Decision may significantly impact active and inactive unlined and clay-lined coal ash impoundments, likely requiring closure or retrofit.

By Claudia M. O’Brien and Stijn van Osch

The D.C. Circuit this week struck down parts of the Environmental Protection Agency (EPA) Coal Combustion Residuals (CCR) rule for not being sufficiently protective of the environment. The decision in Utility Solid Waste Activities Group (USWAG) et al. v. EPA, No. 15-1219 (D.C. Cir. Aug. 21, 2018) will have a major impact on both active and inactive coal ash impoundments used by coal-fired power plants. Although the timing is uncertain, the Court’s opinion will likely require closure or retrofitting of all unlined and clay impoundments, unless EPA is able to address the Court’s concerns on remand.

What Did The Court Find?

The D.C. Circuit’s most significant holdings relate to surface impoundments or “ash ponds.” These are disposal sites where coal ash from power plants is disposed of in a mix with water. In its CCR rulemaking, EPA aimed to regulate the risk associated with leaks or spills from those ponds. In part, the rule did this by requiring new impoundments to have a composite liner. However, the agency allowed existing unlined or clay-lined ponds to continue operation unless and until mandated continuing monitoring reveals a leak, at which point the pond must retrofit or close. Inactive ponds at inactive facilities, also known as “legacy” impoundments, were exempt from regulation altogether. The energy industry challenged several provisions of the rule as outside of EPA’s authority, and as arbitrary and capricious. On the other side, environmental non-governmental organizations (NGOs) challenged several provisions as arbitrary and capricious for being insufficiently protective or unsupported by the record.

Siding with environmental NGOs, the Court struck down several of the provisions relating to unlined, clay-lined, and inactive coal ash impoundments, holding that those provisions were not sufficiently protective of the environment or were inconsistent with the record.

• First, the Court found that unlined surface impoundments pose “a substantial present or potential hazard to human health and the environment,” and vacated the relevant provision (at 40 C.F.R. § 257.101) to the extent that it allows for the continued operation of unlined surface impoundments. Specifically, the Court examined the record evidence and found that such impoundments pose significant risks to the environment. Thus, the Court held that a requirement to monitor these sites and to take action only following evidence of leakage is arbitrary and capricious. It held that this section is incompatible with the requirement of the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. § 6944(a), to ensure that “there is no reasonable probability of adverse effects on health or the environment from disposal of solid waste.” Rather, the Court implied that only immediate closure or retrofitting of unlined ash ponds may meet the statutory requirement.
• The Court similarly found that EPA acted arbitrarily and capriciously in concluding that existing clay-lined surface impoundments should count as “lined.” The Court stated that “clay-lined units are dangerous” and more likely to leak than composite-lined impoundments. Thus, the Court held that EPA acted in an arbitrary and capricious manner in concluding that such units can be repaired if they are found to be leaking. The Court vacated the rule’s provision, at 40 CFR § 257.71(a)(1)(i), that two feet of clay lining sufficed to line a pond. As for unlined impoundments, the Court implied that requiring immediate closure or retrofitting of clay-lined impoundments may be the only way to satisfy RCRA’s “no reasonable probability” standard.
• Finally, the Court found that EPA’s exemption from regulation of existing unlined legacy surface impoundments is arbitrary and capricious. The Court held that the record contradicts EPA’s stated reason for the exemption — that responsibility for legacy ponds is unclear — and noted that legacy ponds pose the highest risks. Thus, the Court vacated the legacy impoundment exemption at 40 C.F.R. § 257.50(e).

The Court rejected NGOs’ claims relating to the inadequacy of posting CCR data online, as the issue was not raised in comments on the rule. The Court also rejected all of industry’s claims. The Court granted EPA’s request for a voluntary remand to reconsider regulations relating to coal residuals’ pile size and on the 12,400 ton threshold for beneficial reuse — that is, the use of coal ash in applications such as cement. The Court denied EPA’s voluntary remand request relating to sections of the rule relating to inactive impoundments, given the Court’s decision on the merits on that issue.

