Dual Air Permitting Scheme in Texas Lives On, For Now

The D.C. Circuit Court of Appeals' ruling on June 26, 2012, upholding the EPA's various rulemakings regulating greenhouse gases (GHG) is a significant blow to the numerous oil and gas, electric generating, chemical, and refining companies operating in Texas that hoped to see an end to the state's dual permitting scheme

The Court's ruling is not the end of the challenges to EPA's GHG permitting program, however, as other challenges filed by the State of Texas and industry are still ongoing.

After the U.S. Supreme Court held in 2007 that greenhouse gases are "air pollutants" subject to regulation under the Clean Air Act, EPA very quickly took four steps to begin regulating greenhouse gases under its PSD program:

  • In 2009, EPA issued the "Endangerment Finding," determining that greenhouse gases may "reasonably be anticipated to endanger public health or welfare."
  • In 2010, EPA promulgated the "Tailpipe Rule," setting emission standards for cars and light trucks.
  • In 2010, EPA promulgated the "Timing Rule," which made clear that major sources of greenhouse gases would be subject to PSD and Title V permitting regulations.
  • In 2010, EPA promulgated the "Tailoring Rule" to phase in greenhouse gas permitting requirements and to apply them only to the largest stationary sources.

Industry petitioners and fourteen states, including Texas, challenged each of the rulemakings, and all challenges were consolidated into one case before the D.C. Circuit. In the June 26 ruling, the Court found that the Endangerment Finding and the Tailpipe Rule were not arbitrary and capricious, and that industry and state petitioners lacked legal standing to challenge both the Timing and Tailoring Rules.

What's Next?

Challenges to how EPA attempted to force regulation of greenhouse gases on the State of Texas and then stripped away the state's PSD permitting authority when the state refused to comply, as opposed to challenges to EPA's decision to regulate greenhouse gases, are still ongoing before the D.C. Circuit.

In the meantime, the dual permitting scheme in Texas lives on - since GHG PSD permitting took effect on January 2, 2011, Texas companies have submitted 30 greenhouse gas permit applications to EPA Region 6. To date, however, only two greenhouse gas permits have been issued.

As a result of the growing backlog of applications at EPA Region 6, and given the D.C. Circuit's ruling, the State of Texas may need to consider pursuing measures to take over GHG PSD permitting from EPA. If the state does not undertake the process to take over this permitting soon, there could be increased pressure from Texas companies for the State of Texas to take action.

For a more detailed discussion of these changes, click here.