Ohio Environmental Law Blog : Ohio Environmental Lawyer & Attorney : Joseph Koncelik : Frantz Ward Law Firm : Environmental Regulation, Land Use, Compliance : Cleveland, Ohio

As Congress failed to pass climate change legislation, U.S. EPA will begin regulating greenhouse gases (GHGs) using its existing authority under the Clean Air Act.  Beginning 2011, major sources of GHGs will be required to analyze methods for reducing emissions when seeking federal permits for expansion or construction of new sources. 

When is a federal review of GHGs triggered?

Under the Tailoring Rule, U.S. EPA established thresholds for triggering federal permit review of GHGs from new and modified sources.  Initially, only the largest sources will be covered.  The newly released guidance document contains these useful tables:

If you trigger a review of GHGs under the federal air permit program (PSD permit), then the permitting agency must determine what the Best Available Control Technology (BACT) is to reduce emission of GHGs for that source. 

Complex Case-By-Case Process Will Prove Very Difficult

Selecting BACT is no easy process. BACT reviews can become the black box of permitting.  It includes a highly complex review of all existing technologies to reduce emissions and their potential application to the source.  A business may propose what they think BACT should be, however, they have no assurance the permitting agency will concur with their choice. 

US EPA's PSD GHG guidance states all available emission reduction options for GHGs should be reviewed.  Once the options are identified, they should be evaluated based upon the following elements:

• technical feasibility;
• cost and other economic considerations;
• environmental and energy considerations.  

The permitting agency performing the review should narrow the options and select the most appropriate technology or combination of technologies from the list.  This case-by-case determination provides no certainty to industry.  This is especially true for the first permits that will trigger the review. 

No Benchmarks for First Permits

With other pollutants (SO2, NOx, CO, etc.) that have long been subject to BACT review, U.S. EPA has assembled a database of permitting actions that identify technology as well as emission limits.  This database is referred to at the BACT/RACT/LAER Clearinghouse.  U.S. EPA directs permit reviewers to consult the Clearinghouse as a first step. 

With GHGs, the Clearinghouse will provide little assistance.  There will simply be no other permits issued for similar sources that will allow permit reviewers to compare determinations.  With no benchmarks, permit reviewers will be guessing at BACT. 

U.S. EPA has released white papers on available and emerging technologies for specific industry sectors.  However, these are simply laundry lists of technologies.  Until the Clearinghouse is populated, permit reviewers will have no ability to benchmark their determinations. 

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Greenhouse Gas Regulation Commences January 2, 2011 without Legislation

On May 13, 2010, EPA finalized its regulatory approach for control greenhouse gases (GHGs) from large stationary sources.  As discussed in prior posts, the statutory thresholds for triggering EPA's New Source Review program (NSR) are 100/250 tons per year of a regulated Clean Air Act pollutant. 

As its name implies, EPA's NSR program requires emission reductions from new or modified sources that emit pollutants above the 100/250 TPY threshold in the Clean Air Act.  This trigger level works reasonably well for typical Clean Air Act pollutants, but not for CO2 which is emitted in much larger quantities.  If the 100/250 threshold were applied for GHGs, EPA indicates thousands of sources would be required to obtain federal air permits under NSR. 

To prevent what EPA calls would be an "absurd" result if the statutory thresholds were applied, EPA is proposing to phase the thresholds in over time.  EPA claims they have the authority to temporarily raise the statutory thresholds based on seldom used legal doctrines known as the "absurd results" doctrine and "administrative necessity."  Whether EPA truly has that authority remains to be seen.

However, the so called "Tailoring Rule" finalized on May 13th is the mechanism that raises the statutory thresholds thereby bringing in only the largest sources of GHGs.  Here is how EPA is phasing in NSR requirements for sources of GHGs:

Phase 1:  January 2, 2011 to June 30, 2011

New Sources (Construction Permits)-  Only sources that trigger NSR due to their non-GHG emissions would be required to address GHG emissions in their permits if GHG emissions exceed 75,000 tons per year.  If GHG's exceed that threshold they must meet the Best Available Control Technology (BACT) standard to minimize GHG emissions.

Existing Sources-Must incorporate GHG related requirements into their operating permits (Title V).  Right now those requirements are limited to the GHG reporting rules previously established by EPA (40 CFR Part 98- reporting rule fact sheet)

Phase 2:  July 1, 2011 to June 30, 2013

New Sources (Construction Permits)-  Expands beyond just those sources trigger NSR for other pollutants and with 75,000 tons per year of GHG emission.  Any source that emits 100,000 tons per year of GHGs would trigger NSR permitting, even if they don't require an NSR permit due to other pollutant emissions. 

Existing Sources-  Any modification to a source that would increase GHG emission by more than 75,000 tons per year triggers NSR.  Also, existing sources with emission of 100,000 tons per year, even they have not modified their facility in any way, will be required to obtain an operating permit (Title V) based solely on their GHG emissions.  (EPA estimates the universe of source covered is about 550- mostly landfills and industrial manufacturers.)

Phase 3  Second Rulemaking by July 1, 2012

EPA has stated it will complete a second phase of rulemaking by July 1, 2012 that will further reduce the trigger thresholds below those established in Phase 2.  EPA states it will evaluate a possible threshold of 50,000 tons per year.   Smaller sources would not be covered until April 30, 2016.

Continual Duty to Reduce the Thresholds

Legally, EPA is under a duty to reduce the trigger thresholds as soon as practicable to be in line with the statutory triggers of 100/250 tons per year.  The key question is- How long will the courts allow them to delay implementing what is expressly stated in the Clean Air Act?

(Photo: everystockphoto- cjohnson7) 

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On February 19th, eight Democrat Senator's wrote a letter to EPA regarding its plans for issuance of greenhouse gas regulations for vehicles, factories and power plants.  This from the Wall Street Journal:

The lawmakers, including prominent Senators Max Baucus, (D., Mont.), Carl Levin, (D., Mich.) and John Rockefeller, (D., W.V), warned EPA chief Lisa Jackson in a letter that "ill-timed or imprudent regulation of [greenhouse gases] may squander critical opportunities for our nation, impeding the investment necessary to create jobs."

The letter could boost a Republican effort led by Sen. Lisa Murkowski, (R., Alaska), to prevent the EPA from regulating stationary greenhouse gas emitters such as power plants, refineries, steel mills, chemical plants and cement kilns.

The Senators letter also showed there is still a basic misunderstanding of how regulation of GHGs emissions from vehicles are tied to stationary source regulation. 

The Senators suggest EPA move forward only with the Light Duty Vehicle rule setting GHG standards for vehicles so that there can be one national standard.  However, based on this comment, it appears the Senators did not understand that issuance of the Light Duty Vehicle rule will automatically trigger regulation of stationary sources without any additional EPA rulemaking.

EPA Responds

In perhaps the quickest response in history, EPA Administrator Jackson has already released her written response.  The response is notable not only for its timeliness, but the key insights it provides into EPA's greenhouse gas (GHG) rulemaking strategy.

The fact the letter provides so much valuable information about EPA's strategy only days after the Senator's letter was sent can only mean EPA's has decided on its path.  Now EPA is floating a trial balloon of its strategy in its response letter.  There are several key developments in the letter:

1. No final GHG standards in 2010.  EPA will finalize the Light Duty Vehicle GHG rule in late March. However, the first vehicle GHG standard will be effective in 2011 (Model Year 2012).   EPA explains that its legal view is that GHG do not become a "regulated" pollutant under the Clean Air Act until the Model Year 2012 standards are effective in 2011.  By adopting this legal interpretation, EPA is effectively buying itself a year before GHG emissions from large stationary sources will be regulated.  Of course, its an open legal question as to whether future vehicle standards amount to "regulation" sufficient to trigger stationary source regulation of GHGs immediately. 
2. EPA is planning major changes to its proposed Tailoring Rule. In the draft Tailoring Rule, EPA proposed federal permit triggers for GHGs of 10,000 or 25,000 metric tons of CO2. Based upon this letter, EPA is proposing to go higher, thereby bringing in even fewer large stationary sources of GHGs in the short term. For example, in 2011 only sources that already trigger federal permitting for non-GHG emissions will have to evaluate their GHG emissions for controls. After 2011, the letter suggests much higher triggers than 25,000 metric tons from 2012-2016.
3. EPA is buying time on BACT.  Major sources triggering federal permits must install Best Available Control Technology (BACT) to reduce emissions.   A major issue has been EPA's determination of what will constitute BACT for GHGs.  Especially concerning was the fact some possible controls, like carbon sequestration for power plants is not yet ready for implementation.   By tying the date for regulation of GHGs from stationary sources to the 2012 model year vehicle regulations, EPA has bought itself a year to work through these issues. 

