EPA and Army Corps of Engineers Propose Significant Revisions to Definition of "Waters of the United States"

By Lesley Foxhall Pietras

On March 25, 2014, the Environmental Protection Agency (“EPA”) and the Army Corps of Engineers (“Corps”) jointly released a proposed rule purporting to clarify the scope of the “waters of the United States” protected under the Clean Water Act. The agencies claim that, as a result of the Supreme Court’s decision in Rapanos v. United States, 547 U.S. 715 (2006), the scope of regulatory jurisdiction in the proposed rule is narrower than under the existing regulations. It appears, however, that the proposed rule actually expands the scope of the waters regulated by the Act.

Rapanos considered whether wetlands, located near ditches or man-made drains that emptied into traditional navigable waters, fell within the scope of the Clean Water Act. A four-justice plurality interpreted the term “waters of the United States” as covering those “relatively permanent, standing or continuously flowing bodies of water,” Rapanos, 547 at 739, that are connected to traditional navigable waters, and wetlands with a “continuous surface connection” to such relatively permanent water bodies, id. at 742. In contrast, in a concurring opinion, Justice Kennedy concluded that “waters of the United States” includes wetlands with a “significant nexus” to traditional navigable waters. Id. at 779. He further stated that wetlands possess the requisite nexus if they “either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity” of traditional navigable waters. Id. at 780.

EPA and the Corps have imported the “significant nexus” standard from Justice Kennedy’s concurring opinion into the proposed rule, applying it not only to adjacent wetlands (the subject of Rapanos), but also to other categories of water bodies, such as tributaries of traditional navigable waters or interstate waters, and to “other waters” (that is, waters not fitting in another category). For example, the agencies represent that all tributary streams are physically and chemically connected to downstream traditional navigable waters, interstate waters, and the territorial seas via channels and associated alluvial deposits. Based on this assertion, the agencies propose that all waters that meet the new regulatory definition of “tributary” are “waters of the United States” by rule, without the need for a case-specific analysis. The agencies propose to define tributaries in reference to physical characteristics (the presence of a bed and banks and an ordinary high water mark) and contribution of flow to traditional navigable waters, interstate waters, territorial seas, and impoundments. The proposal specifies that a tributary “can be a natural, man-altered, or man-made water” and includes waters “such as rivers, streams, lakes, ponds, impoundments, canals, and ditches” not otherwise excluded. Moreover, contrary to the plurality opinion in Rapanos, the proposal provides that the flow “may be ephemeral, intermittent or perennial.”

Based on the “significant nexus” standard, the proposed rule also defines “waters of the United States” to include all waters – not just wetlands – adjacent to a traditional navigable water, interstate water, the territorial seas, impoundment or tributary. The proposed rule defines “adjacent” as bordering, contiguous, or “neighboring,” and then expansively defines “neighboring” as including waters located within the “riparian area” or “floodplain” of traditional navigable waters, interstate waters, territorial seas, covered impoundments, or covered tributaries, or waters with a shallow subsurface hydrological connection to such a jurisdictional water.

Finally, based on Justice Kennedy’s “significant nexus” standard, the proposed rule modifies the definition of “other waters” (that is, those waters not fitting in another category under “waters of the United States”). In the current regulation at 40 C.F.R. § 122.2, “other waters” are defined based on whether they could affect interstate or foreign commerce. The proposed rule deletes this language. Instead, it states that “other waters” are “waters of the United States” on a case-specific basis, where those waters alone, or in combination with other similarly situated waters located in the same region, have a “significant nexus” to – that is, significantly impact the chemical, physical, or biological integrity of – a traditional navigable water, interstate water, or the territorial seas.

Thus, in some aspects, the proposed rule expands the scope of waters protected under the Clean Water Act, and industry may wish to comment on the rule. Comments will be accepted for 90 days after the proposed rule is published in the Federal Register. EPA has submitted the proposed rule for publication in the Federal Register, but it has not been published yet. An unofficial version of the proposed rule is available here.

TCEQ Updates Penalty Policy Document to Incorporate Legislative Enactments and Current Enforcement Practices

By Carlos J. Moreno

On January 6, 2014, TCEQ requested comments on a proposal to revise the agency’s penalty policy. See Revised Penalty Policy (PDF). According to TCEQ, the proposed revision to its Policy simply incorporates recent statutory changes and documents existing enforcement practices.

