United States: The Federal Nexus In EPA GHG Permitting: Additional Burdens On Permit Applicants

Introduction

Beginning on January 2, 2011, the U.S. Environmental Protection Agency (the EPA) began permitting greenhouse gases (GHGs) through the Prevention of Significant Deterioration (PSD) program of the Clean Air Act (the CAA).¹ Most states directly issue GHG PSD permits, but EPA currently retains authority to issue GHG permits in Arizona, Arkansas, Florida, Idaho, Oregon, Texas, and Wyoming.² Permit applicants in these states will find themselves confronted with additional federal permitting requirements. When EPA retains authority to issue PSD permits, the requirements of the Endangered Species Act (the ESA)³ and the National Historic Preservation Act (the NHPA)⁴ become part of the PSD permitting process.⁵ This article highlights the unique burdens GHG permit applicants face in states where EPA issues GHG PSD permits, as exemplified by the Lower Colorado River Authority's (LCRA) experience with federal GHG permitting for its Thomas C. Ferguson natural gas-fired power plant (the Ferguson plant).⁶

GHG PSD Permitting

Under the PSD program, major stationary sources⁷ in attainment areas must obtain a permit prior to beginning construction or performing certain modifications.⁸ PSD permitting includes a review of potential control technologies as well as an air quality impact review.⁹ Since 2011, EPA and various state permitting authorities have issued over sixteen air quality permits reflecting Best Available Control Technology determinations for GHGs.¹⁰

The Federal Nexus

Although GHG requirements represent new obligations for PSD permit applicants, environmental laws outside of the CAA also play a role in GHG permitting when the EPA issues the permit. Before discussing the additional laws implicated by EPA's issuance of PSD permits, we note first that curiously, one major environmental law is not: The National Environmental Policy Act (NEPA).¹¹ Generally, NEPA requires federal agencies to analyze the consequences of "major Federal actions significantly affecting the quality of the human environment."¹² Regulations promulgated by the Council on Environmental Quality (CEQ) state that a "major Federal action" includes the "[a]pproval of specific projects . . . by permit or other regulatory decision . . ."¹³ On its face, NEPA and its implementing regulations seem to cover the EPA's issuance of a PSD permit. This would require that GHG PSD permit applicants prepare an Environmental Assessment (EA) or, if necessary, a more extensive Environmental Impact Statement (EIS) as part of their permit application to EPA.¹⁴ Section 7(c) of the Energy Supply and Environmental Coordination Act (ESECA) of 1974, however, exempts actions taken by EPA under the CAA, such as PSD permitting, from the requirements of NEPA.¹⁵ ESECA's statutory bypass of NEPA's substantial obligations means that EPA cannot require permit applicants to prepare an EA or an EIS for their projects.

Regrettably, permit applicants cannot avoid other federal environmental analyses triggered by the EPA's issuance of a PSD permit. Section 7 of the ESA requires that federal agencies consult with the U.S. Fish and Wildlife Service (USFWS) and/or the National Marine Fisheries Service (NMFS) (collectively referred to as the Service) to "insure that any action authorized, funded, or carried out by such agency . . . is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of habitat of such species."¹⁶ Additionally, section 106 of the NHPA requires any Federal agency with the authority to license a project to take into account the effects of the project on historic properties, and afford the Advisory Council on Historic Preservation (ACHP) a reasonable opportunity to comment.¹⁷

A. The Endangered Species Act

EPA's issuance of a PSD permit may trigger ESA section 7 consultation with the Service. Generally, the ESA prohibits the taking of endangered or threatened wildlife species (referred to as listed species).¹⁸ The term "taking" is broadly defined and means to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or attempt to engage in such conduct.¹⁹ ESA section 7 requires that federal agencies ensure that any activity an agency funds, authorizes, or carries out does not jeopardize the continued existence of a listed species or result in the destruction or adverse modification of a listed species' designated critical habitat.²⁰ Any federal permitting decision with the potential to impact a listed species requires consultation with the Service. Consultation is required only for actions that "may affect" a listed species or critical habitat.²¹

