The Environmental Protection Agency (EPA) has released its long-awaited guidance on implementing Clean Air Act permitting for greenhouse gas (GHG) emissions, a requirement which is set to begin next month. Substantive limits on GHG emissions will be based on a Clean Air Act requirement that certain new and modified emission sources must employ the “best available control technology” (BACT) to limit regulated air pollutants. As a result, the guidance focuses on the process that state agencies will use as they are developing permits for individual sources to determine whether there are technologies available and feasible for controlling GHG emissions from those sources.
EPA’s PSD and Title V Permitting Guidance for Greenhouse Gases (the Guidance) is not a formal rulemaking and does not establish binding regulations, but it does provide permitting authorities and permittees with greater clarity on how EPA expects its new GHG permitting requirements to be implemented. One of the many lingering questions about EPA’s new permitting requirements has centered on how facilities will select the BACT for GHGs. The Guidance makes clear that permitting authorities will continue to make BACT determinations on a case-by-case basis using the five-step “top-down” process that has been in place for over two decades. In addition to the Guidance, EPA issued a series of sector-specific white papers which evaluate available and emerging GHG control technologies. EPA also released a “Greenhouse Gas Emission Strategies Database,” which provides additional information on sector-specific strategies and technologies for controlling GHG emissions.
While the Guidance provides a degree of much needed clarification for permitting authorities and permittees alike, much uncertainty remains. EPA estimates that at least 23 jurisdictions will be unable to meet the January 2, 2011, deadline for implementing the Tailoring Rule. Eight of those states intend to cede authority to EPA for issuing GHG permits. The remaining 15 states, however, will be unable to issue permits for new and modified facilities with GHG emissions that exceed EPA’s regulatory thresholds, meaning that permitting in those jurisdictions will likely grind to a halt for an indeterminate length of time.
EPA’s GHG rules also face legal and legislative challenges. The Tailoring Rule and other aspects of EPA’s GHG regulatory regime have been challenged in multiple lawsuits proceeding in the federal court system. See EPA Proposes to Require Oregon, Idaho, Alaska and Ten Other States to Update Clean Air Act Permitting Programs to Address Greenhouse Gas Emissions, Marten Law Environmental News (Sept. 24, 2010). Furthermore, legislative efforts to either delay or terminate EPA’s authority to implement GHG regulations were likely bolstered by the results last month’s mid-term elections.
Over the past year, EPA has taken a number of steps that will result in the direct regulation of GHG emissions under the Clean Air Act beginning on January 2, 2011. In December 2009, EPA determined that GHG emissions from mobile sources endanger human health and welfare. EPA and NHTSA subsequently issued a joint rule that established the nation’s first standards for greenhouse gas emissions and set new corporate average fuel efficiency (CAFE) standards for new passenger vehicles and light trucks for model years 2012.
Due to the Clean Air Act’s domino-like structure, the new mobile source GHG rules, which go into effect on January 2, 2011, will also trigger permitting requirements for stationary sources under the PSD program. Under the Clean Air Act’s PSD program, new and modified facilities that emit more than 100 or 250 tons per year (depending on source type) of “any air pollutant” must obtain PSD permits. Such facilities are also required to use BACT for each pollutant that is “subject to regulation” under the Clean Air Act and emitted by the facility.
In May 2010, EPA finalized a rule to “tailor” applicability of the PSD and Title V operating permit programs with respect to GHGs. Literal application of the 100/250 ton statutory thresholds to GHGs would vastly expand the number of sources subject to PSD permitting. Therefore, EPA established much higher thresholds for GHGs. For the first six months of 2011, EPA has limited GHG permitting to sources already required to obtain a PSD or Title V Operating Permit due to their other air emissions. Those sources would only be required to address GHGs in their permits if their emissions exceed 75,000 tons a year (for the PSD program, these would be new or increased GHG emissions). For two years after that, PSD and Operating Permits also would be required based only on a facility’s GHGs emissions, even if not required due to emissions of other pollutants. EPA also committed to undertake another rulemaking, beginning in 2011, to consider whether to apply greenhouse gas permitting requirements to smaller sources.
