hazardous materials. OPS works with some states to conduct inspections and does some inspections itself, but the office is not sufficiently staffed or funded to handle all inspection duties on its own. Yet despite the recent tragedies, the record of pipeline transport has been quite good overall. A GAO Report released in May 2000 found that the number of pipeline accidents is relatively low compared to other methods of transporting petroleum products, such as barges, railroads and trucks. Nevertheless, many argue that pipelines should be subject to much stricter standards. New OPS Regulations The National Transportation Safety Board ( NTSB ) held a hearing on pipeline safety in November, 2000 which focused on two main issues that repeatedly arise during discussions of pipeline safety: regular periodic internal inspections and minimum requirements for leak detection. OPS addressed some of these concerns in November of 2000, when it issued a new rule requiring operators to regularly inspect and repair large pipelines in populated and environmentally sensitive areas. The new rule also requires operators to develop integrity management plans that include measures to detect leaks. Legislative Proposals The last Congress (the 106th) considered several pipeline safety bills, and there has already been movement in Congress on the issue this year. Last Congress, a bill drafted by Senator McCain, Chairman of the Senate Commerce, Science and Transportation Committee (the Committee with jurisdiction over the Department of Transportation) passed the Senate by unanimous consent, but stalled in the House of Representatives. Representative Oberstar (D-MN) introduced his own bill in the House in October 2000 and the House is likely to consider the issue again this Congress. In the last Congress, critics of the McCain bill complained that it was too weak and argued that Congress should mandate more prescriptive standards for pipelines. The bill s opponents, aided by Representatives Oberstar and Dingell (D-MI), were successful in raising questions about the appropriate approach to pipeline safety, effectively ensuring that no safety bill emerged at all. Industry and OPS, as reflected in its latest rulemaking favors a risk management approach to pipeline safety. Under this approach, operators evaluate threats to the integrity of a pipeline by analyzing all available information about the line and then prioritizing responses based on the level of risk posed by a particular threat. This allows the operator to direct resources to the most pressing problem based on 4 COPYRIGHT 2001 TROUTMAN SANDERS LLP

5 feedback about the current condition of the line. Industry proponents feel this approach is both safer and more costeffective than prescriptive measures that mandate arbitrary inspection schedules. The House and Senate versions of pipeline legislation will probably differ as well in their approach to the OPS. The McCain bill directs OPS to strengthen its regulations, while Oberstar s bill and other bills proposed in the House largely bypass OPS by setting specific standards in the legislation itself. Opponents of the current pipeline regulatory regime point out that the NTSB has repeatedly criticized OPS for failing to implement many of the NTSB s recommendations in the wake of pipeline accidents. In fact, OPS has implemented fewer of the NTSB s recommendations than any other agency within the DOT a situation that has frustrated the NTSB in the past. In this Congress, pipeline issues got off to an early start. Senator McCain reintroduced his bill in January and the Senate voted 98-0 in favor of the bill on February 8, The vote was not without debate though, particularly from Senators Corzine and Torricelli from New Jersey. Senator Corzine offered several amendments to the bill, though only one was adopted. The Corzine amendment mandates integrity testing of pipelines every five years a requirement that is already included in the regulations OPS issued in November. The focus of debate now moves to the House. Although Senator Patty Murray (D- WA) voted for the McCain bill, she and Representative Rick Larsen (D-WA) recently introduced identical bills in the House that are much more stringent than the McCain bill. These bills reflect the position of environmental and citizen groups and are generally opposed by the pipeline industry. In all likelihood, pipeline safety is sure to be an active issue in this Congress. OPS, an agency that has largely stayed out of the spotlight, will probably continue to face scrutiny and pressure to toughen its stance on enforcement. SUPREME COURT NARROWS WATERS UNDER THE CLEAN WATER ACT Robert G. Dreher robert.dreher@troutmansanders.com In a decision of potentially far-reaching significance, the Supreme Court of the United States narrowed the definition of wetlands on January 9, 2001, in Solid Waste Agency of Northern Cook County v. United States Army Corps of Engineers, 121 S.Ct. 675 (2001) ( SWANCC ). In SWANCC, a narrow majority of the Supreme Court rejected the U.S. Army Corps of Engineers reliance on migratory birds as a basis for jurisdiction over isolated waters, holding that Congress did not intend the Clean Water Act to vest such sweeping authority over land use in a federal agency. The extent to which the U.S. Army Corps of Engineers (the Corps ) and the Environmental Protection Agency ( EPA ) have regulatory jurisdiction under Section 404 of the Clean Water Act over the filling of wetlands, streams and other waterbodies within the United States has been a controversial question since the enactment of the Act in After initially taking a very conservative approach, the Corps broadened its interpretation of its jurisdiction in the late 70s and 80s to include even isolated water bodies such as those at issue in SWANCC, i.e., lakes, (Continued on page 6) COPYRIGHT 2001 TROUTMAN SANDERS LLP 5