A couple of final points. EPA discusses the implications of Sen. Lisa Murkowski's proposed amendment to disapprove of EPA's "endangerment finding." EPA states the immediate result will be revival of the California Waiver for regulation GHGs from vehicles. EPA warns there will be no national standard for motor vehicle emissions.

Also noteworthy is the fact the letter simply waives off claims that EPA may not have the legal authority to set higher trigger thresholds for stationary sources that the 100/250 tons triggers in the Clean Air Act.  Administrator Jackson simply claims EPA has the authority and criticizes business groups for suggesting they would appeal the Tailoring Rule.

Finally, EPA Administrator concludes the letter by making the rather harsh statement that passage of the proposed Senator Murkowski resolution would put the U.S. behind China and more like Saudi Arabia its treatment of the issue of Climate Change. No doubt, that type of rhetoric is designed to discourage Democratic support for the resolution.

Very interesting response from EPA.  It is written in such a way to suggest..."no need for immediate legislative action, nothing it really going to happen for at least a year if not longer."  However, this assumes EPA has the legal authority to implement the strategy suggested in its response letter.

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U.S. EPA has initiated the process for determining what controls it will require should it finalize its proposal to regulate large industrial sources of greenhouse gases (GHGs).  As discussed in a prior post, the first phase of the program would cover sources emitting more than 25,000 tons of CO2 or equivalent emissions.  In subsequent phases of the program smaller sources would likely be covered.

Under EPA's proposal GHGs would become a pollutant covered under its New Source Review (NSR) program.  NSR requires new or modified sources that emit over established thresholds to install Best Available Control Technology (BACT).  The question is...what are the "best available" controls for reducing GHG emissions? 

I was interviewed for a story appearing in Climatewire that discussed the complexities involving in determining BACT for GHGs.  Unlike many mainstream media newspaper articles, the Climatewire article does an excellent job of providing an analysis of the issues related to implementation of this complex regulatory program. 

Two major issues:

1. What is BACT going to be for non-utility pollution sources? 
2. How on earth will EPA determine BACT for a wide variety of sources by its stated deadline of March 2010?

Efficiency improvements co-firing biomass are the two most likely candidates for utility sources.  But less analysis is known regarding potential methods to reduce GHGs emissions from other potentially covered sources like cement and steel production facilities. 

The preamble to U.S. EPA's proposed NSR GHG regulations makes clear the Agency believe the rules must be finalized by March 2010 because they must coincide with the rule regulating GHGs from light duty vehicles.  It seems like an impossible task to determine BACT for the range of sources that will be potentially covered in less than six (6) months.   Without established BACT standards, there is likely to be massive uncertainty and delays in permitting. 

[A complete re-printing of the Climatewire article is available in the extended entry with their permission]

photo: everystockphoto- cjohnson7

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Today, a Georgia Appeals Court overturned a lower court's ruling that invalidated an air permit for a coal-fired power plant on the basis of climate change.  In June 20, 2008 Georgia's Fulton County Superior Court invalidated a permit for construction of a 1200-megawatt coal-fired power plant. The Court said the Georgia Environmental Protection Division should have considered CO2 a "regulated pollutant" under the Clean Air Act and required controls as part of the permit. 

When the lower Court decision was issued it marked the first time a State Court had invalidated a permit issued under the New Source Review (NSR) program for failing to consider CO2 a "regulated pollutant."  The decision sent major shock waves around the Country. 

Since the lower Court decision, a series of administrative appeal rulings and EPA proposals on climate change have been issued. The decisions have resulted in a complex regulatory web.  Lost was a clear indication whether CO2 should be considered a "regulated pollutant" under the Clean Air Act. 

The Georgia Appeals Court decision is well reasoned and navigates the various court and administrative rulings as well as EPA proposed rulemakings.  The Court's final conclusion...as it stands right now CO2 is not a regulated pollutant under the Clean Air Act.  Until U.S. EPA promulgates actual regulations requiring reduction of CO2 emissions or controls, permits issued under the NSR program need not consider a facility's CO2 emissions. 

Here is a key paragraph from the decision that succinctly sets forth the Court's reasoning:

This ruling (lower Court's invalidation of the permit)...would impose a regulatory burden on Georgia never imposed elsewhere.  It would compel [the State] to limit CO2 emissions in air quality permits, even though no CAA (Clean Air Act) provision or Georgia statute or regulation actually controls or limits CO2 emissions, and even though (to this Court's knowledge) no federal or state court has ever previously ordered controls or limits on CO2 emissions pursuant to the CAA.  It would preempt ongoing Congressional efforts to formulate a CO2 emissions policy for all the State...If accepted it would engulf a wide range of potential CO2 emitters in Georgia-and Georgia alone- in a flood of litigation over permits, and impose far-reaching economic hardship on the State.  We reverse this ruling.

Here are some the items I feel the Court got right in its ruling (keep in mind I'm not making pronouncements about climate change, I am just saying I think the legal analysis is well reasoned).

1. Analysis of Impact of Massachusetts v. EPA-  The landmark Supreme Court ruling only says that CO2 and other greenhouse gases are "pollutants" under the Clean Air Act.  Until EPA adopts affirmative regulations requiring controls or emissions limits on CO2, it will not be considered a "regulated pollutant" under the Clean Air Act.  Only "regulated pollutants" must be evaluated as part of the New Source Review Program.
2. Johnson Memo is Determinative for Now (prior post)-  In Deseret Power, the Environmental Appeals Board said U.S. EPA retained discretion to decide whether monitoring requirements applicable to CO2 which currently exist in the Clean Air Act are enough to raise CO2 to the status of "regulated pollutant" under the Act.  Former EPA Administrator Stephen Johnson, in one of his last acts, issued a memo setting for EPA's formal determination that monitoring was insufficient to raise CO2 to the status of "regulated pollutant."  New EPA Administrator Jackson granted a request to reconsider the Johnson memo, however she did not go as far as to stay the effectiveness of the Johnson memo during the review.  The Court finds that the current state of the law is that monitoring is not enough to raise CO2 to the status of regulated pollutant.
3. Formal EPA Rulemaking is Required to Trigger Regulation of CO2-  The Court concludes that until U.S. EPA completes a formal rulemaking that actually requires controls or emission limits on sources of CO2, permits can be issued without considering CO2 as a pollutant. 
4. Rejection of IGCC as Part of BACT Analysis-  The Court also follows prior Court decisions on the issue of requiring all coal plants to be IGCC plants.  It overturned the lower Court ruling that would have required analysis of IGCC as pollution control under the Best Available Control Technology (BACT) requirement.  In rejecting a required analysis of IGCC, the Court found that BACT analysis, as set forth in the New Source Review Program, does not require redesign of a facility from a pulverized coal to a syngas plant.

