GenOn Mid-Atlantic v. Dept. of the Environment

GenOn Mid-Atlantic, LLC, et al. v. MDE, et al., Nos. 883, 884 & 885, September Term, 2019. Opinion by Nazarian, J. ADMINSTRATIVE LAW — QUASI-JUDICIAL AGENCY DISCRETION The agency’s permitting decisions were not arbitrary and capricious where the agency followed existing federal regulations to set compliance deadlines for coal-powered steam electric power plant point sources instead of holding regulations in abeyance until further rulemaking is held. Circuit Court for Charles County, Case No. 08-CV-18-872 Circuit Court for Montgomery County, Case No. 454414V Circuit Court for Prince George’s County, Case No. CAL18-31471 REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND Nos. 883, 884, 885 September Term, 2019 _________________________ CONSOLIDATED CASES ______________________________________ GENON MID-ATLANTIC, LLC, ET AL. v. MARYLAND DEPARTMENT OF THE ENVIRONMENT, ET AL. ______________________________________ Nazarian, Reed, Truffer, Keith R. (Specially Assigned), JJ. ______________________________________ Opinion by Nazarian, J. ______________________________________ Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic.

Suzanne Johnson Filed: October 28, 2020 2020-10-28 15:30-04:00 Suzanne C. Johnson, Clerk “The rabbit-hole went straight on like a tunnel for some way, and then dipped suddenly down, so suddenly that Alice had not a moment to think about stopping herself before she found herself falling down a very deep well.”1 GenOn Mid-Atlantic, LLC, NRG Chalk Point, LLC, and GenOn Chalk Point, LLC (collectively “GenOn”) operate three coal-powered steam electric generating power plants in Maryland. Burning coal produces pollutants, and GenOn needs a permit for each plant from the Maryland Department of the Environment (the “Department”) to discharge pollutants into Maryland’s waters. GenOn applied for renewed permits to replace permits that were expiring. The Department analyzed the applications under existing federal environmental regulations and issued permits that, everyone agrees, comply with these regulations in force at the time of issuance.

Why, then, are we here? Well, the federal regulations in place at the time the permits were issued were promulgated by the United States Environmental Protection Agency (“EPA”) during an earlier presidential administration, and the current EPA had expressed an intention to revisit the applicable federal regulation (and, to acknowledge the elephant in the room, loosen them). At the time the case arose, the EPA had not actually begun the rulemaking process that is required to act on that intention, but GenOn asked the Department to issue permits with terms that reflected the (later, hypothetical) compliance deadlines at which the EPA had hinted but, again, had not yet begun the process of adopting. 2 After the Department issued permits consistent with the regulations existing at 1 Lewis Carroll, Alice in Wonderland (Colonial Press). 2 Since oral argument, the EPA has issued a final rule (the “2019 Rule”), to take effect December 14, 2020, revising the effluent limitation guidelines (“ELGs”) governing the time, GenOn sought judicial review in the circuit courts of the plants’ respective counties, and contended that each permit was arbitrary and capricious because the Department did not await or anticipate the not-yet-revised regulations or give GenOn additional opportunities to show they couldn’t comply with the deadlines in the existing regulations. The courts affirmed the Department’s permitting decisions, GenOn appeals, we consolidated the appeals, and we affirm.

I. BACKGROUND A. Statutory Framework. Generally speaking, the federal Clean Water Act (“the Act”) prohibits the “discharge of any pollutant by any person” into our “navigable waters.” 33 U.S.C. §§ 1311 (a), 1362(7), (12) (2018); see Md. Dept. of Env’t v. Anacostia Riverkeeper, 447 Md. 88, 96 (2016). Some businesses, like GenOn’s coal-powered plants, seek authority from the EPA to discharge pollutants into the water. See Md. Dept. of Env’t v. Cnty.

Comm’rs of Carroll Cnty., 465 Md. 169 , 184–85 (2019). Through the National Pollution Discharge Elimination System (“NPDES”), the EPA is authorized to issue (or to delegate to state environmental agencies to issue) discharge permits. But that authority, once granted, isn’t unfettered—the permits contain restrictions “on the type and quantity of pollutants that can be released” in order to serve the purpose of the Act. Anacostia Riverkeeper, 447 Md. at 96 (quoting S. Fla.