6 R E V I E W (Supreme Court Narrows "Waters" under the Clean Water Act, cont. from page 6) streams and wetlands without any surface connection to navigable streams, if such waters served as habitat for migratory birds or otherwise supported interstate commerce. Following several seminal cases and regulatory refinements, including the Supreme Court s decision in United States v. Riverside Bayview Homes, Inc., 474 U.S, 121 (1985), the Migratory Bird rule was codified in 1986 as a clarification of the definition of waters of the United States, the statutory threshold to which Section 404 of the CWA applies. In the preamble to the 1986 rule, the Corps explained that waters of the United States include waters [w]hich are or would be used as habitat by birds protected by Migratory Bird Treaties, as well as waters [w]hich are or would be used as habitat by other migratory birds which cross state lines. The SWANCC case involved a consortium of suburban Chicago cities and villages which sought to develop a disposal site for baled nonhazardous solid waste on a 533- acre parcel in Illinois. The site had been mined for sand and gravel for several decades until about 1960, but was now forested. Excavation trenches and pits from the old mining operation had become permanent and seasonal ponds varying in size from one-tenth of an acre to several acres and in depth from a few inches to several feet had become established on the site. The ponds supported a wide range of aquatic wildlife, including numerous species of migratory birds; the site was the seasonal home of the second-largest breeding colony of great blue herons in northeastern Illinois, with over 190 nests. SWANCC s proposed landfill involved the filling of approximately 17.6 acres of the ponds and small lakes on its property. The Corps initially concluded that the site did not contain any waters subject to its regulatory jurisdiction, but after receiving evidence from the Illinois Nature Preserves Commission, found that the water bodies on the site were waters of the United States because they were used as habitat by migratory birds. In 1994, the Corps denied SWANCC s application for a 404 permit, finding that the filling of the ponds on the site would eliminate valuable habitat for birds and other wildlife, that the applicant had failed to examine other, lessdamaging alternatives, and that leachate from the project posed an unacceptable risk of contamination to groundwater used as a public drinking water supply. SWANCC challenged the Corps assertion of jurisdiction over the site in the federal courts, arguing that the Corps had exceeded its statutory authority in interpreting the Clean Water Act to cover nonnavigable, isolated, interstate waters based upon the presence of migratory birds, and, in the alternative, that Congress lacked the power under the Commerce Clause of the Constitution to grant the Corps such regulatory jurisdiction. The district court granted summary judgment for the Corps, and that judgment was affirmed by the U.S. Court of Appeals for the Seventh Circuit. The Court of Appeals first analyzed the constitutional question, holding that Congress has the authority to regulate isolated waters based upon the cumulative impact doctrine, under which a single activity that itself has no discernible effect on interstate commerce may still be regulated if the aggregate effect of that class of activity has a substantial impact on interstate commerce. The Court of Appeals found that the aggregate effect of the destruction of natural habitat for migratory birds on interstate commerce was substantial, noting that millions of Americans travel across state lines and spend over a billion dollars each year to hunt and observe migratory birds. Turning to the statutory issue, the Court of Appeals held that the Clean Water Act was intended 6 COPYRIGHT 2001 TROUTMAN SANDERS LLP

7 by Congress to reach as broadly as the Commerce Clause allows, and that it was therefore reasonable for the Corps to interpret the Act as covering isolated waters that were used by migratory birds. The Supreme Court s Decision On January 9, 2001, a sharply-divided Court reversed. Writing for the five-justice majority, Chief Justice Rehnquist held that the Migratory Bird Rule is not fairly supported by the [Clean Water Act]. In addition to its precise holding invalidating regulation of isolated wetlands on the sole basis of their use by migratory birds, the Supreme Court decision contains a number of significant holdings regarding the regulation of wetlands under Section 404 of the Clean Water Act. First, the Supreme Court did not reverse but significantly limited its decision in Riverside Bayview Homes that the term navigable