• D.C. Circuit Court Reinstates CAIR and EPA Issues Interpretative Memo Regarding CO2 Regulation in PSD Permits
  • January 27, 2009 | Author: Michael J. Nasi
  • Law Firm: Jackson Walker L.L.P. - Austin Office
  • D.C. Circuit Court Reinstates CAIR Pending Remand

    Summary
    Effective December 23, 2008, the U.S. Court of Appeals reinstated the Clean Air Interstate Rule (CAIR). The Court of Appeals remanded CAIR without vacatur so that, in the Court's words, EPA may "fix the fundamental flaws" in the existing rule without losing the environmental protections of CAIR.

    Background
    On July 11, 2008, the U.S. Court of Appeals for the D.C. Circuit vacated CAIR in its entirety and remanded to the EPA to promulgate a rule consistent with the decision. On September 24, 2008, the EPA filed a petition for rehearing or, in the alternative, a remand of the case without vacatur. Siding with the EPA's petition and finding that CAIR would provide more environmental protections if still in existence, the Court of Appeals remanded CAIR without vacatur on December 23, 2008. See State of North Carolina v. EPA, Case No. 05-1244 (D.C. Cir. December 23, 2008). The Court of Appeals also declined to require any type of deadline for the EPA to correct the "fundamental flaws" in CAIR.

    Path Forward and Texas Impacts
    A complete vacatur of CAIR would have derailed two ongoing Texas SIP revisions: (1) the SB 1672 Texas CAIR State Implementation Plan (SIP) Revision and associated rulemaking and (2) the Regional Haze SIP. As the Court of Appeals has reinstated CAIR, the CAIR SIP revision and rulemaking will likely be reactivated from the temporary inactive status and the Regional Haze SIP will still be considered for adoption by the Commission on February 25, 2009.

    EPA Interpretative Memo Responds to Deseret Remand Indicating Decision not to Regulate CO2 through PSD Permit Program

    Summary
    The EPA published an advisory letter on December 18, 2008, stating that it would not require Best Available Control Technology (BACT) emission limits for carbon dioxide (CO2)within the Prevention of Significant Deterioration (PSD) permit program. The EPA's letter was in response to the Environmental Appeals Board (EAB) decision to remand a PSD permit for a coal-fired power plant lacking a CO2 BACT emission limit. The EPA's basis for refusing CO2 regulation was historical practice, EPA's view of the original regulatory intent of the PSD program, and the administrative confusion that would ensue if CO2 were to be regulated in PSD Permits.

    Background
    A PSD permit was issued to Deseret Power Electric Cooperative (Deseret) on August 30, 2007, authorizing the construction of a new 110-megawatt waste-coal-fired unit near Bonanza, Utah on the Uintah and Ouray Indian Reservation.1 The new unit would consist of a single circulating Fluidized Bed boiler and would include the following BACT measures: a fabric filter baghouse for particulate matter (PM) control; limestone injection and dry scrubber for sulfur dioxide and sulfuric acid control; combustion control for carbon monoxide; and limestone injection, dry scrubber, low-sulfur diesel fuel, and fabric filter baghouse for control of condensable PM. The PSD permit did not contain an alternatives analysis or BACT analysis for CO2 emissions.

    The Sierra Club petitioned for review of the PSD permit (PSD Appeal No. 07-03), stating that the permit violates CAA Sections (§§)165(a)(4) and 169(3) by not requiring a Best Available Control Technology (BACT) emission limit for CO2.

    The Environmental Appeals Board (EAB) granted review on November 21, 2007, In the matter of Deseret Power Electric Cooperative, EAB App. No. PSD 07-03. On November 13, 2008, the EPA's Environmental Appeals Board (EAB) remanded the Deseret Power Electric Cooperative PSD Permit for further deliberation. The EAB's decision to remand was based on the incomplete administrative record presented during the appeal and the desire to have a more concrete analysis as to why the EPA could or could not regulate CO2 in the PSD permitting regime. The EAB's opinion did not analyze the types of control technology needed or what a significance threshold limit would constitute for CO2, nor was it limited to power plants. Rather, the EAB examined PSD permitting for all major sources and decided that the EPA should provide a clear administrative record for or against the regulation of CO2, with nationwide repercussions, and allow for public participation.

    EPA Response to the Deseret Remand
    On December 18, 2008, the EPA Administrator responded with an advisory letter which stated that the EPA would not regulate CO2 within the PSD framework and that this interpretation was effective immediately, applicable nationwide, and that the EPA would not take public comment on the matter. The EPA's decision was based on a plain reading of the word "regulation," a record of never issuing PSD permits containing emission limits for pollutants such as CO2, and the risk of ensuing administrative confusion if the EPA were to require emissions limits for pollutants, like CO2, which the Clean Air Act requires to be "recorded and monitored" but not necessarily restricted. The EPA Administrator also clarified that the decision to not regulate CO2 within the PSD framework did not infer a lack of CO2 regulation within the pending Advanced Notice of Proposed Rulemaking (ANPR) regarding the potential regulation of greenhouse gasses under the Clean Air Act.

    Path Forward
    Based on the content of the response letter and the concurrent ANPR potentially regulating greenhouse gases within the CAA framework, the EPA intends to direct focus and public involvement on CO2 regulation to the ANPR, rather than through the Deseret case or any other individual PSD permit matter.

    EPA signed the ANPR on July 11, 2008, to examine possible modes of greenhouse gas regulation through the existing CAA framework, such as regulation of greenhouse gasses through the National Ambient Air Quality Standards, New Source Performance Standards, or as a Hazardous Air Pollutant. The comment period for the ANPR ended on November 28, 2008, and the final rule will be published in June 2009.

    It remains to be seen how the EPA administration under President-elect Barack Obama will handle the advisory letter declining to regulate CO2 within the PSD program. It is possible that the new EPA administration could follow a different interpretation of the PSD permit program. What is much more certain is that the new administration will have the issue of whether to regulate greenhouse gasses within the existing CAA framework squarely before them during its first year in office given the timing of the pending ANPR.

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    1 The new unit was a "major modification" of the existing Deseret power plant.