Water Mgmt. Dist. v. Miccosukee Tribe, 541 discharges of bottom ash transport water and flue gas desulfurization (“FDG”) wastewater. Steam Electric Reconsideration Rule, 85 Fed. Reg. 64,650 (Oct. 13, 2020) (to be codified at 40 C.F.R. pt. 423). The new rule shall be considered “issued” as of October 27, 2020, followed by a 120-day period for judicial review.

Id. 2 U.S. 95 , 102 (2004)); see 33 U.S.C. § 1342 (2018). The EPA has the power to delegate its permitting authority to a state so long as the state establishes “a parallel permitting program” as required under the Act. Carroll Cnty., 465 Md. at 185 ; see 33 U.S.C. § 1342 (b). The EPA has done this in Maryland, and the permitting authority is the Department.

Anacostia Riverkeeper, 447 Md. at 96 ; see Md. Code (1987, 2014 Repl. Vol.), § 9-253 of the Environment Article (“EN”); see COMAR 26.08.04.01. Permits are valid for fixed periods of five years or less, subject to renewal. 33 U.S.C. § 1342 (b)(1)(B); EN § 9-328(b). The Act also contains an “anti-backsliding” prohibition that forbids later permits from containing more lenient conditions than their predecessors. 33 U.S.C. § 1342 (o); see Carroll Cnty., 465 Md. at 185 .

The Act defines “water quality standards” that set limits on the concentration of pollutants in water for public use. Carroll Cnty., 465 Md. at 186 ; see 33 U.S.C. § 1313 (c)(2)(A) (2018). To achieve the Act’s water quality standards, permits place restrictions on pollutants. “Effluent limitation[s]” are “any restriction established by a State or the Administrator on quantities, rates, and concentrations of chemical, physical, biological, and other constituents which are discharged . . . into navigable waters . . . .” 33 U.S.C. § 1362 (11). The Department incorporates effluent limitation guidelines (“ELGs”) into the permits it issues.

See 40 C.F.R. § 125.3 (2019). ELGs, in turn, address different classes of pollutants. 33 U.S.C. § 1314 (b). Instead of targeting the quantity of pollutants pushed into our waters by dischargers, ELGs focus on the technology the discharger uses to clean the types of pollutants discharged into the environment. Id. 3 GenOn’s coal-fired power plants produce two types of pollutants that are at issue here: flue gas desulfurization (“FGD”) wastewater and bottom ash transport water.

Coal- fired power generating units produce flue gas, which contains “large quantities of particulate matter, sulfur dioxide, and nitrogen oxides,” that would be released into the atmosphere unless they were cleaned first. Effluent Limitations Guidelines and Standards for the Steam Electric Power, 80 Fed. Reg. 67,838 , 67,846 (Nov. 3, 2015) (codified at 40 C.F.R. pt. 423). The units are equipped with air pollution control systems that clean the air and remove sulfur dioxide. However, FGD systems produce wastewater that contains pollutants, including “chemical precipitation, biological treatment, and evaporation.” Effluent Limitations Guidelines, 80 Fed. Reg. at 67,846.

Bottom ash transport water contains heavy ash particles that fall to the bottom of coal-fired furnaces. Normally, the bottom ash is cooled in a water-filled hopper that produces two byproducts, the ash itself and the transport water. Id. Technology exists for bottom ash to be cleaned and produce zero discharge.

Id. The relevant ELGs require GenOn to use the highest standard of technology it can reasonably acquire, the “best available technology” (“BAT”), to limit the environmental impact of pollutants. The EPA (or here, the Department) determines the BAT for a particular industry by assessing a number of factors: Factors relating to the assessment of best available technology shall take into account the age of equipment and facilities involved, the process employed, the engineering aspects of the application of various types of control techniques, process changes, the cost of achieving such effluent reduction, non- water quality environmental impact (including energy requirements), and such other factors as the [Department] 4 deems appropriate. 33 U.S.C. § 1314 (b)(2)(B) (2018). The BAT standard is “more stringent” than others, and “reflect[s] the intention of Congress to use the latest scientific research and technology in setting effluent limits, pushing industries toward the goal of zero discharge as quickly as possible.” Kennecott v. EPA, 780 F.2d 445, 448 (4th Cir. 1985).

