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Surprise U.S. EPA Turnabout on Grandfathering of Permit Applications

02.01.2011

By Larry Kane, Attorney, Bingham Greenebaum Doll LLP

A sudden change in policy direction was announced by U.S. EPA on January 31, 2011, concerning the obligation of an applicant for a PSD permit to demonstrate compliance with National Ambient Air Quality Standards (NAAQS) adopted subsequent to the permit application’s submittal. Under the new policy, EPA outlined rather narrow circumstances under which pending PSD permit applications will be grandfathered from an obligation to demonstrate compliance with NAAQS and other permit requirements that are adopted after submittal of the permit applications. Specifically, EPA stated that it would not require the applicant for a PSD permit for construction of a new natural gas-fired power plant to demonstrate compliance with the new one-hour NO2 standard or the new one-hour SO2 standard where the permit application had been pending with the agency since 2008, prior to adoption of either NAAQS. U.S. EPA said that the applicant would not be required to comply with new greenhouse gases (GHG) permit requirements either. The announcement came in the form of a declaration (affidavit) by U.S. EPA’s Assistant Administrator for the Office of Air and Radiation filed in Avenal Power Center, LLC v. U.S. EPA et al. (Case No.: 1:10-cv-00383-RJL), a case pending in the U.S. District Court for the District of Columbia. The litigation was initiated by Avenal to challenge U.S. EPA’s failure to issue a timely decision on the PSD permit application, apparently after Avenal concluded that U.S. EPA intended to require it to demonstrate compliance with the newly adopted short-term NO2 standard.

The grandfathering policy cannot be construed as broad ranging given U.S. EPA’s caution that it is limited to certain narrow circumstances where deemed appropriate. One of the key factors favoring application of the grandfather policy is where satisfaction of U.S. EPA’s statutory obligation to make a decision on a PSD application within one year is at issue, as was the case in Avenal.

Interestingly, the recent announcement by U.S. EPA in Avenal would seemingly be inconsistent with statements in the preamble to the GHG Tailoring Rule which indicated that the new GHG permitting requirements would begin to apply to PSD and Title V permits issued after January 2, 2011.

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