Delaware Department of Natural Resources & Environmental Control v. Environmental Protection Agency, 785 F.3d 1

Background

EPA amended emissions rules in 2013 to allow stationary reciprocating internal combustion (backup) generators to operate without emissions controls for up to 100 hours/year for "emergency demand response," in addition to true emergencies and maintenance.
Backup generators typically run on diesel and emit hazardous air pollutants regulated under the Clean Air Act (CAA) Sections 111 and 112; prior rules had allowed limited non-emergency hours (15–50 hours depending on year and context).
Petitioners (state, environmental groups, industry) challenged the 2013 Rule as arbitrary and capricious and as exceeding EPA's statutory authority, arguing the 100-hour exemption would distort capacity markets, harm grid reliability, and increase pollution.
Delaware raised three claims: EPA acted arbitrarily under Section 112; EPA improperly revised definitions under Section 111; and EPA unlawfully exempted certain non-emergency generators in remote areas — but lacked evidence of injury from remote-area engines.
The D.C. Circuit found standing for Conservation Law Foundation and for Delaware (as to the 100-hour demand-response exemption) but held Delaware lacked standing to challenge the remote-area exemption.
The court vacated and remanded the portions of the 2013 Rule creating the 100-hour emergency-demand-response exemption (affecting both NESHAP and Performance Standards), finding EPA’s rulemaking arbitrary and capricious for failing to address significant comments, relying on flawed evidence, and not considering reasonable alternatives.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Standing to challenge 100-hour exemption	Delaware: increased upwind emissions will impede attainment of NAAQS; injury is concrete and redressable	EPA: no specific evidence of imminent, particularized injury from the rule	Court: standing established for Delaware re: 100-hour demand-response exemption (but not for remote-area exemption)
Arbitrary/capricious modification of NESHAP (Sec. 112) increasing exemption to 100 hours	Petitioners: EPA ignored evidence that exemption would distort capacity markets, harm reliability, and increase pollution; failed to respond to significant comments	EPA: exemption supports reliability (esp. rural areas); market issues are outside EPA’s primary purview	Court: EPA acted arbitrarily and capriciously; vacated and remanded 100-hour exemption in NESHAP
Improper revision of Performance Standards (Sec. 111) to mirror 100-hour exemption	Petitioners: Performance Standards change improperly expands unregulated operation and rests on same flawed rationale as NESHAP change	EPA: harmonizing Performance Standards with NESHAP is reasonable to address demand-response reliability	Court: modification of Performance Standards to allow 100 hours was arbitrary and capricious; vacated and remanded those provisions
Remote-area exemption for certain non-emergency generators	Delaware: exemption increases transported pollution harming Delaware	EPA: rule applies nationwide; remote exemptions target sparsely populated areas where reliability needs differ	Court: Delaware lacked standing to challenge remote-area exemption (no specific evidence linking such engines to Delaware)

Key Cases Cited

Motor Vehicle Mfrs. Ass’n v. State Farm, 463 U.S. 29 (agency must examine relevant data and explain connection between facts and decision)
Lujan v. Defenders of Wildlife, 504 U.S. 555 (Article III standing requirements)
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (standing is threshold and plaintiff bears burden)
Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855 (framework for Section 112 "floor" and beyond-the-floor analysis)
Appalachian Power Co. v. EPA, 249 F.3d 1032 (interstate transport of pollution and standing implications)
TC Ravenswood, LLC v. FERC, 741 F.3d 112 (capacity market mechanics and reliance on capacity revenues)