This week, the U.S. Environmental Protection Agency (EPA) took two major
steps in the agency’s continued march toward establishing a new regulatory
framework to control greenhouse gas (GHG) emissions under the Clean Air Act (CAA).
On Monday, March 29, 2010, EPA finalized the agency’s formal reconsideration
of the Dec. 18, 2008, “Johnson Memo” addressing when GHGs would become “subject
to regulation” under the CAA. EPA’s reconsideration action was the first formal
confirmation of recent informal statements by Administrator Lisa Jackson that
EPA is not planning to regulate GHG emissions through the CAA Prevention of
Significant Deterioration (PSD) and Title V permitting programs until 2011.
On Thursday, April 1, 2010, EPA and the U.S. Department of Transportation
took another momentous step by announcing the much-anticipated final light duty
vehicle rules, which formally establish EPA’s first-ever national regulation of
GHGs. Finalizing the vehicle rules has been a major priority for the Obama
Administration, as well as the automobile industry, which has worked with the
administration to avoid a potential state-by-state patchwork of GHG automobile
The final light duty vehicle rules increase Corporate Average Fuel Economy
(CAFE) standards on model year 2012 to 2016 automobiles, and set GHG emission
reduction requirements that will result in a fuel economy standard equivalent to
an average of 35.5 miles per gallon by 2016.
By triggering GHG regulation under the CAA, the light duty vehicle rules also
indirectly impact many other carbon-intensive industries, which potentially will
be subject to PSD and Title V permitting requirements. The reconsideration of
the Johnson Memo issued Monday sets forth some of the details of how and when
such GHG permitting will occur, and additional details are expected in EPA’s
forthcoming final Tailoring Rule. The final Tailoring Rule is expected to be
released later this month.
EPA’s final action on Monday concludes the agency’s reconsideration of former
EPA Administrator Stephen L. Johnson’s determination that the CAA’s permitting
programs only apply to pollutants subject to an actual emissions limitation or
other substantive regulation under either the CAA itself, or regulations adopted
by EPA under the CAA. This action confirms Administrator Johnson's
interpretation that GHGs were not "regulated" under the CAA prior to the
finalizing of the light duty vehicle GHG regulation.
On Dec. 30, 2008, the Johnson Memo was challenged by a coalition of 17
environmental groups that petitioned EPA for reconsideration of its
determination. While the Johnson Memo interpretation has remained in effect, EPA
formally requested comments in October 2009 on five alternative interpretations
of when a pollutant becomes “subject to regulation” and must be addressed
through, inter alia, implementation of Best Available Control Technology
(BACT) under the PSD program.
EPA noted in its reconsideration proposal that it expressly favored the
actual control interpretation adopted in the Johnson Memo, over the other more
expansive interpretations including the monitoring and reporting interpretation
advocated by the environmentalist petitioners.
EPA’s final action on Monday affirmed the Johnson Memo’s determination that
GHGs would become subject to PSD permitting requirements only after a national
emissions rule is finalized requiring actual control of GHG emissions. This
determination set the stage for the announcement of the light duty vehicle
rules, which officially established national climate change regulation and
triggered the CAA’s statutory requirement for PSD permitting and BACT
determinations for new and modified sources of GHGs.
Importantly, however, EPA’s decision on Monday also refined its
interpretation under the Johnson Memo to provide that PSD permitting
requirements will only apply to new pollutants at the time the regulatory
requirement to control emissions actually “takes effect,” rather than
immediately upon finalizing the rule or upon the rule’s legally effective date.
EPA states that since the light duty vehicle rules will not take effect until
Jan. 2, 2011, the date when emissions from 2012 model year vehicles are actually
subject to limitation, the PSD permit program requirements will not be triggered
under the CAA until that date. This change in interpretation moves the trigger
date for GHG PSD permitting under the CAA from about mid-June 2010 (the expected
effective date of the motor vehicle rule) to January 2011. This provides a
respite of approximately nine months for state and federal permitting
authorities to prepare for what many fear will be an onerous new permitting
EPA also stated on Monday that its interpretation on reconsideration –
including the delayed trigger date – will apply to the related Title V operating
permit program as well as the PSD construction permit program.
Much ambiguity remains as to how PSD and Title V permitting for GHG’s will be
implemented. Recent public statements by Administrator Jackson suggest that the
final Tailoring Rule will contain an initial emissions threshold of 75,000 or
potentially even 100,000 tons per year in 2011, which is well above the 25,000
tons per year threshold initially proposed in the draft Tailoring Rule on Sept.
To further ease the burden on permitting authorities, the administrator also
suggested that sources that are only “major” under PSD permitting for GHGs (and
not for other traditional pollutants such as NOx or SOx) may not need to obtain
PSD permits in the initial early 2011 phase of the program.
While EPA’s latest interpretation of the trigger date slows the application
of GHG regulations to stationary sources under the CAA, EPA also makes clear
that no grandfathering or exclusion will apply to permit applications already
pending when the PSD program becomes operative for GHGs in January 2011. EPA
notes that permit applications submitted prior to its final action should “in
most cases” be issued prior to Jan. 2, 2011, thus will have a nine-month
transition period to complete the permitting process before PSD requirements
However, EPA’s determination not to grandfather pending permits applications
will likely incentivize new permit challenges and delay tactics in the coming
months by environmental activists who would like to see pending permit
applications become subject to GHG regulation.
EPA also called on permitting authorities in states authorized to implement
their own PSD permit programs to consider now (even before GHG permitting
requirements become effective) energy efficiency technologies in BACT
determinations for non-GHG criteria pollutants in order to indirectly facilitate
GHG emission reductions prior to January 2011.
EPA recognized that current guidance is lacking regarding utilization of
energy efficiency in making BACT determinations, and EPA proposed to issue
guidance in the near future addressing precisely how energy efficiency should be
incorporated into BACT determinations for current criteria pollutants, or
prospectively, for GHGs.
Following Monday’s action, state permitting agencies and industry groups have
expressed concern that the CAA continues to be the wrong instrument for
regulating ubiquitous and difficult-to-control GHG emissions. Furthermore, the
nine-month respite prescribed by EPA’s interpretation is unlikely to be enough
time for cash-strapped state permitting authorities to ramp up their permitting
staff, and for EPA and the states to develop uniform and defensible approaches
to making BACT determinations for reducing GHGs.
McGuireWoods LLP Clean Air Act Team
McGuireWoods LLP is a full service law firm with a focused practice in
Climate Change and Clean Air Act matters. For more information on the final
light duty vehicle rule or EPA's initiatives to regulate greenhouse gases,
please contact the authors, or any member of our Clean Air Act team.