• EPA Finally Issues Guidance on Greenhouse Gas Permitting
  • November 15, 2010 | Authors: Randy E. Brogdon; Margaret Claiborne Campbell; Charles S. Carter; Peter S. Glaser; Carroll "Mack" W. McGuffey
  • Law Firms: Troutman Sanders LLP - Atlanta Office ; Troutman Sanders LLP - Raleigh Office ; Troutman Sanders LLP - Washington Office ; Troutman Sanders LLP - Atlanta Office
  • As promised, EPA has finally issued guidance and other implementation tools for the new greenhouse gas (GHG) permitting requirements scheduled to take effect January 2, 2011, less than two months from now.  The information applies to two permitting programs— the “PSD” program, under which new and modified sources having the potential to emit air pollutants above a certain amount must obtain a preconstruction air quality permit, and the Title V program, under which sources having the potential to emit air pollutants above a certain amount must obtain an operating permit. EPA's Tailoring Rule set forth the applicable thresholds under these programs for GHGs.

    Permits under both programs are generally issued by states and in a few instances by EPA regional staff.  The package released by EPA is intended to guide both state and federal permitting authorities in issuing permits covering GHG emissions and businesses that will be required to obtain such permits.  It does not, however, establish specific standards for Best Available Control Technology (BACT) for GHG missions for any particular source or categories of sources.  Thus, exactly what GHG BACT requirements will be for the various sectors of the economy that will be subject to GHG regulation remains unknown.  EPA, however, says that in many cases the most appropriate BACT requirement for GHG emissions is likely to be energy efficiency.

    The package released by EPA includes (a) a 57-page (not including appendices) guidance document entitled “PSD and Title V Permitting Guidance for Greenhouse Gases,” (b) “GHG Control White Papers” for seven sectors of the economy:  electric generating units, large industrial/commercial/ institutional boilers, pulp and paper, cement, iron and steel industry, refineries and nitric acid plants, (c) a GHG Mitigation Strategies Database, including specific performance and cost data on current and developing GHG control measures, and (d) enhancements to the RACT/BACT/LAER Clearinghouse, or the RBLC, setting forth information and decisions about pollution control measures required by air pollution emission permits issued for GHG by permitting agencies.  EPA also appointed staff in each EPA regional office to be a “point of contact” on GHG permitting issues.  These papers, along with a Fact Sheet and a FAQs, can be accessed here:

    http://www.epa.gov/nsr/ghgpermitting.html

    Timing and Comments

    Many of the documents that EPA released had originally been scheduled to be issued earlier this year.  In a briefing last May to the Clean Air Act Advisory Committee, EPA stated that it would begin rolling out the White Papers in June and would complete action on the GHG Mitigation Strategies Database and RBLC Clearinghouse over the Summer.

    The Guidance document was also originally to have been proposed in time for EPA to take public comment on it.  Given its late release, however, comment will be restricted both in terms of the scope of comments and the timing.  EPA says it will publish a notice in the Federal Register announcing the availability of the GHG permitting guidance and the opportunity for public comment, but EPA’s request for comment may be more limited than initially expected: “The Agency welcomes public feedback on the guidance over the next few weeks on any aspect that contains technical or calculation errors or where the guidance would benefit from additional clarity.”

    The issuance of the package yesterday did not silence concerns that EPA, the states and business were not prepared to commence regulation by the beginning of next year.  In a press release issued late yesterday on EPA’s release, Senator Jay Rockefeller (D. W.Va.), author of legislation that would delay EPA regulation for two years, stated:

    If we want to encourage companies to invest in new technologies and create jobs, then we need a system that gives major employers the framework to do so and to succeed. I am concerned that the EPA has not provided these employers enough time to process and understand rules that they will be required to comply with in just two months time. In fact, it is still unclear what exactly will be required to receive a greenhouse gas air permit next year, as each state will be making case-by-case decisions. Such an unstable regulatory environment prevents companies from making long range investment decisions that will put West Virginians back to work. That is why the Senate needs to pass my legislation to suspend EPA’s ability to regulate greenhouse gases.