B. The EPA Remarks On Steam-Powered Electric Plants. On November 3, 2015, the EPA issued a final rule establishing the ELGs for coal- burning steam plants such as GenOn’s (the “2015 Final Rule”). Effluent Limitations Guidelines, 80 Fed. Reg. at 67,838. In its preamble, the Rule states that “[s]team electric power plants contribute the greatest amount of all toxic pollutants discharged to surface waters by industrial categories regulated under the Act.” Id.

Citing the health risks to minority and low-income communities housed near these plants, the EPA stated that the 2015 Final Rule was intended to “establish[] the first nationally applicable limits on the amount of toxic metals and other harmful pollutants that steam electric power plants are allowed to discharge in several of their largest sources of wastewater.” Id. The 2015 Final Rule imposed stricter limitations on FGD wastewater and required the elimination of pollutants from bottom ash transport water. Effluent Limitations Guidelines, 80 Fed. Reg. at 67,894–96 (listing new standards for mercury, selenium, arsenic, and total dissolved solids in the discharge of FGD wastewater and allowing “no discharge of pollutants in bottom ash transport water”). The 2015 Final Rule was challenged, ultimately unsuccessfully, in cases consolidated in the United States Court of Appeals for the Fifth Circuit.

See Clean Water 5 Action v. EPA, 936 F.3d 308 (5th Cir. 2019). On April 25, 2017, the EPA (now under a new administration) announced in a letter that it planned to reconsider the 2015 Final Rule, and it postponed the effective date of the 2015 Final Rule “pending judicial review” before the Fifth Circuit. Postponement of Certain Compliance Dates, 82 Fed. Reg. 19,005 (Apr. 25, 2017) (codified at 40 C.F.R. pt. 423). A few months later, on September 18, 2017, the EPA issued a final rule lifting the stay and postponing the compliance dates for some types of wastewater (the “2017 Postponement Rule”).

Postponement of Certain Compliance Dates, 82 Fed. Reg. 43 ,494–500 (Sept. 18, 2017) (codified at 40 C.F.R. pt. 423). But 40 C.F.R. § 423.13 , which contains the relevant deadlines for implementation of the 2015 Final Rule, had not been revised at the time the permits were issued.3 C. The Department’s Permits To GenOn. GenOn, through the separate LLCs named in the caption of this case, operates three steam electric power plants in Maryland: Chalk Point Generating Station in Prince George’s County, Morgantown Generating Station in Charles County, and Dickerson Generating Station in Montgomery County. GenOn needs permits from the Department to discharge wastewater in Maryland’s waterways.

See 33 U.S.C. § 1311 (a). The permits contain ELGs controlling the technology GenOn must use for FGD and bottom ash transport water. See Effluent Limitations Guidelines, 80 Fed. Reg. at 67,838.4 3 EPA submitted a proposed rule modifying the standards in the 2015 Final Rule, and its proposed rule has just been finalized. Steam Electric Reconsideration Rule, 85 Fed. Reg. at 64,650.

The public comment period for this new rule, the 2019 Rule, ran from November 22, 2019–January 21, 2020. Id. 4 “[F]lue gas desulfurization (FGD) wastewater means any wastewater generated specifically from the wet flue gas desulfurization scrubber system that comes into contact 6 GenOn applied to renew each plant’s permit, and on July 5, 2017, the Department issued a tentative determination. The tentative determinations were drafts and stated as much. The drafts indicated that the 2015 Final Rule “required new standards to be met . . . ‘as soon as possible’ beginning November 1, 2018, but no later than December 31, 2023.” They noted that the EPA had issued a letter on April 12, 2017 “announc[ing] a decision to reconsider the terms of the new regulations and implement[ing] a stay on the deadlines in the [2015 Final Rule].” The drafts stated that the letter created “uncertainty as to whether the standards required . . . [would] be altered and what deadlines [would] ultimately be applicable.” The Department’s drafts then outlined the changes to the wastewater standards required under the 2015 Final Rule and noted that “should the actual limitation be adjusted in a final rule,” the Department would reopen the permit.