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As an indication the New Source Review (NSR) enforcement actions are alive and well, today an Indiana federal court has ordered the shut down of units that triggered NSR and failed to install controls.  In addition, the Court required Cinergy to surrender allowances to compensate for "irreparable harm" caused by the operation of the units in violation of the Clean Air Act

The Federal District Court in Indiana issued its decision in the remedy phase of the New Source Review (NSR) enforcement action against Cinergy Corporation's Beckjord, Ohio plant.  A jury trial was held in May of 2008 to determine whether certain projects triggered NSR.  The jury found that four projects performed at the facility "a reasonable power plant owner or operator would have expected a new increase of 40 tons of SO2 and/or NOx "(NSR major modification trigger levels).  Following the jury's verdict, the Court moved into the remedy stage to determine what relief to grant the plaintiffs for the violations.

The Courts decision is an interesting exercise of looking its crystal ball.  Based on calculations of emissions and modeling, the Court projected environmental harm caused by failure to comply with NSR. 

To determine harm, the Court first determined the type of pollution controls that would have been installed had Cinergy complied with NSR requirements (BACT/LAER).  Those controls established the baseline emissions that should have been emitted since the projects were completed.  All emissions above the baseline were considered  "excess emissions" that resulted in environmental harm and potential health impacts.

It was pretty evident which direction the Court was heading when it included the following statement in its order:

With respect to SO2 emissions, Dr. Fox testified that the annual excess emissions of SO2 is approximately 23,000 tons...Putting this into perspective, this rate is approximately equivalent to the amount of SO2 emitted by 324,000 heavy-duty diesel trucks, which is the total number of trucks registered in Indiana, Ohio and Kentucky.

The analysis of environmental harm and potential health impacts was very similar to the exercise undertaken by the North Carolina Court in the nuisance claims against coal fired power plants (see post, "Nuisance Finding Gives Downwind States New Ammo in Long Cross-Border Pollution War").  Here is what the Court examined to gage harm caused by "excess emissions":

• How did the SO2 and Nox emission impact pm 2.5 and ozone attainment
• What were mercury emission impacts
• Potential health impacts from fine particle pollution
• Damage to the environment from acid rain

After finding irreparable harm from these impacts the Court ordered:

1. Shut down of three units by Sept. 2009
2. Until Sept. 2009, the three units must be run so as not to exceed baseline levels that are based BACT/LAER controls
3. Permanently surrender SO2 allowances in an amount equal to total SO2 emissions from May 22, 2008 until September 30, 2009

For those who though the NSR consent decrees carried with them pretty dramatic remedies, this decision shows you take an equivalent risk by going to trial. 

 (Photo: DanieVDM/everystockphoto.com)

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In a dramatic reversal from the Bush Administration, the Department of Justice and U.S. EPA are renewing their New Source Review enforcement efforts against coal-fired power plants.  The NSR lawsuits originally commenced during the Clinton years have resulted in billions of dollars in new controls and hundreds of millions in civil penalties. 

The industry had breathed a sigh of relief when the Bush EPA announced they were not going to pursue additional cases.  Now the industry faces the prospect of a new round of very costly litigation, controls and penalties.

U.S. EPA issued a press release announcing the first new NSR complaint:

Coal-fired power plants collectively produce more pollution than any other industry in the United States. They account for nearly 70 percent of sulfur dioxide emissions each year and 20 percent of nitrogen oxides emissions. Emissions from coal-fired power plants have detrimental health effects on asthma sufferers, the elderly and children. Additionally, these emissions have been linked to forest degradation, waterway damage, reservoir contamination and deterioration of stone and copper in buildings.

To combat these adverse effects, the EPA and the Justice Department are pursuing a national initiative, targeting electric utilities whose coal-fired power plants violate the law.

The suits reverse the Bush Administration decision to only conclude the Clinton era NSR lawsuits and to not pursue new cases unless the involve violations of the Bush era  NSR regulations. In 2006, former EPA enforcement chief Grant Nakayama told Congress he would pursue investigations of coal-fired power plants only if they appeared to fall out of step with the administration's series of proposed and final changes to the NSR program .  On October 13, 2005 Marcus Peabody, Assistant Administrator, issued a memorandum to U.S. EPA's Office of Enforcement Compliance Assurance directing the office to pursue only cases involving violation of the Bush era NSR rules. 

The NSR directive is just one of many Bush evironmental policy and regulatory decisions that the Obama Administration has reversed.  Utility representatives said the Obama administration's efforts to ramp up NSR enforcement came as no surprise.

On February 25th, the Department of Justice has sued Louisiana Generating, alleging that the NRG Energy subsidiary violated New Source Review requirements by operating the Big Cajun 2 Power Plant without also installing and operating modern pollution control equipment after the generating units had undergone major “modifications.”(DOJ Press Release)

This follows a similar lawsuit filed earlier in February against Westar Energy, Inc for failing to install Best Available Control Technology (BACT) at one or more of its coal-fired power plants.  The complaint alleges that for more than a decade, the Jeffrey Energy Center has operated without the best available emissions-control technology required by the New Source Review provisions of the Clean Air Act to control emissions of sulfur dioxide, nitrogen oxide and particulate matter, contributing to formation of fine particulate matter, smog and acid rain.
 

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On February 18th another permit, Northern Michigan University Ripley Heating Plant, for a new coal facility was remanded by U.S. EPA's Environmental Board of Review.  The Board remanded the permit because the State (the Michigan Department of Environmental Quality), in issuing the permit, failed to address whether CO2 was a regulated pollutant under the Clean Air Act.  The most interesting aspect of the decision is that the Board apparently gave absolutely no weight to former EPA Administrator Johnson's Memo which said CO2 was not a "regulated pollutant" and therefore new permits need not consider BACT controls for CO2.  Here is what the Board said on the issue:

For the reasons set forth in that decision (Deseret Power), we similarly remand the CO issue here, directing MDEQ, guided by our findings in Deseret, to undertake the same consideration whether the CAA’s “pollutant subject to regulation” language requires application of a BACT limit to CO emissions.

The Board does not elaborate or even address the Johnson memo.  Therefore, it is impossible to know whether new EPA Administrator Jackson's grant of the Sierra Club's petition for reconsideration rendered the Johnson Memo meaningless.  That seems like a difficult legal conclusion to reach given the fact Jackson's action specifically did not block the effectiveness of the Johnson memo while it was undergoing review.

The permit had authorized Northern Michigan University (NMU) to construct a new circulating fluidized bed (“CFB”) boiler at the Ripley Heating Plant on its campus in Marquette, Michigan. As permitted, the CFB boiler will function as a cogeneration unit that provides both electrical power and heat to NMU’s facilities through the burning of wood, coal, and natural gas

Another interesting aspect of the decision was the Board also remanded the BACT analysis for the SO2 limit.  The permit called for a mix of fuels- mainly wood and coal.  The Board found there was not enough information provided to justify the limited amount of wood which would lower SO2 emissions.  The Board also questioned the fuel choice relative to coal.  It said the MDEQ needed to provide more information as to why lower sulfur coal was not required to lower SO2 emissions.

The BACT requirements for fuel choice are interesting.  For instance, once (not if) CO2 is regulated would BACT require a coal and biomass mix which can lower emissions of CO2?  This could be very good news for biomass producers who blend biomass with coal to form briquettes or pellets. 

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May you live in interesting times....Yesterday EPA Administrator Jackson issued a letter granting the Sierra Club's petition for reconsideration of a Deseret Power memo issued by former EPA Administrator Johnson.  The Petition seeks reconsideration of the Johnson memo which interpreted EPA regulations defining the pollutants covered by federal permitting under the Clean Air Act.  The Johnson memo said that CO2 was not a regulated pollutant under the Clean Air Act (CAA) for purposes of permitting. 

The memo was issued following the decision by the EPA's Environmental Board of Review in the Deseret Power case concluding the CAA was ambiguous and that EPA had discretion to determine whether CO2 was a pollutant subject to regulation.  Johnson, in one of his last acts before leaving office, tried to fill the void by issuing an interpretive memo determining CO2 was not a regulated pollutant.

