The tailoring of greenhouse gases to the clean air act – challenges for PSD and title v permitting ahead?

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Courtesy of Trinity Consultants

In anticipation of the promulgation of Clean Air Act (CAA) regulations to control greenhouse gas (GHG) emissions, EPA published the proposed PSD and Title V GHG Tailoring Rule. The proposed GHG Tailoring Rule was published in the Federal Register on October 27, 2009 and has a 60-day public comment period; thus comments are due by December 28, 2009. The proposed GHG Tailoring Rule attempts to reduce the number of sources that would exceed major source thresholds of GHG emissions under the PSD and Title V permitting programs. The potential impacts of this ruling are far-reaching and could significantly expand the scope of NSR and CO2 leaf clockTitle V permitting actions in the near future.

This article examines the nuances of the proposed rule along with the actions EPA has identified as critical to avoid a potential permitting “train wreck.” Potential implementation issues associated with the proposed GHG Tailoring Rule are also discussed.

Key Objectives of GHG Tailoring
In March 2010, EPA expects to promulgate a light duty vehicle rule regulating GHGs from mobile sources. As stated by EPA, the anticipated promulgation of the light duty vehicle GHG rule will lead to GHGs being classified as regulated pollutants under the Clean Air Act. Following the definition of “regulated pollutant” as described in the PSD Interpretive Memorandum,1 GHGs would immediately become subject to the PSD and Title V permitting programs once a regulation requiring the control of GHGs is promulgated – this requirement to control will be contained in the light duty vehicle regulation. Upon promulgation of GHG control requirements, GHGs become regulated pollutants, and the major source threshold for GHGs would by default be set at 250/100 tons per year (tpy) for PSD and 100 tpy for Title V.

EPA has estimated that the influx of permits resulting from the regulation of GHGs at current PSD and Title V major source threshold levels would be on the magnitude of tens of thousands of PSD permits and millions of Title V permits. Specifically, EPA estimates that if a 250 tpy threshold for GHGs was applied for PSD permitting, over 40,000 new and modified facilities would be subject to PSD review each year, as compared with the 280 PSD permits currently issued each year. The increase in Title V permits resulting from a GHG major source threshold of 100 tpy is estimated to be even more significant with an estimated increase in the volume of permits “greater than” or “in excess of” 400 times the current levels. EPA estimates that more than six million GHG sources that have not previously triggered Title V permitting for regulated pollutants would require permitting if the current major source threshold was applied to GHGs. As stated in the rule preamble, these significant increases in the number of PSD and Title V permits would result in administrative burdens that would exceed the current capacities of these programs, strain state and federal agencies, and apply significant permitting burdens on industrial, commercial, and residential sources. EPA is relying on the legal doctrines of “absurd results” and “administrative necessity” to support the tailoring approach, which would ensure that permitting requirements are not unnecessarily triggered for the smallest sources when the light duty vehicle GHG rule is promulgated.

An additional burden specific to the PSD permitting program is the determination and application of Best Available Control Technology (BACT) for GHG sources upon triggering a major modification. The introduction of BACT for GHGs will require that both permit applicants and regulatory agencies immediately examine the effectiveness and associated cost of potential GHG control technologies to understand what limitations are reasonable for a variety of GHG source types. EPA has formed a BACT workgroup that is currently developing guidance for permitting agencies regarding what will potentially constitute BACT for modified sources – the initial draft guidance is expected to be issued by the end of 2009. From a Title V perspective, additional measurement and monitoring methodologies would need to be included as Title V permit requirements to demonstrate compliance with resultant GHG limits.

The following section outlines the main objectives EPA has included in their proposed rule.

Endangerment Finding Clears Path for GHG Regulation
On Dec. 7, U.S. EPA Administrator Lisa Jackson signed two important findings, clearing the way for EPA to regulate greenhouse gases under the Clean Air Act. The “Endangerment Finding” clarifies EPA’s belief that current and projected concentrations of six key greenhouse gases in the atmosphere pose a threat to human health and welfare. Further, the “Cause or Contribute Finding,” associates the emissions of the six named GHGs from motor vehicles with the threat to public health and welfare. These actions enable EPA to move forward with the Sept. 15, 2009 proposed GHG emissions standards for light duty vehicles, which will initiate the treatment of GHGs as “regulated pollutants” under the Clean Air Act.

These latest actions close out consideration by EPA of the public comments period that was opened following the proposed endangerment and cause or contribute findings signed on April 17, 2009. This course was set in motion in 2007 by Massachusetts v. EPA, whereby the Supreme Court found that GHGs are air pollutants that are covered by the Clean Air Act. The Court charged EPA with determining whether GHGs from motor vehicles negatively contribute to public health. In July 2008, EPA issued an Advance Notice of Proposed Rulemaking to initiate consideration of addressing climate change via the Clean Air Act. It received over 200,000 comments in response.

