4 The record articles

Greenhouse Gas Tailoring Rule – Thresholds, Minors, and PALs, Oh My!

Posted: July 27th, 2012

Author: All4 Staff 

We’re a year and a half into U.S. EPA’s integration of greenhouse gases (GHG) into its Prevention of Significant Deterioration (PSD) and Title V permitting programs, and the excitement keeps on coming! The GHG Tailoring Rule, first promulgated on June 3, 2010 at 75 FR 31514, set “Step 1” and “Step 2” permitting thresholds for GHGs at 100,000 tons per year (tpy) carbon dioxide equivalent (CO2e) for new sources, and 75,000 tpy CO2e for modifications (“100,000/75,000 levels”).   Step 1 became effective on January 2, 2011 and Step 2 became effective on July 1, 2011.  The Tailoring Rule also established a third step, “Step 3”, which would consider a possible lowering of GHG permitting applicability thresholds at a future time.

On March 8, 2012 (77 FR 14226), U.S. EPA published a proposed Step 3, which would keep GHG major source thresholds unchanged from Step 2 levels. Also proposed were streamlined permitting measures which included proposed revisions to New Source Review (NSR) regulations to provide for GHG Plantwide Applicability Limitations (PALs) and to create regulatory authority for U.S. EPA to issue “synthetic minor” permits for GHGs. See ALL4’s 4 The Record article of the proposed rules for more information.

On July 12, 2012 (77 FR 41052), U.S. EPA finalized Step 3 by not lowering “at this time,” the current GHG applicability thresholds from the Step 1 and 2 levels.  Thus, only new sources emitting more than 100,000 tpy CO2e, and modified sources that initiate projects that result in 75,000 tpy CO2e of project-related emission increases, will be subject to PSD and Title V permitting requirements for the foreseeable future. U.S. EPA justified this decision by saying that the states have not had time to develop the necessary infrastructure and to increase their GHG permitting expertise to support the influx of air permitting that would result by lowering the GHG threshold.  Furthermore, neither U.S. EPA nor the state permitting authorities have had the opportunity to develop widespread streamlining measures to improve permit implementation.

In the same July 12 Federal Register notice, U.S. EPA began implementing its initial GHG streamlining measures by finalizing proposed regulations concerning GHG PALs. Please refer to the 4 The Record article on the proposed rule for a detailed discussion of the PAL program.

The finalized amendments to the PSD/PAL regulations allow permitting agencies to do the following:

  • Issue either a mass-based (tpy) or a CO2e-based GHG PAL to a source (without having to mix the two);
  • Allow CO2e-based GHG PALs to include the 75,000 tpy CO2e emission increase threshold;
  • Allow compliance with a GHG PAL (either mass- or CO2e-based) to be used as an alternate applicability approach for determining both whether a project is a major modification and whether GHG emissions are subject to regulation; and
  • Issue PALs to GHG-only sources.

Regarding this last action, U.S. EPA has approved the “Minor Source Approach” to regulating GHG-only sources under a PAL.  This allows a GHG-only source to obtain a GHG PAL (on a mass or CO2e basis) without requiring the source to undertake a permitting action to make GHGs ‘‘subject to regulation’’ and bring the source into major stationary source status under the Tailoring Rule.  Under this approach, non-GHG pollutants would not be eligible to obtain PALs at GHG-only sources.  A second proposed approach, “Major Source Opt-in,” was not finalized. It would have allowed GHG-only sources to become major sources to obtain a PAL for GHG and any other eligible pollutant emitted. The other streamlining proposal put forth by U.S. EPA in the March 8, 2012 rulemaking was to create GHG synthetic minor permit authority within the federal PSD regulations.  In the July 12 Federal Register notice, U.S. EPA states that it has chosen not to finalize the proposed GHG synthetic minor measure at this time.  Please refer to the August 2011 4 The Record article “Mass Confusion:  Are Greenhouse Gases for PSD Permitting Treated the Same Way as Other NSR Regulated Pollutants?” for a review of possible Tailoring Rule applicability outcomes.

What does all of this mean to you? Well, first of all, for non-major sources, (i.e., sources with CO2e emissions less than 100,000 tpy and other NSR-regulated emissions under the 100/250 tpy thresholds) under Step 2 of the Tailoring Rule rollout, it’s welcome news that these facilities will not be phased in to major source permitting for the time being. It’s also good public relations for U.S. EPA in the current economic climate; the press release announcing Step 3’s finalization describes “shielding smaller emitters from permitting requirements” while “maintain[ing] focus on [the] largest emitters.”

For large emitters already subject to GHG permitting, the revised PAL program is now a much more viable option for permitting strategy as GHG PALs can be based on CO2e emissions (and include a 75,000 tpy “cushion”) instead of mass basis (with a 0 tpy significance level).  Selecting a CO2e or mass-based PAL approach is a case-by-case process; however, the effectiveness of the mass-based PAL approach would be limited to those sources that overwhelmingly emit CO2 as the only GHG (i.e., the other five regulated GHG contribute very little to the CO2e total).

Since their inception, PALs have proven to be strategic permitting tools for non-GHG pollutants by preserving beneficial facility baseline emission rates and potentially saving eligible facilities time and money during facility modifications over the long term.  However, the effectiveness of GHG PALs may be limited until U.S. EPA finalizes their thinking regarding biogenic CO2.  Remember that biogenic CO2 is excluded under the federal PSD rule and is excluded from PSD and Title V applicability determinations until July 21, 2014.  Thus a GHG PAL prepared before July 21, 2014 would exclude biogenic CO2 while after July 21, 2014 biogenic CO2 potentially could be included.  Needless to say there could be significant uncertainty concerning compliance with GHG PAL emission limits considering a scenario with biogenic CO2 emissions excluded and a scenario with biogenic CO2 emissions included.

As with any new program, issues will arise along the way that will be “resolved” through regulatory agency policy and guidance.  In the preamble to the July 12 rulemaking, U.S. EPA notes that they are continuing to pursue additional streamlining measures “as expeditiously as possible,” and they encourage state and local authorities to do the same.  Also, note that the PAL changes (along with future streamlining proposals) may serve as a double-edged sword. With every new streamlining measure implemented, it will become easier for U.S. EPA to justify a decision to lower the 100,000/75,000 GHG permitting levels and thereby phase more “facilities” into the GHG major source program.  The June 3, 2010 rule limited the possibility of a lower applicability threshold to 50,000 CO2e tpy.  But rules can be revised and remember that under U.S. EPA’s separate GHG Reporting Rule, facilities emitting 25,000 metric tpy CO2e are considered “the largest GHG emitters”.  That benchmark could easily include your facility.  Hence, it will be important to stay current with PSD GHG applicability and to keep in mind the option for obtaining a GHG PAL.

ALL4 has substantial experience with PALs and Tailoring Rule activities and is ready to help you with your GHG permitting needs. Stay tuned to ALL4’s Blog for future developments!


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