(emphasis added). Compliance would be required by the dates set forth in 40 C.F.R. § 423.13 (k) and (g), or no later than November 1, 2020, the updated deadline for FGD wastewater and bottom ash transport water. Also, the discharger had an option to submit a detailed report requesting a permit modification “within twelve months of the date when the [2015 Final Rule] bec[ame] effective again.” The draft permits underwent a public comment period. GenOn submitted a two- page letter stating that it approved of “the approach that [the Department] ha[d] taken in [the draft] permit regarding language concerning” FGD and bottom ash transport water and with the flue gas or the FGD solids . . . .” Effluent Limitations Guidelines, 80 Fed. Reg. at 67,893. “[B]ottom ash means the ash, including boiler slag, which settles in the furnace or is dislodges from furnace walls.” Id. 7 that waiting for further rulemaking would serve the EPA’s “intention to avoid any actions to meet limits that may change as a result of further rulemaking.”5 The Sierra Club, along with other environmental groups,6 submitted comments arguing that GenOn could and should meet the delayed November 1, 2020 deadline.

They provided a detailed expert opinion by Dr. Ranajit Sahu to support their contention that GenOn had the capacity to meet the guidelines.7 GenOn didn’t specify whether it could meet the ELGs or not in its comments (or in its original application materials), and it raised no objections about feasibility. The Department issued its final determinations renewing GenOn’s permits on July 27, 2018. In the final permits, the Department required GenOn’s plants to meet ELG requirements for FGD wastewater and bottom ash transport water no later than November 1, 2020.8 D. Circuit Court Review. GenOn sought review of the Department’s July 27, 2018 final determination in the circuit courts for Prince George’s County, Charles County, and Montgomery County, the 5 GenOn submitted substantively similar comments for all three permits. 6 Sierra Club, Environmental Integrity Project, Chesapeake Climate Action Network, Chesapeake Physicians for Social Responsibility, Clean Water Action, and Patuxent Riverkeeper all joined in the comments. 7 Dr. Sahu stated in his opinion that [GenOn] “could install technically-proven treatment” to the wastewater to meet the 2015 Final Rule’s guidelines. 8 For FGD wastewater only, the Department provided an option for GenOn to comply no later than December 31, 2023, if it “elected to comply with the voluntary effluent limitation guidelines at 40 C.F.R. 423.13(g)(3)(i).” GenOn has not indicated any intention to meet voluntary FGD guidelines. 8 counties where GenOn operates their plants.

Each circuit court determined that the relevant records contained substantial evidence supporting the Department’s permitting decisions and that the Department’s decisions to issue the final permits were not arbitrary or capricious. Here is the timeline of critical events: Date Event Nov. 3, 2015 The EPA issued 2015 Final Rule. Apr. 25, 2017 The EPA stayed 2015 Final Rule. July 5, 2017 The Department issued draft permits for GenOn’s plants, public comment period opened after drafts were published.

Sept. 18, 2017 The EPA issued 2017 Postponement Rule. Sept. 26-28, 2017 Public hearings on draft permits held. Oct. 5-6, 2017 GenOn submitted written comments to the Department; Environmental groups submitted written comments; Public comment window closed. July 27, 2018 The Department issued final determinations.

Sept. 10, 2018 GenOn filed for judicial review in the Circuit Courts for Prince George’s County, Montgomery County, and Charles County. May 23, 2019 Prince George’s County issued order denying GenOn’s petition. June 5, 2019 Montgomery County issued order denying GenOn’s petition. June 23, 2019 Charles County issued order denying GenOn’s petition.

GenOn appeals all three decisions, and we consolidated the appeals. We supply additional facts as necessary below.

II

DISCUSSION GenOn raises two issues that we rephrase. First, were the Department’s final determinations, both grounded in the 2015 Final Rule and 2017 Postponement Rule, arbitrary and capricious? Second, did the Department’s final determinations lack substantial evidence in the record? 9 Judicial review of administrative actions begins in the circuit court. See Md. Rule 7-201 et seq.

On appeal, though, an appellate court “looks through the circuit court’s . . . decision[] . . . and evaluates the decision of the agency.” Kor-Ko Ltd. v. Md. Dept. of Env’t, 451 Md. 401 (2017) (quoting People’s Counsel for Balt. Cnty. v. Suria, 400 Md. 663 , 682 (2007)). As such, we review the Department’s decision to issue the renewed permits directly. Md. Dept. of Env’t v. Cnty.

