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EPA Continues March toward Regulation of GHG Emissions from Stationary Sources with Proposed SIP Call

10.01.2010

By Larry Kane, Attorney, Bingham Greenebaum Doll LLP

On September 2, 2010, the U.S. Environmental Protection Agency published, as companion pieces, two proposed rulemakings relating to state permitting of greenhouse gas (GHG) emissions from stationary sources consistent with EPA’s GHG Tailoring Rule, 75 FR 31514 (June 3, 2010). The new proposed rulemakings include a proposed State Implementation Plan (SIP) Call for states with inadequate authority under their current SIP-approved Prevention of Significant Deterioration (PSD) programs to regulate GHGs, 75 FR 53892, and a proposed Federal Implementation Plan (FIP) to apply in states that fail to adopt in a timely manner rules to rectify presently inadequate authority to address GHGs in their state PSD programs, 75 FR 53883.

The proposed SIP Call lists thirteen states preliminarily identified, on the basis of self-assessments, as having substantially inadequate authority to regulate GHGs in their SIP-approved PSD programs. Under the proposed SIP Call (if adopted), these 13 states and any additional states identified during the comment period as having inadequate GHG authority, will be required to adopt a corrective SIP revision and submit the SIP revision to EPA by a deadline to be set in the final SIP Call. If a state is unable to or otherwise fails to complete a corrective SIP revision by the specified deadline, EPA indicates that it will likely proceed to adoption of a FIP for GHGs in that state.

To satisfy the final SIP Call (if adopted), a state SIP revision will need to meet certain minimum content requirements, including (i) addition of GHGs to the list of pollutants subject to PSD in the state; (ii) the federal definition of GHGs from the Tailoring Rule, which makes GHGs a composite of six gases (CO2, CH4, N2O, HFCs, PFCs, and SF6) and quantifies GHGs emissions on the basis of a “CO2 equivalent emissions” defined in the Tailoring Rule; and (iii) threshold GHGs emissions that trigger applicability of PSD to construction or modification of GHG-emitting sources. States would not be required to adopt the PSD thresholds from the federal Tailoring Rule if states adopt more stringent (lower) tonnage thresholds. States are encouraged but not required to adopt EPA’s definition of “regulated NSR pollutant” which makes any air pollutant subject to PSD if the pollutant is “subject to regulation” as EPA has construed that term. The advantage foreseen by EPA to adoption of this definition is that it may automatically incorporate new pollutants at the state level once the pollutants have become “subject to regulation” at the federal level. EPA recognizes that some states may not have the ability, due to constitutional or other legal constraints, to construe the definition of regulated NSR pollutant in this fashion.

Significantly, EPA has sprinkled the proposed SIP Call liberally with admonitions that states which currently lack authority to apply PSD requirements to GHGs will be unable, after January 2, 2011, to issue PSD permits for projects with projected GHGs emissions above the PSD thresholds set in the federal Tailoring Rule until the state obtains EPA approval of a corrective SIP revision for GHGs or EPA promulgates a FIP for that state with respect to GHGs.

Even before EPA’s publication of the proposed SIP Call rulemaking, the Indiana Department of Environmental Management published notice in the Indiana Register on September 1, 2010, of a proposed rule to adopt, nearly verbatim, the GHG provisions of the federal Tailoring Rule. This rulemaking is proposed under IC 13-14-9-8, which provides a streamlined rulemaking process for rules that would adopt, or incorporate by reference, a federal regulation applicable to Indiana. To ensure that Indiana has authority to regulate GHGs under its PSD program by January 2, 2011, while the state rulemaking is pending, IDEM has indicated that it intends to ask the Air Pollution Control Board to adopt an emergency rule by January 2, 2011, that contains the same GHG provisions as the proposed rule described in the September 1 notice.

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