Although the recent findings do not directly trigger air permitting requirements under the PSD or Title V programs, the finalization of the proposed light-duty vehicle emissions standards will have that effect.

Trinity Consultants is supporting many companies in preparing for these new requirements. For assistance with how these rules may affect your organization, please contact Trinity’s Climate Change Team at ghg@trinityconsultants.com .

An Overview of the GHG Tailoring Rule
Since GHGs are emitted at comparatively higher rates than existing regulated pollutants, EPA is proposing higher major source and major modification thresholds for GHGs as part of a phased program under the GHG Tailoring Rule. However, it is important to understand that the higher thresholds proposed within EPA’s rule are presented only as temporary adjustments of the major source and major modification thresholds for GHGs, and the Agency does not rule out the potential return to the 250/100 tpy thresholds in the future. EPA has also noted that it is not addressing minor source NSR nor nonattainment permitting through the GHG Tailoring Rule.

The proposed GHG Tailoring Rule includes two separate phases. Under the currently proposed rule, Phase I would last six years and would include the following objectives:

  • Set temporary first-phase applicability thresholds for PSD and Title V at 25,000 tpy CO2 equivalent (CO2e) for GHGs
  • Set temporary first-phase significance level for PSD at a value between 10,000 and 25,000 tpy CO2e for GHGs
  • Undertake efforts to streamline the permitting processes under the PSD and Title V programs
  • Commit to conducting an assessment of the streamlining efforts within five years in support of Phase II rulemaking within six years

Since the outcome and objectives of Phase II are highly dependent upon the results of the Phase I assessment, EPA does not go into great detail about Pase II. Instead, the proposed rule focuses on the objectives of the first phase, documents referenced and analyses supporting the chosen objectives, and provides additional details on how EPA envisions meeting the objectives.

The proposed GHG applicability thresholds for PSD and Title V of 25,000 tpy were determined to be the most stringent thresholds that would not result in programs that are impossible to administer. In addition, the threshold (although in short tons, not metric tons) is close to the threshold set for the EPA Mandatory Reporting of Greenhouse Gases Rule, which became effective December 29, 2009. Similar to how EPA evaluated thresholds contained in the reporting rule, the proposed GHG Tailoring Rule thresholds were determined by evaluating the administrative burdens and associated costs of thresholds ranging from 1,000 to 100,000 tpy for the major source threshold. A similar approach was used in determining the targeted range of 10,000 to 25,000 tpy for the PSD significance level.

Another key objective of Phase I is to undertake efforts to streamline the administrative processes of the PSD and Title V programs. These streamlining techniques would assist in alleviating a portion of the increased burden resulting from the addition of GHGs as a regulated pollutant. Streamlining techniques are described as a supplemental resource to reduce administrative burdens during Phase I and beyond. EPA has indentified the following potential streamlining techniques and processes to be examined and potentially implemented during Phase I:

  • Redefining “Potential to Emit” – to be closer to actual emissions, where possible
  • Establishing “Presumptive BACT” – essentially making BACT determinations based on categories of equipment versus a case-by-case or unit-by-unit basis
  • Utilizing General Permits and Permits-by-Rule – essentially a permitting process through which the regulator drafts the permit one time and applies similar requirements to each covered source under the general permit
  • Employing electronic permitting – e-permitting systems will allow for more effective and efficient source permitting using electronic forms and software
  • Implementing “lean” techniques for permit process improvement – implementation of lean manufacturing techniques to the permitting process to reduce wasted time and shorten the permitting process

EPA estimates that each of these techniques, or similar processes, would typically require three to four years to fully develop and implement.

The final objective of Phase I is to complete a full assessment of the interim major source thresholds and streamlining techniques that were implemented during the first phase. The timeline proposed for completion of the assessment is within five years of the effective date of the final GHG Tailoring Rule. The assessment is a vital element of Phase I since the results will serve as the basis for further rulemaking that may take place as part of Phase II. EPA also anticipates that during the five-year evaluation period, additional activities associated with PSD and Title V applicability for GHGs will be conducted and will aid in completing the assessment of the GHG tailoring approach. These activities may include, but are not limited to, the following:

  • Determination of additional regulatory staffing needs and addition of new staff members
  • Collection of more detailed GHG emissions information as part the GHG mandatory reporting rule
  • Development of control technology and costs background information for specific GHG emission source categories

