EPA last Thursday proposed two additional sets of regulations as part of the Agency’s effort to regulate greenhouse gases (GHGs) beginning on January 2, 2011. Under four EPA regulations issued in the last year—the Endangerment Finding, regulations addressing GHG emissions from new light-duty vehicles beginning in vehicle model year 2012, the so-called “Johnson Memorandum Reconsideration,” and the Tailoring Rule—new and modified stationary sources of GHG emissions will be required to obtain air permits including Best Available Control Technology (“BACT”) conditions to control those emissions. Further background on these regulations is found in the article Waste-Deep in the Big Muddy, by Troutman Sanders Climate Change Team Chair Peter Glaser.
The required air permits, known as Prevention of Significant Deterioration (“PSD”) permits, are generally issued by state permitting agencies. In issuing these permits, states act simultaneously under federal law—the Clean Air Act (“CAA”) and EPA’s regulations implementing the CAA—and state law.
The two EPA regulations proposed on Thursday are designed to conform state laws and regulations to EPA’s new GHG requirements. EPA has identified 13 states whose laws do not authorize them to regulate GHGs in conformity with EPA’s new GHG requirements. EPA says that its 13-state list is based on a “tentative” review of state law and asks for comments on whether any of the laws of these 13 states do in fact authorize GHG regulation and also whether any of the laws of the other 37 states do not authorize such regulation.
EPA proposes to issue on December 1 of this year a “SIP Call” for any state that EPA finally determines does not authorize regulation of GHGs. The SIP Call will require these states to make the necessary changes to their laws and to submit a State Implementation Plan (“SIP”) to EPA confirming that they have done so. EPA proposes to give states up to one year to respond to the SIP Call or some lesser period of time that a state agrees to. Some states may need the year (or even more) to respond to the SIP Call because they must undertake notice and comment rulemaking to change regulations or their legislators need to enact statutory changes.
For states that do not change their laws in response to the SIP Call, EPA proposes to impose a Federal Implementation Plan (“FIP”) under which EPA would essentially take over the state permit program. EPA does not propose to take over the entire state program, only that part addressing GHGs. Recognizing that there could be difficulty with processing a PSD permit application in which states retain control over non-GHG emissions and EPA controls GHG emissions, EPA invites comment on whether EPA should take over the entire state PSD program. EPA states that it will retain control of the state PSD program, in whole or in part, only until the state conforms its laws to EPA’s requirements through a SIP submission.
EPA says the purpose of the rule is to ensure that every state has a permit program in place—whether administered by EPA, the state or both—that is capable of processing PSD permit applications with GHG conditions as of January 2, 2011 when GHG regulation commences. The challenge of doing so, however, will be difficult, at least in some states. Since EPA will not issue SIP Calls until December 1, 2010 and since those states that receive a SIP Call will have at least a year to respond, it appears inevitable that some states will not be able to process PSD permit applications with GHG conditions as required by EPA by January 2, 2011. Moreover, a state response to a SIP Call is not automatically effective but must be approved by EPA through a process in which EPA must issue notice of the proposed approval and take comment.
Given these considerations, EPA recognizes that a possibility exists that, in some states and for some period of time, there could effectively be a permit moratorium and therefore a construction moratorium for sources that are subject to EPA GHG regulatory requirements. This situation could occur for states that must change their laws but cannot do so by January 2, 2011 or those that do so in response to the SIP Call but EPA does not approve their response by January 2, 2011. These states could only issue a PSD permit without GHG conditions, but those permits would violate federal law and could not be relied on by the permittee. Without a valid permit, the developer could not commence construction.
EPA offers several options which it says are designed to minimize the possibility that this type of construction moratorium could come about. It proposes to “parallel process” its approval of a state’s response to a SIP Call with the state making the needed changes in state laws. Under this option, where a state issues notice and takes public comment on a proposed law revision as part of the process of responding to the SIP Call, EPA would simultaneously issue notice and take comment on whether the state’s proposed law revision, assuming it is finalized without change, satisfies federal requirements. Other options proposed by EPA include states agreeing in advance to EPA taking temporary control of their PSD programs and states agreeing to temporarily act as EPA’s delegate in administering a federal PSD program, both until the states make the needed law changes.
EPA also faces the problem that some states that authorize regulation of GHG emissions may have different thresholds for regulation than EPA. EPA’s Tailoring Rule was designed to address the problem that the CAA requires any source potentially emitting more than 100 or 250 tons per year of a regulated air pollutant (depending on the type of source) to obtain a PSD permit. EPA concluded that these thresholds were too low for GHGs and could result in so many sources becoming subject to PSD permit requirements that the permitting system would become swamped with applications. The Tailoring Rule increased those thresholds to much higher levels.
At least some states, however, require use of the lower thresholds, either because their laws incorporate the CAA thresholds by reference or expressly adopt them. EPA is also requiring these states to change these regulatory thresholds.
EPA has already denied numerous requests from business associations that EPA delay the commencement of GHG regulation on January 2, 2011. Despite the obvious difficulty, as reflected in EPA’s proposals, of ensuring that all fifty states are ready to go with GHG permitting as of that date, it seems very unlikely that EPA would change its determination to commence regulation with the beginning of the new year.
Comments on EPA’s proposals are due 30 days after they are published in the Federal Register, expected shortly.