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EPA Proposes to Require Oregon, Idaho, Alaska and Ten Other States to Update Clean Air Act Permitting Programs to Address Greenhouse Gas Emissions

September 24, 2010

The Environmental Protection Agency is taking more steps to implement its greenhouse gas Tailoring Rule, which will restrict emissions from new and modified large stationary sources such as power plants and petroleum refineries beginning January 2, 2011. On September 2, 2010, the agency released two draft rules for implementing the agency’s new permitting requirements under the Clean Air Act’s Prevention of Significant Deterioration (PSD) program.[1] Meanwhile, Congress is expected to vote this fall on proposals to block or delay EPA’s regulation of greenhouse gas emissions under existing Clean Air Act requirements, and litigation over EPA’s rules moves forward. But unless the courts or Congress intervene, limits on GHG emissions on stationary source will begin to go into effect early next year.

States with “Substantially Inadequate” SIPs

  • Alaska
  • Arizona (excluding Maricopa County, Pima County, and Indian Country)
  • Arkansas
  • California (Sacramento Air Quality Management District only)
  • Connecticut
  • Florida
  • Idaho
  • Kansas
  • Kentucky
  • Nebraska
  • Nevada (Clark County only)
  • Oregon
  • Texas

The first of the actions EPA released this month is a proposed determination that the Clean Air Act implementation plans (State Implementation Plan or SIPs) in thirteen states are “substantially inadequate” because their PSD programs do not apply to new or modified greenhouse gas-emitting sources. EPA would require that non-compliant states issue revised SIPs within 12 months of issuance of the final rule (slated for early December 2010). In its second rule, EPA proposes assuming responsibility for PSD permitting for greenhouse gas emissions for those states that do not timely submit compliant SIPs, via a Federal Implementation Plan (FIP).

A report by the National Association of Clean Air Agencies projects that the majority of states will be ready to implement permitting for greenhouse gases by the January 2, 2011, deadline. A number of states, however, are resisting EPA’s new requirements. In a sharply worded August 2, 2010, letter, the state of Texas indicated that “Texas has neither the authority, nor the intention of interpreting, ignoring, or amending its laws in order to compel the permitting of greenhouse gas emissions.” The state of Arizona has asked EPA to reconsider its proposed determination that the Arizona SIP is inadequate. And a number of states have expressed concern that they will not have sufficient authority to implement the Tailoring Rule by EPA’s January 2, 2011, deadline.[2] For example, Wyoming Governor Dave Freudenthal stated that Wyoming may not meet EPA’s deadlines because of the need to amend state law.[3]

As detailed below, EPA’s proposal leaves open the potential for a gap in Clean Air Act permitting authority in those states that either cannot, or refuse to, comply with the January 2, 2011, deadline to begin greenhouse gas permitting. This gap in authority could effectively foreclose the construction or modification of stationary sources in those states, if they have annual emissions exceeding 75,000 tons of carbon dioxide, until the state adopts revisions to its PSD program or accepts EPA’s FIP, which would not take effect until late in 2011.

Meanwhile, threats to EPA’s greenhouse gas rules continue to mount. On August 2, 2010, Texas filed a petition with United States Court of Appeals for the District of Columbia challenging the Tailoring Rule. Texas’ lawsuit joins a growing body of challenges to the four major components of EPA’s climate program: the Endangerment Finding, the mobile source rule, PSD interpretive memorandum, and the Tailoring Rule. See Marten Law Environmental News, With Climate Legislation Uncertain, Challenges to EPA’s Ability to Regulate Greenhouse Gases Mount (June 1, 2010). EPA recently filed a brief that opposes efforts to consolidate over 90 lawsuits challenging those four regulatory actions into a single large coordinated proceeding.

Bi-partisan challenges to EPA’s authority to regulate greenhouse gas emissions are also mounting in Congress. Republican opponents of EPA’s greenhouse gas regulations have threatened to add an amendment to EPA’s fiscal year 2011 budget that would restrict the agency from implementing those regulations for up to two years. Senator Rockefeller (D. WV) has also floated legislation that would similarly delay EPA’s ability to implement greenhouse gas regulations. A similar bill sponsored by Senator Murkowski (R. AK) failed to clear procedural hurdles earlier this year, although there is now speculation that there may be sufficient support in the Senate to preempt EPA through appropriations or otherwise.[4]