Implementation Issues & Remaining Question
If finalized, the GHG Tailoring Rule would result in federally enforceable major source and major modification GHG threshold levels for the PSD and Title V programs that are significantly higher than the existing thresholds. However, for those states that may have PSD and Title V thresholds specifically listed at current levels of 250/100 tpy within state regulations, the GHG Tailoring Rule would not immediately remove those lower thresholds from State law. In other words, the GHG Tailoring Rule may not be self-executing for some states; rather, it could require additional state legislation to remove these limitations. As a result, facilities may face the potential for stalled projects and significant program backlogs if similar action is not taken in a sufficient timeframe at the state level to increase the major source thresholds for GHG. Without updates at the state level, facilities would not be allowed to legally begin construction of or operate a site exceeding the 250/100 tpy GHG thresholds without proper authorization. As stated in the proposed rule, states are not required to use those thresholds proposed in the GHG Tailoring Rule and may implement GHG threshold levels between 250 and 25,000 tpy but would be required to submit a revision to their current State Implementation Plan (SIP) requesting approval of thresholds lower than the federal level. Independent of the ultimate decisions made by individual states, legitimate concerns remain as to whether states will have sufficient time to change the major source applicability threshold for GHG through legislative action and avoid negative impacts on the PSD and Title V programs.

Another implementation issue revolves around pollutant categorization and treatment of biomass. The proposed rule defines GHGs as the sum of the six primary GHGs – including CO2, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride, represented as CO2e in short tons (versus metric tons). The GHG Tailoring Rule provides supporting information on choosing this specific definition; however, it does not distinguish biomass emissions from other GHG emissions when comparing against the major source thresholds. Without a distinction, one would assume that any biomass emissions should be included in the total emissions for evaluation with PSD and Title V thresholds. Questions related to biomass are anticipated during the comment period on the proposed rule, as this may be of significant concern to facilities that fire biomass. The issue of dissonance between the EPA Mandatory Reporting of Greenhouse Gases Rule (codified as 40 CFR Part 98) listing thresholds in metric tons versus short tons in the GHG Tailoring Rule is also a streamlining issue that EPA will need to address.

Additional implementation issues include complications around netting for PSD on the basis of CO2e, which would involve multi-pollutant netting since six GHGs would potentially be regulated for the purpose of the tailoring rule. Regarding additional requirements that are currently present under PSD requirements, EPA does address the ambient impacts analysis and asserts that currently there are no National Ambient Air Quality Standards (NAAQS) or PSD Increment values set for GHG, so if PSD were triggered for GHGs, the ambient impact analysis would not be required. However, if PSD were triggered for a GHG emissions source, all other regulated pollutants from the source that are emitted in significant amounts would be subject to PSD requirements and the ambient impacts analysis.

As previously mentioned, BACT determination is another significant issue that EPA will need to tackle through this streamlining process. Attempting to define what constitutes BACT may result in energy efficiency or work practice standards, which may differ from the prior approach of designating an emission rate (associated with a control technology) as BACT. Currently, trade associations are also forming BACT workgroups to inform EPA on the potential limitations of combustion technologies to achieve significant GHG reductions.

Additional issues that have been identified by specific industry sectors for consideration by EPA include:

  • When does a pollutant become “subject to regulation?” The light-duty vehicle rule may be finalized as early as the spring of 2010. Will GHGs (individually or as a group) become subject to regulation then or upon the compliance date, i.e. model year 2012?
  • The discrepancy between the three named GHGs covered in the light-duty vehicle rule (CO2, methane, and nitrous oxide) compared to the six GHGs that are proposed for regulation under the GHG Tailoring Rule
  • Whether the Clean Air Act requires the establishment of a NAAQS for GHGs in order to independently trigger PSD for increases in GHG emissions. Absent a NAAQS, the application of BACT under the PSD rules would be required for GHGs only when a criteria (NAAQS) pollutant first triggers PSD (for a given project) and there is a significant net emissions increase in GHGs.
  • Whether Congress intended the PSD program to protect only locations directly impacted by the emissions from regulated sources. This would imply site specific assessments of air quality which are routinely addressed in PSD permit applications. EPA has not documented any impacts from GHGs that can be attributed directly to local sources of GHGs.

Finally, it is noteworthy that there may be some significant legal challenges to this rule due to the complexities of trying to redefine thresholds within the Clean Air Act. As with any proposed rule, it is important to understand the potential implications of the rule when it becomes final and track the progress of the rule.

What Should Organizations Do?
Even at this preliminary stage of rulemaking, it is clear that there will be significant permitting issues that many facilities will need to address in the immediate future regarding GHGs.  Trinity has begun work with a number of organizations to confirm facility GHG inventories, anticipate which facilities would be potentially impacted by new GHG thresholds under Title V and/or PSD, and evaluate where limitations could potentially be taken to mitigate the potential impacts of this proposed rule. If you have any questions related to these specific implementation challenges or how the proposed GHG Tailoring Rule may affect your organization, contact our Climate Change Services Group at ghg@trinityconsultants.com .

1 EPA memorandum titled “EPA’s Interpretation of Regulations that Determine Pollutants Covered by Federal Prevention of Significant Deterioration (PSD) Permit Program” from Stephen L. Johnson, then-Administrator of U.S. EPA, dated December 18, 2008.

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