Recent Statutory Changes

House Bill 2615 (PDF) (83rd Legislature, 2013) significantly increased the administrative penalties for a water right holder’s failure to submit an annual water use report to TCEQ. Under the new statutory structure, a large water rights holder may have to pay as much as $500 per day for this violation. TCEQ has revised its penalty policy to incorporate this change.

Similarly, the Texas Legislature gave TCEQ the ability to assess administrative penalties to aggregate production operations that fail to register with the agency. Here, “aggregate” refers to commonly recognized construction materials. TCEQ can now assess penalties of up to $10,000 per year for this violation. The revised penalty policy incorporates this change.

Documenting Existing Practices

The revised penalty policy includes information about specific conditions that must be met for the agency to consider a request for payment deferral for an administrative penalty. In addition, the executive director is given discretion to recommend a conditional deferral of up to 100% for certain violations. Penalty deferral is contingent on compliance with the corresponding Administrative Order.

The revised penalty policy will allow for consideration of good faith efforts to comply in the penalty assessment for each violation, regardless of whether it is a discrete or continuous violation. Finally, the penalty policy has been reorganized to better correlate with the TCEQ Penalty Calculation Worksheet.

The deadline for submitting comments to these Policy revisions is February 5, 2014. 

New Texas Law Encourages Recycling of Wastewater From Oil and Gas Operations by Clarifying Ownership and Limiting Tort Liability

By Jillian Marullo

House Bill 2767, which took effect on September 1, 2013, was enacted to encourage recycling of the wastewater produced in hydraulic fracturing (or “fracking”) and other oil and gas operations.

A hotly contested issue is the consumption of water by fracking activities. Fracking involves the injection of several millions of gallons of water, combined with sand and small amounts of chemicals, into underground formations to fracture the rock in order to release deposits of oil and gas trapped in the rock. On average, over 83,000 barrels (or 3.5 million gallons) of water is required to frack one horizontal well, many of which are fracked multiple times. Much of this water returns to the surface as wastewater, along with underground saltwater known as produced water. In addition, for every barrel of oil or gas produced by a well, it is estimated that 7-9 barrels of wastewater are generated.

The wastewater produced in fracking operations is considered unusable because it contains chemicals, salt, leached minerals and other oil and gas wastes. Thus, instead of being reused in a subsequent frack job, it is most commonly disposed of deep underground by injection into disposal wells. In 2011, 3.5 billion barrels of wastewater were disposed of in Texas injection wells. When fracking wastewater is disposed of in injection wells, it is permanently lost to the water cycle. HB 2767 was intended to lessen this burden on water resources in Texas.

According to the bill’s author, Rep. Phil King, one obstacle to recycling fracking wastewater is the legal ambiguity about the ownership of oil and gas waste transferred for treatment. HB 2767 adds Chapter 122 to the Natural Resources Code to remove this barrier so that fracking wastewater may be more easily recycled and reused in subsequent operations.

The bill shifts ownership from the producer of the wastewater (i.e., the driller) to the company engaged to treat it for subsequent reuse (a “recycler”). Specifically, the bill provides that, unless otherwise provided by contract, ownership of the wastewater will be determined by possession and the purpose of the transfer. When the wastewater is transferred to a recycler “for the purpose of treating the waste for a subsequent beneficial use,” it becomes the property of the recycler and remains so until the recycler transfers the wastewater to another person “for disposal or use.” When the recycler transfers the treated wastewater or any byproduct to another person “for the purpose of subsequent disposal or beneficial use,” the transferred product or byproduct becomes the property of the person to whom it is transferred.

HB 2767 also limits the tort liability of recyclers who take possession of wastewater and produce from it “a treated product . . . suitable for use in connection with the drilling for or production of oil or gas.” Once the recycler transfers the treated product to another person who agrees to use the product in oil and gas activities, the recycler is immune from liability for any “consequence of the subsequent use of that treated product” by the transferee or any other person, except for personal injury, death or property damage resulting from exposure to the initial waste or treated product.

The bill requires the Railroad Commission of Texas to adopt rules to govern the treatment and beneficial use of oil and gas waste. 

Texas Legislature Allows Saltwater Pipeline Operators to Build Pipelines Along Public Roadways for Disposal of Fracking and Other Drilling Wastewater

By Jillian Marullo

Senate Bill 514, signed into law on June 14, 2013, authorizes saltwater pipeline operators in Texas “to install, maintain, and operate” saltwater pipelines “through, under, along, across, or over a public road” in order to transport the wastewater produced by hydraulic fracturing operations to disposal sites. The bill, which was introduced by Sen. Wendy Davis, D-Fort Worth, received widespread support from environmental groups and the energy industry alike, including groups as diverse as the Sierra Club and the Texas Oil and Gas Association, and was unanimously approved by the Senate.

