Legal Niches

EPA Releases Tailoring Rule

By Jim Holtkamp

On May 13, 2010, the Environmental Protection Agency (EPA) released the final Prevention of Significant Deterioration (PSD) Tailoring Rule, which will govern permitting of major stationary sources of greenhouse gas (GHG) emissions. The Tailoring Rule is the latest in a series of EPA rulemaking actions under the Clean Air Act designed to regulate GHGs, including the Mandatory GHG Reporting Standard (40 CFR Part 98, 74 Fed. Reg. 56260 (Oct. 30, 2009)), the Endangerment Finding for Greenhouse Gases (74 Fed. Reg. 66496 (Dec. 15, 2009)), the Light-Duty Vehicle GHG Standards ( 75 Fed. Reg. 25324 (May 7, 2010)), and the decision on Reconsideration of the Johnson Memorandum (75 Fed. Reg. 17004 (Apr. 2, 2010)).

Although the Clean Air Act explicitly provides that the threshold for major source PSD review is 100 tons per year if the source is in a category listed in the statute or 250 tons per year if it is not, to apply the 100/250 tons per year threshold to GHGs would, by EPA?s own estimation, increase the number of sources subject to the PSD program by 140 times, and the number of sources subject to the Clean Air Act Title V Operating Permit program by 400 times. Given the very severe regulatory and economic consequences of such a result (which would entail regulating, among other things, many office buildings, schools, residential complexes, restaurants, and other commercial buildings), EPA is significantly increasing the thresholds for PSD review of GHG sources, and is phasing in the applicability of the PSD program to various sources depending on the timing of their PSD permits and the amount of GHG emissions.

The primary metric for determining the applicability of the Tailoring Rule is CO2 equivalent or ?CO2e?, which is a standardized comparison of the climate-forcing potential of various GHGs compared to a ton of CO2.

The first phase of the rule begins January 2, 2011, when sources that are otherwise major sources for non-GHG pollutants would be required to undergo PSD review for GHGs if they have a potential to emit 75,000 tons of CO2e per year or more of GHGs. A major source which has obtained a PSD permit before January 2, 2011 will not be subject to PSD requirements for GHGs unless and until it applies for a PSD permit for a modification. During this phase, Title V operating permits will be required for sources of GHG that otherwise are major sources for non-GHG regulated pollutants, and will be required to incorporate GHG limitations only to the extent such requirements are found elsewhere and are within the definition of ?applicable requirements? under Title V of the Clean Air Act.

The second phase begins July 1, 2011, and will include sources that have the potential to emit 100,000 tons or more CO2e per year of GHGs, regardless of whether the source would otherwise be major for any other pollutant. Major modification PSD review will be triggered if the modification will result in an increase of 75,000 tons per year or more CO2e of GHGs. In this phase, sources of 100,000 tons of CO2e GHGs or more will be required to obtain a Title V permit if they do not already have one.

Phase 3 entails a rulemaking process in which EPA will seek comment on how to regulate smaller sources of GHGs, and will issue a final rule on or before July 1, 2012, setting lower thresholds. EPA commits that it will not seek to regulate sources of less than 50,000 tons of CO2e GHGs under the PSD and Title V programs before 2016.

The Tailoring Rule concludes that many, if not most, states will be able to implement the Rule quickly, simply by interpreting the term ?regulated pollutant? in the state regulation or statutes in the same way that EPA interprets it in the Tailoring Rule. States are asked to advise EPA in writing no later than 60 days following the date of publication of the Rule in the Federal Register as to whether and how they can implement the Rule most expeditiously.

The Rule will be published in the Federal Register within the next few weeks, and the 60-day period within which to file petitions for review of the Rule with the District of Columbia Circuit Court of Appeals will commence on the date of publication.

Full post as published by Climage Change Law on May 19, 2010 (boomark / email).