A federal agency must analyze all the impacts, including any air emissions associated with the proposed project, on listed species within the project area. Under a strict reading of the ESA, the argument could be made that sources of substantial GHGs and any resulting marginal effects on climate from those GHG emissions may result in an unlawful take of a listed species. This would require consultation under section 7 to analyze the effects of a proposed project's GHG emissions. Several federal agencies, however, have determined that they do not need to consult under section 7 with respect to GHGs.²² Thus, permit applicants are generally not required to analyze the effects of GHGs on listed species within the project area. Instead, applicants must analyze only the effects of regulated criteria pollutants, volatile organic compounds (VOCs), hazardous air pollutants (HAPs), and heavy metals. And so, perversely, a permitting obligation triggered by GHG emissions requires consideration of all environmental effects other than those from GHG emissions.

The requirements of the ESA impose substantial burdens on permit applicants. First, applicants must review the Service's and the relevant state agency's current list of threatened or endangered species found in the project's "Action Area."²³ Regulations define the Action Area as "all areas to be affected directly or indirectly by the Federal action and not merely the immediate area involved in the action."²⁴ Indirect effects are those that are caused by the action and are later in time, but still are reasonably certain to occur.²⁵ If no species or their critical habitat is affected by the proposed project, no further action on the part of the permit applicant is required.²⁶

If a permit applicant discovers federally listed species in the Action Area, a Biological Assessment (BA) detailing the potential effects of the proposed project on listed species must be prepared.²⁷ Generally, the permit applicant then submits a BA to the appropriate EPA regional office for evaluation, modification, and ultimate approval. The purpose of the BA is to determine whether or not the effects of a proposed action will result in a take or jeopardize a listed species or critical habitat.²⁸

Although the contents of the BA are left to the discretion of federal Agency involved in the project, regulations state that the agency may consider the following for inclusion in the BA:

1. The results of an on-site inspection of the area affected by the action to determine if listed or proposed species are present or occur seasonally.

2. The views of recognized experts on the species at issue.

3. A review of the literature and other information.

4. An analysis of the effects of the action on the species and habitat, including consideration of cumulative effects, and the results of any related studies.

5. An analysis of alternate actions considered by the Federal agency for the proposed action.²⁹

Additionally, if the proposed action is identical or "very similar" to a previous project's BA, applicants can incorporate the findings of the previous BA by reference along with any supporting data from relevant documentation.³⁰ In order to incorporate a prior BA, the applicant must demonstrate to EPA that the proposed action involves similar impacts to the same species in the same geographic area and that no new species or critical habitats have been listed or proposed in the Action Area.³¹ The applicant must also supplement the BA with information on any relevant changes.³²

If the final BA determines that the proposed action "may affect," but is not likely to adversely affect, a listed species, and the Service concurs in writing with the determination, consultation is complete. This is called "informal consultation."³³ During informal consultation, the Service can suggest changes to the proposed project to either EPA or the applicant in order to avoid a potential adverse impact on any listed species.³⁴

Formal consultation occurs if the agency determines, based on the BA, that the proposed action will adversely affect a listed species, or if the Service does not concur with a BA's opinion of no adverse effect. According to the regulations, formal consultation can take up to 90 days, with an additional 60 day extension if EPA consents.³⁵ Additionally, neither the applicant nor EPA should make any "irreversible or irretrievable commitments of resources" with respect to proposed project that would have the effect of foreclosing possible alternatives to the proposed project.³⁶ Formal consultation requires the issuance of a Biological Opinion (BiOp) for the proposed project.

A BiOp requires the use of the best scientific and commercial data available in order to provide for an adequate review of the effects of the proposed project.³⁷ The Service can request an extension of the time required for consultation if it determines that additional data is required in order to determine how or to what extent a proposed project will affect a listed species.³⁸ Regulations state that responsibility for funding the gathering of any additional data falls to the applicant.³⁹ During formal consultation, the Service must: (i) evaluate all relevant information to the project, including another on-site inspection; (ii) evaluate the current status of the listed species; and (iii) evaluate the effects of the proposed project and its cumulative effects on the listed species.⁴⁰

If the BiOp determines that the proposed action will result in a take, but will not jeopardize a listed species, formal consultation terminates.⁴¹ The Service will then issue an incidental take permit for the proposed project.⁴² An incidental take permit allows for the taking of any listed species that may occur as a result of the proposed action and will detail what kind of takes will result from the proposed project and the frequency. The final BiOp must include a statement regarding the incidental take that:

1. Specifies the amount or extent of an incidental taking on the species;

2. Specifies the reasonable and prudent measures the Service considers necessary or appropriate to minimize the impact of the proposed project;

3. Sets forth the terms and conditions the applicant must comply with (including reporting requirements)

4. Specifies the procedures to handle or dispose of any species actually taken.⁴³

So long as an applicant meets the terms of the incidental take permit, the applicant will be protected against prosecution under the ESA.