What Happens Next?

This decision has potentially significant implications for unlined or clay-lined surface impoundments, as it would appear the Court sought to disallow continued operation unless they are retrofit with a composite liner. And, importantly, inactive or legacy impoundments under the decision must now be treated in the same way as active impoundments, even those at inactive facilities.

Nevertheless, the mere vacatur of several sections of the CCR rule does not necessarily mandate immediate closure or retrofit of an unlined or clay-lined impoundment. The decision does not (and cannot) accomplish that result. There is no default requirement in the rule that mandates such immediate closure that the Court could order into effect, nor was there any regulatory or statutory requirement in place prior to the rule’s promulgation that mandated closure of ash ponds. The Court vacated only the section of the rule that triggers closure requirements after groundwater contaminants are found to exceed specified levels , as well as the provisions treating clay-lined impoundments as meeting the rule’s requirement and exempting legacy impoundments. The Court ordered “additional consideration consistent with this opinion,” but its ruling does not mandate a particular outcome from a rulemaking or any particular timeline by which unlined ash impoundments must be retrofitted or closed.

Industry or EPA can petition for rehearing (either by the same panel or the Circuit Court en banc) or petition for certiorari before the Supreme Court. A motion for rehearing would take a minimum of about three months to hear and decide. A grant or denial of a petition for certiorari, if filed subsequent to a denial of rehearing, will take several months more. During that time, the parties can request a “stay of the mandate,” meaning that the Court’s opinion does not take effect for 90 days. Such a request is usually granted. Extensions are often granted as needed if it takes more than 90 days to decide the petitions, as is the case for many petitions for certiorari. Thus, the process could be drawn out by another three to  nine months even if the Supreme Court ultimately were to decline to take the case. And if the Supreme Court does take up the case, any stay of the mandate is continued until its final decision — which can take a year or more.

If there are no petitions for rehearing or certiorari, the Court’s mandate will take effect on October 12, 2018. Otherwise, the mandate will take effect shortly after the denial of any petitions or a new decision if a petition is granted. Once the mandate takes effect, the provisions of the rule that were vacated — that is,  40 CFR §§ 257.50(e), 257.71(a)(1)(i) and 257.101(a)(1)) — will cease to be in effect. EPA will also be required to propose — and ultimately finalize — a new rule addressing the vacated provisions, including considering the closure or retrofit of all ash ponds that lack a composite liner. Presumably, that new rule will take into account how much time such closure or retrofitting will take, while remaining cognizant of the Court’s concern that these actions should be taken as quickly as possible.

If EPA fails to publish a proposed rule within a period of several months, NGOs may file a lawsuit seeking to expedite the rulemaking process. On balance, EPA might be able to propose and finalize a rule within a year. Regardless of the timing of the proposal, whether or how quickly EPA might mandate closure or retrofit action in the proposal itself is difficult to predict.

Takeaways From the Decision

Notwithstanding the D.C. Circuit’s strong language regarding the risks of unlined and clay-lined ash impoundments, those impoundments are not likely to be subject to any meaningful regulatory timeline for at least a year. The process likely will be drawn out by at least an additional three to nine months if petitions for rehearing and/or certiorari are filed. Nonetheless, if the D.C. Circuit opinion stands, all active and inactive ponds without composite liners likely have to be closed or retrofitted. In contrast, there is no immediate impact on ash that is disposed of in a “dry” manner in landfills. The Court rejected industry challenges to sections of the CCR rule relating to landfills, and those rules remain in effect unchanged.

Once EPA issues a proposal for a new rule, industry and others will be able to provide comments on how any potential closing and retrofitting affected impoundments should be managed. It will be especially critical for stakeholders to engage in this process and provide EPA with information on the timing for retrofit and closure of affected ponds, to ensure the final rule takes into account the engineering realities associated with retrofit and closure.