WMC sues DNR for violating federal Clean Air Act

Wisconsin Manufacturers & Commerce (WMC) filed a lawsuit last month against the state Department of Natural Resources, alleging that the agency has stepped way out of its lane by illegally regulating certain mobile sources of air pollution while those sources are manufactured.

There are two sources of air pollution, WMC explains in its complaint — stationary and mobile. The federal Clean Air Act (CAA) allows state governments to regulate stationary sources while granting the federal government jurisdiction over mobile sources. 

But, WMC asserts, that hasn’t stopped the DNR from controlling non-road emissions from engines that are manufactured or assembled as part of another piece of equipment, including engines found in lawn tractors, snowmobiles, generators, UTVs, and other similar machinery: engines that are mobile sources of pollution, in other words.

The agency has done so for more than 40 years, WMC contends.

In the lawsuit, WMC, represented by the WMC Litigation Center, argues that the DNR’s regulation of these mobile sources violates federal law.

“It’s a new form of an old trick: using power not just to break the law but to obscure the violation with an air of authority,” said Nathan Kane, WMC Litigation Center deputy director. “It’s not right that manufacturers have to pay huge sums of money to comply with regulations that are contrary to federal law.”

Scott Manley, WMC’s executive vice president of government relations, says the jurisdictional breach hurts the state’s economy.

“The DNR’s illegal regulation puts Wisconsin manufacturers at a competitive disadvantage,” Manley said. “Manufacturers in many other states don’t need to waste any time or money complying with regulations like these. Wisconsin’s DNR is out of line.”

The details

In the lawsuit, WMC sets out to explain what practically differentiates mobile and stationary sources of pollution.

As defined in the CAA, the complaint states, a “stationary source” is “any source of an air pollutant except those emissions resulting directly from an internal combustion engine for transportation purposes or from a nonroad engine or nonroad vehicle.”

“Stationary sources comprise immovable structures like factories and mobile sources, true to their name, are different,” the complaint states. “Mobile sources comprise, to begin with, ‘on-road’ vehicles like cars and trucks.”

They also comprise another class called “nonroad sources,” Kane wrote in the complaint.

“Aptly named, nonroad sources are built for use in yards, driveways, water bodies, and the like,” the complaint asserts. “Operable in so many places, this class is galactic: nonroad sources comprise countless kinds of motorized implements, like lawnmowers, snowblowers, tractors, bulldozers, shredders, and boats (from outboard-powered pontoons to large, oceangoing cargo vessels).”

The idea of a nonroad mobile source of air pollution has evolved over time, Kane wrote.

“Under the CAA as it appeared in 1970, ‘mobile sources’ meant primarily one thing: automobiles,” he wrote. “With the 1990 amendments to the CAA, however, the scope of the term ‘mobile sources’ underwent great expansion (and thus so too did federal regulatory power). The 1990 amendments recognized a new category of mobile sources called ‘nonroad sources.’”

“Nonroad sources” include all equipment powered by a “nonroad engine,” and so every nonroad source, regardless of function, is a type of mobile source, Kane wrote.

Faithful to the best interests of federalism, Kane said the law splits the power to regulate sources of air pollution.

“Under the CAA, the federal government, through the Environmental Protection Agency (EPA), primarily regulates emissions from mobile sources — and the states, from most stationary sources,” the complaint states. “This ‘cooperative federalism’ is a deliberate and ‘defining feature’ of the CAA. And it has been ‘since the CAA’s inception.’” 

As such, Kane wrote, states routinely impose standards on stationary-source emissions to keep in compliance with EPA standards. However, the CAA generally bars states from regulating mobile-source emissions to keep below a federal standard.

“Reserving mobile-source regulation for the federal government is dually justified,” Kane wrote. “[N]ot only can most mobile sources cross state lines quickly (whether on their own wheels or aboard others); a field of state and federal regulations would ‘create nightmares for … manufacturers.’”

Despite the CAA’s sensible federalist framework, Kane wrote, the DNR is imposing standards on emissions from nonroad mobile sources — sources reserved for (and already covered by) federal regulation. What’s more, Kane wrote, the DNR is using its power over stationary sources to do so.

How? 

“According to DNR, emissions from nonroad engines become emissions from stationary sources (and thus emissions open for state regulation) when those engines are turned on and tested by manufacturers,” the complaint states. “Testing, however, does nothing to morph the classification of a source.”

Even so, Kane asserted, right now, when testing nonroad engines — for quality control, for research and development, for whatever reason — Wisconsin manufacturers must comply not only with EPA nonroad-source emissions standards but also with DNR stationary-source emissions standards.

“This double regulation generates the sort of bi-regulatory field the CAA was drafted to prevent,” Kane asserted. “Such extensive regulation burdens manufacturers. It also warps the partnership ordained in the CAA.”