If, however, the BiOp makes a jeopardy determination, i.e., that the proposed project will result in potential jeopardy to the continued existence of a listed species in all or part of its range, the Service will develop "reasonable and prudent" alternatives to the proposed project.⁴⁴ If the Service is unable to develop any alternatives, it will indicate that in the BiOp.⁴⁵ The permitting agency then has the option to: (i) modify the proposed project and consult again with the Service; (ii) decide not to issue the permit; (iii) disagree with the opinion and proceed to issue the permit; or (iv) apply for an exemption. In practice, if a reasonable and prudent alternative is not available, or if the project will not be modified, the agency generally will decline to issue the permit for the proposed project.

B. The National Historic Preservation Act

EPA's issuance of a PSD permit also implicates the consultation requirements of NHPA section 106. The requirements of the NHPA are more procedural in nature than substantive,⁴⁶ but can still delay the issuance of the final permit. NHPA section 106 requires that federal agencies take into consideration actions, such as issuing a permit, that could adversely affect historic and cultural properties listed or eligible for listing on the National Register of Historic Places (the National Register).⁴⁷ The parties involved must make a "reasonable and good faith effort" to identify any historical properties.⁴⁸ The lead agency responsible for implementing the requirements of the NHPA is the Advisory Council on Historic Preservation (ACHP).⁴⁹

The general procedures of the ACHP control for EPA's issuance of a PSD permit. Applicants must coordinate with the State Historic Preservation Officer (SHPO) responsible for the proposed project's area.⁵⁰ The SHPO assists the applicant in the delineation of the project area and the subsequent identification of any potential historic properties therein. The project area includes the area or areas where the proposed project may directly or indirectly cause alterations in the character or use of historic properties.⁵¹ The scale and nature of the project also influences how the project area is defined.⁵²

Importantly, the scope of NHPA section 106 review is potentially broader than the ESA section 7 review. A federal agency must identify properties, including any prehistoric or historic districts, sites, buildings, structures, or objects, that are listed in the National Register of Historic Places, or eligible for listing in the National Register.⁵³ This imposes a significantly greater burden on applicants, as it requires an analysis of any items of historic or cultural value in order to determine if they warrant listing in the National Register.

If historic or cultural properties eligible for the National Register are found within the project area, the applicant must determine whether or not the project will have an "adverse effect." An adverse effect is one that directly or indirectly alters the characteristics of a historical or archeological resource that is listed or eligible for listing in the National Register.⁵⁴ Impacts that may occur later in time must also be considered if they are reasonably foreseeable.⁵⁵ Additionally, applicants must consider the cumulative effects of a proposed project, such as increased noise or air pollution.⁵⁶

An adverse effect is any effect that would "diminish the integrity of the property's location, design, setting, materials, workmanship, feeling, or association." ⁵⁷ Examples include the removal, physical destruction or a change in the property's characteristics that could affect its integrity.⁵⁸ Adverse effects specifically include "atmospheric elements" that diminish the integrity of the property's historical features.⁵⁹ If the applicant or the SHPO finds that a proposed project will adversely affect historic or cultural properties, then the parties must begin consultation.⁶⁰

Consultation involves the evaluation alternatives or modifications to the proposed project that could avoid, minimize, or mitigate adverse effects on historic properties.⁶¹ Consultation includes the applicant, the permitting agency, the SHPO, and the ACHP.⁶² Additional parties with an interest in the historical or eligible historical property may also be invited to join.⁶³ The permitting agency must share all documentation prepared as part of the review with all consulting parties and the public.⁶⁴

