A recent ruling by the Environmental Protection Agency’s Environmental Appeals Board to block a permit that the agency last year granted the Deseret Power Electric Cooperative for a new coal-fired unit could have far-reaching implications for as many as 100 coal-fired power plants seeking air permits in the U.S.

The Sierra Club had asked the board to review a prevention of significant deterioration (PSD) permit issued to the Deseret Co-op on Aug. 30, 2007, by the EPA’s Region 8—the agency’s arm serving Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming. That permit would have authorized Deseret to build a new 110-MW waste-coal-fired facility at its existing 468-MW Bonanza Power Plant in Utah.

The group argued that the region’s permitting decision violated sections 165(a)(4) and 169(3) of the Clean Air Act (CAA), because it failed to apply the best available control technology (BACT) to limit carbon dioxide emissions from the facility, a measure the EPA otherwise mandates for pollutants such as SOx, NOx, and mercury emissions.

The EPA was obligated to consider carbon dioxide a pollutant per the U.S. Supreme Court’s April 2007 decision in Massachusetts v. EPA (PDF), the group contended. In that decision, the Supreme Court established carbon dioxide could be designated an “air pollutant” within the meaning of the CAA. The CAA’s call for BACT emission limits for “each pollutant subject to regulation under the [CAA],” was “plain and unambiguous,” the group said, and the EPA’s permit had therefore violated that requirement.

But Region 8 disagreed that the statutory text had plain meaning. “EPA has historically interpreted the term ‘subject to regulation under the Act’ to describe pollutants that are presently subject to a statutory or regulatory provision that requires actual control of emissions of that pollutant,” it said in an administrative record. It further contended that, notwithstanding the Supreme Court’s decision, the EPA did not have the authority to impose a carbon dioxide BACT limit because regulations only required monitoring and reporting of carbon dioxide emissions—not actual control.

Almost a year since the appellate board granted the Sierra Club’s petition to review the permit, on Thursday, it sent the permit back to the regional EPA office to decide whether or not to impose a carbon dioxide BACT limit, and to develop an adequate record for that decision.

The EPA’s Environmental Appeals Board rejected the Sierra Club’s contention that the phrase “subject to regulation” had plain meaning, though it said the term clearly determined that the region had the discretion under the statute to interpret it. It also rejected the region’s argument that “subject to regulation” had any binding historical interpretation.

The board told the EPA that it recognized this is an issue of “national scope that has implications far beyond this individual permitting proceeding.” It therefore advised the EPA to deal with the issue on a nationwide scale rather than through the specific proceeding concerned with the Deseret permit.

Industry experts agreed that until the EPA does make a decision, the ruling could stymie permit applications for many proposed coal-fired facilities.

Another implication is that the decision will “embolden” lawsuits challenging construction of new power plants, as Michael Gerrard, a lawyer and author of Global Climate Change and the Law, told the Associated Press. “It means that the appeals board recognizes that carbon dioxide regulation of power plants is a very live and open issue. It does not ban them. It puts a cloud over them, by making it clear that this is a real issue,” Gerrard said.

Faced with regulatory uncertainties, the construction of coal plants in the U.S. has already slowed tremendously, and many proposed projects have been abandoned or delayed.

According to statistics compiled in June 2008 by the National Energy Technology Laboratory (PDF), the 3,079 MW of new added coal-fired capacity installed in the past three and a half years (800 MW per year) is only 11% of the 27,218 MW of progressing plants that are proposed to be operational in the next three and a half years.

NETL also found that in the first six months of this year alone, 3,853 MW of new capacity had been proposed while 4,133 MW was removed. Of the removed projects during that timeframe, only 590 MW became operational, whereas 3,543 MW were canceled.

Sources: EPA, U.S. Supreme Court, Associated Press, NETL