I. Federal and State Administration of the Clean Air Act

The Clean Air Act establishes a cooperative framework under which EPA and the states regulate air quality. At the federal level, EPA is required to establish limits (known as National Ambient Air Quality Standards, or NAAQS) on the maximum concentrations of air pollutants allowable in various parts of the country.[5] EPA is also required to designate areas of the country as “attainment,” “nonattainment,” or “unclassifiable” for each air pollutant, depending on whether the area is in compliance with NAAQS.[6] States are primarily responsible for administering the Clean Air Act, and are required to develop plans (known as State Implementation Plans, or SIPs) for implementing, maintaining, and enhancing NAAQS.[7] SIPs must include, among other things, PSD requirements.[8]

The Clean Air Act authorizes EPA to make a determination that a state’s SIP is “substantially inadequate” and require the state to correct such inadequacies.[9] This action is generally referred to as a “SIP call.” When making a SIP call, EPA must establish a reasonable deadline (not to exceed 18 months) for submission of the SIP revisions. If a state fails to submit a corrective SIP, EPA is authorized to assume responsibility for administering the Clean Air Act by developing and implementing a Federal Implementation Plan (FIP).[10]

II. PSD and the Regulation of Greenhouse Gas Emissions

Over the past year, EPA has finalized a series of rules that will result in the direct regulation of greenhouse gas emissions from large industrial sources under the Clean Air Act’s PSD program beginning on January 2, 2011. First, in December 2009, EPA issued its “Endangerment Finding,” which concluded that carbon dioxide emission from mobile sources endanger human health and welfare.[11] EPA and the National Highway Traffic Safety Administration (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.[12]

The Endangerment Finding and mobile source rule have the practical effect of triggering the regulation of greenhouse gas emissions under the PSD program. New and modified facilities that emit more than 100 or 250 tons a year (depending on source type) of “any air pollutant” must obtain PSD permits. Furthermore, facilities subject to PSD permitting requirements are required to use best available control technology (BACT) for each pollutant that is “subject to regulation” under the Act and emitted by the facility.[13] Under the new mobile source rule, greenhouse gases will be “subject to regulation” under the Clean Air Act for the first time beginning on January 2, 2011.[14]

Given the ubiquitous nature of greenhouse gas emissions, the literal application of the 100/250 ton statutory thresholds would vastly expand the number of sources subject to PSD permitting. EPA, therefore, recently finalized its greenhouse gas “Tailoring Rule,” which established a phased compliance program for power plants, refineries and other large sources.[15] 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). For two years after that, PSD and Operating 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 also committed in the rule to undertake another rulemaking, beginning in 2011, to consider whether to apply greenhouse gas permitting requirements to smaller sources. See EPA Issues Final Rule Regulating Greenhouse Gases From New and Modified Sources, Marten Law Environmental News (May 14, 2010).

III. EPA’s Proposed Rules

In its Tailoring Rule, EPA raised the issue that some SIPs may not adequately authorize state permitting authorities to enforce the PSD and Title V requirements for greenhouse gas emissions. EPA asked states to submit letters by August 3, 2010, advising the agency on how the states intended to implement the Tailoring Rule, including whether the states have adequate authority to implement greenhouse gas permitting. EPA also independently analyzed affected states’ SIPs.

Based on input from the states and its own analysis, EPA issued its proposed SIP Call, a proposed finding that the SIPs in thirteen states are “substantially inadequate” with respect to PSD permitting for greenhouse gas emissions. EPA found those SIPs to be inadequate for a variety of reasons. First, while the PSD provisions of most SIPs apply broadly to any “NSR pollutant,” the SIPs in a number of states simply list the individual pollutants by name. EPA found those SIPs “substantially inadequate” because they did not identify greenhouse gases as among the pollutants addressed under their PSD programs. Second, EPA found that one state, Connecticut, explicitly excluded carbon dioxide as an “air pollutant” from its PSD program. Third, EPA found that some states were precluded from incorporating by reference or otherwise adopting any requirements not specifically adopted by the state legislature or other state authority.

EPA proposes requiring each of the thirteen states to submit revised SIPs within 12 months from the publication of the final rule, although EPA would allow states to set their own deadline, which could be as short as three weeks. The revised SIPs must address permitting requirements for greenhouse gas emissions under the PSD program consistent with the Tailoring Rule. EPA proposes publishing the final SIP Call in early December 2010, which means that revised SIPs would be due in December 2011, unless a state has asked for an earlier deadline. In addition to seeking public comment on its determination of “substantially inadequate” SIPs, EPA is also seeking comment on whether or not the remaining SIPs sufficiently authorize greenhouse gas permitting.

