Billboards and big utilities: borrowing land-use concepts to regulate 'nonconforming' sources under the Clean Air Act.

• Author: Varadarajan, Deepa

1. INTRODUCTION

   For more than thirty years, numerous coal-fired, electric utility plants have enjoyed "grandfathered" status under the Clean Air Act (CAA), leaving them virtually untouched by the dictates of increasingly stringent air pollution regulation in the United States. The Clean Air Act of 1970, which essentially codified the federal regulatory approach toward air pollution, established a two-tiered framework for the regulation of major stationary sources of air pollution. (1) This approach mandated stricter federal pollution-control technology requirements on power plants built after the passage of new regulatory standards than those applicable to existing plants. This bifurcated approach, often called the "old-new division" (2) in pollution-control regulation, continues to the present day, despite two subsequent rounds of amendments to the CAA in 1977 and 1990.

   The Clean Air Act Amendments of 1977 introduced two programs, New Source Review (NSR) and Prevention of Significant Deterioration (PSD), which attempted to narrow the old-new divide in control technology requirements. Any major modification of an old source would render it "good as new" for federal regulatory purposes, leading to the imposition of the same control technology requirements that new sources were obligated to follow in a given area. Despite this subsequent "narrowing," many old sources, particularly coal-burning utility plants, predominantly located in the Midwest, continue to operate under more lenient pollution-control requirements. Together, these old sources are responsible for approximately two-thirds of the nation's sulfur dioxide emissions, forty percent of carbon dioxide emissions, and one-third of the nation's nitrogen oxide and mercury pollution. (3) Moreover, if these plants were subject to the same federal technology requirements imposed on their new source counterparts, their emissions figures would diminish by several orders of magnitude. (4) Unfortunately, the last major round of amendments to the Clean Air Act, which took place in 1990, did little to further narrow the old-new divide in federal pollution-control technology requirements for major stationary sources of air pollution. (5)

   The continued grandfathering of old sources runs afoul of not only the stated purpose of the CAA to improve the nation's air quality, but also its larger policy goal of stimulating investment in and growth of cleaner technologies. Even if the original motivations behind a two-tiered approach in the 1970 CAA were justifiable both from a policy and constitutional standpoint, (6) a contention that even some current critics of grandfathering seem to support, much doubt exists as to its continued utility or validity. In 1998, two congressional bills were introduced that would have eliminated the grandfathered status of coal-fired power plants under the Clean Air Act. (7) However, these bills were unable to withstand the arguments of electricity-generation firms and their allies in Congress. A cynical observer might attribute (and, indeed, many have) the failure of such bills to the lobbying power of the energy industry and, while lamenting the power of big money to influence environmental legislation, accept this aspect of American politics and focus the scholarly discourse on approaches more attuned to political realities, such as market-driven, cap-and-trade programs, which have become increasingly popular in recent decades. (8)

   This outright dismissal is simplistic, however, because the old-new distinctions were originally adopted in the 1970 CAA with a variety of motives. (9) Their original inclusion was due in large part to Fifth Amendment takings considerations, as well as some undoubtedly political motives. It is this former takings argument, not the political motivations (10) behind the old-new distinctions in technology requirements under the CAA, that will serve as the focus of my analysis. Insofar as the takings argument continues to validate (or invalidate) old-new distinctions in the regulation of utilities, the land-use context can serve as a useful conceptual guide.

   In the land-use context, zoning law has been forced to contend with a theoretical problem akin to that presented by the regulation of old sources under the Clean Air Act. Namely, when local governments pass zoning ordinances designating the permitted land uses in a given area, certain land uses will likely already exist on the regulated properties that are inconsistent with the new zoning ordinances. These preexisting uses, deemed "nonconforming" uses, cannot be eliminated outright by local governments without compensation, due to the constitutional protection afforded property owners against unjust takings. However, if these uses were allowed to continue indefinitely, they would threaten the very purpose of Euclidian zoning--to ensure an orderly pattern of local development through the separation of conflicting uses. (11) In response to this conundrum, a land-use doctrine evolved over the past half century to deal with the issue of nonconforming uses. In many respects, its pattern of evolution bears a striking resemblance to the development of the regulatory regime designed to address old sources of air pollution, from the lenient 1970 CAA to the comparatively stringent 1977 CAA Amendments.