There was tremendous pressure on new EPA Administrator Jackson to revoke, stay or invalidate the memo.  Such action would have effectively put on hold about a 100 pending permits for coal fired power plants.  In a prior post, I predicted that despite the pressure Jackson would take a more deliberate approach.  She has done exactly that by not issuing a stay and announcing EPA will embark on a formal rulemaking process.  (even I get one right now and then)

While Jackson has chosen to address the issue slowly, she did include language in her letter that cast a great deal of uncertainty regarding pending permits:

In the meantime, the Agency emphasizes a point noted in the memorandum itself: the memorandum does not bind States issuing permits under their own State Implementation Plans.  In addition, given the Agency's decision to grant reconsideration of the memorandum, other PSD permitting authorities should not assume that the memorandum is the final word on the appropriate interpretation of Clean Air Act requirements.

While this statement casts some uncertainty, the Johnson memo is still legally effective.  Unlike others in the blogosphere predicting stoppage of all permitting for new coal plants,  I believe permits will still move forward in State's willing to issue them. 

Yesterday, EPA Administrator Jackson also issued a statement regarding her decision to grant reconsideration:

“I am granting this petition because we must learn more about how this memo affects all relevant stakeholders impacted by its provisions,” said EPA Administrator Lisa P. Jackson “This will be a fair, impartial and open process that will allow the American public and key stakeholders to review this memorandum and to comment on its potential effects on communities across the country. EPA’s fundamental mission is to protect human health and the environment and we intend to do just that.”

My take on the statement is: a) EPA intends to move through a slow rulemaking process; and b) once EPA completes the rulemaking process you can pretty much count on the fact CO2 emissions will be regulated. 

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There has been major developments as a result of litigation, policy, rulemaking and legislation in the last few weeks relating to climate change and coal fired power plants.  Some changes are a result of outstanding litigation.  However, the most significant changes are indicative of the sea change that is occurring at the federal level under the Obama Administration relative to climate change. 

 Here is a review:

1. EPA will not regulate mercury by cap and trade-  EPA Administrator Jackson announced today that the Agency will be moving forward with rulemaking to regulate mercury emissions from coal plants.  "President Obama's EPA does intend to regulate mercury under section 112 of the Clean Air Act," said Jackson. Acting solicitor general Edwin S. Kneedler will drop the prior appeal of the decision in New Jersey v. EPA which struck down the Bush Administration cap and trade proposal for regulating mercury.
2. NEPA reviews of climate change impact required for oversees projects- The Obama Administration has settled an outstanding lawsuit which sought to compel NEPA reviews of climate change impacts for oversees projects financed with federal money.  Western cities and environmental groups alleged that Export-Import Bank of the United States and the Overseas Private Investment Corporation illegally provided more than $32 billion in financing and insurance to fossil fuel projects over 10 years without assessing whether the projects contributed to global warming or impacted the U.S. environment, as they were required to do under the National Environmental Policy Act (NEPA).  The settlement will require NEPA reviews and will also require future reductions of greenhouse gases.
3. BACT for coal plants does not mean IGCC-  A Texas Appeals Court rejected a challenge to a permit for a new 800 mw pulverized coal plant.  Appellants has argued the permit should have required IGCC technology as BACT instead of the proposed pulverized coal technology.  Consistent with other Court decisions looking at BACT, the Court said control technologies under BACT must be applied to the proposed project which in this case was a pulverized coal plant.
4. No Climate Change Legislation This Year-  Senator Boxer released here principles for what must be included in the Senate version of climate change legislation.  Senator Boxer said “Copenhagen is December...That’s why I said we’ll have a bill out of this committee by then.”  However, any bill passing out the committee still must pass the full senate and be reconciled with the House bill.  This schedule renders it impossible that cap and trade legislation will pass Congress in 2009.
5. EPA begins review of California Waiver Decision-  In a press release today, EPA announced they are beginning the review of the California waiver request to regulate greenhouse gas emissions from vehicles.  I think this quote from the EPA press release pretty much tells you what the outcome will be - "EPA believes that there are significant issues regarding the agency’s denial of the waiver. The denial was a substantial departure from EPA’s longstanding interpretation of the Clean Air Act’s waiver provisions. "

 (Photo: CJJohnson7/everystockphoto.com)

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In remarks titled "from peril to progress", the President set forth bold action yesterday that will inevitably lead to full regulation of CO2 and greenhouse gas emissions.  The President ordered a "vigorous review" of California's request to regulate greenhouse gas emissions which had been previously denied by the Bush Administration. [President Obama's memo ordering a review of the California Waiver]   While much of the media focus has been on the effect of the other aspects of the President's actions, such as raising mileage standards, in reality the California waiver request has far more reaching repercussions. 

California has been seeking EPA’s approval to waive federal preemption of state vehicle emission standards for several years.  California wants to enforce a state law that would require automakers to reduce carbon dioxide emissions from new vehicles by 30 percent by 2016. Under the Clean Air Act, U.S. EPA must concur that California has demonstrated a need reduce greenhouse gases in order  “to meet compelling and extraordinary conditions.” 42 U.S.C. § 7543(b)(1)(B). Former EPA Administrator Johnson denied California's "waiver" request last year.

The signs that President Obama would proceed in a radically different direction than the Bush Administration on controlling greenhouse gases have been building for some time. First, he mentioned climate change in his speech in Chicago the night he won the election.  Second, he appointed members to the cabinet and senior staff positions that are strong believers in aggressively tackling climate change.  Third, he made mention of climate change in his 20 minute inaugural speech clearly indicating it will be a major priority of his Administration. 

Yesterday, the President took bold action only a week into his Presidency with his issuance of an order to review the denial of the California waiver request.  After announcing his action, President Obama made a speech that contains a clear message- it the President's intention for the United States to lead on addressing climate change no matter how difficult the task may be.  His speech included some pretty bold statements.  Here is an excerpt from his speech: 

Third, the federal government must work with, not against, states to reduce greenhouse gas emissions. California has shown bold and bipartisan leadership through its effort to forge 21st century standards, and over a dozen states have followed its lead. But instead of serving as a partner, Washington stood in their way. This refusal to lead risks the creation of a confusing and patchwork set of standards that hurts the environment and the auto industry.

The days of Washington dragging its heels are over. My administration will not deny facts, we will be guided by them. We cannot afford to pass the buck or push the burden onto the states. And that's why I'm directing the Environmental Protection Agency to immediately review the denial of the California waiver request and determine the best way forward. This will help us create incentives to develop new energy that will make us less dependent on oil that endangers our security, our economy, and our planet....

Finally, we will make it clear to the world that America is ready to lead. To protect our climate and our collective security, we must call together a truly global coalition. I've made it clear that we will act, but so too must the world. That's how we will deny leverage to dictators and dollars to terrorists. And that's how we will ensure that nations like China and India are doing their part, just as we are now willing to do ours.

It's time for America to lead, because this moment of peril must be turned into one of progress. If we take action, we can create new industries and revive old ones; we can open new factories and power new farms; we can lower costs and revive our economy. We can do that, and we must do that. There's much work to be done. There is much further for us to go.

But I want to be clear from the beginning of this administration that we have made our choice. America will not be held hostage to dwindling resources, hostile regimes, and a warming planet. We will not be put off from action because action is hard. Now is the time to make the tough choices. Now is the time to meet the challenge at this crossroad of history by choosing a future that is safer for our country, prosperous for our planet, and sustainable.
 

California's waiver will almost certainly be granted.  Such action will tip the regulatory dominoes leading to full blow regulation of greenhouse gases from more than just tailpipes in California. As discussed on this blog before, the Supreme Court has already determined CO2 is a pollutant under the Clean Air Act.  Since the Court's decision the debate has centered on whether CO2 is a "regulated pollutant."  Once it is considered "regulated", then numerous provisions in the Act will be deemed to apply to control CO2 and other greenhouse gases.  

