USEPA Issues Final Tailoring Rule
On May 13, 2010, USEPA issued1 the final Tailoring Rule to phase in the regulation of greenhouse gases ("GHGs") for major stationary sources beginning in 2011. In October 2009, USEPA set off a firestorm of comments when it proposed to modify statutory applicability thresholds for emissions of GHGs to avoid engulfing the agency in permitting decisions for tiny sources. Without this rule, USEPA argued, the Prevention of Significant Deterioration ("PSD") and Title V programs of the Clean Air Act ("CAA") would be triggered by the normal operation of furnaces and boilers, as an example, and permitting actions would overwhelm agency staff. USEPA has now finalized its action to modify the statutory 100 and 250 tons per year ("tpy") thresholds, reducing the burden for both regulators and the regulated community to avoid "absurd results."
The Tailoring Rule sets forth two initial steps for phasing in regulation of GHGs:
- Phase One:
- Starting January 2, 2011, GHGs must be addressed in Title V permits for all sources that are otherwise subject to Title V permitting requirements based on their emissions of non-GHG pollutants.
- In addition, PSD requirements will apply to GHGs for projects that increase net GHG emissions by at least 75,000 tpy carbon dioxide equivalent ("CO2e"), but only for projects that are "major modifications" as a result of an increase in emissions of a regulated, non-GHG pollutant.
- Phase Two: Starting July 1, 2011, some stationary sources that would not otherwise require Title V or PSD permits will require such permits solely as a result of emitting GHGs.
- Stationary sources that emit or have the potential to emit at least 100,000 tpy CO2e (and 100 tpy GHGs on a mass basis) will become subject to Title V permitting requirements.
- Stationary sources that emit or have the potential to emit at least 100,000 tpy CO2e (and 100 or 250 tpy GHGs on a mass basis) will constitute "major stationary sources" under the PSD regulations. New stationary sources over the 100,000 tpy CO2e threshold will be subject to PSD requirements for their GHG emissions. In addition, projects that increase net GHG emissions by at least 75,000 tpy CO2e will be "major modifications" (assuming other elements are met and no exclusions apply), whether or not those projects would constitute "major modifications" based on an increase of any other pollutant.
The Tailoring Rule commits USEPA to further actions:
- USEPA must solicit comment on promulgating lower GHG emission thresholds under the Title V and PSD programs. USEPA must finalize a threshold rule — which may phase in a lower threshold or even permanently exclude certain sources — by July 1, 2012, with an effective date of July 1, 2013.
- USEPA must complete a study (or two separate studies) by April 30, 2015, projecting the administrative burdens that remain with respect to stationary sources whose emissions of GHGs fall below the thresholds for Title V and PSD applicability.
- Based on the results of its study or studies, USEPA must take final action on an additional Title V rule and PSD rule, respectively, effective no later than April 30, 2016, addressing the permitting obligations of such stationary sources. USEPA may not take action prior to the effective dates of those rules to lower the thresholds for Title V or PSD applicability, respectively, below 50,000 tpy CO2e (including, with respect to PSD, both the applicability threshold to constitute a "major stationary source," and the significance threshold for an emissions increase to constitute a "major modification").
Permitting burden reductions based on the Tailoring Rule:
- Without the Tailoring Rule, USEPA estimates that Title V permits and PSD permitting actions would have been required to address GHG emissions at facilities that, together, account for 78% of the national stationary source GHG emissions. With the Tailoring Rule, that percentage is reduced to 67%.
- Without the Tailoring Rule, USEPA estimates that six million sources would have needed Title V operating permits at an annual cost to permitting authorities of $21 billion. With the Tailoring Rule, USEPA estimates that only 15,550 sources will need operating permits (15,000 of which already have operating permits) at an annual cost to permitting authorities of $69 million.
- Without the Tailoring Rule, USEPA estimates 82,000 PSD permitting actions per year would have been required to address GHGs at an annual cost to permitting authorities of $1.5 billion. With the Tailoring Rule, USEPA estimates 1,600 permitting actions per year will need to address GHGs (900 of which would be triggered solely due to GHGs) at an annual cost to permitting authorities of $36 million.
The final Tailoring Rule will become effective 60 days from its publication in the Federal Register. This brief summary does not address the many permitting decision nuances reflected in the agency action, so careful reading of the rule and preamble is suggested. Please contact any of the attorneys in Schiff Hardin's Environmental Group for questions regarding implications of USEPA's Tailoring Rule.
1Publication in the Federal Register is expected by early June 2010.
RECENT ENVIRONMENTAL PUBLICATIONS
"USEPA Proposes Reconsideration of 2009 New Source Review Aggregation Rule,"Environmental Update (April 7, 2010)
"EPA Moves Forward on GHG Regulation," Environmental Update (April 1, 2010)
"California Supreme Court Rules that "Established Levels Of Particular Use" are Baseline for CEQA Analysis," Environmental Update (March 19, 2010)
"Administrator Jackson Releases Letter to Congress Regarding Planned Greenhouse Gas Regulations," Environmental Update (February 25, 2010)
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