EPA Issues Final GHG Emission Rules for Large Stationary Sources

May 14, 2010
MGKF News Flash

Despite the provisions in the recently released American Power Act (and other pending legislation) that would strip EPA of its ability to regulate GHGs under its current Clean Air Act authority, EPA on May 13 finalized its "Tailoring Rule" regarding the regulation of GHGs from large stationary sources. This rule "tailors" the applicable GHG thresholds for PSD and Title V applicability from the 250 and 100 ton thresholds currently in the Clean Air Act in an attempt to limit the number of "major" sources that would otherwise be subject to these permitting programs if these thresholds were applied to all stationary GHG emissions sources. According to EPA, the final rule would shield farms and small businesses from these permitting programs. The legal authority of EPA to exempt these smaller sources from the PSD and Title V programs, however, is somewhat uncertain and will likely be litigated. Moreover, the final rule leaves open the important issue as to what constitutes Best Achievable Control Technology ("BACT") for GHG emissions, with guidance from EPA on that issue purportedly coming by the end of this year.

The final Tailoring Rule phases in PSD and Title V permitting requirements for GHG stationary sources in two steps. First, from January 2011 through June 2011, only sources already subject to PSD or Title V permitting requirements would be considered major sources subject to Title V or PSD requirements for their GHG emissions. Furthermore, only projects that result in increases of 75,000 tons per year of GHG emissions (measured as CO2 equivalent or "CO2e") would be considered "significant" thereby requiring emitters to determine and implement Best Available Control Technology ("BACT") for their GHG emissions. In step two, which starts July 2011 and extends through June 2013, sources that emit greater than 100,000 tons per year of GHGs would be considered "major" for purposes of the Title V and PSD programs, even if they would not otherwise be subject to these programs due to emissions from other pollutants. And modifications at these facilities that result in increases of at least 75,000 tons per year of GHGs would be subject to the PSD program even if the modifications do not result in significant emission increases of other pollutants. EPA estimates that these step two provisions will require about 550 new sources to obtain Title V permits and will result in about 900 additional PSD permitting actions.

The final Tailoring Rule also includes a third step whereby EPA states that it will undertake another rulemaking that will conclude by July 2012 and address phasing in Title V and PSD permitting requirements, or exclusions, for smaller GHG sources. This additional rulemaking will not require permitting for sources with GHG emissions below 50,000 tons per year, and any smaller sources that are subject to this future rule will not require permits until at least April 30, 2016. In addition, the final Tailoring Rule commits EPA to a study of any remaining GHG permitting issues for smaller sources, including the possibility that streamlining and/or general permits will allow for additional sources to be phased into the PSD and Title V permitting programs for GHGs.

Importantly, the final Tailoring Rule does not establish BACT requirements for GHGs. Late last year, EPA convened an advisory committee to examine issues associated with establishing BACT for GHGs. That group released its initial report earlier this year, but the group did not come to consensus on a number of issues. Since that time, EPA has indicated that BACT for GHGs would likely involve energy efficiency measures (as opposed to carbon capture and sequestration or other technologies). The final Tailoring Rule states that EPA plans to issue guidance and other information on BACT for GHGs by the end of 2010.