is of limited import in construing Section 404. Justice Rhenquist concluded that the significant hydrological nexus between adjacent wetlands and navigable waters in that case had informed the Court s reading, and that Riverside Bayview Homes was limited to wetlands that were actually adjacent to traditionally-navigable waters or their tributaries. Second, the Supreme Court stated that extending Section 404 to isolated ponds would read the term navigable waters out of the Clean Water Act and refused to do so: The term navigable has at least the import of showing us what Congress had in mind as its authority for enacting the CWA: its traditional jurisdiction over waters that were or had been made navigable in fact or which could reasonably be so made. Third, Justice Rhenquist observed that the United States had presented no persuasive evidence that the Corps original, narrow interpretation of the Act construing navigable waters to mean only waters that were used or susceptible to use for interstate commerce, mistook Congress intent in The Court found that Congress 1977 enactment of Section 404(g), authorizing states to administer the Section 404 program for navigable waters other than traditionallynavigable waters and their adjacent wetlands, was unenlightening. The dissenting opinion by Justice Stevens took the opposite view in most regards. Justice Stevens concluded that Congress had indeed written the word navigable out of the Act in 1972 when it defined navigable waters as waters of the United States, deleting the word navigable. If that conclusion were in doubt, Justice Stevens pointed out, the Court s previous decision in Riverside Bayview Homes had already concluded that Congress had acquiesced in the Corps administrative construction of its jurisdiction in the 1977 amendments to the Act. Justice Stevens cited legislative history to support the dissenting conclusion that Section 404 included isolated waters. Finally, Justice Stevens dismissed the majority s contention that the Corps Migratory Bird Rule raised significant constitutional questions, noting that the protection of migratory birds had long been recognized as an appropriate federal responsibility, and that the discharge of fill into the nation s waters for economic development purposes easily qualified as activity subject to federal regulation under the Commerce Clause. Conclusions The Court s decision in SWANCC leaves significant questions regarding the actual extent of the Corps jurisdiction under 404 unresolved. The majority s direct holding is that the Corps regulation asserting jurisdiction over isolated waters, 33 C.F.R (a)(3) (1999), as clarified and applied to petitioner s balefill site pursuant to the Migratory Bird Rule, (Continued on page 8) COPYRIGHT 2001 TROUTMAN SANDERS LLP 7

8 R E V I E W (Supreme Court Narrows "Waters" Under the Clean Water Act, cont. from page 7) exceeds the authority granted to the Corps under 404. At a minimum, therefore, the Corps reliance upon the presence of migratory birds to establish federal jurisdiction over isolated waters is invalid. The SWANCC decision does not clearly resolve whether the Corps may continue to assert jurisdiction over isolated waters on other grounds on the basis, for example, of evidence other than migratory birds showing that the use, degradation or destruction of such waters substantially affects, in aggregate, interstate commerce. The reasoning of the majority strongly suggests, however, that any attempt by the Corps to establish jurisdiction over nonnavigable, isolated, intrastate waters would fail. The Court s opinion reflects the majority s evident view that Congress exercised only its authority over navigation in enacting the Clean Water Act, rather than its full powers over interstate commerce, and that waters that do not have a close hydrological nexus to navigable waters are outside the Act s ambit. (Indeed, the majority s statement that there is no persuasive evidence that the Corps mistook Congress intent in its original interpretation of its jurisdiction, which was limited narrowly to waters that are navigable-in-fact, raises some question concerning the Court s willingness to find federal jurisdiction over nonnavigable tributaries and their adjacent wetlands, even though such waters directly connect to and affect navigable waters.) The SWANCC decision also raises significant doubt concerning the authority of EPA or delegated states to regulate the discharge of chemical pollutants into nonnavigable, isolated, intrastate waters under the National Pollutant Discharge Elimination System ( NPDES ). Section 301 of the Clean Water Act, like 404, is addressed to discharges into navigable waters, and there would appear to be no reason for the Court to construe the Act s jurisdiction over chemical and conventional pollutants differently than that over fill and dredged spoil. The SWANCC decision is likely to have a major impact on the scope of federal regulation of wetlands, and potentially for federal regulation of the discharge of chemical pollutants into isolated waterbodies as well. While the SWANCC opinion leaves the actual extent of the Corps jurisdiction under 404 unclear, the Court s holding eliminates the clearest basis on which the Corps could find that isolated waters affect