In another pullback of Bush administration clean air policies by the Obama administration, Environmental Protection Agency (EPA) Administrator Lisa Jackson announced that the EPA will reconsider a controversial policy memorandum issued by the agency late last year stating that the EPA would not establish a carbon dioxide (CO2) emission standard for new power plants and other large industrial sources of the heat-trapping gas.

Memo Failed to Quell Debate

The December 18 memorandum by former EPA Administrator Stephen Johnson came in response to a November Environmental Appeals Board (EAB) ruling that concluded the Clean Air Act does not preclude regulation of CO2.

The EAB decision responded to an appeal filed by Sierra Club and other environmental organizations challenging an August 2007 air permit issued by EPA’s Region 8 for an 86-MW addition to Deseret Power Electric Cooperative’s coal-fired Bonanza plant in Utah.

In their appeal, the environmental groups asserted that in the wake of the April 2, 2007, Massachusetts v. EPA decision by the Supreme Court, in which the high court ruled that CO2 may be classified as a pollutant under the Clean Air Act, the EAB violated the federal air pollution statute by refusing to apply Best Available Control Technology (BACT) to limit the Bonanza addition’s CO2 emissions.

BACT standards are designed to ensure that emissions from new plants built in areas that meet federal air quality standards do not degrade local air quality. The Clean Air Act requires BACT for all major emission sources “subject to regulation,” and the environmentalists argued that because power plants are required by the statute to monitor and report their CO2 emissions, the “subject to regulation” requirement means they also must meet BACT standards for the greenhouse gas.

The EAB had jurisdiction in the case because the plant is to be built on Indian land. It ruled that while the Clean Air Act does not require the EPA to regulate CO2, nothing in the statute prevents the agency from doing so. The board also urged the EPA to review the issue, saying that the “national scope” of the issues involved necessitated an EPA review.

Johnson’s memorandum announced it was EPA policy not to require power plants and other large CO2 sources to meet a BACT standard.

New EPA Secretary Finesses the Situation

Johnson’s ruling sparked a request to Jackson by the Sierra Club, Natural Resources Defense Council, and Environmental Defense Fund to reconsider Johnson’s memorandum. The groups also asked the U.S. Court of Appeals for the District of Columbia Circuit to review Johnson’s memorandum, an appeal now mooted by Jackson’s announcement.

Jackson announced her decision in a letter to David Bookbinder, Sierra Club’s chief climate counsel, saying that EPA will publish a proposed rulemaking in the Federal Register and seek public comments on the proposal in the “near future.”

Jackson said she decided to grant the environmentalists’ petition “because we must learn more about how this memo affects all relevant stakeholders impacted by its provisions.

“This will be a fair, impartial and open process that will allow the American public and key stakeholders to review this memorandum and to comment on its potential effects on communities across the country. EPA’s fundamental mission is to protect human health and the environment and we intend to do just that.”

To the relief of utilities planning new power plants, however, Jackson declined the greens’ request that her agency stay the effectiveness of Johnson’s memo, a decision described as a “clever procedural move” by former EPA Assistant Administrator for Air and Radiation Jeff Holmstead—now a partner at the law firm of Bracewell & Giuliani.

“It’s a clever procedural move that allows the new administration to distance itself from the Bush administration without actually changing anything about how CO2 is regulated,” Holmstead said. “As a legal matter, the Johnson memo will remain in place until the Obama EPA does its homework and goes through a public process to create a new framework for dealing with CO2 under the Clean Air Act.”

However, Jackson’s letter said that nothing prevents states from issuing their own CO2 standards under their state plans for implementing Clean Air Act regulations. She also said that, given the EPA’s decision to reconsider the Johnson memorandum, “other . . . permitting authorities should not assume that the memorandum is the final word on the appropriate interpretation of Clean Air Act requirements.”

Jackson’s decision undoubtedly will increase pressure on Congress from utilities and other emission sources to craft legislation to limit U.S. greenhouse gas emissions through an economywide cap-and-trade program or, less likely, a carbon tax. Utilities, in particular, fear being targeted as the only industrial sector—at least initially—subject to climate change regulation.

“We have consistently said that regulating greenhouse gases should be addressed by Congress and not determined by the EPA or any other unelected officials,” Duke Energy spokesman Tom Williams said Tuesday. “The issue is too far-reaching and important—and expensive—to be determined by a government agency.”

Stay Tuned

Bookbinder told The Energy Daily on Feb. 16 that he expects the EPA to finalize in six months or so regulations targeting industrial sources that emit 25,000 tons of CO2 or more each year. Targeted sources would include refineries, large industrial facilities and fossil fuel–fired power plants, he said.

A CO2 BACT regulation—in combination with Jackson’s decision to revisit Johnson’s decision to reject California’s request for a Clean Air Act waiver needed by the state to regulate CO2 emissions from new motor vehicles—would send a powerful signal to the rest of the world that the United States is serious about confronting global warming.

The two moves also would give President Obama something to put on the table if, as environmentalists hope, he attends the next United Nations climate change conference in December in Copenhagen.

“We have to create credibility for the president when he goes to Copenhagen,” Bookbinder said. “Many people doubt that Congress will have approved a climate change bill by the end of the year, so he has to have something to show he’s serious.”

—Chris Holly (cholly@accessintel.com) is a reporter for COAL POWER’s sister publication, The Energy Daily.