The U.S. Environmental Protection Agency (EPA) recently released a proposed rule that illustrates several of the agency’s Next Generation Compliance ideas in action.  The proposed rule concerns hazardous air pollutant (HAP) emissions from refineries, but should be studied by anyone who wants to gain a better understanding of what “Next Generation Compliance” means as a practical matter.  Most importantly, the proposed rule shows the direction in which the agency is likely headed with respect to “fugitive” air emissions at other types of facilities – chemical plants, paper mills, distilleries, etc.

EPA uses the term “Next Generation Compliance” to cover several ideas:  (i) the use of new, advanced technologies to identify and measure emissions, (ii) electronic reporting of environmental data rather than paper reporting, (iii) greater disclosure of environmental data to the public, and (iv) regulations that contain fewer exceptions and more built-in incentives for compliance.

Many of those ideas are on display in EPA’s May 15 proposed rule for refineries, but two features of that rule stand out as being especially relevant to other industries, and as good examples of what Next Generation Compliance means in practice:

First, the proposed rule would impose emission limits that apply at all times; there are no exceptions for startups, shutdowns and malfunctions.  Under this approach, which, because of recent court decisions, will likely be standard for all HAP rules going forward, regulated parties will no longer be automatically shielded from penalties in the event they exceed emission limits because of an equipment malfunction.  But those parties may still be able to convince the agency, on a case-by-case basis, that they should not be penalized, based on the event-specific facts.

Second, the proposed rule would require refinery owners and operators to monitor ambient air quality at the fenceline of their facilities, and it encourages the use of new technologies to conduct that monitoring.  The agency explains, in the draft rule’s preamble, that this approach is intended to provide a flexible means of locating and controlling fugitive emissions – emissions that cannot easily be captured to pass through a stack or vent and that are usually estimated based on engineering judgments rather than measured directly.

Fenceline monitoring is a controversial topic.  Regulated parties sometimes fear that data from fenceline monitoring will be used to impose penalties for emissions that are not in fact unlawful, or that such monitoring will be used to support state law tort claims against the owners and operators of industrial facilities.  But in some situations, fenceline monitoring might provide a defense to state law nuisance and trespass claims, or otherwise exonerate a regulated party from blame for local air pollution problems.  In all events, a critical question is how the fenceline monitoring data will be used.  Does the data establish violations?  Does it trigger corrective action duties?  Does it trigger reporting duties?

The refinery proposal addresses each of those questions, but with mixed results.  Most importantly, there are places where the draft regulatory text and EPA’s explanation [...]

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