interstate commerce, and will make it difficult, if not impossible, for the agency to assert regulatory jurisdiction over nonnavigable, isolated, intrastate waters such as prairie potholes, playa lakes, and intermittent streams that are not tributaries to navigable streams. EPA estimates that such waters may include as much 20% of the nation s wetlands. NOX SIP CALL UPDATE Margaret C. Campbell margaret.campbell@troutmansanders.com Gary R. Sheehan, Jr gary.sheehan@troutmansanders.com Nitrogen Oxide (NOx) regulation continues to spur significant activity in the rulemaking, state implementation plan (SIP), and litigation arenas. Rule Making Activity In early January 2001, the United States Environmental Protection Agency released a proposed rule designed to address certain issues remanded to the Agency by the United States Court of Appeals for the D.C. Circuit in its March 2000 decision, Michigan et al v. EPA, on the final NOx SIP Call rule. That decision largely upheld the SIP Call under the one-hour ozone standard except where the D.C. Circuit agreed with industry 8 COPYRIGHT 2001 TROUTMAN SANDERS LLP

9 petitioners from Georgia and Missouri that EPA had improperly imposed state-wide emissions budgets in those states given that EPA had no modeling data to support inclusion of the coarse-grid portions of the states. The D.C. Circuit, therefore, vacated the SIP Call as applied to Georgia and Missouri and remanded that portion of the rule to the Agency. The proposed rule re-proposes the SIP Call for the fine-grid portions of Georgia and Missouri. For Georgia, this area includes all but the southern third of the state. EPA also proposes to revise the budgets of the other split states Alabama and Michigan. In addition, the proposed rule re-proposes the definition of electric generating unit (as it relates to cogeneration units), control levels for stationary internal-combustion engines, and the dates by which States, would be required to submit state implementation plans to address the emissions reductions required by the rule as amended. However, on January 20, 2001 and prior to the publication of the proposed rule, the Bush Administration issued a 60-day moratorium on all new regulations. Although the 60-day stay expired in late March, EPA s contact person for the proposed rule has recently indicated that she has no information related to the status of the proposed rule, and that to the best of her knowledge, no decision has been made on this particular rulemaking. Once the rule is published in the Federal Register, the proposal provides for a public hearing and a 45-day public comment period. State Activity on the SIP Call The majority of states which were subject to the SIP Call were required to submit their final state implementation plans to EPA for review and approval by October 30, A few states have submitted their SIPs and received EPA approval including Connecticut, Maryland, Massachusetts, and Rhode Island. A number of states missed the deadline or submitted incomplete SIPs, and in December, EPA issued a deficiency notice to those states. The notice starts an 18-month sanctions clock, effective in January 2001, which could result in an increase in the emissions offset ratio for new sources, a loss of federal highway funds, and even the imposition of a Federal Implementation Plan by EPA. The states affected by this notice include Alabama, Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, South Carolina, Tennessee, Virginia, West Virginia and the District of Columbia. In Virginia, the State Air Pollution Control Board approved the Department of Environmental Quality s draft SIP regulation in November 2000 based upon EPA s Model Rule with specific deviations. The draft Virginia-specific provisions included an initial allocation period of 10 years and no new source set-asides. Virginia s 2001 General Assembly subsequently directed that Virginia s NO x SIP rule must provide for an initial allocation period of 5 years and for new source set-asides of 5% during the first five plan years and 2% thereafter. The Department expects to have its NO x SIP regulation revised and re-proposed this Summer and promulgated this Fall. Consistent with the results of the SIP Call litigation, compliance will be required beginning May In Georgia, the Environmental Protection Division has indicated that it does not plan to take any further action on rule makings related to the SIP Call until EPA issues its rulemaking for Georgia. SIP Call Litigation Activity On March 5, 2001, the U.S. Supreme Court declined to hear the appeal filed by several states and industry groups (Continued on page 10) COPYRIGHT 2001 TROUTMAN SANDERS LLP 9

10 R E V I E W (NOx SIP Call Update, cont. from page 9) challenging the March 2000 D.C. Circuit Court s decision upholding the SIP Call. The Supreme Court decision not to hear the case allows the D.C. Circuit decision to stand. On Friday, March 23, the D.C. Circuit Court held oral arguments in the challenge to the final NOx budgets under the SIP Call (Appalachian Power Company, et al. v. EPA). While the proposed budget for Georgia is not specifically at issue in the case, the outcome of that case could affect the final NOx budget for Georgia which will be proposed by EPA this spring. 10 COPYRIGHT 2001 TROUTMAN SANDERS LLP