Cmm’rs of Carroll Cnty., 465 Md. 169, 201 (2019). “[W]here an ‘organic statute’ authorizes judicial review without a contested case hearing and does not set forth a standard of review[,]” we apply the substantial evidence and arbitrary and capricious standards of review. Kor-Ko, 451 Md. at 411 (quoting Md. Dept. of Env’t v. Anacostia Riverkeeper, 447 Md. 88, 118 (2016)). When we review an agency’s factual findings, we assess whether substantial evidence in the record supports the agency’s finding. Id.

An appellate court reviewing for substantial evidence asks “whether a reasoning mind reasonably could have reached the factual conclusion the agency reached.” Anacostia Riverkeeper, 447 Md. at 120 (quoting Najafi v. Motor Vehicle Admin., 418 Md. 164, 173 (2011)). We defer to the agency’s fact- finding and any inferences that the record supports. Id. We review in the light most favorable to the agency and we grant the agency “great deference regarding factual questions involving scientific matters in its area of technical expertise.” Id.

We apply the arbitrary and capricious standard to matters falling within the agency’s discretion. Carroll Cnty., 465 Md. at 202 . This standard too is “extremely deferential”: To determine whether the agency’s actions were “arbitrary and capricious,” we consider whether the agency ‘relied on factors which Congress has not intended it to consider, entirely failed 10 to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. Anacostia Riverkeeper, 447 Md. at 121 (quoting Nat.

Res. Def. Council v. EPA, 808 F.3d 556, 569 (2d Cir. 2015)). We must be satisfied from the record that the agency “examined the relevant data and articulated a satisfactory explanation for its action.” Id.

(cleaned up) (quoting Nat. Res. Def. Council, 808 F.3d at 569 ).

All told, then, our review of the Department’s permitting decisions follows three steps: Whether by statute or by common law, courts look for three things when reviewing a quasi-judicial decision: (1) were the findings of fact made by the agency supported by substantial evidence in the record made before the agency; (2) did the agency commit any substantial error of procedural or substantive law in the proceeding or in formulating its decision; and (3) did the agency act arbitrarily or capriciously in applying the law to the facts—in essence, whether a reasoning mind could reasonably reach the conclusion reached by the agency from the facts in the record. With respect to the findings of fact, judicial review is highly deferential. With respect to determining legal error, it is much less so. Kor-Ko, 451 Md. at 411–12 (quoting Md. Bd. of Pub.

Works v. K. Hovnanian’s Four Seasons, LLC, 425 Md. 482 , 514 n.15 (2012)). Permitting decisions involve conclusions of law, requiring reviewing courts to consider the agency’s expertise in the field: An agency decision based on regulatory and statutory interpretation is a conclusion of law. Even when reviewing an agency’s legal conclusions, an appellate court must respect the agency’s expertise in its field. When an agency interprets its own regulations or the statute the agency was created to administer, we are especially mindful of that agency’s 11 expertise in its field.

Kor-Ko, 451 Md. at 412 (quoting Carven v. State Ret. & Pension Sys., 416 Md. 389, 406 (2010)). Judicial review of the Department’s final determinations ordinarily “shall be on the administrative record before the [Department] and limited to objections raised during the public comment period.” Potomac Riverkeeper, Inc. v. Md. Dept. of Env’t, 238 Md. App. 174, 203 (2018). A. The Department’s Final Determinations Were Not Arbitrary And Capricious. GenOn argues that the Department failed to consider an “important aspect of the problem” in its permitting decisions, see Anacostia Riverkeeper, 447 Md. at 120 , when it didn’t follow the “EPA’s guidance that the regulated industry should not be bound to effluent limitations that were soon to change.” The Department responds that the compliance date included in the final permits was the default compliance date required under the operative EPA regulations and that GenOn’s arguments rely improperly on a legally ineffectual regulatory preamble.

