Yesterday, EPA sent draft proposed regulations to the White House Office of Management and Budget (OMB) designed to limit the effect of future EPA greenhouse gas (GHG) regulations on small GHG-emitters.  The proposal follows on a proposal transmitted last week for OMB review for EPA to regulate GHGs emitted by new motor vehicles and is intended to clear the way both for the motor vehicle regulation and for GHG regulation of other types of sources.

The latest proposed GHG regulations address concerns that EPA regulation of GHG emissions under the Clean Air Act (CAA) could result in regulation of a large number of relatively small emitters of GHGs.  Under the CAA, once a pollutant is regulated under any CAA program, the pollutant is considered to be a regulated pollutant for all of EPA’s air quality permitting programs.  These air quality permit programs apply to stationary sources that have the potential to emit regulated pollutants above certain thresholds.  New stationary sources with the potential to emit the regulated pollutant in amounts above the threshold must obtain permits.  Existing stationary sources emitting the regulated pollutant above the threshold and undertaking modifications that result in a “significant” increase in emissions must also obtain permits.  Thus, once EPA finalizes its motor vehicle GHG regulations – expected by the end of late March – GHGs will become regulated pollutants and many stationary source emitters of GHGs will automatically become subject to air quality permit requirements.

EPA is concerned with the effect of GHG regulation under three air quality permit programs.  The first is the Prevention of Significant Deterioration (PSD) program, which applies to new and modified stationary sources in attainment areas or if no ambient air quality standards have been established for the pollutant in question (as would be the case, at least initially, with GHGs).  The threshold emissions level under the PSD program is 100 tons per year (tpy) for large industrial sources in 28 categories and 250 tpy for all other types of sources.  Sources subject to the PSD program must meet a number of regulatory requirements, including the requirement to install Best Available Control Technology (BACT) to reduce emissions.

The second program of concern is the Nonattainment New Source Review (NSR) program, which applies to sources located in nonattainment areas and has a 100 tpy regulatory threshold for all sources.  The Nonattainment NSR program is similar to the PSD program, but would subject sources to a number of more stringent requirements, including the requirement that they meet the Lowest Achievable Emission Rate (LAER).  However, Nonattainment New Source Review would only come into play if EPA establishes a federal ambient air quality standard for GHGs that is lower than the prevailing level of GHGs in the atmosphere. 

The third program is the Title V operating permit program, which also applies to all sources with the potential to emit over 100 tpy.  The Title V program does not establish new regulatory requirements for sources but instead collects all applicable requirements under the CAA into the source’s permit.  Sources in the Title V program are also required to pay permit fees.

The 100/250 tpy thresholds for these permitting programs were designed to ensure that only the largest emitters would need a permit.  However, although 100 or 250 tpy may be a significant amount of traditional pollutants, the same amount of CO2 is rather insignificant, relatively speaking, since CO2 is emitted in such greater quantities and from so many more sources than traditional pollutants.  For example, according to EPA, a 65,000 square foot building, if heated with natural gas or oil, emits more than 250 tpy of CO2.  A study conducted by the U.S. Chamber of Commerce confirms this analysis, and indicates that more than 1.2 million buildings never before regulated under the CAA could emit more than 250 tpy and therefore could become subject to CAA permitting requirements. 

As a result, the automatic permitting requirements that may be triggered by EPA’s proposed regulation of GHG emissions from motor vehicles presents EPA with a significant dilemma – regulating GHG from vehicles may automatically impose permitting requirements on hundreds of thousands of sources never before regulated under the CAA, such as office buildings, apartment buildings, sports arenas, restaurants, churches, warehouses, etc.  EPA itself has noted that applying the 100/250 tpy thresholds to CO2 could generate such a large number of permit applications that the programs would quickly be overwhelmed.

EPA’s draft proposed regulations, although not yet made public, are expected to address this problem by setting a new threshold of 25,000 tpy of CO2-equivalent.  A great deal of concern has been expressed, however, both by industry and environmental interest group sources, as to EPA’s authority to, in effect, rewrite the statutory threshold.  Some environmental groups have also stated that 25,000 tpy is not the correct threshold and that a 10,000 tpy threshold would be more appropriate.  There has been some Congressional interest in addressing this concern.  Under the Waxman-Markey bill, for instance, air quality permit requirements for GHGs would be eliminated for sources subject to the cap-and-trade program.

There is no set time for OMB review of proposed regulations.  Ordinarily, OMB review could be expected to last several weeks or longer.

Peter Glaser of Troutman Sanders has testified before Congress on a number of occasions on the subject of GHG regulation, including on the issues raised by the proposed rule.  His testimony can be found here: