Under Attack, EPA Defers Greenhouse Gas Permitting for Biomass Projects

With its greenhouse gas regulatory program under attack from Congress, and facing significantly reduced funding for climate change programs, EPA has proposed new rules that will temporarily defer – and possibly exempt - greenhouse gas permitting requirements for carbon dioxide (CO2) emissions attributable to the combustion of biomass and other biologically-based (biogenic) fuels.[1] The new rules defer - for at least three years - permitting that would otherwise have been required under EPA’s controversial Tailoring Rule[2], which went into effect on January 2, 2011. Under the Tailoring Rule, new and modified facilities with annual greenhouse gas emissions exceeding 75,000 metric tons are required to comply with EPA’s Prevention of Significant Deterioration (PSD) and Title V permitting standards, including the use of Best Available Control Technology (BACT). See Climate Change: The Year Ahead, Marten Law Environmental News (Jan. 3, 2011). EPA is accepting public comment on its proposed deferral through May 5, 2011.

 The Tailoring Rule had the potential to delay or halt the construction of biomass cogeneration facilities, which qualify as renewable energy producers under many state-level renewable portfolio standards (RPSs),[3] and is opposed by many in the industry. Under the new rules, during the three-year deferral period, EPA will consider whether a permanent exemption is permissible for at least some (and perhaps all) types of biogenic feedstocks, including an evaluation of the controversial issue of whether biogenic CO2 emissions result in a net increase in atmospheric CO2 concentrations. In the meantime, EPA’s new rules, which are slated to be finalized later this year, will likely ease Clean Air Act permitting of biomass cogeneration power plants, biomass boilers, and other industrial facilities with significant CO2 emissions from the combustion or fermentation of biogenic fuels.

EPA’s proposal, however, is not without controversy. On April 7, 2011, environmental NGOs filed a lawsuit in the U.S. Court of Appeals for the District of Columbia Circuit challenging EPA’s decision to grant an industry petition to exclude biogenic CO2 emissions from greenhouse gas permitting requirements.[4] EPA’s granting of that petition resulted in the proposed permitting deferral, and if adopted, EPA’s deferral will also likely face legal challenges.

PSD, Title V, and the Tailoring Rule

EPA’s PSD regulations establish preconstruction review and permitting requirements for new major stationary sources and major modifications at existing major stationary sources. PSD requirements are triggered if the new source or modification will result in the emission of 100 or 250 tons (depending on source type) of a regulated air pollutant. New and modified facilities with emissions exceeding those applicability thresholds must meet emission limitations based on the application of BACT. The BACT determination is made on a case-by-case basis, taking into consideration cost and other factors. The Title V program does not generally impose new substantive emission limitations, but instead, requires major stationary sources to obtain a permit that ensures compliance with applicable requirements under the Clean Air Act.

On January 2, 2011, EPA’s greenhouse gas Tailoring Rule went into effect, which for the first time subjected CO2 and other greenhouse gas emissions to permitting requirements under the PSD and Title V programs. For the first six months of 2011, EPA has limited greenhouse gas 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 greenhouse gases in their permits if their emissions exceed 75,000 tons a year (for the PSD program, these would be new or increased greenhouse emissions).

Beginning in July, 2011, and for two years after that, PSD and Title V Permits also would be required based only on a facility’s greenhouse gas emissions, even if not required due to emissions of other pollutants. EPA has also committed to undertake another rulemaking, beginning in 2011, to consider whether to apply greenhouse gas permitting requirements to smaller sources.

Treatment of Biogenic Fuels under the Tailoring Rule

Biogenic CO2 emissions are associated with a broad range of industrial and waste management activities, including combusting wood-derived fuel (i.e. biomass) to produce industrial steam or power generation, combustion of the biological fraction of tire-derived fuel, the combustion of the biological fraction of municipal solid waste or biosolids, fermentation associated with ethanol production, and the combustion of biogass collected from landfills, wastewater treatment, and manure management processes.

There has been significant controversy over whether EPA should regulate CO2 emissions from the combustion or oxidization of biogenic materials or biomass combustion under the Clean Air Act. On one hand, forest industry trade groups and other parties have argued that biogenic carbon (i.e. CO2 released from the combustion or oxidization of biogenic materials) differs qualitatively from geologic carbon (i.e. CO2 released from the combustion of fossil fuels). For example, proponents of biomass combustion note that much of the carbon content of biogenic material will be released into the atmosphere as part of the natural carbon cycle (i.e. decomposition of plant matter). At the same time, forests and other land-based carbon stocks can act as carbon sinks by reabsorbing atmospheric CO2 on a far shorter scale as compared to geologic carbon. The result, proponents argue, is that biogenic fuels are “carbon neutral.” Biomass proponents also noted that biogenic carbon and geologic carbon are treated differently under many state, federal, and international rules and policies.

On the other hand, critics of biomass fuels contend that it is difficult to categorize and quantify the differences between natural biogenic CO2 emissions (e.g. natural decay and forest fires) and anthropogenic biogenic CO2 emissions (e.g. combustion of biomass for energy). Critics further note that the use of biomass could potentially reduce carbon sinks by incentivizing logging and other purportedly harmful forest practices.

In its final Tailoring Rule, EPA acknowledged the arguments surrounding how biogenic CO2 emissions should be treated under the Clean Air Act. EPA, however, declined to exclude biogenic CO2 emissions from regulation under the Tailoring Rule. EPA observed that, in developing the Tailoring Rule, it had not analyzed the administrative burdens on a categorical basis, and that commenters had not provided information demonstrating that an overwhelming permitting burden would exist such that a temporary exclusion for biomass was warranted.

Shortly after publishing the final Tailoring Rule, EPA published a Call for Information (CFI) that solicited comments on approaches to accounting for biogenic CO2 emissions, including whether some or all of a source’s biogenic CO2 emissions could be discounted based on a determination that they are cancelled out by the natural carbon cycle (i.e. by the CO2 absorption associated with growing fuel stocks such as biomass).[5] In August 2010, the National Alliance of Forest Owners (NAFO) petitioned EPA to reconsider the Tailoring Rule on grounds that it constituted the first time that EPA would count CO2 emissions from the combustion of biomass toward the applicability thresholds under the PSD and Title V programs.[6] NAFO also argued that regulating CO2 emissions from biomass combustion under the Tailoring Rule was inappropriate because biogenic CO2 emissions (as contrasted with geologic carbon from fossil fuels) do not result in a net increase in atmospheric concentrations of CO2. EPA subsequently granted NAFO’s petition to reconsider the Tailoring Rule with respect to biomass. EPA, however, did not grant NAFO’s request for an administrative stay of the entire Tailoring Rule.

Last month, EPA published its proposed rules that would defer for three years the consideration of biogenic CO2 emissions under the Tailoring Rule. To facilitate the deferral, EPA is proposing to revise the definition of the term “subject to regulation” to exclude biogenic CO2 emissions from stationary sources. The deferral would apply only to CO2 emissions from the combustion and decomposition of biologically-based material.[7] Such emissions will not count towards the PSD applicability determination for greenhouse gases. EPA has provided a non-exhaustive list of emissions that would be deferred by the rule:

• CO2 generated from the biological decomposition of waste in landfills, wastewater treatment, or manure management processes;
• CO2 from the combustion of biogas collected from biological decomposition of waste in landfills, wastewater treatment, or manure management processes;
• CO2 from fermentation during ethanol production;
• CO2 from combustion of the biological fraction of municipal solid waste or biosolids;
• CO2 from combustion of the biological fraction of tire-derived fuel; and
• CO2 derived from combustion of biological material, including all types of wood and wood waste, forest residue, and agricultural material.

Facilities that cofire biogenic and fossil fuels would still be required to count the fraction of CO2 associated with fossil fuel combustion towards the PSD applicability determination. Furthermore, the deferral would not apply to other greenhouse gases (e.g. methane) or non-greenhouse gas pollutants that are otherwise subject to PSD and Title V permitting.

Interim PSD Guidance

EPA also issued an interim guidance for determining BACT for reducing CO2 emissions from bioenergy production. EPA has determined that biogenic CO2 emissions must be considered when determining whether PSD permitting requirements apply; therefore, until the proposed deferral becomes effective, new and modified major emitting facilities will be required to consider biogenic CO2 emissions when determining whether the project will trigger PSD permitting requirements and in their BACT determination. EPA has accordingly published its interim guidance document to guide the BACT analysis for projects that will be permitted prior to the commencement of the deferral period. The interim guidance notes that BACT for CO2 emissions at bioenergy facilities is the combustion of the biomass fuel itself.

Conclusion

EPA is accepting public comment on its proposed deferral through May 5, 2011. EPA anticipates that it will publish the final deferral rule in July 2011. In the meantime, new and modified facilities will be required to consider biogenic CO2 emissions in their PSD applicability determination, and if permitting requirements for CO2 trigger under the Tailoring Rules, facilities will need to make a BACT determination for biogenic CO2.

For more information, please contact Dustin Till or any member of Marten Law’s Climate Change or Air Quality practice groups.