In a major decision aimed at preserving the air quality benefits of the program, a federal court on December 23 modified its July 11 decision to throw out the Environmental Protection Agency’s (EPA’s) Clean Air Interstate Rule (CAIR), saying the sweeping regulation can remain in effect until the agency issues a new rule consistent with the July opinion.

CAIR Part Deux

In its new order, the three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit that wrote the July decision said it was persuaded by EPA, environmentalists, and some utilities that vacating CAIR “would sacrifice clear benefits to public health and the environment while EPA fixes the rule.” (See COAL POWER, September/October 2008, “Who Cares about CAIR?” for additional background.)

Instead, the court now has remanded the case back to the EPA “without vacatur” so the agency “can remedy CAIR’s flaws.” CAIR will remain in effect until the EPA issues new rules.

“Here, we are convinced that, notwithstanding the relative flaws of CAIR, allowing CAIR to remain in effect until it is replaced by a rule consistent with our opinion would at least temporarily preserve the environmental values covered by CAIR,” the court said. “Accordingly, a remand without vacatur is appropriate in this case.”

CAIR, issued in March 2005, was designed to slash emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) in 28 eastern states and the District of Columbia. The rule primarily was intended to help these states in attaining national ambient air quality standards (NAAQS) for ozone and fine particle pollution by reducing interstate transport of SO2 and NOx, which are precursors for fine particulates and ozone. CAIR also was expected to improve visibility in national parks, wilderness areas, and other so-called “Class 1” areas.

These air quality goals would be achieved by the creation in CAIR of three separate compliance programs: a summertime “ozone season” NOx program, an annual NOx program, and an annual SO2 program. Each of these programs would use a two-phased approach, with declining emission caps in each phase based on cost-effective emission controls at power plants. The first phase was scheduled to begin January 1 for the NOx programs, and in 2010 for the SO2 program.

However, in its July 11 ruling the appellate court found a number of “fatal flaws” in CAIR, including a failure by the EPA to properly focus pollution cuts to prevent movement of air pollution from upwind states from worsening air quality in downwind states. The court vacated the rule and ordered the EPA to write a new regulation that fixed the flaws identified by the court.

Unexpected Market Confusion

The ruling almost immediately caused chaos in regional NOx emission markets, and alarmed environmentalists, who warned that the vacatur of the rule threatened to worsen air pollution in the eastern U.S. and cause thousands of premature deaths. The EPA said CAIR’s first phase would have cut NOx emissions by roughly 50% below 2003 levels.

In September, the EPA and a number of environmental organizations, utilities, and CAIR states asked the court to reconsider its decision to vacate the rule. The court responded by asking these petitioners if they would accept delaying the issue of the order vacating CAIR while the EPA takes corrective action in response to the July 11 ruling.

In its order, the court refused requests by some utility and state petitioners to set a deadline for the EPA to submit a new rule, but the panel pointedly reminded the agency that it would not grant an indefinite stay of the vacatur order.

“Though we do not impose a particular schedule by which EPA must alter CAIR, we remind EPA that we do not intend to grant an indefinite stay of the effectiveness of this court’s decision,” the panel said. “Our opinion revealed CAIR’s fundamental flaws, which EPA must still remedy.”

The court also reminded the various petitioners in the case that if the EPA drags its heels in issuing a new version of CAIR, they are free to ask the court to force the agency to issue a new rule promptly.

NOx Levels Steadily Drop

In related news, the EPA recently released a report that said 2007 summertime NOx emissions from power plants and industrial sources in 20 eastern states and the District of Columbia fell 60% compared to 2000 levels and 74% below 1990 levels.

The report, which touts the benefits of the NOx budget trading program (NBP) established in the EPA’s 1998 NOx SIP Call, adds that 2007 NOx emissions in the 20 states and the District of Columbia were 5% below the cumulative state emissions caps despite a 3% increase in power plant heat input in that year. The agency said 2007 was the fourth year of the NBP in which sources cut emissions of NOx more than required.

In addition, the nearly 2,600 power plants and factories regulated by the rule boasted a 99% compliance rate, with only 12 units at 11 sources failing to hold sufficient allowances to cover their emissions.

Since the NBP was implemented in 2003, meteorologically adjusted seasonal 8-hour ozone levels in the NBP region have fallen 10%. Additional analyses using different metrics have reported similar results, with average ozone reductions ranging from 8% to 11% over the five-year span of the program, the EPA said.

Based on 2005–2007 air monitoring data, ozone air quality improved in almost all of the 104 urban areas in the eastern U.S. designated to be in nonattainment for the 1997 8-hour NAAQS for ozone. Furthermore, 67 of these areas—64% of all the areas—now have better air quality than the level of the ozone NAAQS, the EPA said, calling the NBP “the most significant contributor to these improvements.”

—Chris Holly (cholly@accessintel.com) is a reporter for COAL POWER’s sister publication, The Energy Daily (www.theenergydaily.com).