In a memo sent to Regional Administrators on July 24 (“Memo”), EPA’s Offices of Air and Radiation and Enforcement and Compliance Assurance provided a first look at how the Agency is interpreting its PSD and Title V permitting authority following the Supreme Court’s recent decision in Utility Air Regulatory Group v. EPA. Many questions remain unanswered, but the Agency did provide its guidance on the following:

1. EPA confirmed that it will no longer require sources to apply for PSD and Title V permits on the basis of greenhouse gas (“GHG”) emissions alone (so-called “non-anyway” or “Step 2” sources);

2. EPA re-established 75,000 tons per year (“tpy”) as the threshold for triggering BACT requirements for GHG emissions from sources that trigger PSD requirements on the basis of emissions of conventional pollutants (so-called “anyway” sources); and

3. EPA set forth its view that state permitting authorities may continue to require non-anyway sources to obtain PSD and Title V permits if there is independent state authority to do so. 

Background^[1]

On June 23, the Supreme Court held that an industrial facility’s GHG emissions alone cannot be the basis for subjecting the source to the permitting requirements of the PSD and Title V provisions of the Clean Air Act (“CAA” or the “Act”), but if the source does a capital project that would be subject to regulation under these provisions for more conventional pollutants (e.g., particulate matter, NOx, SO2), permitting authorities may impose emissions limits (defined in the Act as Best Available Control Technology or “BACT”) on emissions of GHGs.

The Court was evaluating, in part, the legality of EPA’s Tailoring Rule, which was promulgated in steps and established threshold levels of GHG emissions that triggered PSD and Title V requirements for two categories of sources. Step 1 of the Tailoring Rule required sources that would otherwise be subject to PSD and Title V requirements on the basis of emissions of the conventional pollutants, to also implement BACT for GHG emissions if those GHG emissions exceeded 75,000 tpy. The Court, in UARG, dubbed these sources “anyway” sources and said that these sources could still be required to implement BACT for their GHG emissions as long as the GHG emissions exceeded a de minimis level, which must be justified by EPA and may or may not be 75,000 tpy. Step 2 of the Tailoring rule applied the same GHG triggering thresholds and BACT requirements to what the Court described as “non-anyway” sources – sources that would not otherwise be subject to PSD and Title V requirements. The Court held that the Agency lacked the authority to impose GHG PSD and Title V requirements on non-anyway sources.

EPA Guidance

The guidance is entitled the “Next Steps and Preliminary Views” of GHG permitting, indicating that there will almost assuredly be more guidance issued on these issues in the future, both from the Agency and as a result of proceedings that will restart in the D.C. Circuit following the Supreme Court’s remand of the UARG decision. However, because sources will continue to apply for permits before many of the issues are completely resolved, the Agency has provided some initial signals of how it is viewing its own GHG permitting authority and the authority of state permitting officials.

Federal Authority to Issue PSD and Title V Permits for GHG Emissions

At the outset, the Agency acknowledged that it will no longer require non-anyway sources (identified in the memo as “Step 2” sources, in reference to Step 2 of the Tailoring Rule) to obtain PSD and Title V permits. This is essentially a restatement of the Court’s holding with respect to the Agency’s authority under these permitting provisions.

Importantly, EPA also said that it will not apply or enforce the associated federal rules or state rules that are already part of an approved State Implementation Plan (SIP) that required non-anyway sources to obtain a PSD or Title V permit. This is an important signal to state permitting authorities that they may now amend their permitting rules accordingly without risk that EPA would challenge those amendments.^[2]

State Authority to Issue PSD and Title V Permits for GHG Emissions

EPA takes the position that State permitting authorities may continue to require that Step 2 sources, in addition to anyway sources, obtain PSD and Title V permits for GHG emissions. The Agency stated that “[w]e do not read the Supreme Court decision to preclude states from retaining permitting requirements for sources of GHG emissions that apply independently under state law even where those requirements are no longer required under federal law.” Memo at 4. If a state decides to revise its permitting program to reflect federal authority, the Agency suggests that it does so in consultation with the applicable EPA Regional office. This applies to states with EPA-approved permitting programs that are incorporated in the SIP.

75,000 tpy Threshold for Triggering BACT for GHGs

One of the key issues created by the Court’s opinion in UARG was the apparent absence of a tons-per-year level of GHG emissions that would trigger BACT requirements for anyway sources. The Court, citing EPA’s preamble to the Tailoring Rule, noted that the 75,000 tpy limit established in the Tailoring Rule was not a de minimis level, which, under PSD, is the level of emissions of a particular pollutant that a source must exceed before triggering BACT requirements for that pollutant. EPA’s choice of 75,000 tpy had been made out of administrative necessity, and EPA specifically refrained from characterizing it as a de minimis level.

In the Memo, EPA opted to continue applying the 75,000 tpy threshold to determine if an anyway source is subject to BACT for its GHG emissions, while considering “whether to promulgate a de minimis level and what level would be appropriate.” Memo at 4.

Permitted Step 2 Sources

For Step 2/non-anyway sources that already received a PSD permit, the Agency recommends that it may be appropriate to remove the GHG BACT limitations from the permits, and convert them into minor source permits. Sources should discuss this process with the state permitting authority and appropriate EPA Regional office.

Other Issues

EPA will not pursue any further regulatory action under the Tailoring Rule, including any later Steps and the 5-year study scheduled to be completed in 2015.

EPA’s rule deferring PSD and Title V requirements for GHG emissions from biogenic sources was overturned by the D.C. Circuit (Center for Biological Diversity v. EPA, 722 F.3d 421 (D.C. Cir. 2013)) prior to the Supreme Court’s ruling in UARG, and final resolution of that issue was on hold pending the outcome of UARG. The deferral rule expired on its own terms last week, and EPA continues to work on the “the biogenic CO2 assessment framework” with the understanding that the scope of the issue has been narrowed by the Court’s decision in UARG.

_{[1] We prepared an analysis of the Court’s opinion immediately following its publication, in which we describe, in detail, the background of GHG permitting.}

_{[2] On page 3 of the Memo, EPA makes clear that all of the subsequent information (which we present in the same order in this summary) is general guidance, which “does not itself create any rights or impose any new obligations or prohibitions, and is not intended to be a basis for enforcement actions.” Memo at 3, n. 1.}