II. The Guidance
A. PSD Applicability
The Guidance first clarifies that the Tailoring Rule does not change the basic PSD applicability process for determining whether there is a new major source or modification that would trigger permitting requirements. However, GHGs will be subject to a unique two-part calculation that evaluates a facility’s emissions on both a “global warming potential” and traditional mass basis. EPA provides a detailed discussion of this process, including numerous flow charts and practical examples.
1. New Sources
During the Tailoring Rule’s first phase (January 2 to June 30, 2011), new sources that would be required to obtain a PSD permit for other regulated pollutants (referred to as “anyway” sources) will also be required to incorporate GHGs into their permit if the facility will have the potential to emit (PTE) GHGs equal to or exceeding 75,000 tons per year measured on a carbon dioxide equivalent (CO2e) basis. During the first phase, GHG emissions alone will not trigger PSD permitting requirements.
During the second phase (permits issued on or after July 1, 2011), PSD applies to GHG emissions if either: (1) PSD for GHGs would have been required under the first phase; or (2) if the facility’s potential GHG emissions are equal to or greater than 100,000 tons CO2e and exceed the traditional 100/250 ton PSD thresholds measured on a mass basis.
2. Modified Sources
During the first six-month phase, modified major sources will be required to incorporate GHGs into their permits if: (1) the modification would be considered major regardless of GHG emissions (i.e. emission increases of other regulated pollutants would trigger permitting requirements); and (2) the emission increase and net emission increase attributable to the modification would be equal to or greater than 75,000 tons CO2e and greater than zero tons on a mass basis.
For permits issued on or after July 1, 2011, modifications to existing major sources will be required to incorporate GHGs into their permits if: (1) the criteria for the first six-month period are met; or (2) the existing source as a PTE equal or greater to 100,000 tons on a CO2e basis and 100/250 tons on a mass basis, and the modification has an emission increase and net emission increase equal to or greater than 75,000 tons CO2e and greater than zero tons on a mass basis. For minor sources, modifications will trigger PSD permitting if the modification alone has actual or potential GHG emissions equal to or greater than 100,000 tons CO2e and 100/250 tons on a mass basis.
B. BACT Determinations
The Guidance next details how BACT will be determined for new and modified major GHG sources. EPA did not identify specific BACT for different facility types. Instead, the Guidance clarifies that permitting authorities will retain discretion to make BACT determinations on a case-by-case basis, including using the traditional five-step “top-down” process that has been in place for decades. The five-steps are as follows:
- Step 1: Identify all available control technologies;
- Step 2: Eliminate technically infeasible options;
- Step 3: Evaluate and rank remaining control technologies;
- Step 4: Evaluate the cost-effectiveness and environmental and energy impacts of potentially available control technologies; and
- Step 5: Select the BACT and establish enforceable emission limits.
The Guidance places an emphasis on energy efficiency, whether through technologies, processes, or practices, noting that “[a]pplying the most energy efficient technologies at a source should in most cases translate into fewer overall emissions of all air pollutants per unit of energy produced.” EPA also notes that efficiency will play an important role in reducing GHG emissions since end-of-stack (i.e. add-on) controls for GHGs are not as well-advanced as they are for other regulated pollutants.
EPA, however, also identified carbon capture and sequestration (CCS) as an add-on pollution control technology that is “available” for large CO2-emitting facilities including fossil fuel-fired power plants and industrial facilities with high-purity CO2 streams (e.g. hydrogen and ammonia production, natural gas processing, and cement production). Accordingly, EPA suggests that CCS should be listed as an available technology in Step 1, although the agency notes that technological and cost considerations may eliminate CCS as an option later in the five-step evaluation process. This aspect of the guidance may prove controversial since CCS has yet to be demonstrated on a commercial scale, and sequestration opportunities are currently limited.
