On July 25, 2023, in Port Hamilton Refining and Transportation LLLP v. U.S. Environmental Protection Agency, No. 23-1094, the U.S. Court of Appeals for the Third Circuit overturned the Environmental Protection Agency (EPA) determination that Port Hamilton must obtain a Prevention of Significant Deterioration (PSD) permit prior to resuming operations at its St. Croix refinery (the Refinery). The court found that EPA exceeded its statutory authority under the Clean Air Act in applying its Reactivation Policy to find that the Refinery was effectively “new” for PSD permitting purposes because it was shut down in 2012. While the court could have issued a narrow opinion holding that EPA’s application of the Reactivation Policy to Port Hamilton specifically was arbitrary and capricious, it instead issued a broader ruling that the Reactivation Policy itself contradicts the unambiguous language in the Clean Air Act that the PSD program can apply only to stationary sources constructed or modified after August 7, 1977, regardless of operational status.
Background: EPA’s Reactivation Policy
Under the Clean Air Act, new stationary sources in attainment areas (i.e., areas with ambient air pollution levels within each National Ambient Air Quality Standard, or NAAQS) must obtain a PSD permit and implement “best available control technology.” PSD permits are required for newly constructed facilities as well as those that have undergone major modifications.
EPA developed its Reactivation Policy through a series of individual PSD permitting decisions that the agency treats as “guidance.” Under the Reactivation Policy, EPA draws a distinction between facilities that are permanently shut down and those that are simply idled, concluding that the restart of shut-down facilities requires a PSD permit prior to restart while those that were idled do not. EPA looked to the following six factors to determine whether a facility was idled or shut down:
- “the amount of time the facility has been out of operation”
- “the reason for the shutdown”
- “statements by the owner or operator regarding intent”
- “cost and time required to reactivate the facility”
- “status of permits”
- “ongoing maintenance and inspections that have been conducted during shutdown”1
In November 2022, EPA applied these six factors and concluded that the Refinery had been shut down, rather than idled, since 2012, which necessitated a PSD permit prior to Port Hamilton’s resuming operations.
Third Circuit’s Review of the Clean Air Act’s “Plain Language”
In a relatively short and direct analysis, the Third Circuit determined that the Clean Air Act “unambiguously” limits PSD program applicability to newly constructed facilities irrespective of its idled or shut-down status. The court explained that 1) under 42 U.S.C. § 7475, “[n]o major emitting facility on which construction is commenced after August 7, 1977, may be constructed” in an attainment area without a PSD permit, and 2) “construction,” under § 7479(2)(C), is defined to include “modification.” Reading these two sections together, the court determined that a PSD permit is required if, and only if, a facility was constructed or modified after August 7, 1977.
According to the court, this unambiguous language results in a straightforward application to the Refinery: Because the parties did not dispute that the Refinery was built before 1977 and had not been “modified” within the meaning of the statute, the PSD program cannot apply. And because the Reactivation Policy extends the PSD program beyond these limited circumstances, it too strays from the unambiguous language of the Clean Air Act. While EPA argued that the statutory definition of “construction” was ambiguous, the court determined that the type of construction requiring a PSD permit was straightforward — “construction commenced after 1977 that brings a major emitting facility into existence.”2 The court also noted that other provisions of the Clean Air Act show that Congress could have, but chose not to, apply the PSD program to shut-down facilities upon restart.3
EPA has debated the contours of the Reactivation Policy over the past few years, but the Third Circuit’s ruling draws a clear line in the sand: Operational status and operator intent have no bearing on PSD permitting. While the Port Hamilton decision is binding only in the Third Circuit, the ruling likely will have a broader impact.
1 Port Hamilton, slip op. at 7–8 (citing Matter of Monroe Electric Generating Plant, Petition No. 6-99-2, at 8–9 (June 11, 1999)).
2 Id., slip op. at 15.
3 Id, slip op. at 15 (citing 42 U.S.C. § 7491, which prohibits an out-of-operation facility emitting air pollutants that impair visibility to install the “best available retrofit technology” for controlling emissions prior to restart).
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