Consultations usually result in a Memorandum of Agreement (MOA) between the parties that resolves, mitigates, or minimizes the potential adverse effects of the proposed project.⁶⁵ Importantly, the NHPA does not require that an agency choose the least damaging alternative, only that it consider and analyze the impacts on historic resources and develop methods to mitigate the identified adverse impacts.⁶⁶ The proposed project can still move forward if the parties fail to resolve any potential issues, but this requires the approval of the head of the permitting agency.⁶⁷

Case Study: Lower Colorado River Authority

The LCRA was one of the first permit applicants to endure the additional burdens associated with EPA's issuance of a GHG PSD permit. The proposed project involved the construction of a new 550-megawatt, combined-cycle power plant west of Marble Falls, Texas, on the south shore of Lake Lyndon B. Johnson (LBJ).⁶⁸ The project discharges cooling water into Lake LBJ.⁶⁹ The LCRA and its environmental consultant have been quoted as saying that the ESA and NHPA review represented a greater burden than the GHG permitting process itself.⁷⁰ In a presentation to the Clean Air Force of Central Texas, the LCRA advised future applicants to carefully budget and schedule these additional requirements in order to avoid delaying the PSD permitting process.⁷¹ This section highlights some of the major aspects of the LCRA's experience and details how LCRA scoped its ESA and NHPA review.

A. ESA Review

In its BA, the LCRA determined that air emissions from the proposed project had the greatest potential to impact areas surrounding the Ferguson plant property.⁷² Based on this, the LCRA defined the boundaries of the Action Area based on its air emission dispersion modeling.⁷³ The BA measured the effects of the proposed action by using existing emissions from the Ferguson plant as the baseline against the emissions of the proposed new facility.⁷⁴ The BA does not mention any potential effects of the proposed project's GHG emissions on listed species within the Action Area.

The LCRA identified eight endangered species within the defined Action Area.⁷⁵ As part of its literature review, the BA examined current federal and state lists of endangered and threatened species within Llano and Burnett Counties; a review of all documented rare species and resources known to occur within 15 miles of the Ferguson plant; and a review of relevant scientific literature on the potential impacts of air emissions on general wildlife, listed species, and designated critical habitats in the Action Area.⁷⁶ The LCRA conducted infrared and black and white aerial photography, ground verification of identified vegetation, and pedestrian surveys as part of its attempts to identify any listed species.⁷⁷ Ultimately, the BA determined that the proposed action would have no effect on any of the endangered or listed species because its field investigations did not identify any suitable habitat for a listed species within the Action Area.⁷⁸

B. NHPA Review

The LCRA's NHPA section 106 review began with an examination of existing historical and cultural records on the area around the Ferguson plant.⁷⁹ Due to its proximity to the head of a small tributary creek, the LCRA determined a moderate probability of the presence of prehistoric sites in the project area.⁸⁰ Archival photographs taken during the original construction of the Ferguson plant were also examined to assess the potential presence of any historical or culture resources at the site.⁸¹ Despite the potential to find historic or cultural resources within the project area, the LCRA's Cultural Resource staff determined that a field survey was not warranted.⁸² After receiving written concurrence with LCRA's findings from the Texas Historical Commission, EPA agreed with LCRA's determination.⁸³

The NHPA section 106 review also included a file search of historical maps, aerial photographs, and relevant literature to assess the visible impacts to any structures eligible for listing on the National Register.⁸⁴ The review discovered several potential structures; however, modern maps and aerial photographs indicated that all potential structures were no longer present or had already been moved in accordance with the SHPO's directions.⁸⁵ As no historic or cultural resources were identified within the project area, the review did not assess the potential air impacts of the project. As such, the LCRA's experience sheds little light on the potential depth of NHPA section 106 review with respect to GHG emissions.

Conclusion

The analyses required by the ESA and the NHPA can be costly and time-consuming for permit applicants. Future permit applicants must be cognizant of these additional burdens and plan accordingly. Close coordination with EPA to determine the appropriate scope and depth of the biological, historic, and cultural assessments may be crucial to minimizing the unique impacts of GHG permits in states where EPA retains permitting authority.