Kane said Congress foresaw the possibility of state malfeasance, so to guard EPA’s dominion and protect manufacturers from two-way regulation, the CAA checks state power. The law preempts state standards that limit nonroad-source emissions, unless those standards have been approved by EPA and put to use in California, Kane wrote. 

“And so DNR’s regulatory conduct — imposing standards on nonroad-source emissions — was never condoned by EPA, and its standards were never adopted in California,” he wrote.

How it works

In the complaint, Kane walked through how the double regulatory scheme is implemented and demonstrated how it works in his view.

Under Title V, Kane wrote, states must issue construction permits and operation permits to all the major stationary sources within their borders. The statutory framework contemplates two different types of air permits — one that is preconstruction and one that is an operating permit.

“To work, those permits are required to lay out ‘plans and schedules’ for limiting and keeping down a stationary source’s emissions,” the complaint states. “In line with this congressional dictate, Wisconsin law requires that every major stationary source of air pollution receive a construction permit not only before that source is built but also whenever it is modified.”

To then operate, Kane observed, the source must receive an “air pollution control operation permit.” Both types of permits cost big sums, Kane asserted.

“To obtain a construction permit, a facility must pay thousands of dollars,” he wrote. “And to obtain an operation permit, a facility must pay at least hundreds of dollars (though in many instances the amount eclipses one thousand). An operation permit is valid ‘for a maximum of five years’ before it must be renewed.”

Facilities must also prove their own compliance with their permits’ terms — and pay for all equipment needed to collect the proof, the complaint continued. 

“All those costs are high to begin with, the true cost of compliance is even higher still,” Kane wrote. “Manufacturers must often pay attorneys and consultants many thousands to help get, keep, and renew these permits. These permits are required for all major air-polluting sources that fit the definition of ‘stationary source.’” 

Under state statute, Kane cited, “stationary source” refers to: “[Any] facility, building, structure or installation that directly or indirectly emits or may emit an air contaminant only from a fixed location. A stationary source includes an air contaminant source that is capable of being transported to a different location. A stationary source may consist of one or more pieces of process equipment, each of which is capable of emitting an air contaminant. A stationary source does not include a motor vehicle or equipment which is capable of emitting an air contaminant while moving.”

The problem is, Kane wrote, the DNR is interpreting and applying the definition incorrectly and unlawfully, reading it to include certain engines that are not stationary sources but nonroad engines under federal law.

The alleged conduct

In 2021, the complaint stated, the DNR issued a draft technical support document entitled “Addressing Mobile and Nonroad Engine Testing Operations in Stationary Source Permitting,” in which the DNR stated it had power under both “state and federal law” to regulate emissions from engine test cells/stands for performance testing of uninstalled engines, no matter the type of equipment the engine will eventually be installed in, as well as emissions from the operation of partially assembled motor vehicles and other nonroad equipment prior to being introduced into commerce, arguing that the partially assembled equipment is immobile and not capable of emitting while moving.

The agency also said it could regulate emissions from fully or partially assembled motor vehicles and other nonroad equipment that would not be introduced into commerce, such as engines being tested for research and development, engines being tested for quality control, reliability, or diagnostics, and other engine testing where the equipment is not destined to be introduced into commerce.

“To reach that conclusion, DNR read the definitions of ‘nonroad engine’ in [the statutes] to exclude nonroad engines that are turned on and tested by their manufacturer,” the complaint states. “It also read those definitions to exclude any nonroad engines that are ‘not installed or integrated into a final product’; that have not or will not be ‘introduced into commerce’; or that are not, in their current state, ‘capable of emitting while moving.’”

The DNR exempted all those nonroad engines from the meaning of “nonroad engine” even though no (federal) law suggests those engines are so exempt, Kane asserted.

“DNR then interpreted the definition of ‘stationary source’ in [the statutes] to include those nonroad sources it exempted,” Kane wrote. “Following that reasoning, DNR concluded those emissions listed to be under the control of its stationary-source permitting power.”

The DNR never finalized that technical support document, Kane wrote, but even so the agency has enforced the policies in it, and it has done so for more than four decades. 

“And since issuing the document, DNR has continued to use stationary-source permits to limit emissions from those sources identified above,” Kane wrote. “Because DNR is enforcing this policy, it is imposing emissions limits on nonroad engines.”

In other words, they are imposing emissions standards on nonroad engines during the manufacturing process.

Preemption

In the complaint, Kane observes that federal law preempts the DNR’s conduct regulating nonroad sources with construction and operation permits required for stationary sources.

That’s because, Kane argues, that that law is preempted if it (1) imposes a “standard” that is (2) not identical to one for which California has received EPA approval and (3) does so on “nonroad vehicles or engines.”

“All three conditions are present here, so DNR’s conduct is preempted,” he asserted.

