On September 30, the EPA proposed new construction and operating permit requirements under the Clean Air Act. These requirements would apply to all sources that emit greenhouse gases (GHGs) in amounts more than 25,000 tons a year, or some other level to be set in the final rule. Tighter requirements would follow in six years. The comment period will close in early December 2009. Very probably, the EPA will issue a final rule by March 2010.

This Update describes the background of the rule and the major issues it raises.

Background of the Rule

The Clean Air Act requires every stationary facility that emits more than 100 tons a year of "pollutants regulated under the Clean Air Act" to get an operating permit. It also requires any source that emits at the 100 or 250 ton level—it varies with the industrial category—to get a preconstruction permit before it is either newly constructed or modified. A source is "modified" if it is changed so that its emissions increase "significantly." Among other requirements, the preconstruction permit must require installation of the "best available control technology."

GHGs will become "pollutants regulated under the Clean Air Act" when the EPA issues final GHG emissions standards for motor vehicles in February or March 2010. Those standards will automatically trigger these permit requirements.

Since stationary sources emit GHGs in much greater quantities than conventional pollutants, compliance with the statutory emission levels would increase the number of sources needing operating permits from about 15,000 to 6 million and would increase the number of new source permit proceedings each year from about 300 to 40,000.

Such a workload would break the regulatory system.

Accordingly, relying on legal precedents holding that statutory language need not be followed if it leads to an absurd result, and that new regulations can be phased in if it is impractical to give them full effect immediately, the EPA has proposed to apply the permit requirement only to sources that emit more than 25,000 tons of GHGs per year, measured by summing the global warming potency of six separate GHGs, of which carbon dioxide is the most important. The EPA estimates this would result in about 13,000 sources requiring operating permits and about 400 a year requiring new source permits. Among the major source types covered would be electrical generators, cement plants, natural gas systems, refineries, aluminum smelters, chemical plants, landfills, pulp and paper mills, and even a few non-industrial facilities, such as major hospitals.

The EPA acknowledges it has a duty to work toward full compliance with the letter of the law and therefore commits to proposing new, lower emission levels in five years and establishing them in six years. Everybody hopes that legislation in the interim will make that rulemaking unnecessary, although the proposal does not mention that prospect.

Important Issues

The most important legal issues this proposal raises are whether the EPA has power to ignore the statutory language in the proposed manner and whether there are any flaws in the legal argument supporting that position.

However, we believe that these will not be the issues of the most practical importance to those who will be regulated.

We see two other issues as being of more immediate significance.

The first is determining the exact emission levels that trigger requirements. Although the EPA has proposed to require operating permits and permits for new sources at the 25,000 ton level, it asks for comment on other levels ranging from 1,000 tons to 100,000 tons.

For existing sources that are modified, the EPA proposes to pick a level between 10,000 and 25,000 tons per year and asks for comment both on what level to choose within this range and on numbers outside of it.

Clearly, where the level is set could make a big difference for individual sources and companies.

The second issue is understanding exactly how the EPA will make new source permit decisions—and in particular how it will set emission control levels—for sources that remain in the system.

This issue raises many complex questions, but the EPA's proposal says almost nothing about it even though the first permit applications may be little more than six months away. We understand that the EPA plans to begin discussions with the regulated community very shortly on this topic.

Other Issues

The proposal addresses many other detailed issues. Most, but by no means all of them, concern exactly how to determine whether a source will be in or out of the permits system. Accordingly, the management of any entity that will be close to the proposed thresholds should probably review this proposal in detail.

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.