November 01, 2011

Permitting for Greenhouse Gases: Federal Standards and State Battles

Ronda L. Moore

The U.S. Environmental Protection Agency (EPA) has implemented the regulation of greenhouse gas (GHG) emissions through promulgation of the federal Tailoring Rule. Implementation of this Rule under the Prevention of Significant Deterioration (PSD) program is, however, far from easy. Some states can implement this rule and regulate GHGs, while other states cannot until EPA approves their state’s GHG program. For an “unapproved” state, EPA uses its federal authority to regulate GHG emissions until approval of the state program. In addition, EPA is continuing to defend state and industry lawsuits over the regulation of GHGs. The agency is also adjusting to a recent court decision that requires EPA to issue PSD permits within one year’s time. Environmental counsel must stay tuned to further developments in the regulation of GHGs to assist clients in understanding which regulations apply, when, and to what authority to apply for PSD permitting.


On April 2, 2007, the U.S. Supreme Court decided in Massachusetts v. EPA, 549 U.S. 497 (2007), that EPA could regulate GHG emissions as an “air pollutant” under the Clean Air Act (CAA). Subsequently, in December 2009, EPA issued its findings that current and projected atmospheric concentrations of six key GHGs, including carbon dioxide (CO2), methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride, endanger the public health and welfare of current and future generations. Though these findings were the prerequisite for finalizing GHG emissions standards for light-duty vehicles, the regulation of GHGs for stationary sources followed. Once EPA finalized the light-duty vehicle rule, GHGs became “regulated.” Regulated pollutants are addressed under the PSD air permitting program, which applies to new and modified major stationary sources.

EPA then determined how to effectively regulate GHGs under the PSD permitting program when GHGs did not fit into the traditional applicability thresholds for triggering PSD. To trigger PSD, a source has to emit or have the potential to emit 100 tons per year of a PSD pollutant if it falls within a list of twenty-eight source categories or 250 tons on an annual basis if it does not fall within that list. If this same threshold of 100 to 250 tons were imposed for the regulation of GHG emissions without additional applicability requirements, the program would encompass a significant number of previously unregulated stationary sources, imposing undue costs on small sources of air pollution and overwhelming the permitting authorities.


The GHG Tailoring Rule

EPA issued its GHG Tailoring Rule on June 3, 2010 (75 Fed. Reg. 31,514). The rule essentially raised the thresholds for triggering GHG emission regulation under PSD permitting by adding a new definition of “subject to regulation.” The agency also established a phased implementation schedule for the regulation of GHGs for new stationary sources and modifications to existing stationary sources, as well as requirements for obtaining operating permits.

The first phase of EPA’s Tailoring Rule began on January 2, 2011, and requires new and modified stationary sources that are already required to obtain a PSD permit for non-GHGs to include GHG emissions in their PSD permits. New sources trigger the GHG requirements if they have the potential to emit 75,000 tons per year of carbon dioxide equivalent (CO2e) emissions (based on global warming potential), and modified sources trigger the requirements if they increase their CO2e emissions by 75,000 tons.

The second phase of the Tailoring Rule began on July 1, 2011, and requires all new stationary sources with the potential to emit 100,000 tons per year or more of CO2e and 100/250 tons per year of mass GHGs to be subject to PSD for GHGs. Existing stationary sources undergoing major modifications to their facilities that emit at least 100,000 tons per year of CO2e, would increase their GHG emissions by at least 75,000 tons of CO2e, and those that also exceed 100/250 tons of GHGs on a mass basis would also have to obtain PSD permits.


State implementation of PSD permitting for GHGs

Most states have the authority to implement the federal PSD permitting program, either through a delegation, or through approval of a state program where the state uses its own clean air rules. Delegated states would simply begin using the Tailoring Rule when it became effective at the federal level. States with approved programs, however, typically have added steps.

Approvals of state programs are memorialized by EPA through State Implementation Plans (SIPs). As part of implementing the Tailoring Rule, EPA consulted with the states, reviewed SIPs, and considered states’ laws to determine which states would have the authority to issue PSD permits for GHG emissions. EPA determined that thirteen states (compromising state and locals programs in Alaska, Arizona, Arkansas, California, Connecticut, Florida, Idaho, Kansas, Kentucky, Nebraska, Nevada, Oregon, and Texas) lacked current authority to regulate GHGs. EPA determined that some of the states’ SIPs explicitly precluded application of the PSD program to regulate GHGs, and in other states where the SIP would otherwise have allowed such regulation, the state’s constitution or other state laws precluded the application of PSD to GHG emissions.