One way to make CO2 a regulated pollutant is for EPA to issue new regulations requiring control.  EPA started down that road slowly with the issuance of its Advanced Notice of Public Rulemaking for regulation of greenhouse gases this summer.  However, environmental groups argued new regulations were not needed.  They argued the act already "regulates" CO2.  Specifically, the Clean Act includes monitoring requirements for CO2 from coal plants.

In waning months of the Bush Administration, the Environmental Board of Review issued a major decision in Deseret Power, finding that EPA had discretion to decide whether monitoring was enough to constitute regulation.  In the final days of his tenure, former Administrator Johnson issued an interpretative memo responding to the Deseret Power decision declaring monitoring was not enough. 

Since issuance of the memo, environmental groups have legally challenged the Johnson memo and pressured the Obama Administration to retract it.  However, granting California's waiver request would likely render the memo meaningless.  A grant of the waiver would not by itself be considered regulation of CO2, thereby providing the trigger for regulation of CO2 under other provision of the Clean Air Act.   And with that the dominoes will begin to fall...

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With recent developments in climate change litigation, including the Deseret Power decision, it appears we are moving ever closer to requiring control of CO2 from coal fired power plants and other major sources of CO2.   Outgoing EPA Administrator Johnson may have delayed things temporarily by issuing his memo in response to Deseret Power. However, incoming EPA Administrator Jackson has pledged to quickly review the California waiver request that would allow the State to set CO2 emission standards for cars. If that happens, the dominoes will soon fall requiring controls for CO2 for all major sources under the Clean Air Act.

A positive "endangerment finding" in response to the California Waiver request will trigger a host of other regulations. Those would include requiring emission controls from new major sources of CO2 and other greenhouse gases under EPA's New Source Review permit program. 

If new or modified sources are required to control CO2, then as part of their permit they will be required to install Best Available Control Technology (BACT) to reduce CO2 emissions if located in an area that meets federal air quality standards.  More stringent limits (Lowest Achievable Emission Rate- LAER) apply in areas that don't meet air quality standards. 

The focus of all the recent litigation has been on whether to require CO2 controls as part of a BACT permit review.  But that begs a very interesting question....What would BACT be for CO2?

I was asked this very question during a recent interview I had with a reporter from Inside EPA.  That sent me to research the issue.   My review shows to things:  1) there is a wide divergence of opinion among experts as to what BACT would likely be;  and 2) EPA has a fair amount of discretion to determine the BACT standard for CO2.  Once it is decided that BACT must be required to control CO2 (and other greenhouse gases), Industry insiders expect EPA would take at a minimum 6 months to decide the issue.

Reading the tea leaves, I think we can begin to decipher an answer as to what BACT may constitute.  We certainly can eliminates some suggestion offered by pundits based upon how EPA has applied the BACT standard in the past.  Here is what we know....

1. There are no current EPA endorsed technologies for controlling CO2.  EPA's current RACT/BACT/LAER clearinghouse doesn't have anything on CO2.  The clearinghouse is used to identify various control technologies that would be deemed to meet the various standards on specific industries or technologies. 
2. BACT is a site-specific, case-by-case decision which means uncertainty.  In testimony  House Government Reform and Oversight Committee, attorneys Peter Glaser and John Cline stated the following: "Since BACT determinations for CO2 have no regulatory history at this time, and can vary by type of facility and from state-to-state, businesses wishing to construct new sources or modify existing ones would have no basis for planning what the regulatory requirements will be."
3. Case law and regulatory decisions of EPA establish parameters for the BACT analysis.  As detailed below, case law in the context of BACT for coal plants can be extrapolated to CO2.  The same general guidelines used to evaluate controls for other pollutants (SO2, CO, mercury, NOx) will be used for CO2. 

Now lets turn to a review of experts who have offered their opinion as to which technologies should be considered BACT for CO2.  Here is one guess from the blog Cleanergy.org:

BACT for CO2 is unlikely to mean carbon capture and storage (yet), since it's not readily available, but it will probably mean some combination of co-generation (making use of waste heat from electricity generation), efficiency improvements, and/or fuel switching/co-firing with biomass. Ultimately, President-elect Obama's EPA gets to decide how BACT is defined for CO2, a process which will take at least a year. 

Joseph Romm, author of the blog Climate Progress, offered his opinion of what BACT for CO2 may look like.

Certainly it is going to slow down the permitting of any new coal plant dramatically, until the EPA figures out the answer to the $64 billion question: What is BACT for CO2 for a coal plant? That will probably take the Obama EPA at least 12 months to decide in a rule-making process. But from my perspective it could/should/must include one or more of:

a) Co-firing with biomass — up to 25% cofiring has been demonstrated
b) Highest efficiency plants
c) Cogeneration (i.e. recycled energy)
d) (possibly even) Gasification with, yes, carbon capture and storage (CCS)

Here are some other opinions as to possible technologies that would qualify as BACT for coal-fired power plants:

1. Solar Thermal at a Coal Power Plant- mix the steam from solar thermal with steam from the boiler to reduce emissions. 
2. Highly Efficient Boilers-  Jeff Holmstead, former Chief Air Official for U.S. EPA, has said he  BACT would be for CO2 right now given costs and development of other control technology.

But let's look at the legal guidance associated with BACT.  In doing so, some of the technologies suggested seem "not ready for prime time" or would not be considered a control technology but rather a different type of generation. 

BACT is determined through a case-by-case evaluation of control technology alternatives and involves a complicated weighing of economic, environmental, energy and other factors. BACT can even be no control measure if that weighing process fails to identify a technically and economically feasible technology for controlling the pollutant in question.

A detailed discussion of the permitting process and legal aspects of a BACT analysis is provided below.  The single biggest consideration is that BACT takes the project as proposed and establishes the lowest achievable emission rate for the various pollutants.

This means BACT cannot fundamentally change the design of the proposed project.  This is why EPA has rejected establishing IGCC as BACT.  If the permit applicant is proposing a traditional pulverized coal boiler, then limits must be established based upon what is achievable for that type of boiler.

This eliminates many of the control technologies suggested by pundits:

1. IGCC- would force a redesign and would be rejected
2. Solar Thermal Combined with a Coal Boiler- would be rejected as forcing a redesign
3. Carbon Capture and Storage- This one is interesting.  Under BACT you must take the geographical location of the project into consideration.  If the geologic considerations would make CCS infeasible for the project it could not be required.  In addition, CCS is certainly not ready for prime time and could not be required as part of BACT for any site right now.

Some other technologies are more likely to be considered BACT:

1. High Efficiency Boilers- this would likely be required to reduce emissions
2. Co-firing with biomass-  depending on the project, this could be required.  Co-firing reduces CO2 emissions.  BACT does involve consideration of "clean fuels", however co-firing biomass would likely be rejected if it caused a major redesign of the facility.
3. Coal Drying- By removing moisture from the coal you can reduce CO2 emissions.  Similar to co-firing biomass this could be required if it doesn't force a major redesign of the project.

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On January 15, 2009 the Sierra Club filed a petition in the D.C. Circuit Court of Appeals challenging EPA Administrator Johnson's memo in response to Deseret Power.  The petition seeks the Court to throw out the Johnson memo.  The memo would allow current permits to proceed without considering controls for CO2 or other greenhouse gases.

If the memo is revoked or thrown out it would clear the way for the soon-to-be Administrator Jackson to issue her own interpretation.  But would she likely take such an action?  I doubt it.

The petition filed in the Court is procedural in nature and does not contain any insight into the Sierra Club's arguments.  However, you can review the petition the Sierra Club filed with EPA Administrator Johnson first which contains twenty pages of argument as to why the memo is illegal.  The group summarizes their attack on the memo in the following fashion:

As discussed below, this final agency action was impermissible as a matter of
law, because it was issued in violation of the procedural requirements of the
Administrative Procedures Act (“APA”), 5 U.S.C. § 101 et seq., and the Clean Air Act
(“CAA”), 42 U.S.C. § 7607, it directly conflicts with prior agency actions and
interpretations, and it purports to establish an interpretation of the Act that conflicts with  the plain language of the statute.

