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October 2009
Environmental Law Alert
New Proposed Rules Establish Framework for Regulation of Greenhouse Gas Emissions Through Title V and PSD Permits


Roger Ferland, Michael McCauley, Cynthia Faur

The U.S. Environmental Protection Agency (“EPA”) took a significant step toward regulation of greenhouse gas (“GHG”) emissions on September 30. On that day, EPA issued two proposed rulemakings that will lay the groundwork for limiting GHG emissions under existing Clean Air Act permitting authority. The first proposed rulemaking seeks formal reconsideration of the policy included in a memorandum issued on December 18, 2008 by former Administrator Steven Johnson (the “Johnson Memorandum”). That memorandum determined that GHG emissions are not “regulated pollutants” under the Clean Air Act until they are subject to an emission limit. The second proposed rulemaking, referred to as the “Tailoring Rule,” would incorporate GHG emissions into the existing Title V and Prevention of Significant Deterioration (“PSD”) permitting regime. As explained below, in order to allow permitting agencies to not be overwhelmed by the flood of new permits for GHG emissions sources, EPA proposes raising (or “tailoring”) for at least six years the statutory emission thresholds to levels that the agency deems more appropriate for GHGs. These thresholds are consistent with the levels triggering reporting under the Mandatory Reporting of Greenhouse Gasses rule, which requires monitoring beginning January 1, 2010.

Reconsideration of the Johnson Memorandum

The Johnson Memorandum specifically considered the question of whether recordkeeping requirements alone trigger the PSD program,  including existing recordkeeping requirements for carbon dioxide (CO2), a GHG. The PSD requirements apply to “major sources” of pollutants, which are defined by statute as sources that emit either 100 or 250 tons per year of a regulated pollutant. Major sources that fall within the PSD regulations are subject to significant permitting requirements, including the requirement to install emissions controls. The Johnson Memorandum concluded that PSD applies to pollutants that are subject to emissions control requirements and that pollutants subject only to monitoring or reporting requirements, such as CO2, do not trigger PSD.

EPA has formally proposed reconsideration of the policy set forth in the Johnson Memorandum. As summarized in the Fact Sheet accompanying the proposed rulemaking, EPA is considering the following five policies:
  1. An EPA rule requiring control of emissions of a pollutant under a final national rule;

  2. Inclusion of regulatory requirements for a pollutant in an EPA-approved State Implementation Plan;

  3. An EPA rule requiring monitoring or reporting of emissions of a pollutant;

  4. An “Endangerment Finding” for a pollutant under the Clean Air Act; and

  5. EPA’s granting of a Clean Air Act section 209 waiver, such as the “California Waiver.”
The rule states that EPA’s preferred approach is the first option. Under that approach, EPA will have to publish a rule regulating GHG emissions in order to trigger PSD. This statement is consistent with prior statements made by the Administrator, which suggested that once EPA issues regulations for GHG emissions from mobile sources, then PSD will apply to GHG emissions. EPA is expected to issue those mobile source regulations no later than March 2010.  

The Tailoring Rule   

Pollutants Regulated

The Tailoring Rule would regulate the same pollutants that are subject to reporting under the recently-finalized Mandatory Reporting Rule. These pollutants are: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. These collective pollutants are referred to as “CO2e” (carbon dioxide equivalent). CO2e is the term primarily used in the rule and is the internationally standard reference for this group of gasses. The carbon dioxide equivalent is determined by using a multiplier to scale the emissions of another GHG to those of CO2. For example, four tons of methane is considered to have the same greenhouse gas potential as 100 tons of CO2. As a result, four tons of methane is treated as 100 tons of CO2e.

Proposed Permitting Thresholds

The rule does not propose changes to the Title V or PSD permitting programs in terms of overarching regulatory structure. Rather, the primary proposal is to establish, for a period of at least six years, higher emission limits at which a Title V or PSD permit would be required for CO2e emissions. The emission limits are:
  • 25,000 tons per year CO2e as the threshold at which a Title V permit would be required for existing sources. (This is the same threshold at which reporting is required  under the Mandatory Reporting Rule for most sources.) The statutory threshold for all other pollutants is 100 tons per year.

  • 25,000 tons per year CO2e as the threshold at which a PSD permit would be required. The permitting threshold for major sources of conventional pollutants under the PSD program is 100 tons for certain listed sources or 250 tons per year for all other sources.
In addition, EPA requested comments regarding an exact significance threshold for triggering PSD at existing major sources. The agency proposed that the range should be between 10,000 and 25,000 tons per year CO2e.

Under EPA’s proposal, the higher thresholds would apply for a period of at least six years, and the emission limits for purposes of the Title V permit program would be phased in for existing sources over a five-year period. Facilities with existing Title V operating permits would include estimated CO2e emissions with their permit renewal application. (The CO2e data could be the same as that used to comply with the Mandatory Reporting Rule.) 

Additional Proposals Contained in the Rule

In addition to addressing permitting thresholds for CO2e, EPA describes several other alternatives to streamline these programs. Such options include electronic permitting, broadening the use of general permits, and developing presumptive BACT requirements for various types of sources.

Rationale for the Raised Permitting Threshold Proposals

EPA relies on two legal theories to support its “tailored” proposal: absurd results and administrative necessity. In brief, the absurd results principle is that administrative agencies must interpret statutes in a way that implements the law without having an absurd result. The administrative necessity doctrine indicates that, when interpreting statutes, an administrative necessity can sometimes justify the agency’s plan of implementation. The proposed rule discusses these legal principles in great detail.

These two principles apply to EPA’s proposal for different reasons. If the thresholds set forth in the statute were applied to CO2e emissions, the limits would be unreasonably low. Schools, churches and up to six million other unlikely sources would have to obtain Title V permits (compared to the approximately 11,000 permitees under the proposal). EPA views this as an absurd result that is not intended under the Clean Air Act. In addition, without the higher thresholds for CO2e emissions, many thousands of entities never before subject to the Clean Air Act would be required to obtain permits. Administrative agencies at all levels lack the capacity to process, monitor, or enforce the sheer number of permitees that would result. EPA states that it proposed the higher limits for CO2e emissions in order to avoid these consequences.

These raised permitting thresholds are not intended to be permanent. Under the rulemaking, EPA proposes to review the tailoring program in five years and promulgate revised rules in approximately six years' time that would either make the heightened thresholds permanent, or would phase them out, resulting in the statutory 100/250 TPY thresholds again applying to CO2 emissions. If the latter occurs, casinos, schools, churches, hospitals, stadiums, and any other facilities that generate more than 100 to 250 TPY of emissions would become subject to the requirements of PSD, and will have to obtain Title V operating permits due to their CO2 emissions.

Commenting on the Proposed Rulemakings

Comments on both of the proposed rulemakings can be submitted to EPA until sixty days following publication in the Federal Register. To discuss how these rules might impact your business or for additional information, please contact Katea Ravega or Roger Ferland in Phoenix at 602-229-5200 / or 602-229-5607 / . In Milwaukee or Madison, contact Mike McCauley at 414-277-5525 / . In Chicago, contact Cindy Faur at 312-715-5228 / .