We hold that the permitting decisions were not arbitrary and capricious. These permits implicate a mixture of federal and state statutes and regulations. “[T]he interpretation of an agency rule is governed by the same principles that govern the interpretation of a statute.” Kor-Ko, 451 Md. at 416 (quoting Carven, 416 Md. at 407 ). The Court of Appeals recently summarized the rules governing statutory interpretation in cases involving an agency’s permitting decisions: When interpreting statutes, we seek to ascertain and implement the will of the Legislature. Our first step toward that goal is to 12 examine the text.

If the language of the statute is unambiguous and clearly consistent with the statute’s apparent purpose, our inquiry as to legislative intent ends ordinarily and we apply the statute as written, without resort to other rules of construction. If ambiguities are found, other indicia of legislative intent are consulted, including the relevant statute’s legislative history, the context of the statute within the broader legislative scheme, and the relative rationality of competing constructions. Id. at 417 (emphasis added) (quoting Harrison-Solomon v. State, 442 Md. 254 , 265–66 (2015)). We give the words in the statute their ordinary meaning.

Id. (quoting Scheve v. Shudder, Inc., 328 Md. 363, 372 (1992)). “[W]e begin ‘with the plain language of the statute, and ordinary, popular understanding of the English language dictates interpretation of its terminology.’” Blackstone v. Sharma, 461 Md. 87, 113 (2018) (quoting Schreyer v. Chaplain, 416 Md. 94, 101 (2010)). We don’t “read statutory language in a vacuum, nor do we confine strictly our interpretation of a statute’s plain language to the isolated section alone.” Johnson v. State, 467 Md. 362, 372 (2020). We apply these same principles when interpreting agency regulations: We [] do not read [regulatory] language in a vacuum, nor do we confine strictly our interpretation of a [regulation’s] plain language to the isolated section alone.

Rather, the plain language must be viewed within the context of the [regulatory] scheme to which it belongs, considering the purpose, aim, or policy of the [agency] in enacting the [regulation]. We presume that the [agency] intends its enactments to operate together as a consistent and harmonious body of law, and, thus, we seek to reconcile and harmonize the parts of a [regulation], to the extent possible consistent with the [regulations] object and scope. Lockshin v. Semsker, 412 Md. 257 , 275–76 (2010). “[W]e are especially mindful of [an] agency’s expertise in its field” when considering an agency’s own regulations. Kor-Ko, 13 451 Md. at 412 (quoting Carven, 416 Md. at 406 ). “When the construction of an administrative regulation rather than a statute is in issue, deference is even more clearly in order.” Id.

(quoting Md. Transp. Auth. v. King, 369 Md. 274 (2002)). We accord agencies deference in interpreting their own regulations because of their expertise in their regulatory space: [A]gency rules are designed to serve the basic needs of the agency, are promulgated by the agency, and are utilized on a day-to-day basis by the agency. A question concerning the interpretation of an agency’s rule is as central to its operation as an interpretation of the agency’s governing statute.

Because an agency is best able to discern its intent in promulgating a regulation, the agency’s expertise is more pertinent to the interpretation of an agency’s rule than to the interpretation of its governing statute. Kor-Ko, 451 Md. at 412–13 (quoting King, 369 Md. at 289 ). Moreover, our examination of legislative intent “contemplates ‘the consequences resulting from one construction rather than another.’” Johnson, 467 Md. at 364 (quoting Blaine v. Blaine, 336 Md. 49, 69 (1994)). We avoid any interpretation that would lead to illogical or absurd results.

Goshen Run Homeowners Assoc., Inc. v. Cisneros, 467 Md. 74, 109 (2020). 1. The ELGs in the 2015 Final Rule and the Department’s permits remain valid, and the 2017 Postponement Rule is not an indefinite stay. GenOn argues that, “[s]ince 2017, the EPA has consistently maintained that the regulated industry not be subject to the new 2015 ELG limits until the EPA completes another round of rulemaking.” It argues further that the Department ignored the EPA’s “guidance” when it set the November 1, 2020 deadline in its final permits. The Department 14 responds that the plain language of the 2015 Final Rule and the 2017 Postponement Rule supports its final permits to GenOn and contends that GenOn conflates preamble language with the body of the regulations to support its arguments.

As we explain, we agree with the Department. The difference in the two positions reflects the difference between how things actually were at the relevant time and how GenOn wanted them to be.