EPA Issues "Tailoring Rule"

The U.S. Environmental Protection Agency (EPA) on May 13 finalized the so-called "Tailoring Rule," regulations that would implement certain Clean Air Act (CAA) permitting programs for electric power plants, refineries, and other major "stationary sources" that emit at least 100,000 tons per year of greenhouse gases (GHGs).

Proposed in September 2009, the rules establish emissions thresholds and a phased schedule for permitting under the New Source Review Prevention of Significant Deterioration (PSD) and Title V Operating Permit programs.

The phasing in will start in January 2011 for large facilities that already obtain CAA permits for other pollutants, and which have increased GHG emissions of at least 75,000 tons per year (tpy). In July 2011, CAA permitting requirements will cover all new facilities with GHG emissions of at least 100,000 tpy and modifications at existing facilities that would increase GHG emissions by at least 75,000 tpy. "These permits must demonstrate the use of best available control technologies to minimize GHG emission increases when facilities are constructed or significantly modified," the EPA said.

The EPA’s announcement came a day after Sens. John Kerry (D-Mass.) and Joe Lieberman, (I-Conn.) unveiled their climate and energy package. The rulemaking action stems from the Supreme Court’s 2007 decision in Massachusetts v. EPA, in which it found that GHGs are "pollutants" under the Clean Air Act. In December 2009, the agency responded to the high court’s mandate and made its "endangerment finding," a formal declaration that GHGs pose health and welfare threats, and in April 2010, it set the first national GHG tailpipe standards for passenger cars and light trucks.

The EPA said that it had reviewed and considered 450,000 comments received during the 60-day comment period in its development of a final rule.

“After extensive study, debate and hundreds of thousands of public comments, EPA has set common-sense thresholds for greenhouse gases that will spark clean technology innovation and protect small businesses and farms,” said Administrator Lisa P. Jackson. “There is no denying our responsibility to protect the planet for our children and grandchildren. It’s long past time we unleashed our American ingenuity and started building the efficient, prosperous clean energy economy of the future.”

Setting Down BACT

The rule released Thursday launches a process that requires states, by next year, to specify the best available control technology (BACT) for GHG-emitting facilities seeking new permits. The agency is also expected later this year to issue nonbinding guidance that indentifies BACT to help states revise their existing permit programs.
Earlier this year, when asked directly by lawmakers how the EPA would go about determining such standards—particularly as carbon capture and sequestration (CCS) is still in developmental stages—Jackson said that the agency would apply the “well-developed framework” that exists for determining BACT for non-GHG pollutants, and that it was continuing to “review and analyze options” to identify “practical, achievable, and cost-effective strategies.”

“The additional time that EPA will have before permitting requirements will take effect will enable the agency and stakeholders to consider this issue carefully and thoughtfully,” she told lawmakers at a February hearing. She added, however, that the agency was “closely” following efforts to make CCS commercially available, and that the agency “would expect to carefully consider the state of development of this technology in considering options for BACT.”

Legal Challenges Expected to Surge

The tailoring rule is expected to provoke immediate legal challenges likely to focus in part on whether the EPA has the authority to change emission thresholds statutorily imposed by Congress.

A variety of companies and trade and business associations already are challenging the EPA’s endangerment finding. If the courts uphold these challenges, they will nullify the tailoring rule and prevent the EPA from regulating greenhouse gas emissions.

The endangerment finding also continues being challenged in Congress. In the past week, for example, Sen. Lisa Murkowski (R-Alaska) said she intends to seek a vote on her Resolution of Disapproval of the EPA’s finding that GHG emissions endanger public health and welfare.

Under the Congressional Review Act, the vote must take place by June 7. The resolution currently has 41 cosponsors in the Senate, including three Democrats, and would require 51 votes to pass. If passed by both chambers of Congress and signed by President Obama, the resolution would reverse the EPA’s finding, which is the basis for regulation of GHG emissions under the Clean Air Act, and prevent the EPA from taking any similar actions to regulate GHGs unless explicitly authorized by Congress.

Meanwhile, Reps. Dennis Rehberg (R-Mont.) and Stephanie Herseth Sandlin (D-S.D.) of the U.S. House introduced legislation (H.R. 5294), which would prohibit federal agencies from taking any administrative action to regulate GHG emissions to address climate change without express statutory authorization.

Industry Reactions

The EPA’s issuance of the Tailoring Rule prompted heated reactions from the electric power sector.

Because the rule does not exempt biomass power producers from GHG permitting requirements despite the EPA’s past affirmations that biomass is “carbon neutral,” the biomass industry said it was unpleasantly surprised. The agency said it did not make a decision regarding the treatment of biogenic carbon in the final rule because it did not explicitly raise the issue of biogenic carbon in its proposed rule.

The American Chemistry Council, meanwhile, said that the EPA’s decision was short-sighted because it required CAA permitting for sources only deemed major sources based on GHG emissions, not “criteria pollutant” emissions. “The sound, sensible approach would have been to limit CAA permitting only to those major sources that emit significant levels of criteria pollutants. The fact that EPA is phasing in sources over time and initially (i.e. until mid-2011) limiting permitting to criteria pollutant sources suggests EPA recognizes that broad permitting requirements are not feasible,” it said.

The Council echoed many groups when it said that the EPA’s approach would cause uncertainties, including those concerning business investments. “It will create legal uncertainty due to possible litigation, permitting uncertainty due to insufficient state resources for reviewing and issuing permits, state statutory uncertainty due to the need to amend state laws to conform with the federal tailoring rule, and technical uncertainty due to as-yet undefined ‘Best Available Control Technology,’” the group said.

“Finally, EPA’s transition approach, while providing a small delay in permitting requirements, exacerbates uncertainty because it is unknown what requirements will be in place when a permit is issued.”

“Tailoring Rule” Resources:

Fact Sheet (PDF) (6pp, 33k)
Final Rule (PDF) (515pp, 688k)
Timeline Outlining Permitting Steps under the Tailoring Rule (PDF) (1pg, 79k)
Summary of Clean Air Act Permitting Burdens With and Without the Tailoring Rule (PDF) (2pp, 445k)

Sources: POWERnews, EPA, BPA, ACC