EPA Targets Refineries, Power Facilities, Large Sources in GHG Permit Tailoring Rule

On May 13, 2010, the United States Environmental Protection Agency (EPA) issued its final tailoring rule for greenhouse gas (GHG) emissions that determines which stationary sources need to obtain GHG permits.  The Clean Air Act (CAA) expressly imposes a requirement that stationary sources with emissions that exceed either 100 or 250 tons per year (depending on the type of source) must obtain permits from EPA.  Because thousands of sources, including small businesses, hospitals, and schools, may release more than 250 tons of GHG emissions per year, EPA developed a tailoring rule that purports to phase-in the permit requirement, starting with large stationary sources.  EPA fears that if thousands of sources needed to regulate their GHG emissions, the agency would be overwhelmed by the need to issue the Prevention of Significant Deterioration (PSD) and Title V operating permits for all of these sources.

Yet, by tailoring the requirement to apply (initially) only to power generation facilities, refineries, cement production facilities, and other large industrial plants, EPA appears to be re-writing the permitting thresholds in the CAA - an activity that only Congress has the authority to undertake.

EPA originally proposed the GHG Tailoring Rule in October 2009, stating that GHG emission permits would be required at stationary sources emitting at least 25,000 tons of GHGs per year.  However, after receiving approximately 450,000 comments from the public on the proposal, EPA's final rule raises that threshold and phases in the sources that would need to obtain permits.  The rule established the following timeline for sources needing to obtain permits:

Effective Date Type of Permit Types of Sources (thresholds in CO2e)
January 2, 2011 PSD Sources that are currently subject to the PSD program for non-GHG pollutants and that increase GHG emissions by at least 75,000 tons/year and significantly increase non-GHG pollutant emissions.
Title V New and existing facilities subject to Title V requirements for non-GHG pollutants.
July 1, 2011 PSD New construction projects that emit GHG emissions of at least 100,000 tons per year; or existing sources that emit or have the potential to emit at least 100,000 tons per year of GHG emissions and that undertake a modification increasing net GHG emissions by at least 75,000 tons per year.
Title V New and existing sources not already subject to Title V that emit or have the potential to emit at least 100,000 tons per year of GHG emissions.
July 1, 2013 PSD, Title V In this potential third step of the phase-in, EPA will issue a proposed rulemaking in 2011 and develop an additional final rule by July 1, 2012.  Details of this phase are yet to be determined but will not require permitting for sources with GHG emissions below 50,000 tons per year.
April 30, 2016  or thereafter PSD Sources making modifications resulting in net GHG emission increases less than 50,000 tons per year.
Title V Sources with GHG emissions below 50,000 tons per year.

Under the new rule, project proponents will be required to undergo a long and arduous permitting process that will likely slow development - and the creation of new jobs - at a time when the nation's economy is still struggling.  Given the significance of this hurdle, project proponents are likely to challenge EPA's authority to modify the emission thresholds that determine whether permits are required - limits that were arguably made plain by Congress. 

Another concern is that the rule creates great uncertainty.  In particular, industry does not know yet what EPA will deem to be Best Available Control Technology for controlling GHG emissions.  Similarly, states have not yet assessed whether they have the resources to review and issue such permits.

In short, the practicalities and legalities of the final Tailoring Rule remain unsettled, and unsettling, and may well be resolved through court actions.