Many environmental groups are expecting that the future EPA Administrator will simply revoke the memo.  In the alternative, if their legal challenge is successful they expect future Administrator Jackson to issue her own interpretation which says CO2 is a regulated pollutant. 

I think they may be disappointed.  If such a memo were issued it would trigger an array of Clean Air Act regulations of CO2 emissions.  Many of these regulations are ill-suited for controlling CO2.  I would expect the future Administrator will get strong advice from her staff at EPA to proceed with caution in adopting new interpretations that could result in instantaneous regulation.  At a minimum, I believe they will advise that EPA construct a regulatory scheme in a deliberate fashion through a formal rulemaking process which could take at least a year. 

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(Image: CO2 Emissions in the U.S.)

Perhaps its obvious that the window of opportunity to obtain an air permit without CO2 controls is closing quickly.   Don't delude yourself that controls will wait for Congressional action on climate change.

The battle over requiring CO2 controls without additional rulemaking or legislation is being waged right now. The saga is being played out in the aftermath of the Deseret Power decision and the ensuing memo issued by EPA Administrator Johnson.  Here is a quick synopsis of what has transpired to date:

1. Deseret Power rejected EPA's basis for approving permits without CO2 controls.  However, the Environmental Review Board left the window open.  It said EPA could come out with a new position on the issue as to whether CO2 is a "regulated permit."
2. EPA Administrator Johnson quickly took advantage of the opening issuing a new interpretative memo saying the Clean Air Act's requirement to monitor CO2 was not tantamount to regulation of CO2.  Therefore, new permits did not need to include controls for CO2. 
3. In the latest round of the Deseret saga, the Sierra Club has filed a petition challenging the legality of the Johnson memo.  Citing Section 307(d) of the Clean Air Act, the group argues EPA's memo amounts to a new substantive rulemaking that must go through the notice and comment process.  If EPA denies the petition, the Sierra Club can appeal directly to the D.C. Circuit Court of Appeals.  The hope is that if the memo is declared illegal an Obama Administration would issue a much different memo- one saying controls for CO2 are required.

To me the saga over the Deseret Power decision is a simply good theater.  The fact is CO2 will be a regulated pollutant and soon.  In my mind, if you are seeking an air permit for a source with significant CO2 emissions you may have less than a year or so to get your permit before the whole playing field changes.   We should look to clues from President-elect Obama's pick to head the EPA as to what may happen in the near future.

President-elect Obama named Lisa Jackson to head U.S. EPA.  Ms. Jackson was the former Commissioner of the New Jersey Department of Environmental Protection.  According to some national news organization she brings a mixed record.  U.S. News and World Report stated the following:

She is credited with helping put New Jersey in a leadership role on the issue of climate change and with encouraging the state to adopt a moratorium on building new coal plants. Yet she also has made choices that have been applauded by industry, including an effort earlier this year to use private companies to clean up thousands of contaminated sites around the state.

In recent days, when Jackson's name emerged as Obama's likely pick, some of these issues resurfaced. A few New Jersey-based environmental groups have put out press releases criticizing Jackson's record, and their comments have gotten national attention. But many observers say the criticism is overblown and that Jackson, though having at times taken stands the groups didn't fully agree with, has largely been an ally.
 

Jackson's background shows EPA is likely to take some form of quick action on CO2 shortly after January 20th with Obama is sworn into office.  New Jersey participates in RGGI which is the cap and trade program for CO2 emissions from power plants in the Northeast.  Is no surprise Jackson and the rest of the Obama team strongly supports a national greenhouse gas cap and trade program.  However, such legislation is likely a year away at a minimum. 

What may happen in the interim?  There are several issues pending before U.S. EPA that could result in regulation of CO2 in the near term.  

1. The "endangerment finding" on CO2- EPA still needs to take action in response to the Supreme Court's decision in Massachusetts v. EPA.  This is the case regarding California's request for a waiver to set standards for CO2 from vehicles.  While the Court said CO2 is a pollutant, under Section 202(a)(1) of the Clean Air Act vehicle emission of greenhouse gases are not regulated until the EPA determines CO2 from cars would "endanger  public health and welfare."
2. Deseret Power interpretive memo-   An Obama Administration could also try and retract the memo issued by EPA Administrator Johnson in response to Deseret Power. 
3. Comprehensive Rulemaking on GHG Regulation-  EPA has issued its Advanced Notice of Public Rulemaking seeking comments as to whether to comprehensively regulate CO2 and other GHGs under the Clean Air Act.  An Obama Administration could accelerate action on this rulemaking effort. 

One of these three course of action will happen.  The question is just how soon.  New Jersey declared CO2 an air contaminant back in 2005.  In order to make such a declaration, New Jersey had to go through a formal rulemaking process declaring CO2 "injurious to human health and welfare."  Take a look at the conclusions in the NJ rulemaking, don't they appear to be exactly what would be need for an endangerment finding?

This interpretation (declaring CO2 an air contaminant)  is consistent with the statutory definition of air pollution at N.J.S.A. 26:2C-2 and the Department’s regulatory definition of “air pollution” at N.J.A.C. 7:27-5.1, which states that “’air pollution’ means the presence in the outdoor atmosphere of one or more air contaminants in such quantities and duration as are, or tend to be, injurious to human health or welfare, animal or plant life or property, or would unreasonably interfere with the enjoyment of life or property throughout the State ….”

The exclusion of CO2 as an air contaminant is no longer valid, given the intent of the Department’s definition of air contaminant throughout N.J.A.C. 7:27 and the definition of air pollution at N.J.A.C. 7:27-5.1, because scientific evidence has evolved to the point that adverse environmental and human health impacts due to increasing concentrations of CO2 in the atmosphere are now clear.

Also, New Jersey passed the New Jersey Global Warming Response Act which committed the state to returning global warming pollution to 1990 levels by 2020 and cutting global warming pollution levels by 80 percent by 2050.  New Jersey is only one of three states to make greenhouse gas reductions state law. 

The pressure on Jackson to take action to block new coal plants and regulate CO2 will be enormous.  She will have a hard time defending a slow and deliberate pace when her State has already taken significant action, including a State-like "endangerment finding."  This means some type of action to regulate CO2 will likely come in the first year of the Obama Administration.  As a result, the window of opportunity to avoid CO2 controls in a permit is closing quickly.   

The most likely course of action could be peeling the endangerment finding away from the ANPR and proceeding with a finding CO2 does endanger public health.  The other option that could have a quick and dramatic impact would be to retract the Johnson memo responding to Deseret Power.  A Jackson EPA could declare the memo was issued illegally and issue a new interpretive memo. 

(Image:  flickr Tom Raftery)

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Senator Barbara Boxer sent a letter to the Department of Justice demanding withdraw of what she calls a "blatantly illegal memo" issued by EPA Administrator Steve Johnson in response to the Deseret Power decision. The memo says that CO2 (and other greenhouse gases-GHGs) are not yet regulated pollutants under the Clean Air Act.  As a result, federal air permits will not require installation of Best Available Control Technology (BACT) to reduce GHG emissions.  Here letter states:

Administrator Johnson issued the document without legal authority under the Clean Air Act, and in spite of the clear opinion of the EPA’s Environmental Appeals Board in In re: Deseret Power Electric Cooperative, PSD Appeal No. 07-03 (EAB November 13, 2008). Johnson’s guidance also flies in the face of the U.S. Supreme Court in Massachusetts v. EPA (2007).

The Johnson document presents as arguments against including carbon dioxide emissions in a Clean Air Act permit the same kind of transparent excuses for inaction on global warming pollution that both the Supreme Court and the Environmental Appeals Board flatly rejected in their respective opinions. In addition, the EPA’s issuance of the Johnson document completely disregards the public’s right to participate in EPA decision making.

