In 2018, EPA issued a policy memorandum (Memorandum) stating that a “major source” of toxic emissions can limit its potential to emit below the Clean Air Act (CAA) “major source” threshold and reclassify as an “area source,” thus easing its regulatory burden.  The Memorandum reversed a policy made during the Clinton administration, which stated that once a source became a “major source” for CAA requirements, it could never reclassify to the less regulated “area source.”

Petition for Review Dismissed for Lack of Jurisdiction
The State of California and several environmental organizations (Petitioners) filed a Petition for Review to the DC Circuit Court of Appeals.  The Petitioners claimed the Memorandum was either a legislative rule, which the DC Circuit should vacate because it lacked the required notice and opportunity for comment, or an interpretative rule that the DC Circuit should vacate because EPA’s interpretation is incorrect.

A three-judge panel of the DC Circuit, with one dissent, refused to vacate the Memorandum.  The majority agreed with EPA that the Memorandum was not final agency action, and thus the Court lacked jurisdiction to consider the Petitioners’ challenge.  In reaching this decision, the majority carefully noted it was not addressing if the Memorandum is prudentially ripe, is an interpretative rule or a legislative rule, or is a correct interpretation of the CAA.

Memorandum’s Lack of Independent Legal Authority
According to the majority, the lack of finality stems from the complicated procedures governing CAA permitting for major sources.  Any major source that desires reclassification to an area source must first make the request to the state permitting authority.  The state authority can disregard the Memorandum with no consequence.  If EPA issues a permit reclassifying the source despite the state’s refusal, the state can appeal, and persons claiming to be harmed can participate in that appeal.  Conversely, if a state allows reclassification, those opposing reclassification can petition EPA to object.  If EPA follows the Memorandum and fails to object, those affected by EPA’s failure to object can appeal.  According to the majority, the uncertainty of any reclassification being opposed, and the right to appeal reclassification by those affected, means the Memorandum “has no independent legal authority” and was not final agency action.

Dissent Would Vacate the Memorandum
The dissenting judge concluded the Memorandum is final agency action, because it binds how EPA must make CAA permitting decisions.  The dissent also argued the Memorandum has the force and effect of law, and thus is a legislative rule, which should be vacated for failure to provide notice and opportunity for comment.

To see the DC Circuit opinion and the dissent$file/18-1085.pdf