United States: A Collision Course For Prevention Of Significant Deterioration And Title V Program Regulation Of Greenhouse Gas Emissions?

As announced in Barnes & Thornburg LLP's October Greenhouse Gas (GHG) update, EPA is proposing a rule to establish new thresholds that would define when stationary sources must obtain permits for GHG emissions under the Clean Air Act (CAA). This proposal is called the "Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule."

On Oct. 27, 2009, that proposal was published in the Federal Register. EPA is accepting comments on the proposal until Dec. 28, 2009. In addition, EPA is conducting two public hearings on the proposal, on Nov. 18, 2009 in Arlington, VA, and on Nov. 19, 2009, in Rosemont, Ill.

EPA issued this proposal because it plans to issue a GHG endangerment finding (finding that GHGs cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare) and will soon thereafter promulgate regulations to control GHG emissions from light duty vehicles. Once EPA takes these regulatory actions, other regulatory requirements automatically apply for stationary sources:

When the light-duty vehicle rule is finalized, the GHGs subject to regulation under that rule would become immediately subject to regulation under the PSD program, meaning that from that point forward, prior to constructing any new major source or major modifications that would increase GHGs, a source owner would need to apply for, and a permitting authority would need to issue, a permit under the PSD program that addresses these increases. Similarly, for title V it would mean that any new or existing source exceeding the major source applicability level for those regulated GHGs, if it did not have a title V permit already, would have 1 year to submit a title V permit application.

74 Fed. Reg. 55,292, 55,294 (Oct. 27, 2009).

The prevention of significant deterioration requirements of current law will require all new and modified "major stationary sources" to obtain a CAA permit for GHGs applying best available control technology. Unless EPA takes action to establish thresholds that are "tailored" specifically for GHG emissions, this would apply to any new or modified source emitting, or with potential to emit as little as 100 or 250 tons per year of GHGs (depending on the source category). In addition, the title V operating permit program applies to "major" sources that emit at least 100 tons per year of pollutants. Unless EPA "tailors" that threshold for sources of GHG emissions, as many as six million additional sources would have to obtain title V operating permits. According to EPA, these newly regulated sources would include office buildings, retail malls, hotels, apartment buildings and educational facilities.

The consequences if EPA does not tailor the regulatory thresholds of these programs for GHGs would be catastrophic for both the regulators and the regulated community. As EPA notes in the October 27 proposed rule, the existing permitting system would be overwhelmed:

In short, without this tailoring rule, the administrative burdens would be immense, and they would immediately and completely overwhelm the permitting authorities. Without this tailoring rule, permitting authorities would receive approximately 40,000 PSD permit applications each year—currently, they receive approximately 300—and they would be required to issue title V permits for approximately some six million sources—currently, their title V inventory is some 15,000 sources.

Id. at 55,295. Also, according to EPA the cost of processing these permits would be about $15.9 billion, and the cost to the regulated community to obtain these permits would be about $39.6 billion.

EPA proposed the "Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule" to avoid this $55.5 billion train wreck. However, because the thresholds for the applicability of CAA requirements are in the statute, it is very unclear whether EPA has the legal authority to change those thresholds by regulation. EPA's proposal simply asserts that the higher thresholds are an "administrative necessity" to avoid the "absurd results" associated with regulating GHG emissions under the CAA.

At present, it does not appear that anyone in the business community would challenge EPA's authority to issue the "tailoring rule," because the impact of a successful challenge on small businesses would be catastrophic. However, environmental activists may not want to see a precedent established giving EPA authority to change CAA statutory requirements. In fact, in 2008 comments on the Advanced Notice of Proposed Rulemaking (ANPRM) for the endangerment finding, the Center for Biological Diversity stated that EPA, "has no authority to weaken the requirements of the statute simply because its political appointees don't like the law's requirements" and "EPA has no authority to set higher GHG major source cutoffs and significance levels." Similarly, the Conservation Law Foundation comments on the ANPRM supported regulating sources that emit as little as 100 tons per year of GHG emissions. Thus, a legal challenge by environmental groups is likely.

If EPA's tailoring rule is overturned, the only recourse is Congress. The impending train wreck has become a new argument for those in favor of climate change legislation. Of course, Congress could also pass a narrow fix to address the specific issue.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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