SB 514 was enacted to ease the burden placed on public roads by trucks transporting oil and gas waste produced by hydraulic fracturing. Hydraulic fracturing (or “fracking”) is a drilling process whereby water mixed with small amounts of chemicals and sand is injected under extreme pressure into deep underground rock formations to fracture the rock in order to break up the trapped oil and gas deposits and aid in their flow to the surface. A large portion of the millions of gallons of freshwater used in fracking operations returns to the surface as wastewater, along with the highly saline water contained in the formations.

The wastewater produced at fracking production sites is generally disposed of in underground disposal or injection wells. According to the Railroad Commission of Texas, there are more than 50,000 injection and disposal wells in Texas, with approximately 35,000 actively servicing the more than 295,000 active drilling wells. Currently, vacuum trucks are used to transport the millions of gallons of fracking wastewater generated at production sites to disposal or injection wells. This truck traffic has damaged roads, particularly those in rural counties. In an effort to address community concerns over the use of roadways by heavy trucks, the Texas legislature passed SB 514 to shift the transportation of fracking wastewater from the roads to pipelines, reducing the need for overweight trucks.

SB 514 expands the use of saltwater pipelines to haul fracking wastewater from drill sites to disposal wells by providing the energy industry with a right-of-way to place new saltwater pipelines along public roads, eliminating the need to construct saltwater pipelines over private land. The bill amends Chapter 91 of the Natural Resources Code to allow “a saltwater pipeline operator to install, maintain, and operate a saltwater pipeline . . . through, under, along, across, or over a public road” if the pipeline facility complies with applicable Texas Transportation Commission and county and municipal regulations regarding the accommodation of utility facilities on public roads. In addition, the pipeline operator must “promptly restore[]” the road to its “former condition of usefulness” after the installation or maintenance of the pipeline. The pipeline operator must lease the right-of-way and pay the government the fair market value of the operator’s use of the right-of-way. The bill also provides that a pipeline operator may be required, on 30 days’ notice, to relocate a pipeline.

Subsequent Purchaser Doctrine Defeats Civil Code Art. 667 Claims by Neighbor

On September 13, 2013, the Louisiana Supreme Court denied Plaintiff-landowners’ writ application seeking review of an opinion of the Louisiana First Circuit Court of Appeal granting Defendants’ exception of no right or cause of action based on the subsequent purchaser doctrine. Day v. Northrop Grumman Ship Systems, Inc., 13-0952 (La. 9/13/13), 2013 La. LEXIS 1898. And on October 11, the Supreme Court denied Plaintiff-landowners procedurally rare Motion for Rehearing on the writ denial. Day v. Northrop Grumman Ship Systems, Inc., 13-0952 (La. 10/11/13), 2013 La. LEXIS ----. The Plaintiffs, who owned property adjacent to a former Superfund Site, sought damages under C.C. Art. 667 for alleged contamination of their property. The decision rejected Plaintiffs’ argument that C.C. Art. Code 667 rights of action are “real” rather than “personal” rights, outside of the scope of the subsequent purchaser doctrine.

For more information, please contact Bob Holden, Steve Wiegand, or Megan Spencer.

New Texas Legislation Authorizes TCEQ to Permit Greenhouse Gas Emissions

By Jillian Marullo

House Bill 788, signed into law on June 14, 2013, authorizes the Texas Commission on Environmental Quality (“TCEQ”) to regulate emissions of carbon dioxide and five other greenhouse gases (“GHG”) “[t]o the extent that greenhouse gas emissions require authorization under federal law.” The legislation gives TCEQ the authority to issue permits authorizing GHG emissions and develop rules governing the permitting process as well as rules for transitioning the process away from the United States Environmental Protection Agency (the “EPA”) to TCEQ. In a nod to the State of Texas’ opposition to the federal GHG permitting requirements, the law requires TCEQ to repeal any rules promulgated pursuant to this grant of authority should federal law cease to require permits for GHG emissions. Under the bill, the GHG permitting process will be exempt from TCEQ’s contested case hearing requirements in an effort to make the process more efficient.