1 75 Fed. Reg. 31,514 (June 3, 2010). The Tailoring Rule is currently under judicial challenge, Coalition for Responsible Regulation v. EPA, Nos. 09-1322, 10-1092 (D.C. Cir.); however, the D.C. Circuit declined to stay the implementation of the rule while the challenge was pending. Order, Coalition for Responsible Regulation v. EPA, No. 10-1092 (D.C. Cir. Dec. 10, 2010).

2 See Environmental Protection Agency, Clean Air Act Permitting for Greenhouse Gas Emissions – Final Rules Fact Sheet, Dec. 23, 2010, available at http://www.epa.gov/ nsr/ghgdocs/20101223factsheet.pdf .

3 16 U.S.C. § 1531 et seq.

4 Id. § 470 et seq.

5 The EPA also independently performs an Environmental Justice analysis (the E.J. Order). See Executive Order 12898. Because the immediate burdens associated with the E.J. Order fall on EPA and not directly on the permit applicant, it is beyond the scope of this article, but the analysis can add time and eventual litigation risk to the permitting process.

6 Other analyses, such as for the Bald and Golden Eagle Protection Act (the BEPA), are also required. See 16 U.S.C. § 668 et seq. While the BEPA and the E.J. Order represent additional regulatory barriers to a PSD permit from EPA, this article focuses only on the ESA and the NHPA due to the greater burdens associated with these statutes.

7 The CAA defines a "major stationary source" in the context of the Prevention of Significant Deterioration program as any source that emits or has the potential to emit 100 or more tons per year of any pollutant and the source falls within one of 26 listed categories or the source emits more than 250 tons per year of any pollutant. 42 U.S.C. § 7475(a). The listed categories include electric generating facilities and certain metal smelters. See Id. § 7479(1).

8 Id. § 7475(a). A modification results when a significant increase in the emissions of any regulated pollutant occurs or when new pollutants are emitted. Id. § 7411(a)(4).

9 Id. 7475(a)(4). See also Id. § 7475(a)(3).

10 See Margaret E. Peloso & Matthew Dobbins, Greenhouse Gas PSD Permitting: 2011 in Review, Vinson & Elkins Climate Change Report, Feb. 10, 2012, Issue 17 http://www.velaw.com/uploadedFiles/VEsite/Resources/ ClimateChangeReportFebruary2012.pdf#Art3

11 Id. § 4321 et seq.

12 Id. § 4332(2)(C).

13 40 C.F.R. § 1508.18(b)(4).

14 See Id. § 1501.3 (detailing the requirements for preparation of an EA); see also Id. § 1502 (explaining the requirements of an EIS).

15 15 U.S.C. § 793(c)(1).

16 16 U.S.C. § 1536(a)(2).

17 Id. § 470f.

18 Id. § 1538(a)(1)(B).

19 Id. § 1532(19).

20 Id. § 1536.

21 50 C.F.R. § 402.14.

22 See Memorandum from H. Dale Hall, Director, U.S. Fish and Wildlife Service re: "Expectations for Consultation on Actions that Would Emit Greenhouse Gases" (May 14, 2008); Memorandum from Mark D. Myers, Director, U.S. Geological Survey re: "The Challenges of Linking Carbon Emissions, Atmospheric Greenhouse Gas Concentrations, Global Warming, and Consequential Impacts" (May 14, 2008).

23 50 C.F.R. § 402.12(c).

24 Id. § 402.02.

25 Id.

26 Id. § 402.12(d)(1).

27 16 U.S.C. § 1536(c).

28 50 C.F.R. § 402.12(a).

29 Id. § 402.12(f)(1)-(5).

30 Id. § 402.12(g).

31 Id. § 402.12(g)(1)-(2) 32 Id. § 402.12(g)(3).

33 Id. § 402.13(a).

34 Id. § 402.13(b).

35 Id. § 402.14(e). A consultation cannot be extended more than 60 days without the consent of the applicant. It is often prudent, however, for an applicant to agree to additional time. Thus, regulatory time frames are seldom met.

36 16 U.S.C. § 1536(d).

37 50 C.F.R. § 402.14(d).

38 Id. § 402.14(f).

39 Id. Regulations also state that the permitting agency can fund the gathering of any additional data. However, in practice this burden falls on the applicant.