    General Issues

    The key part of the package was the Guidance document, and particularly its discussion of potential Best Available Control Technology (BACT) requirements for GHG emissions for facilities that will be subject to the PSD program.  Key elements of the document are as follows:

    Preserves Traditional Five-Step Top-Down BACT Process

    EPA states that the process for considering GHG BACT will be no different than the process for considering BACT for other pollutants.  State and federal permitting agencies will thus apply the traditional five step process:  identify all available control technologies, eliminate technically infeasible options, rank remaining control technologies, evaluate most effective controls and document results, and select BACT.

    State Discretion to Determine BACT

    EPA also says that states retain discretion to determine BACT in individual cases, subject to EPA review and guidance.  Thus, although EPA highlights energy efficiency as the most likely BACT requirement for GHG emissions, EPA says that states retain discretion, so long as they follow the top-down BACT process, to make BACT determinations in individual cases.

    In the last year and a half, however, EPA has become more assertive in exercising its power to disapprove state BACT determinations.  In at least two high-profile cases, EPA disapproved BACT determinations in appeals by environmental organizations under Title V (claiming that Title V operating permits could not be issued because of alleged deficiencies in the BACT determination made in the initial PSD construction permit).  Thus, although the Guidance says that states have great discretion to make BACT determinations in individual cases, states and sources should be aware that EPA retains and may exercise authority to disapprove BACT determinations.

    Redefine the Source/Fuel-Switching

    One of the most contentious aspects of BACT determinations is the extent to which a permit applicant can be required to either change the type of project it is proposing or switch to a different fuel in order to lower emissions.  Coal-plant developers in particular have been concerned that they might be required to switch to natural gas as BACT for GHG emissions.

    The new Guidance document says that EPA is not changing what it describes as its traditional policy.  According to the Guidance, “BACT should generally not be applied to regulate the applicant’s purpose or objective of the proposed facility.”  Furthermore, “EPA continues to believe that permitting authorities can show in most cases that the option of using natural gas as a primary fuel would fundamentally redefine a coal-fired electric generating facility.”

    On the other hand, EPA emphasizes that whether fuel-switching may be required as BACT, and the extent to which a facility can be required to change its basic design, is a matter of state discretion.  EPA says that it “does not interpret the CAA to prohibit fundamentally redefining the source and has recognized that permitting authorities have the discretion to conduct a broader BACT analysis if they desire.”  Moreover, “any decision to exclude an option on ‘redefining the source’ grounds must be explained and documented in the permit record, especially where such an option has been identified as significant in public comments.”

    Additionally, EPA believes that IGCC facilities should be considered as BACT for a conventional coal plant, at least at step one of the BACT process, although it says that states may exclude IGCC at step one “if it can be shown that application of such a control strategy would disrupt the applicant’s basic or fundamental business purpose for the proposed facility.”  Moreover, the Guidance makes clear that EPA will not consider changing one type of the same fuel for another type to be a redefinition of the source in most circumstances.  Thus, “a permitting authority may consider that some types of coal can have lower emissions of GHG than other forms of coal, and they may insist that the lower emitting coal be evaluated in the BACT review.” This statement, combined with a lengthy discussion in the electric generation white paper regarding the energy efficiency benefits of bituminous over subbituminous coal, indicates that plants burning subbituminous coal may now have to defend their fuel choice in future BACT determinations.

    As can be seen, given the amount of state discretion, it will matter very much to a developer in what state it builds its plant.  States that are hostile to GHG-emitting facilities will have the tools to require significant changes in the facility.  Moreover, even in states that seem receptive to building GHG-emitting facilities, the standards in the Guidance are broad enough to enable opponents of a project to challenge it and argue for detailed consideration of new project designs and fuel-switching.  EPA itself also remains legally authorized to overturn a state decision that is not carefully documented.