Currently, major sources of GHG emissions in Texas are required to obtain a permit from the EPA. The federal Clean Air Act allows the EPA to delegate permitting authority to states that adopt and follow an EPA-approved State Implementation Plan (“SIP”). However, Texas lacks the authority to implement a GHG permitting program because at the time the EPA began requiring SIPs to cover GHG emissions, Texas law did not authorize TCEQ to regulate GHGs or other new pollutants identified solely by the EPA. Instead, TCEQ is only authorized to regulate those pollutants specifically identified by the Texas legislature. Because the legislature only meets every two years, TCEQ could not obtain authorization until the 2013 legislative session. Thus, because TCEQ missed the EPA’s 2011 deadline, the EPA imposed a Federal Implementation Plan (“FIP”) under which GHG permits for Texas sources are issued directly by the EPA.

HB 788 was enacted to allow TCEQ to take over and streamline the permitting process. Once TCEQ rules are enacted and approved by the EPA, they should eliminate the lengthy delays encountered by Texas applicants seeking GHG permits from EPA Region 6, which have allegedly resulted in millions in lost revenue. The bill was authored by Rep. Wayne Smith, an strong industry supporter, and is backed by environmentalists as well as industry leaders anxious to avoid the bottlenecking experienced at Region 6.

The transition of permitting authority from the EPA to TCEQ will take place in three phases. First, TCEQ will, in conjunction with public commenting, propose and adopt a regulatory program that will allow it to become the permit authority for sources of GHG emissions in Texas. HB 788 directs TCEQ to adopt rules to implement the permitting process and procedures for shifting review of applications pending before the EPA to TCEQ. Several chapters in the Texas Administrative Code relating to air permitting and public notice will need to be amended, including chapters 39, 55, 101, 106, 116 and 122. Once these changes are made, the new rules must be approved by the EPA as part of a revision to the Texas SIP. Finally, before TCEQ can begin reviewing applications and issuing permits for GHG emissions, the EPA must withdraw the FIP currently in place. Until this process is complete, the EPA will remain the permitting authority for GHG emissions in Texas.

Draft rules are expected to be made public by October 4, 2013, with responses to public comments being made by the end of 2013. The rules will likely be adopted in early 2014 and will become effective immediately. EPA approval of the adopted rules and withdrawal of the current FIP is expected to occur, if all goes as planned, in May or June 2014.

The State of Texas brought a lawsuit against the EPA challenging its authority to impose a FIP to issue GHG permits. In July 2013, the D.C. Circuit ruled for the EPA, upholding the district court’s dismissal of the suit on the grounds that the state lacked standing. Texas v. EPA, No. 10-1425, 2013 U.S. App. LEXIS 15210 (D.C. Cir. July 26, 2013). However, the case is still pending before the D.C. Circuit as the court has extended the time to file a petition for rehearing.

Louisiana's New Twenty-Day Deadline for Hydraulic Fracturing Reporting Requirements

By Sarah Y. Dicharry

On July 20, 2013, the Louisiana Department of Natural Resources amended its reporting and disclosure requirements for hydraulic fracturing stimulation operations. 39 La. Reg. 1824 (July 20, 2013). The amendment does not significantly alter the substance of the reporting requirements, but it imposes a new twenty-day reporting deadline (required by a 2012 statutory amendment). See La. Rev. Stat. § 30:4. The rule requires operators to report the types and volumes of hydraulic fracturing fluid used, the additives used, the chemical ingredients of the hydraulic fracturing fluid, and the concentrations of those chemical ingredients. Specifically, the new reporting deadline requires operators to report within twenty days from the date that hydraulic fracturing stimulation operations are completed. Before the amendment, the regulation did not specify a reporting deadline. The amendment is important due to the statutory penalties associated with noncompliance. Under La. Rev. Stat. § 30:18, violators of the rule are subject to mandatory civil penalties of “not more than five thousand dollars a day for each day of violation and for each act of violation.” 

Fifth Circuit Vacates $6 Million Clean Water Act Penalty

By Greg Johnson and Stephen Wiegand

In a July 17, 2013 decision, the United States Court of Appeals for the Fifth Circuit vacated a $6 million dollar penalty levied under the Clean Water Act (“CWA”) against CITGO Petroleum Corporation (“CITGO”) and remanded the matter to the Western District of Louisiana for further consideration. See U.S. v. CITGO Petroleum Corp., Case No. 11-31117 (5th Cir. July 17, 2013) (pdf).