To the first condition, Kane said DNR’s permitting requirements are standards because they dictate that certain “vehicle[s] or engine[s] must not emit more than a certain amount of a given pollutant.” 

Kane pointed to limits on carbon monoxide (CO) emissions from nonroad engines tested in certain testing stations. The agency also imposes CO standards on nonroad engines running in a group of “wet test cells.”

Still another regulation imposes standards on engines tested during research and development.

“DNR itself concedes that its stationary-source permits limit emissions from sources WMC alleges to be nonroad engines,” Kane wrote. “In its response to public comments on its draft technical support document, DNR emphasized that its permits reduce both carbon monoxide and nitrogen oxide emissions. DNR’s policy therefore imposes ‘standards’ on emissions.”

As for the second condition, Kane argued that the EPA has not authorized California to impose standards “identical to” the ones DNR is imposing in Wisconsin. The third condition was likewise met: DNR’s unique policy imposes standards on ‘nonroad sources,’ as defined in federal law.

Finally, Kane said the DNR also misconstrued another federal rule.

“That provision asks only whether an engine ‘is designed to be’ and is ‘capable of being carried or moved’ — whatever its current location, condition, or state,” Kane wrote. “Construing and applying this provision, DNR asks two incorrect (almost inverse) questions. First: whether an engine is currently — whatever its design and capabilities — immobile. Second: whether the structure to which the engine is currently attached — never mind all the structures to which it is designed to be and capable of being attached — allows the engine to be carried or moved.”

Even though the federal rule justifies neither of those inquiries, Kane said the DNR uses both to classify sources.

“As a result, many engines that are rightly nonroad engines according to EPA are stationary sources according to DNR,” he wrote. “DNR concedes this error in its draft technical support document. Stationary-source permits, it writes, ‘include[ ] emissions from all types of engine testing, including testing of nonroad vehicles and equipment.”

But emissions from nonroad engines are never emissions from stationary sources — regardless of how or when those emissions generate, Kane contended, and all emissions from “nonroad engines” as defined in the statutes and code must be treated just so: as emissions from nonroad engines.

Kane said his analysis agreed with guidance from at least two EPA enforcement regions: “Both Region 5 (in which Wisconsin is located) and Region 7 (in which Iowa is located) have determined already that similar emissions generated during product testing are ‘direct emissions from [ ] certified nonroad engine[s]’ and so are ‘not stationary source emissions.’” 

In sum, Kane wrote, federal law preempts DNR’s regulatory conduct insofar as DNR imposes on “nonroad engines” “standards” not adopted by California.

“Unless this court grants the relief WMC seeks, DNR will continue to enforce a federally preempted policy,” he wrote. “That means DNR will continue its tornadic intrusion on EPA’s exclusive domain — and manufacturers will stay stuck in a bi-regulatory field the CAA was designed to prevent.”

WMC is asking for a declaration that any engine meeting the criteria in federal statute and rule is a nonroad engine, even if it is undergoing testing by a manufacturer, has not yet been installed or integrated into a final product, or will not be introduced into commerce.

WMC also wants a declaration that the federal statutes preempt DNR secretary-designee Karen Hyun from imposing standards on emissions from any nonroad engine as defined by federal law and code, as well as to permanently enjoin Hyun from imposing and enforcing emissions standards on engines fitting the definition of a “nonroad engine” in federal law and code, unless those emissions standards are exempted from preemption.

As such Kane and WMC are requesting that the court declare preempted under federal law DNR’s imposition of standards on nonroad engines. 

“WMC further requests this court permanently enjoin DNR from using its stationary-source permitting power to impose standards on nonroad-engine emissions generated from manufacturer-run testing,” Kane wrote. “As courts have explained: every state besides California is ‘preempted from adopting any regulation for which California could receive authorization.’” 

It isn’t the first time the DNR has gone to court accusing the agency of illegal conduct.

In 2021, WMC won its lawsuit against the DNR in the District II Court of Appeals. A 2-1 decision found that the DNR was violating the law by regulating so-called “emerging contaminants” as hazardous substances under Wisconsin’s Spills Law without written rules in place. In February of 2021, WMC filed a lawsuit against the DNR over its application of “hazardous substance” regulation. Leather Rich, a small family-owned dry-cleaning business, joined WMC on the suit. 

Then, too, when Joanne Kantor took steps to sell her and her late husband’s Oconomowoc-based business, the DNR determined that underground substances on her property were hazardous substances but refused to clarify what remediation was necessary. 

Now in her mid-80s, WMC states, Joanne’s attempts to investigate and remediate the issue have lasted several years and been extremely expensive, costing her small business hundreds of thousands of dollars with no end in sight.

Richard Moore is the author of “Dark State” and may be reached at richardd3d.substack.com.