    Energy Efficiency

    EPA recognizes that there are essentially only two potential GHG control options available: (1) improved energy efficiency and (2) carbon capture and sequestration.  EPA’s general theory with respect to energy efficiency is that a more efficient process will use less fuel, thus reducing the amount of GHGs emitted for the same level of production.  EPA states that this concept is not unique to GHGs—it applies equally to all other pollutants emitted as well—but the guidance clearly places a greater emphasis on energy efficiency as BACT than ever before.  EPA justifies its position on energy efficiency as BACT by essentially pointing out that there will be little else most sources can reasonably do to address GHGs.

    Recognizing that the specific options available for improving energy efficiency will vary from industry to industry, EPA prepared the seven sector-specific “white papers” to go along with its general guidance and cover the myriad ways in which specific industries may improve their energy efficiency.  Each paper lists specific projects that could improve the efficiency of sources within the particular industry covered.  The white paper covering coal-fired power plants, for instance, indicates that permit applicants must consider the following options in assessing energy efficiency BACT for GHGs: supercritical and ultrasupercritical boiler designs, double reheat cycles, coal drying (to remove moisture from subbituminous or lower classification coals), oxy-combustion (the use of pure oxygen as combustion air), integrated solar thermal energy (for improving feedwater heating efficiency), or even combined heat and power alternatives (often referred to as cogeneration).  EPA views all of these efficiency improvement technologies as potential BACT for reducing greenhouse gas emissions, which means that coal-fired power plants will need to study each one and either adopt them, or explain why not.  Most importantly, perhaps, is the fact that the analysis will inevitably lead state permitting authorities to establish efficiency limits, in addition to specific GHG emission limits, for all permitted GHG sources.

    Carbon Capture and Storage

    Beyond energy efficiency measures, carbon capture and sequestration (CCS) may be the only “add-on” control option for reducing GHG emissions, according to the guidance.  Although EPA concedes that carbon sequestration has not been demonstrated on a commercial scale and that the costs are likely prohibitive, EPA firmly states that nearly all sources seeking a GHG permit will need to at least consider whether CCS would be possible.  Specifically, EPA notes that CCS must be included in Step 1 of its five step “top-down” analysis, which requires a listing of all “available” controls, although EPA expects that CCS will most often be eliminated from the BACT analysis in later steps for various reasons, including technical infeasibility and cost-effectiveness.  Each of the three steps of CCS - capture, compression, and sequestration—could provide an insurmountable challenge to specific sources, and EPA notes that ruling CCS out in some cases (e.g., a small package boiler) may be easier than in others (e.g., large combustion sources such as power plants).  What is abundantly clear is that EPA would like each source to review the technology fully and, again, either adopt or explain why not.

    Biomass

    The Guidance notes that numerous commenters on EPA’s Tailoring Rule requested recognition for the “carbon neutral” nature of GHG emissions from biomass or biofuels—the idea that such emissions are only a release of what was relatively recently taken from the atmosphere.  While EPA agrees that the carbon neutrality of such renewable fuels can be taken into account in determining BACT for a source, it does little to explain exactly how, and does not go as far as excluding such emissions from the analysis of whether BACT should apply at all.

    Off-Site Emissions

    Several portions of the Guidance appear to suggest that “offsite” or “life-cycle” emissions impacts of a project could be considered in a BACT analysis.  For example, EPA notes that it may be appropriate to consider whether a switch to a different coal would not reduce “overall” emissions because the mine producing the more efficient coal itself emits more GHGs.  Such considerations have rarely been relevant to BACT determinations in the past, except perhaps as a potential environmental or energy impact to be considered in Step 4 of the BACT process.  EPA’s guidance now makes it clear that such considerations may be central for assessing the merits of various GHG control options, which will likely add further complications (and room for challenges) in all future BACT determinations.

    Conclusion

    All told, the documents EPA released do not come as a surprise—a recommendation that states focus primarily on energy efficiency while still fully considering any new emerging technologies was expected.  Developers nevertheless are likely to remain concerned at the level of uncertainty as to what will be required in the BACT process for reducing GHGs, even as the program takes effect in less than two months.