The case relates to a 2006 oil spill which occurred at CITGO’s Lake Charles, Louisiana, refinery. After a two-week bench trial, the District Court found that CITGO was merely negligent (rather than grossly negligent) under the CWA; that approximately 54,000 barrels of oil had spilled; and that a penalty of $111 per barrel was reasonable in light of the evidence presented, for a total penalty of $6 million.

The Fifth Circuit vacated the District Court’s penalty determination, finding that the District Court failed to adequately quantify the economic benefit that CITGO realized from the spill as required under the CWA. The District Court determined that quantifying the economic benefit to CITGO was almost impossible given the conflicting evidence presented. The District Court concluded that the economic benefit was in the range of less that $83 million as argued by the government but more than $719 as argued by CITGO. The Fifth Circuit reasoned that consideration of economic benefit is integral to arriving at an appropriate damage award under the CWA penalty analysis, therefore, the District Court was required to make an actual estimate of economic benefit, even if it was difficult to do so in light of the conflicting evidence. The Fifth Circuit concluded that the broad range set by the District Court in actuality “left economic benefit as s non-factor.” Opinion, p. 7. Thus, the District Court erred in its penalty calculation.

The Fifth Circuit did not expressly reverse the District Court’s determination that CITGO was merely negligent rather than grossly negligent. However, the Court noted that on remand, the District Court “should reconsider all its findings with respect to CITGO’s conduct, giving special attention to what CITGO knew prior to the oil spill and its delays in addressing recognized deficiencies.” Opinion, pp. 13-14.

This opinion from the Fifth Circuit is likely to have wide-ranging effects on CWA penalty cases. At a minimum, it appears that a calculation of economic benefit will be a required element of any penalty determination by a district court. The CITGO case may continue to provide insight as it progresses on remand and any subsequent appeals.

You Cannot Just Read the Regulations to Understand Stormwater Permitting for Oil and Gas Activities!

By Carlos J. Moreno and Robert E. Holden

EPA’s most recent NPDES regulations for stormwater permitting of oil and gas facilities were vacated by the Ninth Circuit in 2008 and new regulations have not been promulgated. To understand the stormwater permit requirements for oil and gas activities, you need to review not only the regulations that remain in force, but also the Clean Water Act as amended by the Energy Policy Act of 2005.

The 1987 amendments to the Clean Water Act (“CWA”) added language creating a permitting exemption for uncontaminated runoff from Oil and Gas operations. CWA §402(l)(2). EPA subsequently issued regulations implementing this exemption. As a result, operators of oil and gas exploration, production, processing, or treatment operations, or transmission facilities, with a stormwater discharge only had to obtain a permit for this discharge if the facility (1) had a discharge of a reportable quantity of hazardous substance, (2) had a discharge of a reportable quantity of oil, or (3)contributed to a violation of a water quality standard. 40 CFR §122.26(c)(1)(iii).These three conditions became in essence EPA’s definition of “contaminated stormwater” for purposes of the Act. The regulations clarified that the permitting exemption only applied to oil and gas operational activities; thus, construction activities were not included in CWA §402(l).

In 2005, the Energy Policy Act changed the stormwater permitting requirements by redefining the term “operations” in CWA §402(l) to now include construction activities. The following year, EPA promulgated regulations implementing the expanded permitting exemption. The regulations, among other things, clarified that a stormwater stream with sediment as the only pollutant did not trigger permitting even if there was contribution to a violation of a water quality standard. Thus, under the 2006 regulations, stormwater from Oil &Gas sites that only contained sediment was always exempt from permitting.

The 2006 regulations were judicially challenged and eventually vacated. See Natural Resources Defense Council v. United States Environmental Protection Agency, 526 F.3d 591 (9th Cir. 2008). EPA has not promulgated new regulations to replace them. Therefore, the 2005 Energy Policy Act modifications, along with regulations already in place before then, are the “last word” on the question of stormwater permitting requirements for Oil and Gas sites.

If stormwater permitting is required, we suggest a careful review of NPDES stormwater delegation and the potential applicability of the 2008 Multi-Sector General Permit (“MSGP”) or the 2012 Construction General Permit (“CGP”). See 73 Fed. Reg. 56,572 (Sept. 29, 2008); 77 Fed. Reg. 12,286 (Feb. 29, 2012). Alternatively, in some cases, individual permits may be needed.

