On August 12, 2014, the Ninth Circuit, in Sierra Club v. EPA, vacated US EPA’s decision to issue a Prevention of Significant Deterioration (PSD) permit to construct a power plant under outdated – and less stringent – air quality standards in place when the permit application was submitted.  The Court held that the Clean Air Act (CAA) unambiguously requires the applicant to demonstrate that its construction project complies with regulations in effect when US EPA issues the permit, “even if [EPA] unreasonably delays taking action on a permit.”  And, because Congress has directly spoken on this issue, US EPA cannot waive this requirement. 

Avenal Power Center LLC applied in 2008 for a PSD permit to build and operate a 600 megawatt natural gas-fired power plant.  US EPA failed to comply with the CAA’s one-year limit to issue a permit decision.  After the deadline passed but before making a final decision, US EPA adopted more stringent applicable national ambient air quality standards (NAAQS) and best available control technology (BACT) requirements.  Avenal Power filed suit and sought to compel US EPA to issue the permit under the standards in effect when it submitted its application.  The Agency, still not having yet issued a final decision on the application, initially opposed Avenal Power’s petition, arguing that even though it missed the deadline, the CAA expressly requires any newly constructed facility to meet BACT and NAAQS standards in effect at the time the permit is issued.  But, US EPA subsequently backpedaled, granting Avenal Power’s permit under the expired regulations. 

The Sierra Club, the Center for Biological Diversity, Greenaction for Health and Environmental Judgment, and El Pueblo para el Aire y Agua Limpio appealed US EPA’s decision, arguing that the Agency must enforce the regulations in effect when the permit was issued.  US EPA responded that ambiguity exists between the applicable CAA provisions requiring it to (1) enforce current NAAQS and BACT requirements and (2) act on applications within one year.  Thus, US EPA argued it had the right to apply its inherent grandfathering authority to reach a decision fair to Avenal Power who was penalized for US EPA’s delay. 

The Ninth Circuit found the CAA unambiguously required Avenal Power to demonstrate that its construction project complied with the regulations in effect at the time the permit was issued.  The Court also found the CAA expressly addressed the consequences of US EPA’s delay to take action on a permit:  “[A]ny person may commence a civil action on his own behalf … against the Administrator where there is alleged a failure of the Administrator to perform any act or duty under this chapter which is not discretionary with the Administrator.”  42 USC §7604(a)(2).  Because Congress had directly spoken on the issue, US EPA could not grandfather the permitting requirements. 

The Court also recognized that the equities weighed in favor of Avenal Power who filed its application six years prior and continued to work with US EPA in the following years to obtain a final decision.  “But,” the Court concluded, “however regrettable EPA’s treatment of Avenal Power has been, we simply cannot disregard the plain language of the Clean Air Act, or overlook the reason why an applicant must comply with revised and newly stringent standards … to protect and enhance the quality of the Nation’s air resources so as to promote health and welfare and the productivity capacity of its population.  Honoring the statute’s plain language and overriding purpose, we must send EPA and Avenal Power back to the drawing board.” 

Readers may wonder if the decision means that, as the petitioners suggested, US EPA must deny a permit application if its review cannot be completed within one year.  The Court suggested otherwise, proposing an option – unsuccessfully attempted by US EPA and Avenal Power – that “even after the deadline passes, at least absent suit, EPA could presumably work with the applicant to ensure compliance with whatever regulations are in effect, and then issue or deny a permit accordingly.”