U.S. EPA Proposal for Greenhouse Gas Clean Air Act Regulation
A presentation by U.S. EPA Administrator Lisa Jackson outlines an approach to regulate greenhouse gas (GHG) emissions from mobile emission sources while also laying the groundwork for exempting small industrial sources of GHG emissions. At the center of the approach is U.S. EPA’s response to the Supreme Court’s decision that GHG from mobile emission sources could endanger public welfare (Massachusetts v. U.S. EPA). Although the U.S. EPA response only addresses GHG emissions from mobile sources, it is establishing a precedent that will logically lead to regulation of other sources of GHG emissions under Clean Air Act (CAA) programs (e.g., New Source Review (NSR)). The potential regulation of other sources of GHG emissions (i.e., industrial sources) is of significant concern because of the relatively low thresholds associated with defining a source as major (100 to 250 tons per year) under NSR and thus requiring regulation of that source. U.S. EPA is proposing to address the low emission thresholds by providing precedent from previous CAA regulations involving mobile sources. Specifically, U.S. EPA has exercised authority to regulate those sources that it felt were contributing to an air quality problem regardless of the emission threshold of the source. U.S. EPA believes 
that the precedent exercised when regulating small mobile sources also establishes the discretionary review that U.S. EPA would need to exempt smaller sources of GHG under CAA programs such as NSR. The U.S. EPA approach is most likely a stopgap measure for regulating GHGs. There are so many aspects to GHG regulation under different U.S. EPA programs (e.g., CAA, Safe Drinking Water Act, etc.) that separate Congressional action is likely the best solution to establishing a program to provide effective management of GHGs.
The Latest on the Commonwealth Court Mercury Rule Decision
The court battle over Pennsylvania’s regulations to limit mercury air emissions from coal-fired Electric Generation Units (EGUs) feels very much like watching a tennis match waiting to see where the next volley lands. On January 30, 2009, Commonwealth Court Judge Dan Pellegrini ruled that Pennsylvania’s Mercury Rule was unlawful, invalid, and unenforceable. Following that ruling, the Pennsylvania Department of Environmental Protection (PADEP) filed an appeal of that decision with the Pennsylvania State Supreme Court. That filing created an automatic stay of the Commonwealth Court ruling which kept
the PA Mercury Rule in effect. Next, the PPL Corporation (PPL), who began the original appeal with the Commonwealth Court, filed a request with the Commonwealth Court to lift the automatic stay on its ruling. The Commonwealth Court granted PPL’s request and lifted the automatic stay. So for now, the PA Mercury Rule is not in effect. PADEP will need to file a request with the State Supreme Court to place a stay on the Commonwealth Court’s vacature of the PA Mercury Rule if it wants to continue with implementation of its mercury reduction regulations. Stay tuned for the latest on the next volley.
Cap and Trade or Carbon Tax?
The debate about a cap and trade greenhouse gas (GHG) program versus a carbon tax GHG program is beginning to focus on where the money goes, particularly with respect to a cap and trade program. To appreciate the monetary aspect, it is important to understand the basics of both programs.
A GHG cap and trade program requires facilities to offset their actual emissions with allocated allowances and, if necessary, additional credits purchased from brokers. If a facility’s emissions do not exceed its allocated allowances, it can trade (i.e., sell) its remaining allowances to another facility that did exceed its allocated allowances. The facility would use a broker to sell its credits, who would in turn make a profit from buying and selling them. The argument against the cap and trade program is that part of its cost will be borne by the consumer if facilities offset the cost of GHG credits by charging higher prices for their services.
A carbon tax is simply a fee that is based on a facility’s total GHG emissions. The carbon tax is collected by the agency administering the tax program. One positive aspect of the carbon tax proposals is that the carbon tax revenue would be returned to the tax paying 
public.
Similar to the economically friendly aspect of the carbon tax proposals, proponents of the cap and trade approach to regulating GHGs have also instituted a tax payer benefit option. Specifically, Senator Diane Feinstein is proposing a plan that would return the revenue as part of a “cap and dividend” program. It appears that this type of cap and trade program could receive support from both the Senate and House and thus move even closer to GHG reporting and regulation.
U.S. EPA Proposes First National Reporting Rule on Greenhouse Gas Emissions
U.S. EPA released proposed regulations for mandatory greenhouse gas (GHG) emission inventory reporting on March 10, 2009 and will be requesting public comment as soon as the regulations are published in the Federal Register via a 60 day public comment period. The regulations regarding the inventory are contained at 40 CFR Part 98 (Mandatory Greenhouse Gas Reporting) while several other Parts have also been revised to reference nitrous oxide (N2O) and methane (CH4) emissions. U.S. EPA has a June 26, 2009 deadline to finalize the GHG inventory program and intends to require 
sources with 25,000 metric tons equivalent of CO2 GHG emissions to report calendar year 2010 GHG emissions beginning in 2011. U.S. EPA estimates that the requirement will cover approximately 13,000 facilities and will account for about 85 to 90 percent of GHGs emitted in the United States.
CO2 and PSD – In or Out?
On December 18, 2008, in one of his final acts as U.S. EPA Administrator, Stephen Johnson issued an interpretive memo to U.S. EPA’s Regional Administrators that addressed the regulation of CO2 for a power project in Utah under the Federal New Source Review (NSR) Prevention of Significant Deterioration (PSD) air permitting rules. The memo focused on the definition of “regulated NSR pollutants” included in the PSD rules at 40 CFR §52.21(b)(50). Johnson indicated that from the date of the memo, U.S. EPA would exclude pollutants from the definition if they only require monitoring or reporting under the Clean Air Act (CAA). In other words, if there are no standards for a particular pollutant, it wouldn’t meet the definition of a regulated NSR pollutant and therefore it wouldn’t be regulated under the PSD program. From U.S. EPA’s perspective, CO2 was out.
However, two months later on February 17, 2009, U.S. EPA’s new Administrator under the Obama administration, Lisa Jackson, issued a letter to the Sierra Club granting reconsideration of Johnson’s decision. This was in response to a suit and petition that the Sierra Club and other parties had filed seeking reconsideration of U.S. EPA’s position expressed in the December 18 interpretive memo. The petition was granted in order to allow for public comment on the issues raised in that memo. Jackson stated that U.S. EPA was declining action that would stay the effectiveness of the memo while comments were sought on it and related decisions, and that a notice of proposed rulemaking would be published to respond to the petition for reconsideration. Jackson also went on to point out that the memo was not binding for states issuing permits under their own State Implementation Plans (SIPs). The National Association of Manufacturers (NAM) is challenging the decision by Lisa Jackson to reconsider the Johnson memo.
Lisa Jackson, in testimony to Congress, indicated that she believes CO2 can be effectively regulated under the CAA while still avoiding a scenario where hundreds of thousands of sources would be subject to regulation because of the 100 or 250 ton per year major source thresholds. Industry is not convinced that the flexibility needed to distinguish between CO2 and other regulated NSR pollutants in the CAA exists to support this approach. Recent air permitting projects in South Dakota, Utah, and Georgia are currently in litigation involving CO2 emissions.
While U.S. EPA studies the public comments on the 
Johnson memo and other interested parties prepare their comments, what effect will the result have on the project you are planning or the PSD application you are preparing? A recommended first step is to determine your state agency’s position on CO2. Next, even if your state is declining to address CO2, ALL4 still strongly recommends quantifying your CO2 emissions. The new Administration is prioritizing climate change and regardless of what program oversees CO2, (CAA program or a new Congressional action), CO2 emissions from your source will eventually be regulated.
