Will a contract term come in to play with the Government Shutdown?
Posted: January 10th, 2019Authors: Kevin R. Dan H.
As chief financial officer at ALL4, I oversee the financial operations of the company and minimize risk when possible. As a part of my role, I review contracts and assess the risk included in the contract language. A common contractual provision is a force majeure clause, which basically describes how a contract’s terms and conditions can be enforced when a “major force” or “event” occurs beyond the control of the contracting parties. One of the major forces that sometimes makes its way into the contract conditions is “acts of government” or conversely non-acts of government. Is it possible that the current government shutdown represents a force majeure event, and if so, what impact might such an event have on facilities as they work to meet their air quality obligations?
According to ALL4’s Dan Holland, who provides our AQ101 training, there is no Clean Air Act (CAA) legislation that directly addresses a force majeure event. However, CAA Section 110(g) does allow for a state’s governor to implement state implementation plan (SIP) changes if U.S. EPA fails to act on a SIP submittal. In order for the state to implement the SIP changes, the state must determine that a facility would close for at least a year without some SIP-related remedy and that the state’s SIP actions will prevent substantial unemployment.
A situation involving states undertaking SIP revisions as a response to a government shutdown seemed a little extreme to Dan, but he did acknowledge that the U.S. EPA shutdown could impact the timelines for U.S. EPA to the review and comment on major and minor New Source Review (NSR) air permits as well as Title V air permits. In situations where a U.S. EPA comment period has not been triggered, states could merely delay starting the U.S. EPA comment clock. However, for circumstances where the review period is already started it’s unclear if states or the federal government have a mechanism outside of environmental statutes to invoke a force majeure condition and stay the review or comment period. Without an extension or delayed comment period mechanism, the comment period may simply lapse and the permitting process continues.
Dan also indicated that the Standards of Performance for New Stationary Source (NSPS) at 40 CFR Part 60 include a definition of force majeure in the General Provisions at 40 CFR Part 60.2 that excuses sources from complying with the regulatory deadline to conduct performance tests. A definition similar to the NSPS force majeure definition is contained in the 40 CFR Part 63 National Emission Standards for Hazardous Air Pollutants (NESHAP) General Provisions. However, most states have been designated as the authority to receive reports and oversee performance testing under both of these regulations with notification to the regional U.S. EPA office being included at U.S. EPA’s discretion. Therefore, the government shutdown will most likely not provide relief to facilities from the requirement to conduct performance tests or submit reports according to the regulatory timelines. Facilities should confirm that their state’s implementation plans identify their state as being the delegated authority to enforce and implement the NSPS and NESHAP regulations. In the absence of guidance, facilities should continue to fulfill compliance obligations in accordance with regulations applicable to them (e.g., submitting reports and notifications).
Finally, Dan reminded me that in 2013, the government also shut down, so we could look back to that period for precedent on how U.S. EPA, state agencies and facilities dealt with this matter. Unfortunately, the precedent was state-by-state driven and not based on uniform or judicial determinations. As for U.S. EPA, you can look at U.S. EPA’s December 31st, 2018 plan for the shutdown.
Certainly, we can hope that the shutdown of the government is resolved as soon as practical and that the consequences to our clients and partners are minimized. In the near term, don’t hesitate to reach out to Dan or your ALL4 Project Manager if you need to solicit some guidance for reacting to what might be called an environmental force majeure.