EPA issued notice through a “SIP call” for the thirteen states on December 13, 2010, requiring these states to submit SIP revisions between December 22, 2010, and December 1, 2011, demonstrating that their PSD programs satisfied the CAA requirements in applying the PSD requirements to GHG sources. Some states advised EPA that they would revise their SIPs by December 22, 2010. When this deadline was not met, EPA established a Federal Implementation Plan (FIP) on December 30, 2010.  

Other states advised EPA that they would revise their SIPs within one year of EPA’s December 22, 2010, deadline. In the meantime, EPA is delaying implementation of PSD permitting for GHGs in these states. So far, this has not been an issue for the permitting of GHG emissions due to the lack of new or modified emission sources applying for permits. 

Since the SIP call, some of the thirteen states have submitted revised SIPS. Currently, EPA is proposing to approve at least four: Nebraska, New Hampshire, Kansas, and Wyoming. Texas, on the other hand, has refused to revise its SIP. EPA promulgated a FIP, and the state has until December 1, 2011, to submit its SIP revision for EPA approval. If Texas still refuses, then EPA will promulgate a new FIP.


Legal battles over the Tailoring Rule and SIP call

During the 2011 state legislative sessions, at least two states (Montana and Texas) introduced bills to stop the implementation of GHG regulation in their states, citing it as a violation of the Tenth Amendment of the U.S. Constitution. Neither bill, however, passed.

Additionally, Texas has challenged EPA’s regulation of GHGs in a case transferred to the D.C. Circuit Court of Appeals. At the D.C. Circuit, Texas’ challenge was combined with at least five other challenges against EPA’s GHG regulation filed by the SIP/FIP Advocacy Group, the Utility Air Regulatory Group (a non-profit group of electric utilities and trade associations), and various mining and energy interests. The combined case before the D.C. Circuit is Utility Air Regulatory Group v. EPA (Docket No. 11-1037), and is still in the briefing phase.

Wyoming, along with the National Association of Manufacturers and the Utility Air Regulatory Group, recently filed similar challenges in the U.S. Court of Appeals for the Tenth Circuit. It is anticipated that these challenges will be transferred to the D.C. Circuit as well.

These challenges have largely focused on EPA’s December 2010 determination that several state SIPs were inadequate to regulate GHGs and the establishment of FIPs in response.  Challengers also assert that EPA violated the CAA because states were not given proper notice-and-comment periods to revise their SIPs, that previously EPA allowed states up to three years to write SIPs conforming to the implementation of past EPA regulations, that EPA incorrectly issued its SIP call, and that SIP revisions are not required to implement GHG permitting. EPA rejoins that these challenges are not jurisdictionally before the court of appeals and should be dismissed. The brief of the United States was just filed this September.


EPA’s actions during initial implementation

Since January 2, 2011, EPA has reviewed and provided comments on a handful of PSD permits that were processed by states with full authority to regulate GHG emissions. Most of EPA’s comments have recommended inclusion of numeric limits and installation of continuous emission monitoring systems or some other type of monitoring requirement, that the use of carbon capture and storage systems be evaluated, and that the best available control technology analysis should address startup and shutdown. Since these states have full authority, the states would have the ability to reject EPA’s comments—and certainly some states have. So far, it does not appear that EPA has itself issued a PSD permit for GHG emissions under a FIP.

Some applications are currently under review, and as part of its review of pending PSD permit applications under a FIP, EPA is requesting that applicants list all endangered or threatened plant and animal species and their critical habitat around the proposed project.  Should any plant, animal, or habitat be in the proposed area, then a biological assessment of the proposed facility’s impact would be needed for EPA’s evaluation in determining whether, pursuant to the Endangered Species Act, a section 7 consultation with the U.S. Fish and Wildlife Service would be necessary.


What’s new on the PSD front?

EPA’s embattled PSD permitting program recently received another challenge. On May 26, 2011, the U.S. District Court for the District of Columbia in Avenal Power Center v. EPA, 2011 U.S. Dist. LEXIS 56251 (D.D.C. 2011) held that EPA was required to issue PSD permits within the one-year timeframe established in section 165(c) of the CAA. Before this decision, EPA’s timeframe for issuing or denying a PSD permit could take approximately two to three years, in part because EPA’s proposed permitting decision would be subject to an administrative appeal process before EPA’s Environmental Appeals Board (EAB), prior to EPA’s issuance of the final permit. The practical implications of the Avenal decision may mean that EPA will issue more denials for PSD permits, including PSD permits for GHGs, and the EAB may not be able to consider challenges to proposed agency air permits as a result of this timeframe.

Trends, Vol. 43, No. 2, November/December 2011, Section of Environment, Energy, and Resources, American Bar Association.

Ronda L. Moore

Ronda L. Moore is an assistant general counsel for the Florida Department of Environmental Protection.