40 Id. § 402.14(g)(1)-(3).

41 Id. § 402.14(l)(3).

42 Id. § 402.14(i)(1).

43 Id. § 402.14(i)(1)(i)-(iii)

44 Id. § 402.14(g)(5); Id. at § 402.14(g)(8).

45 Id. § 402.14(h)(3).

46 Morris County Trust for Historic Pres. v. Pierce, 714 F.2d 271, 278-79 (3rd Cir. 1983).

47 16 U.S.C. § 470f. The Secretary of the Department of the Interior is responsible for maintaining the National Register. Id. § 470a(a)-(j).

48 Pueblo of Sandia v. United States, 50 F.3d 856, 862 (10th Cir. 1995).

49 16 U.S.C. §§ 470i(a).

50 36 C.F.R. § 800.4.

51 Id. § 800.16(d).

52 Id.

53 Id. § 800.5(a)(1).

54 Id.

55 Id. § 800.5(a)(1).

56 Id.

57 Id. § 800.5(a)(1).

58 Id. § 800.5(a)(2)(i), (iii), (iv).

59 Id. § 800.5(a)(2)(v).

60 Id. § 800.5(d)(2).

61 Id. § 800.6(a).

62 Id. § 800.6(a)(1).

63 Id. § 800.6(a)(2).

64 Id. § 800.6(a)(4). The extent of notice and comment at this stage is at the discretion of the permitting agency. The magnitude of the project as well as previous opportunities for the public to comment are also taken into consideration. Id.

65 Id. § 800.6(c).

66 Northwest Bypass Group v. U.S. Army Corps of Engineers, 453 F. Supp. 2d 333, 341 (D.N.H. 2006)

67 16 U.S.C. § 470h-2(l). This decision cannot be delegated. Id.

68 Biological Assessment of Effects on Threatened and Endangered Species – Thomas C. Ferguson plant Upgrade, LCRA at 1 (August 2011), available at http://www.epa.gov/region6/6pd/air/pd-r/ghg/lcra_other_tomfergusonplant_upgrade.pdf [hereinafter LCRA BA].

69 Id. at 3.

70 RDBenvironmental, A Review of the GHG PSD Permit Process for Texas Power Plant 1, http://rdbenvironmental.com/wp-content/uploads/2012/01/A-Review-of-the- GHG-PSD-Permit-Process-for-LCRA-Power-Plant3.pdf (last visited May, 12, 2012).

71 Joe Bentley & Larry Moon, Case History of LCRA Ferguson plant GHG Permitting, Presentation to the Clean Air Force of Central Texas, Jan. 26, 2012, available at http://www.zephyrenv.com/presentations/LCRA-GHG-Permitting-012612.pdf.

72 LCRA BA, supra note 68, at 7.

73 Id.

74 Id. at 9.

75 LCRA BA, supra note 68, at III. The species included the black-capped vireo, golden-cheeked warbler, interior least tern, whooping crane, gray wolf, red wolf, concho water snake, and the Bee Creek cave harvestman. Id.

76 Id. at 21.

77 Id. at 22.

78 Id. at 33.

79 Letter from Daniel J. Prikyrl, Program Manager, LCRA Cultural Resources, to Mark Wolf and Linda Henderson, Texas Historical Commission, Section 106 Review under the National Historic Preservation Act at 1 (Nov. 1, 2010), available at http://www. epa.gov/region6/6pd/air/pd-r/ghg/lcra_other_nhpa.pdf .

80 Id. at 2.

81 Id.

82 Id. at 3.

83 U.S. Envt'l Prot. Agency, Statement of Basis – Greenhouse Gas Prevention of Significant Deterioration Preconstruction Permit for Lower Colorado River Authority 11 (2011), available at http://www.epa.gov/earth1r6/6pd/air/pd-r/ghg/lcra_sob.pdf.

84 Letter from Daniel J. Prikyrl, Program Manager, LCRA Cultural Resources, to Mark Wolf and Linda Henderson, Texas Historical Commission, Section 106 Review under the National Historic Preservation Act at 3 (Nov. 1, 2010), available at http://www. epa.gov/region6/6pd/air/pd-r/ghg/lcra_other_nhpa.pdf .

85 Id.

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