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EPA issues rules regarding regulation of greenhouse gas emissions from stationary sources

Greenhouse gases (GHGs), particularly carbon dioxide, are emitted by virtually every industrial and business facility. Indeed, if your plant or place of business includes a fuel-burning boiler or even a process heater, then your operations emit carbon dioxide into the atmosphere. Further, even where such equipment is small, emissions can be significant. For example, a 10 million Btu/hour natural gas boiler emits an estimated 4,500 tons of carbon dioxide per year.

In 2007, the U.S. Supreme Court issued a landmark ruling holding that, contrary to the long-standing interpretation of the U.S. Environmental Protection Agency (EPA), GHGs constitute “air pollutants” proper for regulation under the Clean Air Act. In the time since, pressure has mounted, with both Congress and the EPA taking steps toward addressing climate change issues, including the regulation of GHG emissions from stationary sources (i.e., industrial and business facilities). Indeed, for some time, much like a game of chicken, both Congress and the EPA have seemed to be daring the other to take action first.

For the time being, the EPA has called Congress’ bluff. In December 2009, the EPA issued rules requiring, for the first time, a wide variety of stationary sources to monitor and report GHG emissions to the EPA for the purpose of collecting data that will shape policy regarding future substantive controls on such emissions. Further, in April and May of 2010, the EPA issued two final rules that, together, set forth stationary source GHG permitting requirements under the Clean Air Act. As a result, absent the enactment of federal climate legislation preempting the EPA’s authority under the Clean Air Act to issue permits for GHG emissions (which is in fact proposed to at least some extent in both the current House and Senate bills) or a successful court challenge, the first requirements for permits containing GHG emission limits will take effect in less than a year, on January 2, 2011.

The EPA’s GHG Monitoring and Reporting Rule

On December 28, 2009, the EPA finalized its “Mandatory Greenhouse Gas Reporting Rule” which requires, beginning January 1, 2010, an estimated 10,000 facilities to monitor and electronically report annual GHG emissions data to the EPA. The rule applies to 28 industry categories as well as a general category of facilities that are not otherwise covered but have fuel burning equipment (such as boilers or process heaters) that collectively exceed certain size thresholds as well as a general category applicable to facilities that engage in certain miscellaneous uses of carbonate. In general, where a facility falls within the scope of the rule, the facility is subject to the rule’s monitoring and reporting requirements if its annual GHG emissions exceed 25,000 tons. However, 15 of the identified source categories must monitor and report regardless of their GHG emission levels.

The first facility annual report must cover emissions for the entire calendar year 2010 and is due on March 31, 2011. Under the rule, companies may be required to install new or modified monitoring equipment and are subject to detailed data acquisition, recordkeeping and verification requirements. Covered facilities are required to develop and maintain written monitoring plans which were to be in place no later than March 31, 2010. Further, unless an extension was granted by the EPA, the monitoring methods specified by the applicable subpart of the rule (some of which require new equipment or the completion of calibration procedures) were to be in use no later than April 1, 2010. It is imperative that if not already completed, companies determine applicability of this Rule to their operations and act accordingly to come into immediate compliance.

The EPA’s GHG Permitting Rule

Under the Clean Air Act Prevention of Significant Deterioration (PSD) Program, companies are required to undergo a burdensome, lengthy permit review process that includes the requirement to meet case-by-case technology-based emission limits prior to the construction of any new facility that has the potential to emit a “regulated” pollutant in an amount exceeding 250 tons per year, or 100 tons per year for certain source categories. Under this program, existing major source facilities must also undergo this same permit process when they plan to modify their facility such that a “significant” net increase in the emissions of a regulated pollutant will result. Under the Clean Air Act a “significant” increase is any increase unless the EPA has established a specific significance level for the pollutant. In addition to this pre-construction permitting program, Title V of the Clean Air Act sets forth a operating permit program, which extends to facilities with annual emissions of a “regulated” pollutant in an amount exceeding 100 tons.

In a final determination published April 2, 2010, the EPA stated that under its interpretation of the Clean Air Act, GHGs will become “regulated” pollutants for purposes of these permitting requirements when the GHG emission limits recently issued by the EPA for light duty vehicles take effect on January 2, 2011. The above statutory permitting thresholds are such that, when this permitting obligation is triggered, an astonishing 40,000 or more new facilities would technically become subject to Clean Air Act PSD permitting requirements annually. Similarly, literally millions of existing industries, including a myriad of smaller sources that have never been subject to Clean Air Act requirements, such as multi-family residential units, schools and hospitals, would become subject to Clean Air Act Title V operating permit requirements.

In an effort to mitigate the overwhelming burdens created by this application of the Clean Air Act, on May 13, 2010, the EPA released a final rule that purports to establish phased, “tailored” permitting thresholds for emissions of GHGs under these permitting programs.

The first phase of the rule begins January 2, 2011 and runs through June 30, 2011. During that time, where a new construction or facility modification project triggers PSD permitting requirements due to emissions of pollutants other than GHGs and would increase GHG emissions by 75,000 tons per year or more, any final PSD permit issued must include case-by-case technology-based emission limits for GHGs. For operating permits, facilities already required to hold a Title V operating permit will also be required to incorporate GHG-related requirements during this phase. Although for such sources, only monitoring and emission reporting requirements are likely to be included in the permit unless greenhouse gas PSD permitting requirements were also triggered.

The second phase of the rule begins on July 1, 2011 and runs through June 30, 2013. During this time, GHG permitting requirements will be extended to include facilities that are not otherwise be required to hold PSD or Title V permits but have significant GHG emissions. During this phase, a new construction project with the potential to emit 100,000 tons per year or more of GHGs and that has not yet begun actual construction will be required to obtain a PSD construction permit that includes case-by-case technology-based emission limits for GHGs (even if the source has already obtained a permit or other approval authorizing construction). During this phase, modifications at existing facilities that result in 75,000 tons per year or more in increased GHG emissions will also trigger PSD permitting requirements. During this phase of the rule, facilities that emit at least 100,000 tons per year of GHG emissions will also be subject to Title V operating permit requirements. For an existing facility that does not otherwise hold a Title V permit, applications for Title V permit coverage will be due no later than July 1, 2012.

The final rule also calls for the EPA to undertake another rulemaking, to be concluded no later than January 1, 2012 that evaluates PSD and Title V permit requirements for smaller sources of GHG emissions. In the May 13 rule, however, the EPA represented that this additional phase, if established, will not require permitting for facilities with GHG emissions below 50,000 tons per year and will not impose permitting requirements for any additional facility until at least April 30, 2016.

Due to the extensive time and cost burdens associated with these permitting requirements, companies should factor the above time deadlines and permitting thresholds into their planning now, especially where large capital investment projects are being considered.

  • Of Counsel

    As a member of the Environment, Energy & Natural Resources practice group, Kelly's practice at Bingham Greenebaum Doll LLP involves consulting with and representing firm corporate clients with respect to a broad range of state and ...

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