EPA has issued a veritable grab bag of greenhouse gas rules in the past two months, many of them just in time for Christmas.  Here is a brief summary of some of the more significant EPA actions.

 Final Greenhouse Gas Tailoring Rule

On December 30, 2010, EPA issued its Final Tailoring Rule, which sets forth EPA’s strategy for issuing Title V operating permits to the largest sources of GHG emissions.  Significantly, the rule narrows EPA’s previous approval of some states’ permitting thresholds for GHG emissions.  Before, sources with the potential to emit 100 tons per year of GHGs would have required Title V permits, even if their GHG emissions were below the PSD thresholds. Now, only sources that equal or exceed the GHG thresholds for PSD permits will require permits under federally-approved Title V programs in the affected states. This means EPA will not require states to impose more stringent Title V permit thresholds and the number of sources that will need Title V permits for their GHG emissions is reduced.

This rulemaking does not affect the definition of a “major source” of GHGs for purposes of the Prevention of Significant Deterioration (PSD) construction permit programs.  PSD permitting thresholds for GHGs were established on June 3, 2010 in the first Tailoring Rule and remain in effect. 

GHG thresholds for both Title V and PSD permits are expressed in terms of the CO2 equivalent, or “CO2e.”  This means an amount of CO2 that would have the same global warming potential as a given mixture of the six GHG gases EPA will regulate.  CO2e is a way for EPA to tie GHG permitting to a single quantity.  The GHG threshold for both PSD and Title V permits is 100,000 tons per year CO2e.

Since there is never a free lunch where EPA is concerned, the rule does not mean EPA will never require permits for smaller GHG sources.  Rather, EPA intends to address smaller sources, and has excluded the smallest GHG sources from Title V permitting until at least April 30, 2016.

It remains to be seen whether EPA’s narrowing of Title V permitting for GHGs will survive legal challenge.  Environmental groups and some states will probably appeal the rulemaking.  For this reason, and because EPA intends to regulate smaller GHG sources in the future, any potentially affected business must continue to monitor regulatory developments closely.

Establishing EPA Authority to Issue PSD Permits for GHG Sources in Seven States

Also on December 30, 2010, EPA established federal PSD permit rules for seven states which have not submitted timely revisions to their State Implementation Plans (SIPs) to apply their PSD programs to GHG sources.  This rule does not affect Indiana, Ohio and Kentucky, because these states have submitted appropriate PSD rules on time.  This rulemaking does establish new federal PSD rules for GHG sources in Arizona.

Limitation on approval of PSD Rules for GHG Sources in Twenty-Four States

On December 30, 2010, EPA withdrew its approval of twenty-four SIPs that would have required PSD permits for GHG sources with emissions below the threshold established by the Tailoring Rule for PSD permitting.  In these states, including Indiana and Ohio, PSD programs for GHG sources that were previously submitted to, and approved by, EPA would have used the usual PSD thresholds for determining which new and modified sources of GHGs require PSD permits, instead of the much higher threshold established by EPA.  This rulemaking means that the higher GHG thresholds for PSD permits will apply in all the states. Since EPA has stated the rule takes effect without any further action by the states, EPA is signaling that it will not require states to impose more stringent PSD thresholds.

The rulemaking does not affect Kentucky, which has already interpreted its SIP to require PSD permits only for sources with GHG emissions above the Tailoring Rule thresholds.

This rulemaking will probably also be appealed by environmental groups and interested states, which have opposed any EPA rulemaking that limits the scope of GHG regulation. 

Proposed Timetable for Issuing GHG Emission Standards for Power Plants and Refineries

When EPA promulgated revised new source performance standards (NSPS) for electric utility steam generating units (EGUs) in 2006, several states and environmental groups appealed the rule because it did not place limits on GHG emissions, among other reasons.  The GHG portion of the appeal was severed from the rest of the lawsuit (the petitioners wanted to make the entire rule tougher).  Following the Supreme Court’s decision in Massachusetts v. EPA, which recognized EPA’s authority to regulate GHGs in certain circumstances, EPA asked the Court of Appeals for the D.C. Circuit to remand the GHG questions back to EPA for further consideration.  The petitioners countered that EPA needed to act promptly to promulgate GHG standards for new and modified EGUs and demanded specific deadlines for rulemaking.

On December 30, 2010, in accordance with a settlement agreement between EPA and the petitioners, EPA proposed to issue a proposed rule by July 26, 2011 that includes standards of performance for GHG emissions from new and modified EGUs.  In addition, EPA will propose by the same date emission guidelines for GHGs from EGUs not otherwise subject to the NSPS.  EPA proposes to take final action on the new GHG limits no later than May 26, 2012.

In addition, and also to settle a lawsuit, EPA proposed to set GHG emissions standards for new and modified petroleum refineries by December 15, 2011, and to issue final regulations no later than November 15, 2012.

Owners and operators of EGUs and refineries will be watching EPA closely for the next eighteen months as the rulemaking process goes forward.  Industry and environmental groups will be lobbying EPA and Congress hard on the appropriate GHG emission limits.  EPA’s future rulemaking on GHG emissions from power plants may prove to be a bellwether for GHG limits on other stationary sources.

GHG Reporting

EPA has also recently issued GHG reporting rules.  EPA’s first mandatory GHG reporting rules were published in October 2009, and applied to suppliers of fossil fuels or industrial GHGs, vehicle and engine manufacturers, and facilities that emit 25,000 metric tons or more per year of GHGs. Facilities subject to these rules must submit annual reports of GHG emissions to EPA.

On December 17, 2010, EPA acted to defer some of the deadlines for submitting certain types of data required by the reporting rules.  The key issue was whether certain emissions information should be regarded as business confidential.  EPA has proposed to defer the deadline for reporting confidential information for the calendar years 2100 through 2104 until March 2014, to give interested parties more time to submit comments and EPA more time to study the problem.  However, the reporting of certain types of data required to be reported for the calendar year 2010 is being deferred only from March until August 2011.  In the meantime, EPA is asking affected sources to submit information on the types of data considered to be sensitive business information. Written comments may be submitted to EPA until January 16, 2011.

GHG Emissions from Vehicles and Fuel Economy Standards

On October 25, 2010, the EPA and the National Transportation Safety Administration proposed rules to reduce GHG emissions by improving the efficiency of all medium and heavy-duty vehicles, including large pickups, semis trucks and buses.  The new fuel economy standards are proposed to take effect for the 2014 model year.  EPA is currently seeking input from manufacturers, fleet owners and operators, and environmental groups. These new rules follow on the April 1, 2010 rule which established new fuel economy standards for passenger cars and commercial trucks for the 2012 through 2016 model years.  However, EPA is also promising to issue even stricter standards for passenger cars and light-duty vehicles beginning with the 2017 model year.

For more information about EPA’s greenhouse gas regulations, contact Larry Vanore or any member of Taft’s environmental practice group.