The Good Neighbor Provision on Steroids: Third Circuit Ruling Resurrects Clean Air Act Section 126(b)

By Lesley Foxhall Pietras

A recent opinion by the United States Court of Appeals for the Third Circuit has breathed new life into Clean Air Act Section 126(b), which allows downwind state and local governments to petition the Environmental Protection Agency (“EPA”) for immediate relief from interstate pollution caused by a major source (or a group of sources) in an upwind state. In the recent ruling, the Third Circuit held that it was reasonable for EPA to interpret Section 126(b) to be an “independent mechanism for enforcing interstate pollution control,” thereby giving EPA authority to directly regulate a specific source in an upwind state. See GenOn REMA, LLC v. EPA, No. 12-1022, slip op. at 29 (3d Cir. July 12, 2013) (pdf).

Specifically, Section 126(b) provides that:

Any State or political subdivision may petition the Administrator for a finding that any major source or group of stationary sources emits or would emit any air pollutant in violation of the prohibition of [the “good neighbor” provision] or this section. Within 60 days after receipt of any petition under this subsection and after public hearing, the Administrator shall make such a finding or deny the petition.

42 U.S.C. § 7426(b). The “good neighbor” provision, in turn, prohibits sources within one state from emitting air pollutants in amounts that significantly contribute to the nonattainment of the national ambient air quality standards (“NAAQS”) in another state. Id. § 7410(a)(2)(D)(i). If EPA finds, pursuant to a Section 126(b) petition, that the upwind source is violating the “good neighbor” provision, the polluting source must cease operations within three months of EPA’s finding. Id. § 7426(c). EPA may, however, allow the source to continue operations beyond three months if the source “complies with such emissions limitations and compliance schedules … as may be provided by the Administrator” to bring about compliance “as expeditiously as possible, but in no case later than three years after the date of such finding.” Id.

In the recent Third Circuit case, the New Jersey Department of Environmental Protection filed a petition under Section 126(b), requesting that EPA issue an order restricting sulfur dioxide emissions from Portland Generating Station (“Portland”), a coal-fired, electricity generating plant in Pennsylvania that is within 500 feet of Knowlton Township in Warren County, New Jersey. Following notice and comment, EPA granted the petition, concluding that Portland’s sulfur dioxide emissions significantly contribute to nonattainment and interfere with maintenance of the 1-hour sulfur dioxide NAAQS in New Jersey. EPA authorized the continued operation of Portland but imposed emissions limits and compliance schedules to bring Portland into compliance.

GenOn REMA, LLC (“GenOn”), the owner and operator of Portland, petitioned for review of EPA’s action, challenging the agency’s authority to impose direct regulations on Portland before the time that Pennsylvania is required to complete its Section 110 State Implementation Plan (“SIP”) for the 1-hour sulfur dioxide NAAQS. According to GenOn, EPA’s action offended the cooperative federalism structure of the Clean Air Act by undermining a state’s power to determine how to achieve air control standards.

The Third Circuit rejected this argument, concluding that the Clean Air Act is unambiguous that EPA can make a finding on a Section 126(b) petition without regard to the Section 110 SIP process. The court stated that “[t]he plain language of the relevant portions of the statute and the context in which such language is used convey that Congress intended Section 126(b) as a means for the EPA to take immediate action when downwind states are affected by air pollution from upwind sources.” GenOn REMA, No. 12-1022, slip op. at 18. Even if the statute were deemed ambiguous, however, the court found that EPA’s construction of the statute was reasonable. Based on the legislative history, the court concluded that “Section 126(b) was intended to allow the EPA, as a federal regulator, to intervene when states fail to adhere to the air pollution control process.” Id. at 22.

Finally, the court rejected GenOn’s argument that EPA’s action was arbitrary and capricious because it requires a reduction in sulfur dioxide emissions at Portland before requiring similar reductions from sources in New Jersey and prior to the time that SIPs addressing the new NAAQS are required. According to the court, once EPA independently determined that Portland was contributing to nonattainment and interfering with New Jersey’s air quality, “it reasonably abided by the Clean Air Act” in requiring Portland to undertake emissions reductions “as expeditiously as practicable, but in no case later than three years after the date of such finding.” Id. at 27 (quoting 42 U.S.C. § 7426(c)). Further, the court noted that it was satisfied that EPA had thoroughly examined the relevant scientific data.

In the wake of the Third Circuit’s ruling, it is possible that more states and local governments will file Section 126(b) petitions, and that EPA may be more receptive to such petitions.