The End of U.S. EPA’s Reactivation Policy?

The U.S. Court of Appeals for the Third Circuit has ruled that the U.S. EPA’s “Reactivation Policy” violates the Clean Air Act (CAA).

What is U.S. EPA’s “Reactivation Policy”?

The “Reactivation Policy” (Policy) addresses whether existing major stationary sources that have been out of operation are considered “new” sources when evaluating the need to obtain a Prevention of Significant Deterioration (PSD) permit prior to restarting the existing major stationary source. Under the Policy, U.S. EPA established six criteria to determine if a major stationary source has been permanently shutdown, including:

1. Amount of time the facility has been out of operation,
2. Reason for the shutdown,
3. Statements by the owner or operator regarding intent,
4. Cost and time required to reactivate the facility,
5. Status of permits, and
6. Ongoing maintenance and inspections that have been conducted during shutdown.

After reviewing the above criteria, U.S. EPA classified an out of operation facility as either “idled” or “permanently shutdown”.  Facilities that were determined to be “idled” were not required to obtain a PSD permit prior to startup.  However, facilities that were determined to be “permanently shutdown” would be considered a new source upon startup, resulting in the likely need to obtain a PSD permit prior to startup.  The policy came under review due to the restart of a refinery in the U.S. Virgin Islands.

The St. Croix Refinery and Reversal of the “Reactivation Policy”

In 2012, HOVENSA, LLC ceased operation of the St. Croix Refinery (Refinery).  The Refinery was purchased by Limetree Bay Terminals, LLC (Limetree) in 2016 with the intention of restarting the Refinery’s operations.  In 2018, Limetree sent a letter to U.S. EPA asking whether the Refinery would be considered “idled” or “permanently shutdown” under the Policy. At the time, U.S. EPA indicated that the Refinery was considered “idled” and that the agency would not require Limetree to obtain a PSD permit prior to restarting the Refinery.

Following several years of investments in the Refinery, Limetree restarted the Refinery in February 2021. However, due to excess emissions and flaring events, the Refinery was forced to cease operations again in April 2021 under emergency order by U.S. EPA. Limetree later filed for bankruptcy and the Refinery was up for sale again.

In December 2021, Port Hamilton Refining and Transportation, LLLP (PHRT) submitted a letter to U.S. EPA to confirm the U.S. EPA’s consideration of the Refinery as “idled” under the Policy. Prior to receiving a response from U.S. EPA, PHRT finalized the purchase of the Refinery.  In March 2022, PHRT received a response from U.S. EPA indicating that there were “strong indicators” that the Refinery would be reconsidered as “permanently shutdown” and that the Refinery would require a PSD permit prior to restart. In November 2022, U.S. EPA issued a revised final determination stating that U.S. EPA considered the Refinery to be “permanently shutdown” and had been “permanently shutdown” since the original cessation of operations by HOVENSA, LLC in 2012.

PHRT filed a petition with the U.S. Court of Appeals for the Third Circuit to review U.S. EPA’s November 2022 final determination. PHRT contended that the U.S. EPA had exceeded their authority under the CAA.  The petition was based on the fact that U.S. EPA had reached two different conclusions on the requirement to obtain a PSD permit in 2018 and 2022 and that the Refinery is neither new nor has undergone a “modification” as defined in the Federal New Source Review (NSR) program.

Upon completing a plain language review of the CAA and review of the Refinery’s history, the U.S. Court of Appeals for the Third Circuit agreed with PHRT’s case that the U.S. EPA had exceeded their authority under the CAA. In the final decision, the U.S. Court of Appeals for the Third Circuit states that the language of the CAA is unambiguous when defining a new construction or modification and if Congress had intended for the PSD program to apply to restarted facilities, the applicability would have been clearly defined in a similar manner as it was in 42 U.S.C. § 7491 (Visibility protection for Federal Class I areas).

Therefore, the court determined that U.S. EPA’s Policy exceeds the limits of the PSD program by classifying restarted facilities as new facilities.  The U.S. Court of Appeals for the Third Circuit vacated the November 2022 final determination letter issued by U.S. EPA and determined that PHRT is not required to obtain a PSD permit prior to restarting the Refinery. For other facilities, this decision means that restarting a facility is not an action that requires a PSD applicability evaluation. However, the results of this ruling are currently only applicable within the Third Circuit (e.g., Delaware, New Jersey, Pennsylvania, and the U.S. Virgin Islands).  This landmark decision will likely have a much broader impact on the implementation (or lack thereof) of U.S. EPA’s Policy. However, U.S. EPA is considering an appeal, and restarting a previously idle major source in an environmental justice area is still likely to receive a higher level of scrutiny.

If you should have any questions regarding the reversal of U.S. EPA’s Reactivation Policy and how this decision may impact your facility directly, please contact me at sarner@all4inc.com or 678.293.9433.