   Regulations emerged in the zoning context that allowed a nonconforming use to continue provided there were no major alterations to the use. (12) Zoning regulators believed that these restrictions would cause the gradual disappearance of such nonconforming uses. (13) Similarly, the 1977 Amendments to the CAA attempted to bring more old sources within the ambit of the new source-control technology regime under the NSR and PSD programs, in which "major modifications" to old sources would result in the loss of grandfathered or protected status. Again, the expectation behind such restrictions was the gradual replacement of old sources by newer, cleaner sources. Interestingly, in both cases, such restrictions failed to bring about the desired goal: the elimination of the nonconforming use. (14) In fact, the opposite has occurred due to the unique economic advantages unwittingly bestowed upon owners of old sources and nonconforming uses alike by these types of regulations. They have created incentives to continue nonconforming uses in the land-use context, and in the air pollution context, to extend the life of old, coal-burning utilities beyond what was originally envisioned in the CAA. (15)

   Land-use regulation, however, has given birth to one technique that, in many cases, has successfully resulted in the elimination of nonconforming uses--amortization. Zoning laws can require the termination of nonconforming uses provided that the owner is given a sufficient time period in which her property investment can be amortized. Although it is often a controversial technique, tolerated in different measure by the courts of different states, it is generally accepted provided that the amortization period is a "reasonable" one. Thus, one can say that the general concept of amortization has survived takings challenges in the land-use context. Interestingly, it has never been incorporated into the highly analogous air pollution context, and takings arguments continue to carry weight in the legislative debate over the elimination of old-new distinctions in technology requirements.

   In Part II of this Note, I will provide an overview of how the regulatory framework has developed with regard to federal control technology requirements governing major stationary sources. I will focus on the statutory language of the 1970 CAA and the 1977 CAA Amendments and subsequent administrative and judicial interpretations. In Part III, I will examine the development of land-use doctrine governing the regulation of preexisting nonconforming uses and highlight its theoretical similarities to the air pollution context. In Part IV, I will look specifically at the jurisprudence surrounding the use of amortization provisions in the zoning context. By and large, a court's acceptance of an amortization provision in the majority of cases hinges on a determination of the reasonableness of an amortization period based on (1) a balancing of public good against private loss and/or (2) the length of the amortization period in relation to the investment. Another important vein of judicial reasoning that emerges on the "reasonableness" of amortization provisions in the takings calculation is what I term the "amortization-compensation equation." This line of reasoning, popularized in the context of billboard amortization, suggests that the monopolistic position afforded to the owner of a nonconforming use during the amortization period is itself a type of compensation for future loss. In Part V, I will propose that the incorporation of amortization provisions into the Clean Air Act could provide a viable solution to the problem posed by old sources and, if applied properly, is a solution that is both preferable to several proposed alternatives and one that should successfully withstand constitutional takings arguments. Finally, I will frame this proposal within the context of a larger debate between the proponents and critics of command-and-control regulation.

2. THE "GRANDFATHERING" OF OLD SOURCES: AN OVERVIEW

   1. Clean Air Act Amendments of 1970

      The Clean Air Act Amendments of 1970 established the basic regulatory framework of air pollution control in the United States. This legislation directed the newly created Environmental Protection Agency (EPA) to establish two sets of National Ambient Air Quality Standards (NAAQS) for six criteria pollutants. (16) Depending on whether air quality regions in a state met or fell short of these uniform, federally prescribed NAAQS, they were designated as "attainment" or "nonattainment" areas. (17)

      In addition, the 1970 Act established new source performance standards (NSPS)...