Senator Boxer goes too far in calling the memo "blatantly illegal."  In fact, the Environmental Appeals Board recommended that the EPA issue an interpretative memo to decide whether CO2 is considered a regulated pollutant. 

What I take away from the fact the letter was sent is how different things will begin to look come January 20th.  President-Elect Obama has already nominated members of the Cabinet that will have a 180 degree different view point of tackling Climate Change than the Bush Administration.  Most people know action will be taken, but I still don't think people fully grasp the magnitude of the change to move toward a low carbon economy.

My other observation is that many on the Internet who have been commenting on the events surrounding the Desert Power case don't fully grasp the implications of regulating CO2 under the current structure of the Clean Air Act.  (See Joe Romm's Post on his blog Climate Progress).  I have discussed this implications in prior posts.  There is a right way to do things and rushing to regulate CO2 without the proper regulatory framework would be a disaster.

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When the Environmental Review Board (EAB) issued its decision in Deseret Power, the Sierra Club and many others across the Internet declared victory claiming the decision would block permits for new coal fired power plants for the immediate future.  Looks like they may have been premature...  

The EPA issued a significant interpretive memorandum in response to the Deseret Power case which states CO2 is not a regulated pollutant under the Clean Air Act.   While more litigation will ensue, the permitting process can move forward on pending permits for new coal plants.

Background on Deseret Power

At issue in Deseret Power was whether controls were required (BACT) for CO2 for new coal-fired power plants.  Under the Clean Air Act, controls are required for CO2 if it is a "regulated pollutant." The Sierra Club pointed to provisions requiring monitoring of CO2, arguing those provisions were sufficient to be deemed "regulation."  EPA said monitoring requirements were insufficient and that past interpretations dictated a conclusion that monitoring was not enough to qualify as regulation.

As indicated in my post on the decision, the EAB in essence punted on the issue.  They rejected the Sierra Club's argument that the plain text of the Clean Air Act required regulation.  They also rejected the EPA analysis that past interpretations required it to conclude monitoring was not enough to trigger the need for controls.  However, the EAB said EPA has discretion to decide whether monitoring is enough to trigger the need to control through a new binding interpretation of what is sufficient to be considered a "regulated pollutant."

EPA Fills the Vacuum Left By the EAB

Here is Administrator Johnson's review of the EAB order, recognizing the discretion his agency retains:

The Board agreed with the Region and OAR that the statutory phrase "subject to regulation under this Act" is ambiguous. However, as discussed above, the Board also concluded that the Region's reason for not including a BACT limit for C02 in the permit - that it was bound by a historic interpretation of the phrase "subject to regulation" - was not supported by the administrative record for the permit. Id. Thus, the Board remanded the permit to the Region to "reconsider whether or not to impose a C02 BACT limit in light of the Agency's discretion to interpret, consistent with the CAA, what constitutes a 'pollutant subject to regulation under this Act."' The EAB also encouraged EPA offices to consider whether to undertake an action of nationwide scope to address the interpretation of the phrase "subject to regulation under the Act."

After citing to EPA's discretion, EPA concludes monitoring is insufficient to trigger controls for CO2:

EPA interprets the definition of "regulated NSR pollutant" in 40 C.F.R. 8
52.21(b)(50) to exclude pollutants for which EPA regulations only require monitoring or reporting but to include each pollutant subject to either a provision in the Clean Air Act or regulation promulgated by EPA under the Clean Air Act that requires actual control of emissions of that pollutant.  This interpretation is supported by the language and structure of the regulation and sound policy considerations.

EPA supports its interpretation by looking at the dictionary definitions of the words "subject to regulation."  However, this justification is pretty close to the one put forward to the EAB in the appeal which the EAB rejected.   EPA further supports this interpretation by arguing it amounts to sound public policy:

Furthermore, an interpretation that preserves the Agency's ability to gather information to inform the Administrator's judgment regarding the need to establish controls on emissions without automatically triggering such controls in no way limits the Agency's authority to require controls on emissions of a particular pollutant when the Administrator determines they are warranted. This
interpretation preserves the Administrator's authority to require control of individual pollutants through emissions limitations or other restrictions under various provisions of the Act, which would then trigger the requirements of the PSD program for any pollutant addressed in such an action.

EPA also attempts to create a better record in support of its interpretative ruling by citing to a series of previous permitting decisions that are consistent with this approach.  The permits arguably "demonstrate that EPA has not in practice issued PSD permits establishing emissions limitations for pollutants that are subject to only monitoring and reporting requirements."

Observations

1. More Litigation to Follow:  This interpretative memo will be challenged.  EPA certainly builds support for its interpretation, most notably by citing to a series of prior permit decisions that are in harmony with its interpretation. However, it is principally relying on a similar textual interpretation of the phrasing of the Clean Air Act that had, in part, been rejected by the EAB in Deseret.
2. EPA Rushed to Issue the Memo Before the Change in Administration:  The EAB recognized EPA had discretion to go either way in deciding to regulate CO2 under the Clean Air Act.  The Bush Administration did not want to allow this decision to be made by the next Administration, so it issued the memo without allowing for public comment which would have delayed finalization of the memo.  Administrator Johnson justifies cutting out public comment by citing to the need to keep the permitting process moving forward because a large number of permits put in limbo following Deseret. 
3. The Bush Administration's action ties the Obama Administration hand for the short term:  Administrator Johnson's memo cites to a series of cases that "recognized that an Agency has the flexibility to establish an initial interpretation of a regulation without engaging in a notice and comment process."  This memorandum is meant to be that "initial interpretation", which means the Obama Administration could not change it without going through a formal rulemaking process with a public comment period.  In the short term, this action keeps the permit processing moving forward for nearly 100 pending permits.

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Talk about your pro-bowl quality punts...U.S. EPA's Environmental Appeals Board made a major one this week on the issue of climate change.  All eyes were fixated on the Board waiting for their decision on whether the Clean Air Act requires immediate regulation of greenhouse gases  (GHGs-which include CO2).  The Board's answer?  We would rather let the Obama Administration decide.

Others on the web point out this may hold up permits for coal plants while EPA deliberates on what to do next.  There is uncertainty after the decision, but other Courts don't have to follow the EAB ruling.

-See Coal Plant Stop Orders and Power Landscape Changes After Ruling

Background:  For those not keeping up to date on the latest litigation over regulation of GHGs, a major decision was issued yesterday- Deseret Power Electric Cooperative (Bonanza).  At issue in the case was whether the current language of the Clean Air Act requires immediate regulation of GHGs.

The Sierra Club appealed a federal permit that would have allowed construction of a new coal fired power plant.  The Sierra Club argued the permit was illegal because it did not require control of CO2 and the Clean Air Act (CAA) mandates regulation of the pollutant. 

Under the CAA,  EPA would have to require controls for CO2 if it is a pollutant "subject to regulation" under the Act.  The issue turned on the amount of regulation necessary to trigger this provision.  The Clean Air Act does require monitoring and reporting of CO2 for some sources.  But EPA argued monitoring is not enough, claiming that it has interpreted "subject to regulation" as meaning the Agency has set a standard requiring reductions, not just monitoring of emissions.

Implications:  A win for the Sierra Club would have had immediate and dramatic impacts on business across the country.  Hundreds of thousands of businesses, even commercial buildings may have needed a federal air permit to control CO2 emissions.  The EPA would have been overwhelmed with a tidal wave of new work. Why?

As discussed in a prior post, the permit thresholds in the CAA are extraordinarily low in the context of greenhouse gases.  Just how low?  The Act requires federal regulation for sources that emit 100 or 250 tons of a pollutant, depending on various factors.  That's fine for traditional pollutants like sulfur dioxide and soot, but ridiculous when viewed in the context of greenhouse gases.  As a comparison, California's Climate Change Program (AB-32) uses a threshold of 25,000 metric tons. 