For states that do not timely submit adequate SIP revisions, EPA is also proposing a FIP that would authorize EPA to administer PSD permitting for greenhouse gases consistent with the Tailoring Rule. The proposed FIP is generally consistent with EPA’s regulations for jurisdictions where it directly administers the PSD program. If a state has asked for an early deadline for correcting its SIP and is unable to complete work by that date, then the FIP could be triggered early in that state.

IV. Potential Gap in Permitting Authority & Upcoming Actions

EPA’s proposed rules may result in a gap in permitting authority in states that cannot, or refuse to, comply with EPA’s Tailoring Rule. Before assuming responsibility for PSD permitting via a FIP, EPA must first determine that the relevant SIP is “substantially inadequate.” EPA must also provide the state with a “reasonable” amount of time to cure its defective SIP. Here, EPA has given the thirteen states identified in its proposed SIP Call twelve months to submit corrective SIPs. Under EPA’s proposed timeline, the corrective SIPs would not be due until December 2011. However, the Tailoring Rule is set to go into effect on January 2, 2011; thus, between February and December 2011, new or modified large greenhouse gas sources may not be able to obtain PSD permits because neither an approved SIP nor FIP will be in place. While a number of states, including Oregon, are in the process of revising their SIPs to address greenhouse gas permitting requirements, those revisions are unlikely to be completed before EPA’s January 2, 2011, deadline. This permitting authority gap could potentially restrict parties from constructing or modifying large stationary sources in a number of states for up to a year.

EPA’s proposal to let states pick an earlier deadline appears to be an effort to avoid this gap. If, for example, a state were to ask EPA to set a January 2, 2011, deadline for correcting that state’s SIP, then EPA would have grounds to impose the FIP on that state in January, 2011. While creative, it remains to be seen how well this concept will work when applied.

In addition to finalizing these proposed rules, EPA is expected to take a number of steps in coming weeks to implement its PSD permitting program for greenhouse gas emissions. For example, EPA is expected to issue draft guidance on determining what is the Best Available Control Technogology (BACT) for various greenhouse gas sources. EPA is also expected to issue a draft rule to address inadequacies in various state-level Title V (air operating permit) programs with respect to greenhouse gas emissions

If you have any questions about EPA’s proposed rules or other aspects of EPA’s greenhouse gas regulations, please contact any other member of Marten Law’s Climate Change and Air Quality practice groups.

[1] Action to Ensure Authority to Issue Permits Under the Prevention of Significant Deterioration Program to Sources f Greenhouse Gas Emissions: Federal Implementation Plan, 75 Fed. Reg. 53883 (Sept. 2, 2010); Action to Ensure Authority to Issue Permits Under the Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP Call, 75 Fed. Reg. 53892 (Sept. 2, 2010). The rules were initially proposed by EPA on August 12, 2010, but were not published in the Federal Register until September 2, 2010.

[2] Robin Bravender, State, Federal Fight Brewing Over EPA Emission Rules (E&E Greewire, Sept. 10, 2010) (subscription required).

[3] Id.

[4] Gabriel Nelson and Robin Bravender, Thursday Shaping Up to a Senate Showdown Over EPA’s Greenhouse Gas Regs, NY Times (Sept. 14, 2010).

[5] 42 U.S.C. § 7409.

[6] Id. at § 7407(c).

[7] Id. at § 7410(a)(1).

[8] Id. at § 7410(a)(2)(C) and (a)(2)(J).

[9] Id. at § 7410(k)(5).

[10] 110(c)(1).

[11] 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).

[12] Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule, 75 Fed. Reg. 25324 (May 15, 2010).

[13] 42 U.S.C. § 7475(a).

[14] EPA has also finalized an interpretation of when greenhouse gases are “subject to regulation” for purposes of PSD permitting. The agency concluded that a pollutant becomes “subject to regulation” when controls on that pollutant take effect, meaning the date when the requirement to control the pollutant first applies to a source. See Interpretation of Regulations that Determine Pollutants Covered by Clean Air Act Permitting Programs, 75 Fed. Reg. 17004 (April 2, 2010).

[15] Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule, 75 Fed. Reg. 31514 (June 3, 2010).

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