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EPA Tailoring Rule and Greenhouse Gas Permitting

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On January 2, 2011 the Environmental Protection Agency (EPA) will begin enforcing the first-ever permitting program for greenhouse gases (GHGs). This program is complicated and will not arrest our changing climate, but it is a significant first step. It will place real emission limits on the largest sources of carbon dioxide and other GHGs and it sends an important signal that the United States is beginning to manage GHG pollution.

HOW WE GOT HERE
The first real GHG regulations iautomobile_traffic_pollution.jpgn this country are coming about through a fairly circuitous route. In 2003 the Bush Administration’s EPA determined that they did not have the authority under the Clean Air Act (CAA) to regulate GHGs and that even if they did they would decline to set GHG standards for motor vehicles because the reduction would be negligible. In response, 12 states plus several cities and advocacy groups joined together to sue the EPA over this decision. In 2007 the United States Supreme Court ruled in favor of the plaintiffs in Massachusetts v. EPA. The Court ruled that GHG emissions do meet the definition of “air pollution” under the CAA and therefore EPA should regulate CO2 and other GHGs.
Notably, the Court found “…unreasonable EPA’s argument that regulation of CO2 in the transportation sector would not make significant reductions in emissions, noting that although enforcing regulations may not by itself reverse global warming, it is the duty of EPA to take such a step in order to “slow or reduce” global warming.”

In 2009 EPA undertook an extensive scientific review and determined that GHGs endanger public health (called the Endangerment Finding) by “causing or contributing” to global climate change. Based on these findings and the Supreme Court ruling, EPA announced new motor vehicle emissions standards for GHGs in May 2009. The new standards first apply to 2012 model-year vehicles.

The CAA requires that when a pollutant becomes newly subject to regulation under any provision of the CAA—such as GHGs becoming subject to regulation under motor vehicle standards—that pollutant must also be subject to the New Source Review Prevention of Significant Deterioration (PSD) and Title V operating permit programs. 2012 model-year vehicles are first available for sale on January 2, 2011. So, on that date, GHGs from motor vehicles are subject to regulation and are then automatically also subject to PSD and Title V requirements. Accordingly, EPA issued the Tailoring Rule, which addresses the regulation of GHGs from large stationary sources.

tall_coal_photo.jpgHOW THE NEW RULES WORK
Operators of major sources of air pollution (namely coal-fired power plants for the purposes of our work), will now be subject to PSD review whenever they construct a new facility or make major modifications to an existing facility.

Under PSD review, permitting authorities will oversee GHG reductions by requiring that facilities limit their GHG emissions to levels consistent with Best Available Control Technology (BACT). For GHGs, the BACT analysis is a case-by-case analysis. For each permit the permitting authorities will compile a list of plausible control technologies that could reduce a source’s GHG pollution. The agency then reviews the costs, energy, environmental and economic impacts of each realistic technology, and selects the viable alternative that provides the maximum degree of emissions reductions. The permitting authority then sets numeric emissions limitations based on the selected control technology.

Because GHGs are newly subject to PSD and therefore BACT analysis, there is limited experience with determining what technologies polluters can use to reduce their GHG emissions. To combat this problem the EPA has offered guidance that suggests a number of possible control methods.

Chief among the EPA suggestions is overall industrial efficiency at GHG sources. This simply means that a facility will maximize its operations with the least amount of energy. If a facility can reduce its energy demand, or produce energy more efficiently, then each unit of energy output will require less fuel and will consequently produce fewer GHGs. Besides offering efficiency as a viable option, EPA has also indicated that carbon capture and sequestration is probably not a viable BACT alternative. EPA states that while this method is an available technology that permit writers should consider, carbon capture and sequestration is typically unaffordable and easily eliminated from a BACT analysis.

The second CAA program to which sources of GHG may be subject is the Title V operating permit program. While PSD is a preconstruction permit, a Title V permit is required for operation. The Title V permit does not place any new obligations on a pollution source, but it does consolidate obligations found elsewhere. Thus, the BACT requirements from the PSD permit are incorporated into the Title V permit. Other requirements established through state clean air implementation plans may also be incorporated into the Title V permit.

HOW THE RULES APPLY
The Tailoring Rule will be implemented in two steps beginning in January 2011.

Under Step 1 of the Tailoring Rule, from January 2, 2011 until June 30, 2011, the only facilities that will need to include GHGs in their PSD permits are those that already require PSD permits for other pollutants and that emit at least 75,000 tons per year (TPY) of GHGs. With respect to Title V permits, only those sources that are already required to have Title V permits will need to address GHGs therein. That is, no source will need a PSD or Title V permit solely for GHG emissions.

Step 2 of the Tailoring Rule begins on July 1, 2011 and remains effective until June 30, 2013. In Step 2, all projects covered under Step 1 are still subject to PSD and Title V permitting. In addition, any source that will emit at least 100,000 TPY must obtain a PSD permit regardless of whether PSD applies for other pollutants. If the project is a modification rather than a new source, PSD applies at 75,000 TPY of GHG emissions. A source will be subject to Title V permitting based only on GHG emissions if it will emit at least 100,000 TPY of GHG.

Although this tailoring scheme limits the applicability of new GHG obligations, EPA has calculated well. This plan covers 70% of the national GHG emissions from stationary sources. Likewise, this plan allows permitting agencies to learn the nuances of GHG permitting over an extended time and it spares small businesses, farms and others from new regulatory burdens during tough economic times. Under the Tailoring Rule, GHG permitting only applies to those who have the institutional experience and capacity to easily respond to new regulations.
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WHERE WE GO FROM HERE
It is still unclear how GHG regulation will play out after June 30, 2013. EPA has committed to undertake further rulemaking in 2011 in order to consider the future scope of GHG permitting. This rulemaking is likely to broaden the scope of permitting for some sources and permanently exclude other smaller sources.

Likewise, the future of GHG permitting is complicated by a number of ongoing lawsuits. One group of lawsuits seeks to invalidate the entire GHG permitting paradigm. In the first phase of the lawsuit, industry groups argued that the GHG permitting would be so devastating to business that it must be stopped even before the court could hear full arguments on the legal issues. In mid December 2010 the court ruled that it would not stop EPA from moving forward. The second phase of this lawsuit will continue through 2011 when the court will hear full arguments and determine whether EPA’s plans are valid.

A second lawsuit does not challenge the permitting program, but it does rely heavily on the outcome. A group of states and land trusts sued major utilities including the Tennessee Valley Authority, Duke and Progress claiming that the utilities’ GHG emissions are causing harm through climate change. The United States Supreme Court agreed to hear arguments in this case, and the outcome might rest heavily on how effective and protective the new permitting scheme turns out to be.

This new GHG program, of course, has a number of benefits. The most obvious benefit is that it will help to reduce GHG emissions. Additionally, for the first time, there will be a legally mandated opportunity for citizens to get involved by commenting on GHG permits and challenging GHG emissions because both the PSD and Title V programs create strong pathways for public input. Finally, the incorporation of GHGs into the CAA is a significant symbolic victory demonstrating that the United States can still respond to pressing environmental issues.