On the other hand, if the Board sided with U.S. EPA then regulation of GHGs would be delayed until either U.S. EPA completed its lengthy rulemaking process or legislation is enacted by Congress.

Decision:  The Board definitely punted.  It did not agree with the Sierra Club that the plain text of the CAA requires CO2 to be regulated.  However, it rejected the EPA's position that an analysis of its historical interpretations forecloses the possibility that monitoring requirements are sufficient to trigger the need to regulate GHGs as a pollutant. 

The Board returned the permit to the Agency for further deliberation.  The Board said it is within EPA's discretion to begin regulating GHGs because the CAA includes monitoring requirements.  The Board concludes with the following paragraph:

Accordingly, we remand the Permit to for the Region (U.S. EPA) to consider whether or not to impose a CO2 BACT limit in light of the Agency's discretion to interpret, consistent with the CAA, what constitutes a "pollutant subject to regulation under this Act."  In remanding this Permit to the Region for reconsideration of its conclusions regarding application of BACT to limit CO2 emissions, we recognize that this is an issue of nation scope that has implications far beyond this individual permitting proceeding.  The Region should consider whether interested persons, as well as the Agency, would be better served by the Agency addressing the interpretation of the phrase "subject to regulation under this Act" in the context of an action of national scope, rather than through this specific permitting proceeding.  (emphasis added)

In otherwords, we want the Obama Administration to decide this through a regulatory interpretation that will apply universally and not by us requiring it in the context of a single appeal of a permit.

(Photo: Tostie14/everystockphoto.com)

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Lets get everyone up to speed with events on regulation of greenhouse gases (GHGs) including CO2:

1.  Supreme Court says CO2 is a pollutant under the Clean Air Act.  In Massachusetts v. EPA decided in April of 2007, the Supreme Court held that GHGs are pollutants that may be regulated under the Clean Air Act.  But the Court did not go far enough to say EPA must regulate GHGs. At issue in this case was Section 202 of the Clean Air Act which covers regulation of greenhouse gases from motor vehicles. For a pollutant to be regulated under Section 202 it must be “reasonably be anticipated” to “endanger public health or welfare.”   Therefore, EPA must conclude GHGs from motor vehicles endager public health before regulation commences The Court remanded the Section 202 determination to EPA to make the necessary "endangerment finding." 

2.  U.S. EPA says Clean Air Act is "ill suited" to regulated GHGs-  in July 2008, the EPA released its Advance Notice of Proposed Rulemaking on GHG regulation.  Along with its release, EPA Administrator Johnson made statements that the Clean Air Act is an ill-suited vehicle for regulation of GHGs. The ANPR represents EPA's response to both the Supreme Court's decision in Massachusetts v. EPA and a number of pending petitions to regulate greenhouse gas emissions from most mobile and stationary air pollution sources. The ANPR includes extensive analysis of the science related to climate change, technologies available for reducing greenhouse gas emissions, and the various statutory provisions that may be implicated by an endangerment finding under section 202 of the Clean Air Act. It solicits public comment on a variety of important issues.

3.  Environmental Groups Argue Regulation of GHGs is Not Discretionary by EPA-   Many environmental groups have argued that the finding that GHGs are a "pollutant" under the Clean Air Act is enough to trigger immediate regulation under permitting provisions of the Act.  They argue the endangerment finding necessary for regulation under Section 202 is not necessary to begin regulating GHGs under other provisions of the Act.

4.  Litigation Ensues Over Whether Regulation of GHGs is Discretionary-  As discussed in previous posts, a number of legal challenges have been filed to the issuance of permits for construction of new coal fired power plants.  Environmental and Citizen Groups have challenged the permits on the basis the failed to control CO2 as a pollutant.  U.S. EPA and State EPA's have argued that C02 and the other GHGs are not "regulated" pollutants under the Act.  They distinguish the Massachusetts decision by saying the Court only found GHGs to be a pollutant.  Therefore, U.S. EPA must complete its rulemaking process before GHGs are regulated.  At least one State Court has already disagreed with EPA's interpretation.  A Georgia Court has already ruled the GHG are a regulated pollutant that must be considered as part of EPA's New Source Review (NSR) permitting program.

And now the latest....

While U.S. EPA methodically proceeds down its rulemaking path, it is more than likely the Courts will not wait for EPA before deciding whether CO2 is a regulated pollutant.  In fact, I believe the landmark case to decide whether regulation of GHGs must occur immediately is about to be decided.  In the case, the Sierra Club is challenging EPA’s issuance of a permit for a waste-coal-fired generating unit at a power plant in Utah that did not establish Best Available Control Technology (BACT) emissions limits for CO2

On September 12, 2008, reply briefs were filed in the case of in the Deseret Power Electric Cooperative (Bonanza) case which is before U.S. EPA's Environmental Appeals Board.   A decision in the case could be expected in the next couple of months.  To give you an idea of the level of attention this case is attracting, the following business groups filed briefs in the litigation:  U.S. Chamber of Commerce, National Association of Manufacturers, American Petroleum Institute, American Chemistry Council, etc.   

Sierra Club argues that because the Supreme Court has already determined that CO2 is an “air pollutant” under the Clean Air Act (CAA), that finding triggers EPA's obligation to establish BACT for CO2 emissions in the permit.  EPA and the business groups counter that the Supreme Court only EPA found CO2 to be a “pollutant” under the CAA, it is not yet a pollutant “subject to regulation” for which BACT is required until EPA concludes is rulemaking process. 

The Sierra Club together with New York, California and other Northeast States have put forward a novel argument that may tip the scales in their favor based upon comments I have heard from EPA officials.  The Sierra Club cites to Section 821 of the Clean Air Act which establishes monitoring requirements for CO2.  The following excerpt is from a Sierra Club brief filed in the litigation:

In § 821 Congress ordered EPA “to promulgate regulations” requiring that hundreds of facilities covered by Title IV monitor and report their CO2 emissions, and in §165, Congress required a BACT limit for “any pollutant subject to regulation” under the Act. The only possible reading of these two statutory mandates is that Congress intended that EPA apply BACT limits to CO2 pursuant to §165.

The ultimate issue boils down to whether monitoring requirements rise to the level of "regulation" of CO2 or does EPA have to establish actual air quality standards or emission limits for CO2 and other GHGs.    

The decision in this case will have massive repercussions.  If EAB decides in EPA's favor, regulation of GHG will likely be delayed for at least a couple of years.  If the EAB agrees with the Sierra Club, EPA will need to immediately begin regulating GHG in permitting actions.  As I will discuss in an upcoming post, such a decision could overwhelm EPA and the States in new permits for hundreds of thousands of new sources. 

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For the first time a court has revoked a permit due to concerns over C02 emissions and climate change.  While there have been previous instances where states have denied permits due to concerns with C02 emissions, this is the first time a court has revoked a previously issued permit.  Notably, the Court did not base its decision on state law, rather it ruled the Clean Air Act (CAA) requires analysis and control of C02 emissions. 

Other courts are currently hearing similar challenges.  If this decision is a trend it will have major implications for any new facilities seeking an air permit.  In a future blog post I will discuss the implications of using the Clean Air Act, specifically the New Source Review provisions, to regulate CO2.  Much speculation has been made as to whether CO2 will be regulated even without action by Congress on comprehensive climate change legislation.

The CO2 decision was issued on June 20, 2008 in Georgia's Fulton County Superior Court.  The Georgia Environmental Protection Division had approved a permit for the construction of a proposed 1200-megawatt coal-fired power plant.   Environmental groups, including the Sierra Club, challenged the permit saying the plant's emission of 8-9 million tons of CO2 had to be considered. Siding with the Sierra Club, the Court overturned the State's issuance and sent the permit back to perform the analysis it said was required under the CAA. 

Note: According to Sourcewatch, between 2007 and 2008, plans for 69 coal plants have been canceled.

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