With respect to fossil fuel-fired power plants, the Guidance does not specify that fuel switching (converting from coal to natural gas) should be selected as BACT because doing so would potentially “redefine a coal-fired electric generating unit.” EPA notes that permitting authorities should take a “hard look” at the proposed design to discern which design elements may be changed to achieve emission reductions without fundamentally redefining a proposed source. EPA, however, notes that permitting authorities will retain significant discretion:
EPA does not interpret the Clean Air Act to prohibit fundamentally redefining the source and has recognized that permitting authorities have the discretion to conduct a broader BACT analysis if they desire. The “redefining the source” issue is ultimately a question of degree that is within the discretion of the permitting authority. However, any decision to exclude an option on “redefining the source” grounds must be explained and documented in the permit record, especially where such an option has been identified as significant in public comments.
This aspect of the guidance is also likely to draw criticism from industrial sources.
It remains unclear whether emissions attributable to the combustion of biomass may be excluded when determining whether a new or modified facility must incorporate GHGs into their PSD permit. The Tailoring Rule did not provide biomass emissions with a blanket exemption that had been lobbied for by the biomass industry. The Guidance notes that permitting authorities may consider the environmental, energy and economic benefits that may accrue from the use of certain types of biomass (e.g. landfill methane) for energy generation. The Guidance also notes that permitting authorities may take into consideration federal and state policies relating to biomass as way of addressing climate change when evaluating the environmental, energy, and economic benefits of biomass fuels.
EPA intends to issue guidance in January 2011 that will provide a suggested framework for evaluating biomass in Step 4 of the BACT analysis. EPA also expects to determine by May 2011 whether it will issue a supplemental rule regarding whether it is appropriate, and if so how, to quantify carbon emissions from bioenergy or biogenic sources when making an initial PSD threshold determination.
D. Sector-Specific White Papers
In conjunction with the Guidance, EPA also published seven white papers, which detail sector-specific technologies for addressing GHG emissions that may be useful in the BACT evaluation process:
E. GHG Mitigation Database
Finally, EPA released a GHG Mitigation Database, which will include specific performance and cost data on current and emerging measures for reducing GHG emissions, including available data on the environmental impacts associated with those measures. EPA plans on expanding the database, which is currently limited to electric generating and cement production.
EPA accepted public comment on the Guidance. But since the Guidance is not a formal rulemaking, EPA indicated that it may or may not publish a revised version reflecting public comment. Public comments reflected some of the practical concerns that remain about PSD permitting for GHG emissions. For example, one comment requested clarification on whether “fleet netting” is permitted when determining PSD applicability. Fleet netting would allow entities with multiple facilities to offset the emissions increases attributable to a new or modified source by shutting down or curtailing another source, with the net result being an aggregate decrease in GHG emissions.
Other comments raised concerns regarding the inclusion of CCS as “available” technology. One comment asked EPA to clarify that BACT determinations should not require new or modified sources to be made “capture ready” due to concerns that modifications based on current technology run the risk of locking in obsolete technology that could become stranded or never used. Comments similarly asked EPA to clarify that BACT determinations should not require a facility to relocate based on the potential for future geologic storage of CO2 emissions.
Finally, comments asked EPA to consider the use of GHG offsets (i.e. offsite emission reductions) as part of the BACT analysis. These comments and others highlight the contentions nature of EPA’s GHG regulatory framework and the uncertainties that remain for permitting authorities and regulated entities.
For more information on the Guidance or complying with EPA’s greenhouse gas regulations, please contact Dustin T. Till or any member of Marten Law’s Climate Change practice group.
 Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act; Final Rule, 74 Fed. Reg. 66496 (Dec. 15, 2009).
 Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule, 75 Fed. Reg. 25324 (May 15, 2010).
 42 U.S.C. § 7475(a).
 Each of the six principal GHGs contribute to global warming in differing degrees. For example, methane has 21 times the global warming potential (GWP) as carbon dioxide. Thus, one ton of methane is measured in carbon dioxide equivalents as 21 tons CO2e. Note that emissions under the Tailoring Rule are measured in short tons (2,000 pounds) while emissions under EPA’s Mandatory GHG Report Rule are measured in long or metric tonnes (2,000 kg).
SOURCE: EPA and Dustin T. Till – Marten Law
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