A three-judge panel of the U.S. Fifth Circuit Court of Appeals in New Orleans on Monday ruled 2-1 that the Environmental Protection Agency (EPA) overstepped its authority in disapproving Texas’s Flexible Permit Program and that reasons the agency offered for rejecting the program were "arbitrary and capricious."

The State of Texas, the U.S. Chamber of Commerce, and a number of representatives from manufacturing, chemical, and petroleum industries had petitioned the court to review the EPA’s disapproval of the flexible permit program under the Administrative Procedure Act, arguing it was "an abuse of discretion." 

The EPA contended that its reasons for the disapproval were fair, saying that the program could allow major sources to evade New Source Review provisions under the Clean Air Act (CAA), and the provisions for monitoring, and the methodology for calculating flexible permit emissions caps lacked clarity. 

But the court disagreed. In a 23-page opinion by Circuit Judge E. Grady Jolly, the court ruled: "The EPA is not satisfied with the language Texas has chosen, and would prefer an express negative statement that the Flexible Permit may not be used to evade Major NSR. But it cannot direct us to any provision of the CAA or the CAA’s implementing regulations that empower it to disapprove a SIP revision on this basis."

Texas’s submittal in 1994 of the program to the EPA as a revision to the 1992-approved state implementation plan (SIP) sought to allow modifications to facilities without additional regulatory review as long as emissions increases would not exceed an aggregate limit specified in the permit. Texas had by then already incorporated the program into the state’s Clean Air Act. But as Judge Jolly noted, "Despite the [Clean Air Act’s] mandate that the EPA approve or disapprove a SIP revision within eighteen months of its submission, the EPA delayed formal consideration of the Texas Flexible Permit Program for more than a decade."

The agency was forced to make a decision on the program only after industry petitioners brought a lawsuit to compel the EPA to act, and on July 15, 2010, the agency issued final disapproval of the program.  "As a result of the EPA’s disapproval every facility with a flexible permit could face fines or other enforcement action irrespective of emissions levels," the judge wrote. "The untimely disapproval unraveled approximately 140 permits issued by Texas under the revision’s terms, and now requires regulated entities to qualify for pre-revision permits or risk federal sanctions."

“We hold that the EPA’s disapproval of Texas’s plan fails Administrative Procedure Act review,” the court ruled. “Although the EPA acknowledges the distinct role of the states, which is congressionally called for in the design and enforcement of State Implementation Plans, the EPA based its disapproval on demands for language and program features of the EPA’s choosing, without basis in the Clean Air Act or its implementing regulations. For the foregoing reasons, we grant the petition for review, vacate the EPA’s disapproval of Texas’s plan, and remand.”

Texas Gov. Rick Perry described the decision as a "big win for jobs and a big win for Texas." The finding affirmed that states have the right to develop permitting processes that balance environmental protection priorities while allowing industries to thrive, he said. "It’s unfortunate we had to go to such extremes to fight back against this troubling trend of overreach and reckless political activism by the Obama Administration that shows no regard for the impact on jobs or our economy."

In Congress, Republican members of the House Energy and Commerce Committee hailed the court’s decision, which they said stood up to "EPA’s overreach."

"The court recognized the important role that states play in designing air quality programs and ruled that EPA had acted in excess of its statutory authority—a common theme we have seen throughout this administration," said  Joe Barton, Michael C. Burgess, and Pete Olson, all Republicans from Texas. "This attempt to extend EPA’s power has done nothing to advance environmental protection, but only created more red tape, served as an impediment to growth, and wasted valuable time and resources.”

Sources: POWERnews, 5th Circuit, Gov. Rick Perry, House Energy and Commerce Committee
—Sonal Patel, Senior Writer (@POWERmagazine)